**Return to Lender: Week of April 3, 2025**
Several commercial real estate properties across the U.S. are facing financial setbacks, leading to loan defaults, auctions, and transfers to special servicing. Here’s a roundup of notable developments:
– **Rockville, MD Office Building Set for Auction**
A 2000s-era office building in Rockville, Maryland, previously considered for conversion to life sciences use, is heading to the auction block. The property, located at 805 King Farm Blvd., includes a 240,000-square-foot office building, a 250-space parking garage, and easements on three surface parking lots with 200 spaces. The auction is scheduled for April 18 and will be conducted by Alex Cooper Inc. The current owner, King Farm 4 Sub Owner LLC, defaulted on a loan tied to its $33.2 million acquisition of the property in December 2021, according to the Washington Business Journal.
– **Seven MSRE Properties Placed in Receivership**
Seven properties owned by Martin Selig Real Estate (MSRE), which are backing $239 million in commercial mortgage-backed securities (CMBS), have been placed into receivership. CW Capital, the special servicer, appointed a receiver who has engaged Kidder Mathews to manage the properties. MSRE is currently working with the servicer to modify and extend the loan, as reported by the Puget Sound Business Journal.
– **Luxury Multifamily Loan in San Francisco Defaults**
A $210-million loan secured by The Cove at Tiburon, a luxury multifamily development in the San Francisco area, defaulted at its March 2025 maturity. The borrower has not provided an update regarding refinancing or repayment plans. According to Morningstar Credit, the net cash flow in 2024 was 16% below the levels projected at issuance, with expenses outpacing revenue gains.
– **City Center in Downtown Minneapolis in Special Servicing**
The owner of City Center at 600 Nicollet Mall and 33 S. Sixth St. in downtown Minneapolis has defaulted on a $130-million loan. The loan has been transferred to special servicing after the borrower failed to pay off the debt or secure refinancing before its January 9 maturity. The City Center, built in 1981, comprises 1.1 million square feet, and is primarily leased to Target Corp., which announced plans in 2021 to vacate the space and put it up for sublease, according to the Minneapolis/St. Paul Business Journal.
– **Hyatt Regency Lexington Moves to Special Servicing**
The $29.4 million loan backed by the 366-room Hyatt Regency Lexington has been transferred to special servicing after the borrower failed to repay it by the December 2024 maturity date. Despite receiving a 60-day forbearance, the borrower was unable to secure take-out financing. While the hotel reported improved trailing twelve-month net cash flow as of September 2024, surpassing original issuance levels, the special servicer is currently evaluating workout strategies.
– **Tallahassee Student Housing Defaults on Maturity**
The Boulevard at Tallahassee, a student housing property, has entered special servicing after missing its $27.7 million loan maturity in December 2024. The borrower had requested a 60-day forbearance but was unable to arrange refinancing. Occupancy at the property fell to 82% in September 2024, down from 98% in August and 99% at the time of issuance, according to Morningstar Credit.
These cases reflect a broader pattern of distress in the commercial real estate sector as properties contend with elevated interest rates, stalled refinancing efforts, and changing market demands.
