Finance  ·  CMBS

Lender Takes Control of Dulles View Office Following CMBS Loan Auction

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The Dulles View office complex in Herndon, Va., has been returned to its lender after the owner defaulted on a $51 million commercial mortgage-backed securities (CMBS) loan last year, according to Fairfax County property records.

Landlord Gemini Rosemont purchased the 359,689-square-foot property in 2013 for $100 million and initially secured a $60 million loan, which was later collateralized in a $1.3 billion CMBS deal led by JPMorgan Chase and Wells Fargo

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The loan backing the two-building complex at 2551-2553 Dulles View Drive went to auction in December, and the special servicer placed the winning bid on behalf of the CMBS trust, according to an update from CMBS research firm Trepp. The estimated value of the property at the time of the auction was $47.5 million, according to a deed recorded in Fairfax County.

Rosemont Realty was the original buyer, but joined forces with Hong Kong-based Gemini Investment in 2015 to form Gemini Rosemont.

The buildings were 80 percent occupied when the loan matured in April 2023, and its appraised value was lowered to $50 million shortly after, per Trepp. Occupancy had slipped to 75 percent as of September 2023, according to Morningstar. 

The property was in trouble before the pandemic, however, since five of its largest tenants had leases expiring between 2019 and 2021, including Time Warner, which left early, leading to an occupancy rate of 48 percent in 2018. Still, the landlord managed to bring the property up to 80 percent occupied. Annual revenue also recovered from a low of $4.4 million in 2020 to $9.4 million in 2022, according to the Washington Business Journal, citing loan servicers. But it was still not enough to fend off foreclosure.

Current tenants at the property include tech consultant Procentrix, national security firm KeyW Corporation and government contractor Akima, which each occupy roughly 13 percent, according to Morningstar. Two more tenants, LinQuest Corporation and Amdocs, occupy 8 and 6 percent, respectively.

Gemini Rosemont’s loan makes up 15.8 percent of the collateral behind the JPMCC 2013-LC11 deal. It previously made up a smaller percentage of the total, but other assets in the deal have faced difficulty, including a two-building office complex in Denver, which went into special servicing back in 2020, according to Trepp.

This is the latest office asset in the Washington, D.C., area to face distress, as the pain in the office market begins to take effect. A Trepp analysis found that almost 80 percent of office loans in D.C. were “criticized” at the end of 2023, meaning there was some concern of default risk.  

Chava Gourarie can be reached at cgourarie@commercialobserver.com.