T
he Heard Building, currently part of Expansive's portfolio, is at risk of becoming the first high-rise in downtown Phoenix to face foreclosure due to the reset of values affecting central business districts across the country. According to a report by the Phoenix Business Journal, a filing by lender SMS Financial VW with Maricopa County indicates an upcoming auction on November 26 at the Arizona Superior Court building downtown. SMS Financial VW, a partnership between SMS Financial and Phoenix-based ViaWest Group, took over $11.7 million in debt on the building from First Interstate Bank in July.

    Steven Schwarz, founding partner at ViaWest Group, confirmed the sale and stated that they would love for the current owner to come up with a solution for the loan. However, if no solution is found, ViaWest Group is ready to take over the office business. Expansive declined to comment on the matter.

    The eight-story Heard Building, which has been standing at 112 North Central Avenue since 1919, was originally the headquarters for Dwight Heard's investment and publishing ventures, including the Arizona Republic newspaper. The newspaper had its offices there from 1920 until 1948.

    The property is located within the downtown office submarket, which has higher vacancy rates compared to other parts of the metro area due to the pandemic. Additionally, higher interest rates in recent years have increased overhead costs for landlords. According to CoStar, the downtown submarket has experienced a negative net absorption of 250,000 square feet over the past 12 months.

    Some local observers believe that the Heard Building could be a potential candidate for residential conversion. Connor Devereux, director of market analytics for CoStar, stated that multifamily developers are still interested in this market. However, it may take some time for occupiers to return and locate there, as the property is not currently performing well from an office fundamental standpoint.