If you’re looking for evidence of how reliant local office building owners remain on the federal government, consider the Skyline office complex, along Leesburg Pike in Bailey’s Crossroads.
In 2007 the buildings’ owner Vornado (now Vornado/Charles E. Smith), borrowed $678 million to refinance the complex, which has eight buildings, totaling 2.6 million square feet. Companes that have leased space there include Northrop Grumman, General Dynamics, SAIC and Booz Allen Hamilton.
But thanks to the government’s base realignment and closure process, the Defense Information Systems Agency just vacated one of the buildings, Skyline 7, at 5275 Leesburg Pike, and moved to Fort Meade. That building — all 403,000 square feet of it — is now completely empty.
The office complex, which was nearly full when Vornado took out its loan, is now only about two-thirds leased, according to Manus Clancy, managing director for the research firm Trepp.
So even though he said the loan doesn’t come due until 2017 and Vornado has not missed any payments, the empty space prompted a special servicer on the loan, CW Capital, to place Vornado’s loan on its “watch list.” Which is not where you want your loan to be.
Why the concern? A Vornado spokeswoman declined to comment, but Clancy told me Friday Sept. 30 that the Skyline complex was especially reliant on leases from the feds and related contractors. “In this case it’s pretty large exposure on this one particular loan,” he said.
With some big tenants leaving, Clancy said that, “what was once an asset for this particular borrower now becomes something that they have to deal with.”
How will Vornado respond to its emptying Skyline complex? It has re-branded Skyline 7 as Skyline Technology Center and began pointing out how close it is — less than two miles — from the Mark Center, one of the biggest recipients from a separate BRAC move.