Since the 175-acre mixed-use project in Frisco known as Wade Park was posted for foreclosure by a second lender last week, there’s been no shortage of speculation about how developer Thomas Land & Development will react and what this project means for the market at-large.
The Atlanta-based developer’s vision for Wade Park includes 600,000 square feet of retail space, more than 6 million square feet of office space, condos, apartments, single-family homes, and tons of parks and trails. Since Thomas Land & Development purchased the land in 2013, the project has hit several development snags. As it stands now, more than $14 million worth of mechanic’s and material men’s liens have been filed on the project, delivery dates have been delayed, and some tenants (including Hotel ZaZa) have pulled out of the project.
Earlier in February, two lenders on the project—Farmers Branch-based Bamcap Partners and New York-based Gamma Real Estate—posted the $2 billion project for foreclosure for defaulting on its loans. So ahead of March 6, the date the project is scheduled to be sold at auction, let’s take inventory of the various ways this could all shake out.
Thomas Land & Development could bring lenders current.
The developer could just pay the delinquent payments on its loans from Bamcap and Gamma. But because lenders have said the project was posted for foreclosure due to default of payment, it stands to reason that Thomas Land would need to secure additional capital to bring its lenders current. To keep the Bamcap and Gamma loans in place, new capital would likely come in the form of equity.
Thomas Land could secure a new lender.
This possibility is a form of bringing lenders current. If the borrower secured new debt (rather than equity) the current lenders would probably be removed from the deal. Another high-profile project, The Drever in downtown Dallas, recently did this after being posted for foreclosure in November. In both hypothetical scenarios, lenders would remove the foreclosure posting and the project would not be sold at auction.
Thomas Land could file for bankruptcy.
There are many legal intricacies when a bankruptcy gets thrown into a complex project like this, because bankruptcies are handled in federal court. If Thomas Land filed for bankruptcy on Wade Park, a trustee, who’s typically an attorney, would be appointed to be a neutral stakeholder acting on behalf of the property. The bankruptcy court would put a “stay” on the project and foreclosure and, most likely, work on restructuring the project’s capital stack. This process could take many months or longer.
Wade Park could be sold at auction on March 6.
If none of the above happen before March 6 at 10 a.m., Wade Park will be auctioned off on the steps of the Collin County Courthouse. In this instance, anyone with available funds—including lenders Bamcap and Gamma—could potentially buy the project.
Forced sale or not, new lender or not, there’s likely a long and winding road ahead for Wade Park. Thomas Land & Development did not return phone calls from D CEO.
Now, if you’ll allow a reporter her own two cents regarding speculation that this troubled project is a bellwether for the real estate cycle: Very few of the specifics about this project are publicly known, so it’s a risky venture to speculate about Wade Park’s capital structure or the developer’s master plan.
But I’ll draw attention to just one detail about the project: the office portion has not yet secured an anchor tenant. And, as a few brilliant real estate minds recently reminded me, there’s just not an endless supply of Toyotas and Liberty Mutuals waiting in the wings. It’s tough to sustain 600,000 square feet of retail space in 2018, particularly when that space is adjacent to projects like The Star and Legacy West. It’s not 2014 anymore, and a 6 million-square-foot speculative office development is a wager many lenders are no longer willing to take.