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April 15, 2008
Deal Sheet
(our more serious side)



2099 Pennsylvania Ave., a CBD trophy, traded yesterday for the highest SF price recorded in the District: $172.5 million, or $837 SF. Jones Lang’s John Kevill and Collins Ege brokered the deal for seller Wealth Capital Investments, which Debra and Benjamin Lacy of Lacy, Ltd. also advised. Lacy previously advised Wealth Capital, then Blue Capital, in the purchase of 2099 on September 11, 2001.

The 206,000 SF building was acquired by a private equity fund called Vico Capital that is controlled by a Dublin-based husband-and-wife lawyer and doctor, Brian O'Donnell and Mary Patricia O'Donnell.

Vico Capital has acquired a portfolio of high end office buildings around the world, including the Fatburen in Stockholm; Sanctuary, the largest office building in Westminster; and 17 Columbus Courtyard and
15 Westferry Circus at Canary Wharf.

Designed by Pei Cobb Freed and Partners, the building was developed by a JV between Kaempfer and Real Estate Capital Partners, In 2001. It then sold to a German closed-end fund Wealth Capital Investments, a wholly-owned subsidiary of Bayerische Hypo- und Vereinsbank AG. Jones Lang LaSalle advised Wealth Capital Investments when the building was acquired by Vico.

The O'Donnells are looking for other properties in DC as well as the United States to acquire.

Akridge   Miller & Long

That is hardly surprising, says Kevin Thorpe, VP and director of research at Cassidy & Pinkard Colliers. DC has traditionally been an investment destination to foreign buyers, along with New York and a handful of other gateway cities.  It is hard to say exactly how much they own in the DC market as such data is notoriously difficult to track, Thorpe says. "In general, I would say foreign investors usually account for between 5% to 7% of DC's market share."

In Q4, though, that figured spiked to 20%, says Thorpe, who bases his estimate on data from Real Capital Analytics. Vico's acquisition is a good sign that this trend will continue for at least the first half of the year.

"Foreign investors seem to be targeting markets that are tested and true, like DC." Buying a building at the moment is a windfall thanks to the dollar: not only can a foreign investor buy now when the dollar is low, but it can hold onto the property long enough to sell when both the building and the dollar have risen in value.

"This trend is putting foreign investors in the driver's seat while highly levered buyers are forced to sit on the sidelines," Thorpe says.

Saul Centers, an equity REIT in Bethesda, has paid out $60.6 million for three shopping centers in the Mid-Atlantic; two of which are in the DC area. It acquired the 89,000 SF Great Falls Center in Great Falls; a 115,000 SF single tenant property leased by BJ's Wholesale Club in Alexandria; and the 22,000 SF Marketplace at Sea Colony at Bethany Beach. All are either fully leased, or in the case of Great Falls Center, 95% leased.

About half of the purchase price was secured by mortgage loans the company took out; the balance, $30.9 million, was funded with proceeds from its recent preferred stock offering.

The mortgage financing included the assumption of a $10.35 million, 5.8% mortgage loan that is secured by the Great Falls property. Saul Centers also closed on a $6.5 million increase to the assumed mortgage with interest-only payments for the first year, then principal and interest payments based upon a 6.8% rate and 30-year amortization period. It also closed on a $12.7 million, 15-year mortgage loan at a 6.43% interest rate and 30-year amortization schedule. That loan was secured by the BJ's Wholesale Club.

New Development

JPI East is developing another multifamily project in the Baseball District. A 419-unit apartment building on Half Street, its latest addition to the neighborhood will be called Jefferson at Half Street.
It will also be, according to JPI, the city's first Silver LEED multifamily for new construction. Ground will break this September. By June 2010 the first of the luxury units will be available. Beside the eco-friendly design and appliances, Jefferson at Half Street will have a roof top movie theatre, fitness center and dog park. The project will be part of JPI's extensive Capitol Yards master-planned community.

Short Takes

The District is awarding 53 grants totaling almost $900,000 to homeowners in the Anacostia Historic District, one of the city's oldest historic districts. The money will be used to restore and repair houses. The District will also make funding available to residents in the Blagden Alley/Naylor Court; Capitol Hill; Greater Fourteenth Street; Greater U Street; LeDroit Park; Mount Pleasant; Mount Vernon Square; Mount Vernon Triangle; Shaw; Strivers' Section and Takoma.  The average grant size is $16,856.

CBRE is predicting that demand for office space in the greater DC area will continue to slow – and vacancy rates rise -- as new product continues to deliver. Activity, or lack thereof, in Q1 is part of that trend. According to new CBRE figures, net absorption in Q1 was 34,829 SF. This is an increase from the previous quarter's negative 128,830 SF – but still well below the five-year and ten-year averages of 1.6 and 1.9 million SF, respectively. DC's vacancy rose slightly to 6.79% this year, from 6.56% at the end of 2007.



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