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Real Estate Bisnow
   
November 5, 2008
 
       
 
The Deal Sheet
(our more serious side)



Leases

DOJ’s Bureau of Prisons has renewed 112,970 SF at 500 1st, NW. Darian LeBlanc, head of Cassidy & Pinkard Colliers’ Government Services group, represented the building owner, a partnership between Van Ness Property Group and Apollo Real Estate. GSA was represented by JLL’s William Craig and its Public Institutions GSA National Broker Contract Account team.

Van Ness, an affiliate of Polinger Co., and Apollo acquired the building this summer for $45 million (the acquisition fell under Apollo’s $758-million Real Estate Advisors Value Enhancement Fund VII).  At the time it wasn't at all clear whether the government would renew its sole-occupant lease, LeBlanc tells Bisnow. One problem was the looming multi-million renovation -- the last time the 39-year-old building was renovated was in 1989. The Bureau didn't want to have to move for the construction. Part of the lease negotiations, LeBlanc says, was figuring out a way to keep the agency in the building. Its solution was to consolidate the operations more densely and then move them from floor to floor as needed.

The government’s space requirements have always provided oomph to the traditionally strong DC market. Now, as activity slows, these leases and renewals are becoming ever more important. LeBlanc tells Bisnow that he is working on a large government lease currently pending that will hopefully close in the next two weeks. He is tightlipped on the details other than to say it is a new lease for between 50,000 SF to 100,000 SF.

**

Bechtel renewed 325,879 SF in its Frederick office on Westview Drive. The company is the only occupant in the five-building complex, owned by California-based Gateway Franklin. Meredith LaPier and Andy Cole, from CBRE, repped Bechtel.  The ten-year renewal covers only four of the buildings; the fifth is not due for renegotiation for another few years.

Investment Sales

801 N. Quincy St., a 110,900 SF office in Arlington, traded hands last week, for $55.5 million. Guardian Life acquired the building from Normandy Real Estate Partners, on behalf of Normandy Northeast Office Venture Partners LP. Bill Collins, Paul Collins, Drew Flood, James Cassidy and Jud Ryan of Cassidy & Pinkard Colliers represented Normandy in the transaction. Fully occupied and anchored by the Interior Department, Quincy Crossing only resided a short while under Normandy ownership. The company acquired it in late 2006 from Morgan Stanley as part of a $538 million, 2.4 million SF, 13-office portfolio that Morgan Stanley immediately sold after its $1.9 billion purchase of Glenborough Realty Trust.

Miller & Smith   Goulston & Storrs

 

Financing

A Washington-headquartered REIT, DuPont Fabros Technology, has closed on a $100 million secured loan with a syndicate of lenders led by KeyBank National Association. The loan has a three-year term with a one-year extension at a floating rate of Libor plus 3.50%; it also includes quarterly principal payments of $500,000. The loan also has an accordion feature that allows new lenders to join the syndicate, increasing the amount up to $250 million over the next 18 months.

The loan is secured by the company's recently constructed ACC4 data center in Ashburn, now 87.5% leased. In this market, $100 million can be considered an achievement; unfortunately for the company it needs $300 million to $400 million to complete projects in its construction pipeline. It was forced to suspend construction on a $270 million wholesale data center in Santa Clara, CA., for lack of financing, for instance. CEO Hossein Fateh says the company is actively seeking other lenders for the syndicate.  The company is also negotiating mezzanine financing on ACC4 and exploring other financing alternatives to make up the shortfall, he says -- a goal it hopes to reach before year-end.

Funds

Urban Investment Partners has about a $140 million war chest --investment capital divided between two active funds -- that it plans to deploy in the DC area over the next several months.

Its Washington Residential Fund II (WRF II) has invested about $60 million over the past year, in value-add multifamily opportunities. It has about $40 million left, Steve Schwat, UIP principal, tells Bisnow, “enough for at least one more investment.”

UIP has acquired several properties under this fund in the District, including the 21-unit apartment building, Absecon, at 1706 T St. Bought out of foreclosure, it was in a terrible state of disrepair, Schwat says. It is now undergoing a rehab. WRF II also acquired the Shelburne, a 63-unit apartment building one block away, as well as apartment buildings on 19th St. and Kalorama Rd. “The idea for this fund was to buy AAA-located buildings in less than A-rated shape and bring them up to 21st century standards.”

Other properties under contract for this fund includes a 45-unit apartment building in Dupont Circle that it wants to buy for $90,000 per unit; a 4-unit building on Capitol Hill, for $1.4 million; and two apartments in Columbia Heights, for $1.4 million and $2.4 million, respectively. It also has a building in Hyattsville under letter of intent, for $4.5 million.

Now UIP is looking at properties to buy under another $100 million fund, called WRF III. This fund’s investment criteria calls for stabilized assets, Schwat says. There are more attractive opportunities in this space now, he adds, as cap rates have started rising and more firms seek to put assets on the block for various reasons. “We wish more people would call us to look at prospects,” he says, only half jokingly.

Briefly

Cassidy & Pinkard Colliers has added Bobby Schwartz, Eli Barnes and Will Stern to its DC Landlord Representation Leasing team. Schwartz was managing director of leasing at JLL; both Barnes and Stern were VPs at JLL.

**

Studley has added two brokers to its office in McLean: Matthew Klaff and Sam Sanders. Klaff is a former advisor at CresaPartners. Sanders was a real estate advisor at Woodmark Commercial.

 
 




 
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