A chunk of downtown office space totaling nearly 1 million square feet has landed on the auction block.

The James Center, consisting of three towers at 901, 1021 and 1051 E. Cary St., is scheduled for a March 8 foreclosure auction on the courthouse steps, according to a legal notice, after the buildings’ owner defaulted on two loans totaling $150 million.

The three buildings, known as One, Two and Three James Center, comprise 986,000-square-feet of office space and 50,000 square feet of retail space. About 360,000 square feet – more than a third of the total space – is vacant between the three buildings. That’s according to the website of New York-based JEMB Realty, which has owned James Center since 2005.

Foreclosure has been a looming option for the property since its largest tenant, law firm McGuireWoods, announced it was vacating its 489,000 square feet in One James Center in favor of Gateway Plaza in 2013. A special servicer took over the loans on the property – one at $100 million and the other at $50 million – shortly thereafter.

Since then, new tenants have shown some interest in the tower, including the Virginia Economic Development Partnership, which took over 55,000 square feet in One James Center. But that wasn’t enough to feed the rent rolls and keep the lender at bay.

“You can imagine that all of your measures of success, when it comes to handling something like this, are based on who is paying rent and how much,” said Sean Barrie, spokesperson with commercial real estate tracking firm Trepp, which has followed the status of the loans on the James Center. “If you only have half the building full, you won’t have revenue or cash flow.”

JEMB Realty defaulted on the loans in January, according to a Trepp report. JEMB owns the properties through James Center Plaza LLC. A representative with the company did not return a request for comment.

LNR Partners Inc., a special servicer, currently controls the $150 million in loans on James Center. CWCapital LLC was the original lender in 2005, according to city records. The note has since passed between a few different banks, most recently being taken on by GMACC 2006-C1 East Cary Street, LLC.

When McGuireWoods announced its intention to leave before its lease expired in One James Center, the property faced two options: refinance the loans or foreclose.

“It comes down to the servicer,” Barrie said. “They’re there to determine the strategy that will return the most money, and they felt that refinancing right now didn’t look feasible. And even though the mortgage has fallen on hard times, (the property) is still appraised somewhat high compared to other properties that have gone into special servicing.”

When the loan originated in 2005, the property was appraised at $192.5 million. That has since fallen to a $136 million appraisal in 2014, according to Trepp.

Foreclosure would allow the lender either to sell the buildings at auction and use the proceeds to cover at least some of what it is owed, or to retain the buildings itself and look to sell it down the road or hold it while it increases rental revenue.

“I think the servicer looked at it and said, we could probably get a decent chunk of change if this goes to sale, it wouldn’t be a total bath,” Barrie said.

Brokers Andrew Ferguson and Chris Wallace of Colliers International predicted that the James Center foreclosure would continue to put pressure on downtown rental rates, where new construction like Gateway Plaza and planned projects like the Locks at 3Twenty-One and Dominion’s impending new tower are already putting pressure on older properties.

“So where will the pricing of the James Center be adjusted to, and whether this allows (a new owner) to become more aggressive with their pricing, is the question,” Ferguson said. “Depends on what that owner ends up doing with the buildings.”

“A lot of investment is needed in that property as well,” Wallace added.

The James Center towers were built in the mid-1980s and not only appear older from the outside, compared to the new sleek look of new buildings like Gateway, but are also competing with older buildings that have had the benefit of more interior upgrades, the brokers said.

The foreclosure includes five properties, the three towers, a parking deck at the corner of South 10th Street and East Canal Street, and a vacant parcel at the corner of East Cary Street and South 10th Street.

Another property owned by James Center Plaza LLC, consisting of green space along South 10th Street, is not included in the foreclosure.

William Casterline, Jeremy Root and Michael Howes of the Washington, D.C.-based law firm Blankingship & Keith are the substitute trustees handling the foreclosure.

Casterline said he was retained about two months ago. He declined to comment on what led to the foreclosure or on the future of the properties. He did say that this is one of the largest foreclosures he’s ever handled in three decades of commercial foreclosures.

The auction is scheduled to take place at noon on March 8 outside the Richmond Circuit Court at 400 N. Ninth St.