Finance  ·  Distress

D.C. Office Building Handed Back to Lender in Lieu of Foreclosure

Less than two-thirds of The Portrait Building is currently occupied

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A Downtown Washington, D.C., building has traded hands in lieu of foreclosure, the latest example of the ongoing office distress in the nation’s capital. 

An affiliate of Clarion Partners handed over 701 Eighth Street Northwest — known as The Portrait Building due to its close proximity to the National Portrait Gallery — to its lender, an affiliate of Atlanta-based Voya Investment Management

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Clarion acquired the 135,000-square-foot property in early 2013 for $98.5 million, aided by a $59.1 million loan from HSBC Bank, according to the Business Journals, which first reported the news. Clarion refinanced the building in early 2020 with a $41 million loan from Voya, per property records.

Over 81 percent of that principal loan balance, about $33.3 million, remained outstanding before Clarion handed over the building, per Business Journals. The city’s assessed value of the property for this year meanwhile is $57.3 million, or nearly 42 percent less than what Clarion paid for it. 

Clarion maintains an office at the property, alongside fellow tenants Boston University Federal Relations, architecture firm DLR Group and law firm Locke Lord. Yet less than two-thirds of the building is currently occupied, according to leasing information from Avison Young, which markets the property. 

Representatives for Voya declined to comment. Clarion did not immediately respond to a request for comment. 

The Portrait Building is yet another casualty for D.C.’s foundering office market in the wake of remote-work trends that accelerated during the COVID-19 pandemic. Last month, an affiliate of Barings also turned over its own D.C. office property, the 171,000-square-foot Chevy Chase Plaza, to lender KKR in lieu of foreclosure. 

Office leasing volumes in the District ticked up last quarter, largely thanks to The Washington Post renewing its roughly 300,000-square-foot lease at One Franklin Square, according to a quarterly market report from Savills. Yet, leasing volumes are still drastically behind pre-pandemic averages, while availability reached a record high of 22.6 percent. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.