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Monday Properties Defaults On Loan Backed By Billion-Dollar Rosslyn Office Portfolio

Monday Properties is at risk of losing seven high-rise office buildings in Rosslyn, Virginia, just across the river from D.C., after it missed a payment on a piece of an $841M loan, which matures in less than two weeks.

The skyline in Rosslyn, Virginia, which features several buildings in Monday Properties' seven-building portfolio, including 1100 and 1101 Wilson Blvd., left.

The owner went into monetary default on a $150M mezzanine loan backing the 2.1M SF portfolio after it failed to make its May payment, according to information shared with Bisnow by Morningstar Credit. Monday Properties' $691M senior loan is expected to go to special servicing as it hasn't been able to refinance it ahead of the June 9 maturity date. 

The senior CMBS loan has extension options, but the landlord hasn't met the conditions necessary to extend the maturity, per Morningstar. A Monday Properties spokesperson confirmed to Bisnow that the loan will transfer to special servicing ahead of the maturity. 

"Elevated interest rates and impaired real estate values are causing significant strain on commercial office owners and investors globally. As with many other owners, we are grappling with the challenges lingering from the pandemic and exacerbated by economic headwinds," the spokesperson said.

"We anticipate a collaborative process with the assigned special servicer for this loan and will be committed to finding solutions that best serve the interest of all stakeholders."

The borrower's inability to refinance its loans was more a factor of the lack of available debt for office properties today than underlying problems in the buildings themselves, Morningstar Credit Head of CRE Analytics David Putro said in an interview. 

"It's becoming increasingly difficult for office loans to get refinancing right now," Putro said. "So this is one where I don’t think there were any acute performance concerns up until this moment, but just the amount of debt that’d have to get refinanced or extended, market conditions are not favorable for that to get done."

The loans were originated in 2021 by two Goldman Sachs entities  and securitized as CMBS transactions. Monday Properties owns an 11% stake in the portfolio, with the remainder owned by US Real Estate Opportunities I LP, a fund formed by Goldman Sachs Group and two sovereign wealth funds, according to Morningstar

A Goldman Sachs spokesperson declined to comment. 

The loans back seven office buildings totaling 2.1M SF that were developed between 1964 and 1982: 1000 Wilson Blvd., 1100 Wilson Blvd., 1101 Wilson Blvd., 1200 Wilson Blvd., 1501 Wilson Blvd., 1515 Wilson Blvd. and 1701 North Fort Myer Drive. 

The portfolio was valued at $1.17B at the time the loan was initiated in 2021. 

As of December, the portfolio's occupancy was 75%, down from 78% when the loan was initiated, and its cash flow dropped about 3% over that same period, according to Morningstar. 

The 31-story tower at 1100 Wilson Blvd., part of Monday Properties' seven-building portfolio.

The portfolio's largest tenant is the U.S. Department of State, and it includes private sector companies such as the government contractors that concentrate in Rosslyn due to its proximity to the Pentagon

The portfolio has a floating-rate loan, which has made it vulnerable as the Federal Reserve has hiked rates over the last year. The portfolio's interest rate rose from just under 10% in July 2021 to 14.75% as of last month, according to Morningstar. For the $150M mezzanine loan specifically, this meant its interest payments rose from $921K to $1.37M over that time frame. 

The loans had a two-year term when they were initiated in 2021, and while they came with three one-year extension options, those options require the borrower to meet a series of conditions that it was unable to satisfy in this market, according to Morningstar. 

Many office owners are facing these same unfavorable conditions that are leading to distressed situations. Brookfield has defaulted on multiple nine-figure loans tied to buildings in the D.C. suburbs and in Los Angeles. Last month, a $485M Tishman Speyer loan backed by a building on New York's Park Avenue went to special servicing

“In the current environment we’re seeing many, many offices, sometimes regardless of performance, that are moving to special servicing at maturity because financing to take them out is not there," Putro said. 

Monday Properties, run by CEO Anthony Westreich, who's based in New York, and Managing Partner Timothy Helmig, who is based at 1000 Wilson, is the largest office owner in Rosslyn and one of the largest in the region. It will now try to save its portfolio through the special servicing process. The landlord can try to reach an agreement to restructure the loans and avoid handing the properties back to the lender.

“They can work with the special servicer to get some concessions, change the payment stream, find a way to put some dollars in,” Putro said. “So it’s not necessarily an indication that they would walk away, but up against a hard maturity date there’s really no alternative. They’re not unique in saying, 'Let it go to special servicing and we’ll attempt a workout from there.'”  

Monday's total portfolio spans 5.2M SF, including several offices and other buildings that aren't part of the Rosslyn portfolio. Two other office buildings in Rosslyn were separated from the portfolio in 2017 and have been slated for demolition to make way for a new development, but that has yet to move forward

Monday also developed 1812 North Moore, one of the tallest towers in the D.C. region, where Nestlé's moved its U.S. headquarters in 2017.