Gayle Benson pictured September 2021 at New Orleans Saints training ground in Metairie.

Gayle Benson, pictured in September 2021 at New Orleans Saints training ground in Metairie. Her real estate arm has taken over running of two regional office towers from troubled Hertz Investment Group.?(Photo by Chris Granger | The Times-Picayune | The New Orleans Advocate)

Gayle Benson's real estate arm has taken over the operation of two regional office towers from the struggling Hertz Investment Group, one of which is the 39-story Energy Centre in New Orleans.

Corporate Realty, a New Orleans-based real estate brokerage and management firm that?Benson bought in December 2021, began running the nine-story Pinnacle building in Jackson, Mississippi, last week when it was appointed by the lender, which had foreclosed on the property after Hertz defaulted on the mortgage.

The Pinnacle building in Jackson, Mississippi

The Pinnacle building in Jackson, Mississippi. The nine-story office tower was owned by Hertz Investment Group but was foreclosed by the lender, which brought in Gayle Benson's real estate arm to run it.

Last month, Corporate Realty was also put in charge of the Hertz-owned Energy Centre, though that property hasn't been foreclosed on and Hertz is still negotiating with the lender while it tries to refinance the mortgage on the building.

After a debt default, Louisiana law requires?a receiver to be appointed to manage the property while the debtor and lender are given time to negotiate. The receiver appointed Corporate Realty in March to manage the Energy Centre.

Corporate Realty's president, Mike Siegel, said the company is glad to have been asked to manage the two buildings. "But I would much rather it be a better market where there is a lot of activity buying and selling these properties," he said.

The company manages a dozen properties in New Orleans, with the Pinnacle building in Jackson being the only out-of-state one in its portfolio.

The Hertz group, founded in 1977 by Judah Hertz, who grew the company to become one of the largest owners of office buildings in medium- and smaller-sized U.S. cities, has run into financial difficulties since he died in 2021. The highly leveraged real estate operator has been hit hard by shrinking office usage since the COVID pandemic, which was accompanied by a sharp spike in the cost of borrowing and other expenses associated with running buildings.

New Orleans and Jackson are two of Hertz's most important markets, where the company owns a dominant share of the major office skyscraper square footage in both cities.

As well as the Energy Centre, Hertz owns four of the 10 other Class A office towers in New Orleans, including the largest: the Hancock Whitney Center on Poydras Street, with 1.25 million square feet. In total, Hertz owns more than 3.6 million square feet of office space in the city.

In Jackson, Hertz owns six office towers, including the largest in the city: the 22-story Regions Building.

Office shrinkage

Hertz has been caught up in the widespread downturn in the U.S. office market, which began before the pandemic, according to global real estate services firm Jones Lang LaSalle. A combination of tax breaks, prolonged low interest rates and a glut of short-lived startup companies had spurred too much office building in recent decades, JLL said.

In its latest quarterly U.S. office market report on Tuesday, JLL said that the office glut seems to be waning a bit but mainly because of an "exponential" rise in conversions of buildings into other uses.

That was the fate of one of the earliest foreclosures on a Hertz-owned building during the current downturn. In 2021, the 35-story tower at 100 E. Wisconsin Ave.,?was foreclosed on and last year the new owner announced it would be converted into 350 luxury residential units.

Zev Hertz, who took over running the firm after his father's death, has been trying to work out similar conversion deals where possible. That includes the Gateway Center in Pittsburgh, which he is looking to convert to apartments.

Hertz confirmed the details about the Energy Centre and Pinnacle building but declined to comment further.

The article has been updated to correct the spelling of the Energy Centre.

Email Anthony McAuley tmcauley@theadvocate.com.

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