Owner of Government-Leased Portfolio Nearing $660M Default

The chaotic downsizing of the federal real estate footprint is hitting landlords where it counts. For NGP Group, a big maturity looms amid questions regarding refinancing a portfolio tied so closely to the government.

A $660 million commercial mortgage backing a 41-property portfolio owned by NGP was sent to special servicing, the Commercial Observer reported. NGP risks imminent default on the loan, which is set to mature in August, according to Morningstar Credit.

Barclays and a Cantor Fitzgerald affiliate provided the 10-year loan in 2015.

The 2.6-million-square-foot portfolio is primarily made up of office properties, though a pair of industrial properties are also tied to the debt. The single-tenant buildings span 19 states, primarily Florida, Texas, Virginia and Kentucky. Sixteen agencies occupy the spaces with the FBI, the DEA and Citizen and Immigration Services accounting for a majority of the rent obligations, per Fitch Ratings.

Chaos at the General Services Administration is partially driving the debt’s trip to special servicing. The performance of the portfolio is strong, according to Morningstar, and an extension or loan modification seems likely.

But the stability of a lease through the GSA — which manages the federal real estate portfolio on behalf of the government — is sorely lacking as Donald Trump and Elon Musk take a hatchet to existing contracts.

Where GSA leases historically boast long-term lengths and lack “termination for convenience” clauses, seemingly anything is on the table as the administration turns over every stone in the name of efficiency and cutting costs.

NGP and the GSA did not immediately respond to requests for comment from the Observer.

As of January, the federal government had more than 174 million square feet under lease, paying roughly $5.8 billion annually in rent. The GSA has 18.4 million square feet of leases due to expire this year and another 54 million square feet under lease with termination rights.

Two months ago, the GSA published a list of “non-core” assets that were “designated for disposal,” though the agency quickly scrubbed the list after about a day. The GSA has been posting select properties weekly that are designated for “accelerated disposition.”

— Holden Walter-Warner