Elevated vacancy rates and sluggish leasing activity in Washington, DC, area have landed a string of CMBS loans in special servicing
A $116.5m loan backing the Fair Lakes Office Park in Fairfax, Virginia has been sent to special servicing due to imminent monetary default, according to research and data firm Trepp.
The note, backed by nine office buildings in Fairfax, Virginia totaling 1.25m sq ft, makes up 4.69% of GSMS 2006-GG8 and matures in August 2016.
The property will take a blow in December with the departure of Information technology consultant SRA International, which occupies two of the buildings (264,500 sq ft) and will bring occupancy down to 60%.
The troubled loan follows a string of others in the Washington, DC, area that were recently sent to special servicing, also in large part due to the departures or pending departures of major tenants.
DC area office vacancy rates rose more than three percentage points from 2011 to 17.1% at the end of 2014, according to data from Jones Lang LaSalle, and vacancy rates remain elevated amid sluggish leasing activity. When CMBS loans are tied to buildings with a waning tenancy, it can lead to missed mortgage payments, special servicing and eventually, foreclosures.
About three weeks ago a $108.9m Greensboro Park loan on the special servicer list was granted a second maturity date extension until June 2017, and two other loans backing DC offices were sent to special servicing: a $30.7m Spacenet loan at 1750 Old Meadow Road and another backing the Chevy Chase Center in Chevy Chase, Maryland with a remaining balance of about $87m.
“While the financials for the notes appeared solid, watchlist notes from May indicated that several tenants did not plan to renew their leases in the coming years,” Trepp noted in an emailed memo.
In April, a $46.4m loan tied to the adjacent Willowwood I and II office buildings at Eaton Place in Fairfax, Virginia, backing LBUBS 2006-C6 deal, was sent to the special servicer after a string of missed payments. Occupancy on the pair of five-story multi-tenant buildings had dropped 9% over the course of just three months to 72% by the end of 2014.
The Fair Lakes park is backed by $259m of CMBS debt, which in addition to the GSMS 2006-GG8 securitization includes a $142.4m loan that makes up 7.28% of CD 2006-CD3, which is current on payments as of June 2015.