Appraised value of James Center in downtown Richmond drops below amount of its CMBS debt

Published January 14, 2015 by Paula C. Squires

The appraised value of the James Center office complex in downtown Richmond has fallen below the total of its commercial mortgage backed securities (CMBS) debt, according to Trepp LLC, a real estate analytics company.

Trepp, based out of New York, reported in an email newsletter today that the appraised value of the 22-story, 975,000-square-foot complex at 901, 1021 and 1051 East Cary Street came in at $136 million in September, down from a $192.5 million appraisal done in 2005 and below the $150 million in securitized CMBS debt still owed on the building.

According to Trepp documents, the James Center debt is structured in two pieces, for $100 million and $50 million. The $100 million loan was transferred to a special servicer, CW Capital Asset Management, in June while the $50 million piece went to another special servicer, LNR Partners I, in August.

The reason given in Trepp’s documents is “imminent default due to major tenant leaving the premises upon lease expiration on 8/31/15.”

The major tenant is the law firm of McGuire Woods. It’s moving to Gateway Plaza next year, a high-rise currently under construction across the street from the James Center. With the move, the law firm is downsizing a bit to 205,000 square feet compared to the 250,000 square feet it leases at James Center One, about 24 percent of the center’s gross leasable space.

Also leaving One James Center for Gateway Plaza is CCA Industries, a company with several resort properties in its portfolio. It signed a 25,000-square-foot lease for the building’s top floor.

Other major tenants at the James Center are Wells Fargo with 144,815 square feet.  Its lease expires in February 2020, and Davenport and Co., with a 79,836-square-foot lease that ends in January 2022.

According to Trepp, the Class A property had an occupancy of 88.6 percent in June.

“There’s no reason to hit the panic button yet, but there’s still cause for concern,” said Sean Barrie, a research analyst for Trepp. “If they can fill the vacancies, that would be a huge step. Once you lose a large tenant, if you can’t fill the space, if can drop the financials for a while.”

Overall, though, the fact that the appraisal is just a little below the current balance “isn’t as bad at it could be,” Barrie added. Plus, the current appraisal of the James Center complex comes nearly 10 years since another appraisal, done shortly after a renovation.

JEMB Realty Corp. in New York, the building's owner, selected Jll as the leasing agent for the office space at the James Center last February. A spokeswoman for JLL said the firm could not comment in terms of how leasing efforts are going.

The buildings are owned and operated by James Center Property LLC, an affiliate of JEMB Realty. Tenant amenities include a fitness center and a 50,000-square-foot retail atrium that connects to the Omni Hotel.
The center is well known in the business district for its annual display of thousands of lights on reindeers and a large holiday tree during the holiday season.