Fitch: Bethesda Gateway Loan Near “Imminent Default”

Bethesda Gateway via CoStar

Bethesda Gateway via CoStar

The $41.575 million loan on the Bethesda Gateway office building at 7201 Wisconsin Avenue in Bethesda, MD has been transferred to a special servicer due to imminent default, according to Fitch.

Bethesda Gateway is a 149,074 square foot office property with ground level retail in Bethesda’s central business district.

Built in 1986 and completely renovated in 2004, the building has recently lost the tenancy of the Nuclear Regulatory Commission, which vacated its 20,062 square foot space prior to the agency’s lease expiration at the end of November this year.

Watchlist notes from Trepp have said since May that management has three prospects to replace the space being vacated.

In addition to the Nuclear Regulatory Commission, over 40 percent of the building’s leases expire within a year, including Modell’s, the building’s largest retail tenant.

The loan payment on the asset has never been late, but the Debt Service Coverage Ratio (DSCR) is just over 1.00, meaning the property is struggling to generate enough revenue to cover the note, which has nearly three years remaining on its term.

At the time of securitization, the building’s appraised value was $55.3 million.

Bethesda Gateway features an open lobby with high ceilings and a private underground parking facility. It is close to the Bethesda Metro and located on Wisconsin Avenue, which has retail and hotel amenities within short walking distances. The building was awarded an Energy Star label in 2012 for its operating efficiency.