The largest loan in the transaction is for The Federal Center Plaza, a fixed rate loan with a principal balance of $130 million. The loan is secured by the fee simple interest in two adjacent office buildings totaling 725,317 square feet and a controlling interest in a connected, 912-space parking garage in downtown Washington, DC.
The asset has an appraised value of $309 million, which excludes unused development rights, which was part of the collateral and is valued at $28.5 million.
The Federal Center Plaza Loan has a 10-year term and interest only payments for the term of the loan. The Federal Center Plaza Loan accrues interest at a fixed rate equal to 4.1405 percent.
Loan proceeds were used to retire existing debt of approximately $126.2 million and return $1.9 million of equity to the borrower.
Federal Center Plaza Corp and Donohoe Investment Company I are the sponsors of the borrower, Federal Center Office Associates LLC. The non-recourse carve-out guarantor is Federal Center Plaza Corporation.
Federal Center Plaza Corporation owns 53.6 percent of the borrower, Donohoe Investment Company I owns 13.9 percent and the remaining 32.5 percent is owned by 10 different investors each controlling less than 10.0 percent of the borrower.
Federal Center Plaza Corporation and Donohoe Investment Company I are primarily controlled by members of the Donohoe family and Donohoe family trusts.
The Donohoe family founded the Donohoe Companies (TDC) in 1884, making it the oldest full-service real estate organization in the Washington, DC region and one of the largest private companies in the Washington, DC metropolitan area. TDC’s current portfolio includes approximately 6 million square feet of commercial property and 858 multifamily units.
Federal Center Plaza Corporation has a current real estate portfolio comprised of ownership interests in 22 properties, including the Federal Center Plaza Property and the adjacent Holiday Inn Capitol – Washington, DC.
The Federal Center Plaza Property is located at 400 & 500 C Street SW between the United States Capitol and the Washington Monument, approximately two blocks south of the National Mall and one block each from the Federal Center SW and L’Enfant Plaza Metrorail stations.
Constructed in 1981 by the Donohoe Companies, the Federal Center Plaza Property consists of two adjacent 8-story office towers leased to fifteen tenants, and a 57.1 percent interest in a three-level 912-space subterranean parking garage located beneath the office buildings. The remaining 42.9% interest in the parking garage is owned under common control with the adjacent hotel, which is owned by an affiliate of the Sponsors.
400 C Street SW and 500 C Street SW are 100 percent occupied. 400 C Street SW and 500 C Street SW, along with the Holiday Inn Capitol – Washington, DC, share a common corridor which connects their lobbies, as well as a common exterior plaza. Office space represents approximately 95.4 percent of the total NRA and ground floor retail represents approximately 4.6 percent of the NRA.
The Federal Center Plaza development (which includes the adjacent Holiday Inn Capitol Inn – Washington, DC) also includes approximately 200,000 square feet of unused development rights and 650,000 square feet of additional FAR, density that could be realized subject to government approval, 510,302 sq. ft. of which is attributed to the Federal Center Plaza Property.
Since originally developing the Federal Center Plaza Property in 1981, the Sponsors have invested $8.3 million in capital improvements and $14.0 million in tenant improvements. In addition, the two largest tenants, the Department of State and FEMA have collectively invested approximately $29.0 million since 2008 in their respective spaces.
The Department of State leases 388,523 square feet and utilizes its space as an extension of its headquarters, which is located at 2201 C Street NW, 2.2 miles from the Federal Center Plaza Property. The DoS has been a tenant at the Federal Center Plaza Property since 1981 and recently renewed its lease for a five-year term. Since 2008, the DoS has invested a total of $9.6 million in capital improvements to its space.
The Federal Emergency Management Agency leases 302,946 square feet, at the 500 C Street SW Property which serves as its headquarters. FEMA has been a tenant at the Federal Center Plaza Property since 1981 and has invested a total of $19.0 million in capital improvements in its space since 2008. FEMA has a one-time right to terminate its lease effective August 16, 2017 with 18 months notice.
The Federal Center Plaza Property is located in the Southwest submarket of Washington, DC, bound by the National Mall to the north, Interstate-395 / Interstate-295 to the south, 14th Street to the west and South Capitol Street to the east.
As of December 2012, the Southwest office submarket was 94.4% occupied.
An appraiser determined a comparable group of GSA leases within the submarket with base rents ranging from $43.50 to $50.71 and lease terms ranging from one year to 15 years. The Department of State and FEMA U/W base rents are approximately 2.8% and 17.2% below the comparable set average of $46.04.
The Phase I environmental report dated January 3, 2013 recommended the development and implementation of an asbestos operation and maintenance plan at the Federal Center Plaza Property, which is currently in place.