Washington D.C. is a busy and thriving city with many families and busy workers. Foreclosures can happen in housing areas and neighborhoods that are rapidly growing and changing. The process of a residential foreclosure, however, is pretty different than the process for businesses. Here’s some news on a recent company foreclosure in the D.C. area, and how this news explains what’s happening with commercial real estate in the city.
What’s in the News?
The D.C. area has the highest number of unpaid CMBS loans, which are commercial real estate loans. A large office building owned by Heyman Enterprises in the southwest D.C. area has decided to foreclose. One of the company’s partners owes over $95 million from a CMBS loan taken out in 2006 on the property. The debt expired about a year ago, and it represents one out of 40 unpaid CMBS loans in the D.C. area. This surge of unpaid loans is a result of many 10-year loans that were issued before the recession; these loans projected a much higher occupancy and rents than these businesses were able to accomplish.
In late 2016, the real estate investment trust company Vornado attempted to build a Skyline campus in Fairfax County, Virginia, but their delinquent loans collected to over $2 million, and they were forced to foreclose the construction. These examples of overdue CMBS loans has developed into a $2.1 billion outstanding principal balance for the D.C. metropolitan area. If the state government doesn’t figure out how to repay these CMBS loans soon, there will be many more company foreclosures in the city.