|Unpaid Principal Balance||
Jones Lang LaSalle Americas, Inc (“JLL”) is pleased to offer for sale a matured commercial mortgage loan with a current unpaid principal balance of $37,510,973 (the “Loan”) secured by a first-lien deed of trust on the 151,300-SF office building located in the East End submarket of Washington, DC (the “Property” or “Collateral”).
The Loan was originated in June 2016 for an initial three-year term maturing May 31, 2019. After multiple short-term loan extensions, the Loan is now in default as the Borrower failed to pay off the Loan upon maturity on April 1, 2022. A hard lockbox with a full cash flow sweep is in place.
The 13-story office building is currently 100% occupied by three agencies for the District of Columbia, acting through the General Services Administration (“GSA”) via a single lease. However, the tenants are currently occupying their spaces as holdover tenants as the original lease has expired.
The offering presents investors with a prime opportunity to acquire a note at an attractive basis secured by a well-located office building that has significant upside either through continued leasing as an office property or a potential redevelopment into a multifamily or mixed-use development.
INVESTOR OPTIONALITY - The Loan is currently in default, presenting investors with workout optionality via a loan modification or pursuit of title to the Property.
DESIRABLE BASIS - An investor would benefit from acquiring the note at a significant discount to the replacement cost.
RE-LEASE OR REDEVELOPMENT POTENTIAL - While the Property is 100% leased and generates approximately $5MM of net operating income, the tenants are currently month-to-month. Limited availability of sufficient square footage in competitive buildings suggests that the tenant will remain in-place for the foreseeable future while allowing for the development of a longer-term strategy.
STRATEGIC LOCATION TO TENANT’S NEEDS - The Property is located within walking distance of the Superior Court of the District of Columbia and the US District Court for the District of Columbia. Due to the nature of their functions, the tenants need to be housed within close proximity to the courts.
JUDICIARY SQUARE / EAST END OFFICE MARKET - With more than 45.9MM SF, the East End submarket is the largest in Washington, DC. While the submarket has an overall vacancy rate of 19.4% as of the end of Q2, there is limited large block availability in the Judiciary Square micro market, with only 1 building having more than 150,000 SF of contiguous space available. Government-oriented office buildings in the Judiciary Square micro market outperform the market with long-term vacancy rates of 5% or less.