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New $317M SASB deal features Fannie Mae HQ building

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The developer of the newly constructed Washington, D.C., headquarters for Fannie Mae is securitizing part of its $525 million mortgage through a single-asset, mortgage-backed transaction.

Carr Properties is sponsoring the deal, DC Office Trust (DCOT) 2019-MTC, which finances a first-lien commercial loan for Carr’s Midtown Center office building, an 867,654-square-foot office tower complex near D.C.’s central business district.

Construction of the building was completed last year, shortly before Fannie began moving into the more than 713,000 square feet of space it now occupies. Fannie consolidated its headquarters into the East End neighborhood building from five D.C. buildings it previously owned or leased.

The two adjoined 14-story towers — which reportedly cost $650 million to construct — is four blocks from the White House, and on the site of The Washington Post’s former headquarters at 1100 15th Street NW. It was designed by New York-based SHoP Architects.

The trust will market bonds backed by a $334 million portion of the 10-year mortgage held in the trust. The loan is interest-only for most of its duration.

The capital stack has six note classes, with $317 million of the bonds being offered to investors. Those include a $145 million Class A senior-note tranche with preliminary triple-A ratings from Moody’s Investors Service and DBRS Morningstar, plus four subordinate principal-and-interest bond tranches totaling $172.3 million that carry Morningstar ratings of AA+ (Class B), AA- (Class C), A- (Class D) and BBB- (Class E).

A $317.3 million tranche of class X notes (rated BBB by Morningstar) pays only interest, but is second in the payment waterfall ahead of the subordinate notes.

Moody’s is not rating the Class X or Class E notes, and assigned ratings of Aa3 to the Class B tranche, A3 to Class C and Baa3 to Class D.

The loan on the property was underwritten by Wells Fargo, Bank of America and Goldman Sachs, and has a coupon of 3.085%. Moody’s estimated debt-service coverage ratio is 2.61x, based on annual rental income of $43.03 million. (Fannie's annual rent obligation is more than 87% of that amount, topping $35 million on a lease that runs through September 2033, the loan’s final maturity date).

The building is 99.7% leased, and includes workshare site firm WeWork as another major tenant occupying more than 40,000 square feet of the space. The building includes more than 44,000 square feet of ground-floor retail space, as well.

Carr Properties is a privately held REIT that owns, manages, acquires and develops properties in Washington and Boston. Carr owns 14 commercial properties, and have five development projects in the pipeline, according to presale reports.

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