D.C. Office Portfolio Heading to Foreclosure Auction

A collection of office buildings in Washington, D.C.’s L’Enfant Plaza that were written off by JBG Smith (JBGS) last year are now slated for foreclosure auction. 

A loan on the four properties — at 470 L’Enfant Plaza SW, 490 L’Enfant Plaza SW, 955 L’Enfant Plaza SW and 429 L’Enfant Plaza SW — had an outstanding balance of nearly $238 million, according to the Business Journals, which cited a foreclosure notice filed this week with the D.C. Recorder of Deeds. The properties are part of the BXMT 2021-FL4 commercial real estate collateralized loan obligation deal and the auction is set for Oct. 23, per the Business Journals.

JBG Smith reported at the beginning of last year that its investment in the roughly 888,000-square-foot portfolio had been written off, and that the Bethesda, Md.-based firm had ceased including them in its operating metrics. 

“As of Dec. 31, 2022, our investment in the L’Enfant Plaza assets was zero, and we have discontinued applying the equity method of accounting on these assets after Sept. 30, 2022, as we have not guaranteed their obligations or otherwise committed to providing financial support,” the firm said in its February 2023 report to the Securities and Exchange Commission. 

A spokesperson for JBG Smith declined to comment.

At least some of the building’s distress is likely attributable to the intent by the General Services Administration (GSA) to downsize the office footprint of the National Transportation Safety Board (NTSB), which had leased 251,515 square feet across 470 and 490 L’Enfant Plaza SW, another building in the plaza and a separate delegated lease in Northern Virginia, according to a 2023 lease prospectus. 

The NTSB’s leases are set to expire in late November of 2025, with the delegated lease having expired in July of last year. It’s unclear whether the prospectus has since been approved by Congress. 

The foreclosure is also a symptom of the GSA’s effort to reduce the federal government’s office portfolio as a whole, and of mounting office distress throughout the District. 

Just earlier this week, for example, the GSA identified a new headquarters location for the Court Services and Offender Supervision Agency, which will consolidate a number of its offices into one 198,000-square-foot complex in Northwest D.C. 

Or take asset management firm BGO, which surrendered a nearly 291,000-square-foot D.C. office building to Brookfield Asset Management in June. State Farm Life Insurance that same month acquired a 10-story office property three blocks from the White House at a foreclosure auction following its former owners’ default. 

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