The debt tied to Regions Center, a Shreveport premier Class A office property, and another office tower once owned by the same family business in New Orleans, has been downgraded. KBRA, the credit rating agency that issued the downgrade, said the estimated loss from the Regions Center was 7.3%.
The Regions’ properties, the 25-story Tower and 16-story Regions Building in the 300 block of Texas Street, along with the attached 1,000 space parking garage in the 600 block of Market Street, are financed through Commercial Mortgage Backed Securities.
CMBS are commonly used on high-dollar commercial properties that may be outside a bank’s comfort zone and focus solely on the property’s cash flow.
“The downgrades follow sharp valuation declines, maturity defaults and foreclosure sales,” reports CoStar, a real estate information company.
Orest Mandzy, the managing editor of commercial real estate direct for Trepp Inc., a leading provider of data and analytics for the commercial real estate and banking markets, says the downgrade relates to the property’s bottom line.
Regions Tower in Shreveport, La., Tuesday, Aug. 20, 2024.
“I’m looking at the financials. We have financials through June of 2025; the building was 71% occupied and not generating enough cash flow to service its debt. So I’m going to get kind of very fundamental, very basic, and if it’s kind of redundant and you’ve heard this a million times, but a building is worth how much it generates, right?”
“A building’s value is not how much it costs to build, but it’s the quality and the value of the tenant role, how much tenants are paying and the duration of their leases.”
“There has been a lot of lease rollover.”
The property went through sheriff’s auction on March 11. A local bidder group topped out at $15.5 million. The company that holds the note, Wilmington Trust, National Association, a subsidiary of M&T Bank, bid $15.75 to keep the property, which had been appraised for $11.4 million in 2025. According to Trepp, $32.88 million is owed on the Regions property.
Shreveport commercial property appraiser Robert Russell said the fact that the property could not be built now for $11.4 million or that it appraised for such a low amount is not taken into consideration in the downgrade. “They definitely don’t care what it cost to build,” he said.
“The investors want return on their investment. They want return that is above and beyond the debt service. There’s other expenses and they’ve got to pay themselves. So, when you get down to where you are just barely covering debt service, you’re already in trouble.”
“The smart people knew these properties were in trouble, I mean, because the building gets older every year, operating expenses go up.”
It has been a rough few years for the Regions Center.
SWEPCO employees put up electrical disconnect notices in the Regions Tower atrium on August 21, 2024.
In August of 2024, SWEPCO sent employees to the building to post notices that service was going to be turned off.
There was also a disconnect notice from Centerpoint, and money was owed for city-provided water service and to the property’s security services provider, who stated that it planned to “vacate due to nonpayment.”
Three local companies including Gene Nims Builders, Storer Services LTD and Cowtown Materials, Inc., also filed liens in 2024 against the building’s owners for money owed.
The Wilmington Trust, National Association stepped in, paying more than $420,000 to SWEPCO, and handled other bills owed by the Hertz Investment Group. That was the tipping point, said the lender, which filed a lawsuit sending the property into receivership in 2024.
The guarantors for the property, Isaac and William ‘Zev’ Hertz and Sarah Hertz Gordon, were unable to make payments on the $38,250,000 loan. The Hertz Investment Group had purchased the Regions property in September of 1999 for $24,968,507.
What a difference the years have made. Manzy said the property was appraised for $51 million in 2017. Then, it generated four times as much cash flow as it does currently.
The Regions Tower in downtown Shreveport, La.
“At the time, the building was generating, let’s call it $3.96 million.” He said. Now, rents are lower and vacancies are higher, and the current owner, the Wilmington Trust, is not in the business of owning buildings.
What the Trust wants now
Mandzy sids loans are repackaged into bonds and sold. “Proceeds of the bonds go back to the lenders. The lenders make additional loans, then they securitize those. So it’s kind of, it’s like a machine, basically.”
“The Trust’s mandate now is to maximize, to get as much of that $32.88 million as possible for bond holders in order to make them as whole as possible.”
The market for Class A office space in a number of cities around the U.S. is improving markedly, says Mandzy. “It’s a totally different market than it was two years ago.”
He believes the value of office space plummeted after 2020 not so much because of COVID work-from-home options, but because of a spate of overbuilding in anticipation of leasing demand that never occurred. “Everything is always supply and demand,” he said. According to Mandzy, the demand is now catching up with supply in some markets.
Russell is not optimistic that downtown property demand has caught up. “Southeast Shreveport, the office buildings are 100% occupied at good rents. I mean, it’s a trend.”
“It’s just a very complex issue, but the whole deal is that demand for office space is down nationwide, and we’re a bunch of little fish here, and we maybe get hit a little bit harder than some other locations.”