CoStar: Dallas developer’s finance arm marks return to office lending for first time in five years

Featured in CoStar News written by Candace Carlisle

Dallas developer Craig Hall has seen a few real estate cycles in his decades in the business, and now he’s ready to lend on office properties for the first time in five years.

Hall’s finance arm, HALL Structured Finance, made a first-lien loan for $30.8 million to an affiliate of Dallas-based Bradford Cos. that recently acquired Uptown Tower, a 12-story, nearly 254,000-square-foot office building at 4144 N. Central Expressway in Dallas. In recent years, Hall Structured Finance has backed apartment and hotel properties, but now office is part of its business with the 1980s-vintage property being the first of many more office investments planned by the firm.

Bradford Cos. is planning to renovate Uptown Tower with upgrades that include a new first-floor lobby, fitness center, new common areas, and garage access controls.

“The market is still pretty capital-constrained, and a lot of lenders are understandably on the sidelines,” Hall, founder and CEO of HALL Group, the parent company of Hall Structured Finance, told CoStar News. “A lot of lenders have a problem with office deals. We stayed out of the market when we thought a lot of things had changed” about the office sector after the onset of the pandemic.

“I think now there’s clarity,” he added. “I wouldn’t say that all office is coming back, because I don’t believe that is what’s going to happen, but I do think well-located properties that have good amenities are absolutely going to be … in really good shape” over the next two to three years, Hall said.

HALL Structured Finance is expecting to invest at least $500 million in the next two years in both new and value-add office properties in Texas markets, with the Dallas area expected to land some of those deals.

“We have a couple of sizeable new construction deals that we are discussing in Dallas,” Hall said.

Hall said his team decided to financially back Uptown Tower in Dallas because of the “high regard” for the borrower and its plans to upgrade the building to attract and retain tenants.

The return to lending on office properties comes months after HALL Group opened The Tower at Hall Park at a 162-acre, 15-building development in Frisco, Texas. The 16-story office property with leases in tow from Chobani and the Frisco Economic Development Corp. recently landed a 10-year lease from Brightline Dealer Advisors for just over 10,000 square feet. The insurance agency expects to move into its new space in November.

At Hall Park, Hall said his team pivoted from having an office park with 2.2 million square feet of office space to a mixed-use hub with a focus on amenities. That focus continues today, he said.

“Our job is no longer about physical space alone,” Hall said. “At HALL Park, we are thinking about how we can improve our services and how can we help tenants recruit and retain employees.”

Being a North Texas landlord and understanding what drives office tenants, Hall and his team have a front-row seat to the office market in certain areas, including Uptown Dallas, as well as the urban-suburban nodes in the Plano and Frisco areas, he said. At HALL Park in Frisco, he added, leasing is “reasonable” with an expectation it will pick up in the second half of the year.

“We think the back half of this year is going to be very strong,” Hall said. “And not just the new building, but also our existing buildings out there are feeling a greater sense of momentum than we’ve had for the last five years.”

With little new office construction in the pipeline, Hall said he sees an opportunity to lend on new office projects with the right kind of space cued up to hit a strong leasing market in 2027 and 2028.

Few real estate lenders have the ability to take on this”countercyclical” approach, Hall said, with many lenders grappling with existing office properties that are financially challenged.

“If you look at public real estate investment trusts with office in their portfolio, they’re just dead in the water,” he added. “Some of the office deals done in the last few years are just not going to come back.”

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