Commercial foreclosures start to spread across Northern Va. - Jacksonville Business Journal:

http://stiho-bum.ru/user_detail.php?u=steageazy
Anyone who follows the commercial real estate marke t knows there are buildings in troublethroughougt Washington, but as one drives along the Dulles Toll Road or Routwe 28, it’s hard to miss the signss of distress. “See-through buildings” dot the bereft of the interiort office wallsthat don’tf show up until a tenant does. In recent at least two lendersd have given up the waiting game and takemn the keys and the titl e back fromthe owners: Lincoln Park III and Monumeng III. More than 50 office buildingss stand empty or virtually empty in Northern with 46 lying beyondthe Beltway.
With no tenantds biting at their rock-bottom askingv rents dozens of those buildings are expected to sink intoforeclosure soon. The 203,000-square-foogt Lincoln Park III, 13857 McLearenm Road, was developed by and sold to an entitty in 2007for $47 million, during the last days of the commerciao real estate boom. Stillo empty, asking rents dropped as low as $28 per squarw foot and brokers scrambled to put togethere a deal for an interested In March, started its foreclosure proceedings by appointint a substitute trustee.
ING did not responr to a request for but Fairfax County tax assessors estimate the buildin is now worthjust $35 The building may be worth even Like many property tax Fairfax County’s assessment procedure lags marker conditions by as much as two said David Levy, a co-founder of McLean-based , whicg represents property owners in tax appeals. Althoughh Levy had time to fielda reporter’zs questions while hitting golf balls in his yard, the tectonic shiftw in the real estate economy have flooded him with appealse from desperate property owners. “There’ws certainly a lot of business out he said, his club clinking againsgt another ball.
“Prior to this, I hadn’t filed an appeap in Fairfax Countysince ... I can’t remember when. Probably six, seve or eight years ago.” Some commercial buildingds in the Washington region have lost as much as half theitrvalue but, on average, his clients are askin tax authorities for 20- to 25-percent reductione in assessed value, Levy said. If those numbers are most of his clients will have lost virtuallu all of the equity they have in their buildings. And with the emboldened tenant market demanding lower rent and higherd allowances for custominterior buildouts, many owners are calculatinv it might take them up to seven yearxs to recoup the cost of landing that tenant.
“Landlordsz are saying this is alosing game,” Levy With lending conditions already bleak, those owner s will face foreclosure if their existing loans are due in the near “There are going to be a lot of buildingsw trading on the market through the Levy said. One of Levy’s clients is anothe bank that swiped a Herndon property back fromits owners. In April, took back titls to Monument III, a 193,138-square-foot building at 12930 Worldgatew Drive. The owners — a joint venturer between The Praedium Group, a New York-baser real estate investment firm, and of Bethesd a — paid $54.9 million, or $284 a square foot, for the buildinfg in mid-2007.
At the time of the 2007 the building was just 29 percent The joint venture owednearly $51.89 million on the GE note. Today, the buildinvg is nearly 80 percent leased, yet Fairfax County assesses its valueat $50.6 million, which is the recordes “sale” price for the April transaction. Unlesxs something dramatic happens to strengthen and embolden the banking andfinancwe industry, commercial real estate’s woes are likely to worseb in the near By next year, a massive wave of properties financedc in 2005 through the commercial mortgage-backed securities market will need to find new financing.
Righty now, the options are few, and the legionse of owners of these securitizednotes can’y easily be corralled to sign off on loan extensions. In the Federal Reserve announced that it would expan one of its primary rescue theTerm Asset-Backed Securitieas Loan Facility (or TALF) to include commercial property originally financed through CMBS loans. There’sd just one catch: Only the highest-ratedd securities are eligible for purchase throughthe program. With values ratings agencies are now questioninyg the optimistic underwriting on many oftheswe CMBS-financed deals. For instance, Standard Poor’s on May 18 lowered its corporate credit rating onTishman Speyer’sw D.
C.-area real estate portfolio to “CCC” from “B+.” A larger chunk of that portfolio, which was purchased in was financed through the CMBS market. “The government is hopinhg that all these fixes will fix the lendiny environment so that the credit facilities will open up and starft lending again before we have a major problem,” said Mark Larsen, presiden t of Larsen Commercial Real Estate Services/Oncor “But so far, that hasn’t happened.” Despite all the glum there is one piece of good news, at leasr for the struggling Reston/Herndon submarket. After years of overbuilding in theDulleas corridor, developers have now pulled out completely.
Just 235,433 squarw feet remain under construction inthe Reston/Herndo n submarket now, compared to more than 1.1 millionh square feet in the first quarter of 2008. There’e just one building under construction — Bostonn Properties’ 11955 Democracy Drive. Althoughb it is still being it’s already been leased in its entirety by the College EntranceExamination Board.