Fitch: $225M in Loans on Lincoln Square in DC Face Imminent Default

Lincoln Square

Lincoln Square

Two loans totaling $225 million that back the Lincoln Square property at at 555 11th Street, NW in Washington, D.C. have been transferred to a special servicer due to imminent default, according to Fitch.

According to Trepp, the loans, an A-note for $160 million and a B-note totaling $65 million, were sponsored by Ralph Dweck, which acquired the asset for between $668 and $728 a square foot in 2005, reported in 2008.

The loan is current and has not been delinquent in the past 12 months, Trepp reports. The loan has not been on a Watch List.

Latham & Watkins LLP leases 232,099 square feet in the building through a lease that expires in 2016, according to Trepp. The United States of America, or the General Services Administration, leases an additional 47,991 square feet as the building’s second largest tenant. The GSA lease expires at the end of 2013.

Built in 2001, the building totals 405,978 square feet. In May 2007, it was appraised for $357 million, or $879.36 per square foot, according to Trepp. On June 1, 2007, Lincoln Square Property was 100 percent occupied by 11 tenants.

The $160 million, 10-year interest-only fixed rate loan secured by a first priority mortgage on the borrowers’ fee simple interest in the property was used to refinance existing debt and fund defeasance and closing costs. This loan is a portion of a loan combination with an original aggregate principal balance of $285 million. The other loans related to the Lincoln Square Loan are multiple separate notes.

The borrowers are four special purpose, tenants-in-common (TIC) entities structured to be bankruptcy remote. The sponsor of the borrower is Ralph S. Dweck, who has control of each borrower through their respective wholly-owned non-member manager.

Dweck has been a real estate developer since 1972 after practicing law with the firms of Dweck, Horowitz & Goldstein and Grossberg, Yochelson, Fox & Beyda.

The Lincoln Square Property consists of a 14-story Class “A” office building on 0.9 acres of land. The office component of the property contains 349,298 square feet. The retail component contains 56,680 square feet throughout the ground floor and a below-grade eight-screen cinema. The Lincoln Square Property also contains a subterranean parking garage with 320 parking spaces providing for a parking ratio of 0.8 per 1,000 square foot.

At the time of loan origination, the borrowers, their direct owners and Ralph Dweck individually granted an entity, controlled by Richard Ruben, who had a 5 percent ownership interest in one of the borrowers, a right of first refusal to purchase the Lincoln Square Property or certain direct or indirect interests in the borrowers pursuant to a certain Right of First Offer Agreement (ROFO) at the time the borrowers acquired the Lincoln Square Property from another entity owned by Richard Ruben.

The Lincoln Square Property encompasses one-half of the block surrounded by 10th, 11th, E and F streets. The Lincoln Square Property is within two blocks of all five of Metrorail system’s lines. The 11th Street entrance to the Metro Center station, the hub of the entire system, is located just one-half block north of the Lincoln Square Property.