Dallas-based developer Harwood International, the visionary firm behind the sprawling Harwood District, is navigating significant financial pressures. Recent months have seen the company sell four of its office towers, secure a $100 million loan from a private equity firm, and now faces the potential foreclosure of its flagship building.
The series of transactions and foreclosure notices, documented in county records, points to a period of distress for one of the city's most influential real estate players. The firm is now contending with construction delays on a major new project and the scheduled auction of two key Uptown properties in early November.
Key Takeaways
- Harwood International sold four office towers (Harwood No. 2, 6, 7, and 10) to private equity firm TPG.
- The developer has also taken a $100 million loan from TPG to address financial needs.
- Two properties, including the original Harwood No. 1 (the Rolex building), are scheduled for a foreclosure auction on November 4.
- Construction on the 23-story Harwood No. 15 tower, planned to start in January, has been delayed.
- An expert describes the situation as a "sign of distress" and warns of a "rough road ahead" for the developer.
A Wave of Property Sales and Foreclosure Threats
Harwood International has been actively divesting assets to generate capital. Between early September and early October, the firm sold four office towers to TPG, a private equity firm with headquarters in San Francisco and Fort Worth. The properties sold include Harwood No. 2, 6, 7, and 10, which collectively represent approximately 900,000 square feet of office space.
Notably, Harwood No. 6, also known as Saint Ann Court, was among the properties sold. This building had previously been saved from a foreclosure threat earlier in the year, highlighting the ongoing financial challenges.
The developer's difficulties extend beyond these sales. The company has faced at least four foreclosure threats in 2022. Earlier this year, Harwood No. 4 was sold to Spear Street Capital at a foreclosure auction after Harwood defaulted on its obligations. At the time, Harwood's CFO, Justin Burleson, mentioned that the firm was attempting to recapitalize the property but ran out of time.
Flagship Building Faces Auction
The most significant challenge looms on November 4, when two more Harwood properties are set for auction. The first is Harwood No. 1, located at 2651 North Harwood Street. This building, often called the Rolex building, is a landmark property that marked the beginning of the Harwood District when it opened in 1984.
Harwood No. 1 at a Glance
- Size: Nearly 106,000 square feet
- Opened: 1984
- Significance: The first office development in the Harwood District
- Appraised Value: $25 million for tax purposes (not market value)
The second property scheduled for the same auction is a vacant parcel of land at 2840 Bookhout Street in Uptown Dallas. The Dallas Central Appraisal District values this land at just over $4.3 million for tax purposes. These auctions represent a critical moment for the developer's control over its foundational assets.
The $100 Million Loan and Project Delays
While TPG has acted as a buyer for Harwood's assets, it has also provided a significant financial injection. The private equity firm has extended a $100 million loan to the Dallas developer, a move that could provide crucial liquidity. However, the collateral tied to this loan reveals the extent of Harwood's financial needs.
According to county deed records, the loan is secured against several key holdings, including the site for the delayed Harwood No. 15 project. This 23-story tower was slated to begin construction in January 2022, with an estimated cost of $127 million and a completion date of June 2027. The project has not yet broken ground.
The Harwood District Vision
The Harwood District is a master-planned, 19-city-block development north of downtown Dallas. It currently includes over 3 million square feet of office, residential, and retail space. The firm's long-term vision is to expand this to 8.1 million square feet, creating a dense, walkable urban neighborhood.
The collateral for the TPG loan also includes the future Harwood No. 16 development site, the popular sports bar Happiest Hour, and several other parcels near North Akard Street. This broad use of assets as collateral underscores the high stakes involved in the financing deal.
The delays to Harwood No. 15 raise questions about its anchor tenant, the global law firm Jones Day, which was expected to occupy the new tower. The law firm, currently located in Harwood No. 3, has not commented on how the construction delays might affect its plans.
Expert Analysis: A Difficult Path Forward
The combination of asset sales, foreclosure threats, and reliance on private equity financing paints a challenging picture for Harwood International. Financial experts suggest that turning to a private lender like TPG instead of traditional banks is a significant indicator of risk.
Sriram Villupuram, a professor of finance and real estate at the University of Texas at Arlington, commented on the situation.
"That’s the first sign of distress. If you have to have some fancy financing for a standard office or retail property then … you’re in a world of trouble."
Villupuram further explained the implications of the developer's recent moves, suggesting that conventional lenders may view the company's portfolio as too risky.
"The foreclosures, along with the absence of traditional bank financing for its construction loan, paint a picture of a rough road ahead for Harwood," he stated. "This implies that traditional banks deem Harwood’s portfolio too risky, and Harwood is likely giving up too much to a private lender to stay afloat."
The developer has not provided public updates on the status of Harwood No. 15 or its plans for future development. As the November auction date approaches, the Dallas real estate community is watching closely to see what comes next for the firm that shaped a significant portion of the city's modern skyline.
