Goldman Sachs’ $102M Loan Refis Office Asset in Downtown Washington, DC
By Mack Burke December 13, 2021 4:29 pm
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Los Angeles-based PED Investments has nabbed $102.2 million in debt from Goldman Sachs to refinance its office property at 425 I Street NW in downtown Washington, D.C., according to ratings agency analysis of the transaction.
The seven-year, interest-only commercial mortgage-backed securities (CMBS) loan retires about $89 million in existing debt and allows PED to recoup about $9.6 million in equity, according to information from Fitch Ratings. An “accretive leasing reserve” of about $2.5 million was also established as part of the financing, per Fitch.. The loan, which will pay interest at a rate of 2.94 percent, was originated on Dec. 7.
Goldman Sachs extended the mortgage at a conservative 56.8 percent loan-to-value ratio, based on an underwritten valuation of $180 million — underpinned by a $11.1 million net cash flow (NCF) figure and a 10.9 percent NCF debt yield, according to Fitch data.
A $62.4 million portion of the loan is set to be securitized in the $625.1 million, Goldman Sachs-led GSMS 2021-GSA3 conduit CMBS deal. The remaining balance will likely end up in a future securitization, per Fitch.
The roughly 374,700-square-foot office property was built in 1973 and is situated in D.C.’s Mt. Vernon Triangle neighborhood, just east of the White House and nearby a variety of cultural attractions and entertainment venues, such as the Capital One Arena. About $25 million was deployed into renovating it in 2010.
More than 68 percent of the property’s net rentable area (NRA) is occupied by investment grade tenants, with the federal government housed in a significant portion of the asset, according to Fitch. The U.S. Department of Veterans Affairs occupies about 64 percent of the NRA, on a lease that expires in June 2026; the agency has been in that office space for a decade and has invested more than $38 million into it.
The Medicare Payment Advisory Commission — or MedPAC — occupies more than 14,000 square feet, or about 4 percent of the property’s NRA, the Fitch analysis indicates. MedPAC is an independent government agency formed in 1997 through the Balanced Budget Act that essentially analyzes the country’s Medicare program and advises the U.S. Congress on it, from a policy perspective; all 32 of its employees work out of the space.
In its analysis, Fitch pegged the asset’s occupancy rate at 76.7 percent, which is markedly under the submarket’s average occupancy rate of 85.4 percent, according to third-quarter data from Reis that was cited by the rating agency.
PED Investments could not be reached. Goldman Sachs was unable to comment prior to publication.
Mack Burke can be reached at mburke@commercialobserver.com.
