A Wegman's is being developed in Chantilly.

CHANTILLY, VA–November was not a good month for CMBS loan losses, with average loss severity spiking especially in the retail category, according to Trepp's monthly report. Last month some $671 million across 58 loans were liquidated with losses with the monthly loss rate for all loans climbing to 56.38%.

The overall loss severity for retail loans rose to 61.5% from 37.3% and for office it reached 56.7% from the previous month's rate of 42.6%.

The third largest loan loss for the month was the $58.4 million note backing three offices and four office-flex buildings located in Avion Business Park. Last month, the portfolio was disposed with $55.3 million loss which translated to a 94.56% severity.

Chantilly, of course, has been struggling since the recession but in the last year there have been signs of a recovery. Wegmans, for example, is opening a grocery store in the submarket, much to the delight of local businesses and residents. Indeed, Regency Centers' development plans for that 21-acre site where the Wegmans will be located, along with growing demand by the federal government, have raised the submarket's profile among investors considerably.

However, these steps forward in other parts of the submarket were not enough to turn around the troubled assets in Avion Business Park. In October 2010 the portfolio was transferred to special servicing for payment default with an average occupancy of 60%.

Not all of the buildings have fared poorly — five were sold in August 2014, and those properties now serve as collateral for a different loan that was securitized in 2014.

The special servicer has been marketing the remaining properties but found that “tenant credit stigma, state of the markets and lack of leasing velocity on the vacant space over the past 36 months depressed the price prospective purchasers were willing to pay.”

Instant Insights /

Avion Business Park Portfolio Among Top CMBS Loan Losses for November

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