From Washington Business Journal -

It's the fifth-largest tax-generating property in Fairfax County, with a taxable assessment of nearly $325 million, and later this month Vornado Realty Trust's Skyline business campus will be sold to the highest bidder from the steps of the county courthouse.

The 2.6 million-square-foot, eight-building Baileys Crossroads complex by George Mason Drive and Leesburg Pike is slated for a substitute trustee's sale Dec. 21 after Vornado (NYSE: VNO) defaulted on the terms of its $678 million mortgage. The auction marks the end of a long slog for the New York-based real estate investment trust, which has watched occupancy rates at the park plummet to a little more than 40 percent and its taxable assessment fall from as much as $680.6 million in 2009.

Interested bidders will be required to put up a $13.5 million deposit and close on the property, being sold as is, within 30 days, according to the terms of a legal notice on the sale that lists law firm Ballard Spahr LLP's D.C. office as the point of contact. Representatives for Vornado did not respond to a request for comment.

The offering is likely to generate a significant amount of interest from developers, more so for the prospect of redeveloping or repositioning the struggling campus than the less feasible prospect a fresh coat of paint and a new marketing campaign to try to bring it to full occupancy. Skyline was specifically withheld from what Vornado planned to contribute to JBG Smith Properties, the combination of its D.C.-based business unit with The JBG Cos.

Skyline is home to a range of mostly federal agencies and contractors, including the U.S. Fish and Wildlife Service, Department of Justice, Leidos Holdings Inc. and Science Applications International Corp. But the cash flow has fallen short of the debt service on the property, and Vornado still owes about $140 million, according to commercial real estate debt tracker Trepp LLC.

Vornado's days as Skyline's landlord were already numbered, as CEO Steven Roth said in the company's annual letter to shareholders in April that the company had begun the process of disposing of the Skyline properties and had asked the debt on them be transferred to a special servicer. Then, on an August earnings call, Vornado CFO Stephen Theriot said the REIT had stopped paying debt service to put the loan into default.