This week, CRED iQ calculated real-time valuations for 5 office properties that have major tenants with lease expirations in the next 6 months. Featured leases include a large block of space in the Midtown West submarket of Manhattan and spaces in suburban office complexes located across the Washington, DC, Memphis, and Dallas MSAs. Lease expirations are opportunities for tenant reps to source options and find solutions for clients. Additionally, lease expirations can serve as a preemptive signal of distress for CRE loans if prospects for leasing the newly vacant space are low.
The CRED iQ valuations factor in a base-case (Most Likely), a downside (significant loss of tenants), and dark scenarios (100% vacant). Base-Case valuations are provided for the properties below. For full access to the valuation reports including the Downside and Dark scenarios as well as full CMBS loan reporting, with detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
603,928 sf, Office, New York, NY 10019
L Brands is vacating approximately 418,000 sf of space upon lease expiration on March 31, 2022 at 1740 Broadway. The property, a 26-story office tower located in the Midtown West submarket of Manhattan, NY, secures a $308.0 million mortgage loan that has been on the servicer’s watchlist since April 2021. News of L Brands’ departure pre-dated the loan’s addition to the servicer’s watchlist, however, when a CBRE Research note first pointed out the fashion retailer’s impending move to 55 Water Street in March 2020. The property’s second largest tenant at origination, law firm Davis & Gilbert, also vacated its 95,000-sf space, equal to 16% of the GLA, at lease expiration in December 2020.
The timing of L Brands’ departure announcement is two-fold. First, there is a benefit of additional time to prepare to backfill the vacant space, and Blackstone, the loan sponsor, has taken advantage of the early notice to redevelop the building’s lobby and add new tenant amenities including a tenant-only gym, café, and lounge. Second, there was a disadvantage due to the announcement’s coincidence with the onset of the pandemic, which left many office tenants in the market uncertain about future needs of space. CRED iQ’s estimated occupancy for the property is 13%. The loan remains current in payment and has a maturity date of January 6, 2025. For the full valuation report and loan-level details, click here.
|Property Name||1740 Broadway|
New York, NY 10019
|Most Recent Appraisal||$605,000,000 ($1,002/sf)|
|Most Recent Appraisal Date||12/1/2014|
|CRED iQ Base-Case Value||$403,700,000 ($668/sf)|
Rockville Corporate Center
220,539 sf, Office, Rockville, MD 20850
AARP is vacating approximately 76,000 sf of space at lease expiration on November 30, 2021 at the Rockville Corporate Center. The property, a two-building suburban office complex located in Rockville, MD, secures a $32.6 million mortgage loan that is scheduled to mature on May 6, 2022. AARP accounts for approximately 34% of the property’s GLA and was the primary tenant at 15 West Gude Drive. A large vacancy just 5 months prior to maturity could adversely impact the loan’s refinancing prospects. The property’s second building, located at 45 West Gude Drive, is fully leased to Montgomery County Public Schools through December 2031. CRED iQ estimates occupancy of 66% for the office complex following the departure of AARP. For the full valuation report and loan-level details, click here.
|Property Name||Rockville Corporate Center|
|Address||15 West Gude Drive|
Rockville, MD 20850
|Most Recent Appraisal||$55,000,000 ($249/sf)|
|Most Recent Appraisal Date||2/21/2012|
|CRED iQ Base-Case Value||$45,180,000 ($205/sf)|
Goodlett Farms Business Campus
364,926 sf, Office, Cordova, TN 38016
Regions Bank has a 108,731-sf lease expiration on December 31, 2021 at a suburban office complex located about 15 miles outside of Memphis, TN. Regions Bank is the largest tenant at the property and accounts for 30% of the GLA. The property, which consists of three buildings, secures a $25.2 million mortgage loan that has been on the servicer’s watchlist since December 2020. Regions Bank appears to be vacating the property at lease expiration. The space is being marketed as available and Colliers has the listing. Occupancy at the property declined to 72% during 2020 and the loss of Regions Bank would reduce occupancy even further to 42%. With loan maturity less than 4 months away, lease rollover issues at this property will likely need to be resolved before the borrower can secure refinancing. For the full valuation report and loan-level details, click here.
|Property Name||Goodlett Farms Business Campus|
|Address||7130 Goodlett Farms Parkway|
Cordova, TN 38016
|Most Recent Appraisal||$42,750,000 ($117/sf)|
|Most Recent Appraisal Date||12/14/2016|
|CRED iQ Base-Case Value||$23,470,000 ($64/sf)|
Hall Office G4
117,452 sf, Office, Frisco, TX 75034
A 117,452-sf office building located in Hall Office Park in Frisco, TX is working through lease rollover issues. The property secures an $18.1 million mortgage loan that has been on the servicer’s watchlist since November 2020. The property’s largest tenant, Randstad Professional US, had a lease that expired in August 2021. The staffing agency occupied 40,991 sf of the building, equal to 35% of the GLA. Randstad’s original lease expired in April 2021, but the tenant negotiated a 4-month extension. The extension may have been used to buy time to facilitate a move to another building because Randstad signed a 31,884-sf lease at an office building in Plano, TX located 3 miles away in June 2021.
Schlumberger is the property’s second-largest tenant with a 39,190-sf lease, accounting for 33% of the GLA. Schlumberger’s lease expires on February 28, 2022. Commentary from the servicer’s watchlist indicates the tenant may reduce its footprint at lease expiration. A downsizing for full departure would create added distress to a building that was 80% occupied as of April 2021. Approximately 49% of the GLA is being marketed as available for lease. CRED iQ estimates that occupancy could decline to about 12%, accounting for departures of Randstad and Schlumberger. For the full valuation report and loan-level details, click here.
|Property Name||Hall Office G4|
|Address||3011 Internet Boulevard|
Frisco, TX 75034
|Most Recent Appraisal||$25,800,000 ($220/sf)|
|Most Recent Appraisal Date||4/25/2017|
|CRED iQ Base-Case Value||$19,000,000 ($162/sf)|
12650 Ingenuity Drive
124,500 sf, Office, Orlando, FL 32816
Kaplan University is vacating this 124,500-sf office building in Orlando, FL, which secures a $16.5 million mortgage loan. Kaplan, formerly a for-profit college, was the property’s sole tenant. The loan was added to the servicer’s watchlist in August 2021 and updated commentary indicates a 78,500-sf portion of the property may already be backfilled pending negotiations. The remaining vacant space is being marketed as available and CBRE has the listing. Assuming the 78,500-sf leasing deal comes to fruition, then occupancy at the property would be approximately 63%. The loan is scheduled to mature in December 2024 and has been current throughout its term. For the full valuation report and loan-level details, click here.
|Property Name||12650 Ingenuity Drive|
|Address||12650 Ingenuity Drive|
Orlando, FL 32816
|Most Recent Appraisal||$26,600,000 ($214/sf)|
|Most Recent Appraisal Date||10/14/2014|
|CRED iQ Base-Case Value||$17,940,000 ($144/sf)|
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. For full access to our loan database and valuation platform, sign up for a free trial below: