Foreclosure Looms Over Historic Phoenix Office Tower

By Elias DaSilva | September 13, 2024

The Heard Building, constructed in 1919, might be auctioned by lenders in November. 

This historic high-rise, a landmark in downtown Phoenix, is at risk of foreclosure due to the ongoing reevaluation of property values affecting central business districts nationwide.

Currently managed by coworking company Expansive, the Heard Building is facing a foreclosure auction, as reported by the Phoenix Business Journal. A document filed by lender SMS Financial VW with Maricopa County reveals that an auction is scheduled for November 26 at the Arizona Superior Court building downtown. SMS Financial VW, a collaboration between SMS Financial and Phoenix-based ViaWest Group, assumed $11.7 million in debt on the property from First Interstate Bank in July.

Steven Schwarz, a founding partner at ViaWest Group, confirmed the impending sale. “We stepped in as the lender and have provided the borrower a chance to resolve the loan issues,” Schwarz mentioned to the Business Journal. “We hope the current owner can devise a strategy — if not, we are prepared to manage the office space.”

Expansive chose not to comment on the situation.

The eight-story, 77,000-square-foot Heard Building has been located at 112 North Central Avenue since 1919, originally serving as the headquarters for Dwight Heard’s investment and publishing enterprises, including the Arizona Republic. The newspaper operated from there from 1920 until 1948.

Situated in the downtown office submarket, the property is experiencing higher vacancy rates compared to the broader metro area, a trend exacerbated by the pandemic. Additionally, recent increases in interest rates have raised costs for property owners. The downtown submarket has experienced a negative net absorption of 250,000 square feet over the past year, according to CoStar.

Local experts view the Heard Building as a potential candidate for residential conversion. “Multifamily developers remain interested in this market,” stated Connor Devereux, CoStar’s director of market analytics. “It may take some time for businesses to return and capitalize on the talent pool, but currently, it’s not thriving as an office space.”