This week’s column examines loan extensions sought for an office complex in Northern Virginia, a Miami building heading for a bankruptcy sale, and a default on an Atlanta hotel. Read the entire piece by clicking “read more” below.
Owners seek extensions for Northern Virginia office loans: Tamares Group and Atlantic Realty Cos. have engaged Iron Hound Management to begin loan extension negotiations across the four office buildings that make up Plaza America in Reston, Virginia.
As part of the decision, the owners have asked to have two separate CMBS loans on the properties moved to special servicing, according to Stream Realty Partners, the firm recently hired to provide leasing services for the properties.
Plaza America Towers 1 through 4 are located at 11700, 11710, 11720 and 11730 Plaza America Drive. The four buildings are currently split across two loans.
Towers 3 and 4 are subject to a $79.3 million loan, which was extended for two years in late 2023 but still has two 1-year extension options remaining. Towers 1 and 2 are subject to a $125 million loan that has a scheduled final maturity of August 2026.
The loans’ move to Iron Hound’s special servicing is not indicative of financial distress, according to a statement from Stream Realty. CMBS data shows scheduled payments are being made on time.
“Moving into special servicing is a proactive and strategic step to secure long-term stability at Plaza America,” Jeff Roman, co-managing director at Stream Realty, said in the statement. “With limited trophy office space remaining in the area, this campus is exceptionally well-positioned within the Dulles Corridor, and we continue to see meaningful leasing momentum that supports ownership’s long-term investment strategy.”
“Plaza America remains a key asset within our portfolio, and we are committed to its long-term success," added David Ross, partner and president of Atlantic Realty. "As we move through the loan extension process, we look forward to making additional capital investments that will further elevate the tenant experience and ensure the campus continues to meet the evolving needs of today’s office users.”
Miami office building nears bankruptcy sale: Morningstar DBRS has downgraded its credit ratings on two classes of CMBS deal A10 2023-GTWY that hold an $80.5 million loan on the Gateway at Wynwood, a 12-story, 220,900-square-foot office building in Miami. It also placed all classes under review with negative implications.
The actions reflect concerns about the financial struggles of the borrower, R&B Realty Group. The firm defaulted on debt payments and subsequently filed for bankruptcy, according to Morningstar DBRS. The bond rating firm also said there is potential for value deterioration, following delays in finalizing a business plan for the property.
R&B Realty, also known as Rose & Berg Realty, did not respond to CoStar News' request for comment. The company filed for bankruptcy reorganization in September 2024, just two months after the 1-year-old Gateway at Wynwood loan was transferred to special servicing, according to CMBS data.
Litigation is ongoing, and a bankruptcy sale is expected to close this month, according to Morningstar DBRS. However, the borrower could file further motions objecting to the sale that may cause further delays.
When the 2023 loan was originated, the property was valued at $162.6 million, according to Morningstar DBRS. An updated appraisal from October 2024 put the value at $89.6 million.
The property is close to half vacant and has 164,000 square feet of available space, CoStar data shows.
Overall softness in Miami’s Wynwood Arts District, where the property is located, has affected stabilization efforts. The market has seen its vacancy rate nearly double over the past five quarters to more than 24%, according to CoStar data.
The low in-place occupancy rate has kept cash flow well below expectations, with the loan servicer reporting net operating income of $5.6 million for 2024.
Atlanta hotel owner defaults: Sotherly Hotels said it received a notice of default for a $37.9 million loan secured by its 326-room Georgian Terrace property in Atlanta.
Sotherly’s subsidiary, Soho Atlanta, failed to make the final payoff when the loan came due last month, the company said.
The loan servicer plans to take actions it deems appropriate to collect the debt, including seeking foreclosure, according to Sotherly. The hotel owner has engaged a consultant to negotiate a loan extension. Meanwhile, Sotherly said it will continue to make monthly interest payments.
“Extensions of CMBS loans typically follow a formal process that includes voluntarily being transferred to special servicing, a formal default notice being issued, and a negotiation process being entered into; we are currently in the negotiation phase and being assisted by our CMBS consultant," Dave Folsom, president and CEO of Sotherly, said in a statement. “Although never welcome, the recently announced default notice at Sotherly’s Georgian Terrace hotel in Atlanta has been anticipated.