Carr Properties At Risk Of Losing Its Downtown D.C. Headquarters Building

The downtown office building where Carr Properties houses its headquarters appears close to being sold by the special servicer on its CMBS loan. 

The $134M CMBS loan that Carr holds on the 1615 L St. NW building has been in special servicing for the past year, and Carr hasn't paid off the debt that matured Sept. 1, 2023, or paid interest on the loan for the last few months, according to Morningstar Credit. 

The 417K SF building, constructed in 1984 and renovated in 2009, was 69% leased as of the most recent servicer commentary last month. 

Given D.C. office market conditions and the building’s performance, the servicer is expected to try and offload the property quickly, Morningstar Credit Vice President Sarah Helwig told Bisnow in an email. 

"Although the loan status is tagged as foreclosure, we believe the servicer may try to offload the asset quickly, rather than go through the lengthy and costly foreclosure process," she said. "In cases where the sponsor and borrower see upside in an asset, there may be efforts made to stabilize the property, but given the vacancy issue and market conditions, it doesn’t seem likely for 1615 L Street.

Carr Properties declined to comment on the building’s financial situation. The 1615 L building is still listed as Carr Properties' headquarters, but it no longer appears on the portfolio page of the company's website. 

Helwig said that Carr removing the property from its website signals the owner likely won't put up "much of a fight" to retain the asset. 

While the property is more than 30% vacant, that number could increase to more than 50% in the coming months.

Its largest tenant, Pew Research Center, is described as a "future move out" in CoStar’s database. The nonprofit leases 74K SF at the property, 18% of the building’s total area. 

Morningstar couldn't confirm that Pew plans to leave, but Helwig said the servicer updated the tenant's expiration to January 2025 from its original expiration in 2029. Given that the original lease had a termination fee baked in, Helwig said that "indicates to us" that it may be terminating its lease in January. 

Morningstar reported the building's occupancy at 90% in 2022 and 77% in 2023. LoopNet lists 194K SF of availability in the building, with 74K SF — the same square footage Pew occupies — as available beginning on Jan. 1, 2025, on the seventh and eighth floors. Pew Research Center’s contact information lists its location as Suite 800. 

Pew has another office in D.C., a 59K SF lease at 901 E St. NW, according to CoStar's database. 

Pew didn't respond to requests for comment, and Carr declined to comment on Pew's potential departure.

Carr purchased the property in 2016 for $230M from Spitzer Enterprises. It assumed the two-piece, $134M loan on the property that was originated in 2013 and matured last year, according to Morningstar.

Morningstar lists an expected resolution date for the loan as Jan. 1, 2025. 

In addition to Pew, the property’s second- and third-largest tenants have leases expiring next year.

Law firm Bradley Arant Boult Cummings’s 35K SF lease expires in March, and Independent Community Bankers of America’s 39K SF lease is up next August, according to Morningstar.

In 2021, Carr brought in Italian café concept Officina from D.C. restaurateur Nick Stefanelli to the property’s ground floor. 

Carr Properties faced another major office tenant departure at its Midtown Center complex when Fannie Mae executed an early exit clause for its 720K SF headquarters space, Bisnow first reported in January. 

CEO Oliver Carr said at Bisnow's D.C. State of the Market in June that D.C. office is facing a "Category 5 Hurricane" and is "the worst it's ever been." 

D.C. office buildings have seen worsening financial distress this year as more tenants downsize and as high interest rates have made refinancing difficult.

At the end of last year, a historic  Dupont Circle building at 1201 Connecticut Ave. was sold at a foreclosure auction, as was Brookfield’s 383K SF property at Franklin Square in June. 

The Liberty Building, a 176K SF property on K Street, is headed to the auction block next month. A foreclosure affidavit was filed in June, and a foreclosure notice was filed with the D.C. Recorder of Deeds Tuesday. The building is owned by Monument Realty and Ares Management.