D.C. Department of Veterans Affairs Building’s CMBS Loan Enters Special Servicing

The $102 million commercial mortgage-backed securities (CMBS) loan on PED Investments’ 425 Eye Street NW, home to the headquarters of the U.S. Department of Veterans Affairs’ Office of Construction and Facilities Management, has been sent to special servicing for “imminent monetary default,” according to an alert from Morningstar Credit. 

The alert notes that the building has a “large exposure” to federal office leases arranged by the federal General Services Administration (GSA), with “the majority (64 percent) of the space expiring this month.” The alert noted that the tenant’s failure to provide a renewal 12 months before expiration was a “trigger event,” although PED Investments did provide a $5.5 million letter of credit. At the time of the alert, PED was “still negotiating with the GSA,” according to Morningstar.

A KLNB Washington, D.C., office report from the third quarter of 2021 cited the Department of Veterans Affairs’ lease of 283,242 square feet at the property among its major deals of the quarter.

The seven-year loan was originated by Goldman Sachs on Dec. 7, 2021, with an interest rate of 2.94 percent. At the time, Commercial Observer noted that the refinancing for the property — also known as 425 I Street NW — retired $89 million in existing debt and allowed PED to recoup around $9.6 million in equity, as well as establishing an “accretive leasing reserve” of around $2.5 million, according to information from Fitch Ratings.  

CO also noted that, according to Fitch, Goldman Sachs extended the mortgage at a “conservative” 56.8 percent loan-to-value ratio that was based on an underwritten valuation of $180 million, and that $62.4 million of the loan was set to be securitized in the $625.1 million, Goldman Sachs-led GSMS 2021-GSA3 conduit CMBS deal. A December 2021 release by the Kroll Bond Rating Agency noted that the loan for 425 Eye Street NW was the largest loan in that deal at 10 percent of the total. 

This was one of two CMBS deals cited by Morningstar in Wednesday’s  special servicing alert, the other being Benchmark 2022-B32 Mortgage Trust (BMARK 2022-B32). 

In February 2026, Fitch downgraded BMARK 2022-B32, assigning a status of “negative outlook” to six classes and noting that five classes remained negative. The announcement cited 425 Eye Street NW as “the third-largest contributor to loss.”  

425 Eye Street NW is a 373,450-square-foot, seven-story Class A building in the city’s Mount Vernon Triangle. A recent leasing ad by Colliers puts the building’s rents at $52 per square foot.

An October 2018 article in Commercial Property Executive noted that 425 Eye Street NW was initially completed in 1973 and later underwent “complete renovations,” upgrading to LEED Platinum in 2010. It also said that the building had been sold that month by Paramount Group to Saban Capital Group for $157 million, with EagleBank providing an $81.5 million acquisition loan. It is unclear what the nature of the relationship is between Saban and PED, or if the building was sold again sometime between 2018 and 2021. 

PED Investments could not be reached for comment. Goldman Sachs did not immediately reply to a request for comment.

Larry Getlen can be reached at lgetlen@commercialobserver.com.