Brazilian Retail Tycoon's Downtown D.C. Office Building In Special Servicing
The loan backing a 1970s-era office building at 20th and M streets in the heart of Washington, D.C.'s central business district was moved to special servicing this month after its owner fell behind on debt payments.
An entity controlled by Michael Klein, the CEO of Brazilian department store chain Casas Bahia, hasn't made its July interest payment on the $63.6M mortgage backing 2025 M St. NW, according to Morningstar Credit.
The sponsors of the loan are Klein and EK 2013 Family Trust, which was set up to benefit Klein's sister, Eva Klein, and her children according to a filing with the Securities and Exchange Commission.
Klein purchased the 191K SF property in March 2015 for $106M and took out the loan to fund the acquisition with RAIT Financial Trust, which sold into a JPMorgan Chase-created CMBS trust.
When Klein purchased the property, it was 99.5% leased, according to the SEC filing. The eight-story 2025 M St. NW, just a few blocks to the south of Dupont Circle, was 59% occupied as of the end of the first quarter, according to the Morningstar Credit database.
D.C. appraisers valued the Golden Triangle property at $72M for fiscal year 2025.
Watchlist commentary from the loan's servicer said that the property “has struggled for years” after losing its largest tenant in 2020 when professional services company Smithbucklin vacated 71K SF.
The commentary said the property’s performance has been “lackluster” ever since, with its debt service coverage ratio falling below breakeven and year-end cash flow for last year landing 66% below its underwriting. Cash management and a cash sweep on the loan have been in place since Jan 2019.
The interest rate on the loan was 4.25% with a three-year interest-only period. Its unpaid balance is now at $56.3M and it matures in April 2025, according to Morningstar Credit. The loan was current through June, but Klein hasn't yet made the July payment — estimated by Morningstar at $313K — and it was transferred to special servicing July 5.
Bisnow placed a request for comment with Grupo CB, Klein’s family holdings company where he serves as president, according to his LinkedIn profile, but hasn't received a response. Klein was named one of the wealthiest people in the world by Forbes magazine in 2015, a status he lost a year later.
Current tenants at 2025 M St. include Radio Free Asia, American Education Institute and Posh Nails on the ground floor, per Morningstar. Radio Free Asia has two leases at the property, one for 68K SF and another for 21K SF, both expiring in 2033. American Education Institute leases 21K SF, which expires in 2026.
Hybrid workspace operator IWG announced it would open a Regus-branded coworking space at the office building in 2022, but the website no longer shows availability for the property.
2025 M St. is a block away from the vacant office building at 2100 M St. NW, which is poised for a residential conversion from Post Brothers. It’s also just north of Lafayette Centre, where a $243M loan went into special servicing last month ahead of its anchor federal tenant's planned move out.
