Jemals' K Street Office Building Lands In Special Servicing
The loan Douglas Development took out to refinance a 44K SF office building on downtown D.C.’s K Street corridor is now in special servicing. It is the latest in a series of Douglas’ loans that have faced financial issues over the past year.
The D.C.-based real estate firm, run by the Jemal family, took out a $13M loan in 2015 for the property at 1424 K St. NW, according to Morningstar Credit.
Commentary from special servicer LNR Securities Holdings LLC, posted in Morningstar's CMBS loan database, says the loan wasn't paid in full when it matured on Feb. 6. There is $8.7M left on the loan, according to the database.
“It shouldn’t be any surprise that a downtown office building in DC that is coming off of a low rate CMBS loan maturity has been sent to special servicing,” Douglas Development principal Norman Jemal said in a statement to Bisnow. “We are in discussions with the special servicer and will work to a favorable outcome.”
The property was 80% leased as of September, down from 93% when the loan was originated, according to Morningstar. The building's tenants include an M.M.LaFleur showroom on the ground floor and nonprofit Partners of the Americas, according to their websites.
“I’d say that a lack of leasing momentum and a bearish outlook on the DC office market likely led to the loan’s inability to refinance,” Morningstar Credit Vice President Sarah Helwig told Bisnow in an email.
“The property has not been able to gain much leasing traction over the past few years, leading to years of weak occupancy,” she said, adding that it will undergo additional rollover over the next few years.
Just over half a mile away, Douglas’ 16,700 SF property at 722 12th St. NW was slated for a foreclosure auction in January, which the lender has rescheduled to evaluate a potential sale, according to Morningstar servicer commentary on that property's loan.
In August, Douglas defaulted on a $51.6M CMBS loan backed by 14 mixed-use properties in the D.C. area. Two of those properties — a vacant building in D.C.’s Chinatown neighborhood and a Rockville property that houses a paint store — have been sold to partially pay down the loan, according to the database.
Douglas also offloaded three properties in the last days of 2024, selling two Ivy City properties and one downtown property for just over $96M.
Douglas Development owns more than 14M SF of residential, retail and office developments, according to its website, with the vast majority of its property in the District.
The General Services Administration selected Douglas in 2021 to build a 1.2M SF headquarters for the Securities and Exchange Commission in NoMa, a deal that was terminated just over three years later.
