Reston Office Property Defaults on $38M CMBS Loan After December Maturity
By Keith Loria January 24, 2024 4:59 pm
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The owner of the Reston Eastpointe office building in Reston, Va., has defaulted on a $38 million commercial mortgage-backed securities loan that matured Dec. 1.
A joint venture of Lincoln Property Company, Ritz Banc Group and Masic acquired the 195,890-square-foot property in 2016 for $58 million, with JPMorgan Chase (JPM) providing the $38 million acquisition loan.
The CMBS loan went into special servicing ahead of the maturity deadline in December after the lender sent a notice of default, according to the Morningstar Credit database. The news was first reported by Bisnow.
The building has a checkered occupancy history since year-end 2020, according to Morningstar. Early in the pandemic, occupancy waned to 56 percent and stayed at that level through 2021. In 2022, leasing increased to 68 percent and hit a high of 73 percent midway through 2023.
Over this period, the debt service coverage ratio hovered below the break-even point, with a three-year high-water mark of 1.39, achieved in the trailing 12-month period that ended June 2023.
Despite the modest financial improvements, the property was facing the lending markets with interest rate headwinds and less-than-stellar occupancy at a time when lenders were looking for more equity and a higher going-in debt service coverage than when the loan was made, a Morningstar analyst said.
“Our opinion of value currently is about a 40 percent discount to the original appraised value, and yields a 100 percent LTV on a likely scenario and about 150 percent LTV in our current bearish scenario,” the analyst told CO. “If the borrower has some leasing traction, an extension could be an outcome that would allow for some stabilization. But I would venture a guess that current lending standards were probably too much under current conditions.”
The building sits on 5.7 acres at 11091 Sunset Hills Road. Tenants include the Northern Virginia Chamber of Commerce, aerospace company BAE Systems, and federal defense contractor ASRC Federal Holding. It is currently 73 percent occupied, according to Morningstar.
Requests for comment from the owners and lender were not immediately returned.
Keith Loria can be reached at Kloria@commercialobserver.com.
