Carr Properties, a longtime D.C. office developer that is pushing into residential, has closed a major financing package for its first conversion project.
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The developer obtained an $84M loan from Kennedy Wilson to convert an office building at 425 Montgomery St. in Alexandria into 237 apartments, it announced Tuesday.
Barings, an investment subsidiary of MassMutual, is now an equity investor in the project, which has a total expected cost of $131M. Cushman & Wakefield represented Carr in securing the debt and equity.
Carr acquired the property, which previously had the address of 901 Pitt St., in February 2024 for $15.4M. The team has already begun construction on the conversion and expects to deliver it in late 2026, the company said Tuesday.
The project is planned to offer units ranging from studios to three-bedroom apartments, with amenities including an outdoor pool and resident lounge. The developer also has a lease with CityDance for a performing arts venue in the building.
“Through our strong partnerships with Barings and Kennedy Wilson, we look forward to delivering a premier residential apartment community which combines elegant design with sustainable features that will contribute to Alexandria’s continued growth and vibrancy,” Carr Properties CEO Oliver Carr said in a release.
Alexandria has been a leader in the D.C. region and nationally for office conversions due to its stock of aging standalone buildings near high-demand residential and retail areas. Planning for conversion projects has been on the rise across the region, but it has been difficult for many to obtain financing in a difficult capital markets environment.
Carr's financing comes not from a bank but from a large real estate investment firm that has a growing debt fund. Kennedy Wilson has raised more than $11B for its debt platform, and in 2023 it acquired a $5.7B loan portfolio from Pacific Western Bank.
“Kennedy Wilson’s construction loan for 425 Montgomery continues our debt platform’s focus on funding high-quality projects in premier locations with reputable sponsors,” Kennedy Wilson Managing Director Craig Lockard said.
Barings has $421B in assets under management. Its head of acquisitions for the eastern U.S., Kevin Miller, said in a release that it invested in 425 Montgomery project because of the region's strong demographic trends, rent growth and supply-demand fundamentals.
For Carr, which owns 12 office properties totaling more than 4M SF, the project is part of its push into residential. In 2020, it delivered its first apartment building, a 456-unit high-rise in Bethesda called The Elm, which it sold in August 2023 for $220M.
