Silver Star Properties subsidiary Hartman SPE has filed for Chapter 11 bankruptcy as it sells off a portfolio of 35 commercial properties valued at around $400 million and spread throughout the Texas Triangle.
The filing followed the recent sale of the Prestonwood retail center in Plano, which netted $25 million.
The bankruptcy filing aims to lay the groundwork for the sale of remaining assets with an October 9 maturity date looming for a loan with a balance of $217 million, according to a September 13 SEC filing. The loan was issued in 2018 by Goldman Sachs Mortgage Company on 39 of the company’s properties, according to Morningstar.
Hartman SPE has been selling aggressively in hopes of paying off the loan, which has been extended several times. The property’s complex debt structure includes several notes, and recent events have led to a “hard lockbox” arrangement that forces cash flow directly into a lender-controlled account. Special servicer KeyBank National Association is actively working with the borrower to address the impending maturity date, with property sales and potential refinancing on the horizon.
Eleven of the firm’s holdings are currently under contract for sale, with prices ranging from $3 million to $18 million. They are expected to bring in $133 million in proceeds, which should be enough to work out a refinancing of its maturing loan, the firm said. Marcus & Millichap and CBRE are under contract to market the properties. An additional six assets are said to have pending contracts. Silver Star Properties has said it is making a strategic move to shift its 6.8-million-square-foot portfolio toward self-storage, and the bankruptcy is seen as a crucial step in streamlining those operations.
The filing follows months of negotiations and legal actions related to intercompany ownership between Silver Star and Hartman vREIT XXI, which is controlled by Allen Hartman.
Efforts to reach a resolution proved unsuccessful, leading to the decision to seek bankruptcy protection, according to court records. Hartman SPE emphasized that tenants of its properties should not be affected by the bankruptcy .Last month, Silver Star also appointed self-storage veteran Steve Treadwell as CEO as it continues to reposition its holdings.