Douglas Development Defaults On $52M Loan Tied To D.C. Portfolio
One of the District’s largest property owners has defaulted on a loan backed by 14 mixed-use buildings in the D.C. area.
Douglas Development went into default on the $51.6M CMBS loan when it matured on Aug. 1, according to Morningstar Credit.
The loan was transferred to special servicing in July ahead of the maturity. It totaled $63.5M when it was originated in 2014.
Douglas didn't respond to a request for comment.
The portfolio is spread across D.C., Maryland and Virginia, with 10 properties in the District, three in Old Town Alexandria and one in Rockville.
The properties range between 3K SF and 41K SF, with the vast majority smaller than 8K SF. Tenants range from yoga studios and medical practices to a paint store to one of D.C.’s most beloved ramen spots, Daikaya.
A few doors down from Daikaya, 717 Sixth St. NW, which housed Bar Deco until last winter, is also part of the loan portfolio. Douglas has put that 7,500 SF vacant property up for sale.
The D.C. government occupies the portfolio's largest property at 920-928 Rhode Island Ave. NE, which houses the Virginia Williams Family Resource Center and D.C. Superior Court offices.
Occupancy across the 14 properties was at 83% as of March, according to Morningstar. Douglas had remained current on the loan until it failed to pay the balance on its Aug. 1 maturity date.
The financials of the portfolio have remained stable, but it wasn’t performing well enough to refinance in today's difficult capital markets environment, Morningstar Credit Senior Vice President David Putro said in an email to Bisnow.
“Net cash flow in 2023 was roughly the same as at underwriting back in 2014 and portfolio occupancy has stayed above 80%, down a bit from issuance but not terrible by any means,” he said. “But with higher rates and tighter underwriting these days, it wasn’t able to re-fi.”
The original loan was for 15 properties, but Douglas sold one of the assets, a 7K SF retail building at 100 King St. in Alexandria, in 2022.
The portfolio is a small portion of Douglas’ overall footprint. The D.C.-based, family-owned development firm owns 14M SF across the mid-Atlantic. In the District, it owns office, hotel, multifamily and retail developments like 655 New York Ave. NW, Chinatown Row, the Woodies Building, the Hecht Warehouse and a site in Northeast where it filed plans this year for a 186K SF warehouse.
