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Tuesday, 26 May 2015

CMBS Loan Against Watergate Office Space Sees Low Coverage; Nears Maturity

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Commercial Real Estate Direct Staff Report

The $64.2 million CMBS loan against two buildings with 261,084 square feet of office and retail space at Washington, D.C.'s Watergate complex is coming due in six months and Morningstar Credit Ratings has warned that it might face challenges getting refinanced in full.

But that risk is being mitigated by relatively strong recent leasing activity at the property.

The Horsham, Pa., rating agency warned that the property generates only about 40 percent of the cash flow needed to fully service its CMBS loan, which is among the largest in the collateral pool for GS Mortgage Securities Corp. II, 2006-GG6. The loan amortizes on a 35-year schedule and pays a 5.43 percent coupon.

What's more, earlier this month, three floors of an attached parking garage had collapsed, forcing the evacuation of 2500 and 2600 Virginia Ave., the two buildings that comprise the collateral for the CMBS loan.

Tenants that occupy the 199,603 sf of office space securing the CMBS loan since have been allowed back into their spaces. But most of the 61,481 sf of the property's retail space remains inaccessible. While the parking garage isn't part of the collateral for the CMBS loans, a total of 314 parking spaces are ground leased to Penzance Cos., the owner of the office and retail space.

According to Morningstar's analysis, the CVS store in the retail space, which takes up 13,000 sf, still hasn't re-opened.

The two-building property, which is part of a six-building complex that also includes a hotel that's being renovated, last year was 81 percent occupied. Morningstar projects that occupancy should climb slightly by the time the CMBS loan comes due in November. It noted that 25,000 sf were leased to Sage, a publishing company, in January.

Despite the property's weak cash flow - $2 million last year - the property is still likely worth substantially more - as much as $149 million, according to Morningstar's analysis - than its mortgage's balance.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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Additional Info

  • Syndicate to Realpoint: No
  • Cities: Washington
  • States: District of Columbia
  • Sector: Office
  • Private: No
Read 749 times Last modified on Thursday, 28 May 2015

Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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