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A major owner of downtown D.C. offices is jettisoning one of its properties close to the White House, with the new owner eyeing a residential conversion.
Pembroke sold the 11-story office building at 1010 Vermont Ave. NW to Altus Realty for $16M. Altus is planning to convert the property to 89 apartments and secured a $12.85M acquisition and pre-development loan from New York-based ACRES Capital, which announced the deal Monday.
"The sale of 1010 Vermont Avenue follows the successful execution of a highest and best use analysis of the property, where we reviewed several options and ultimately determined that the asset is no longer a suitable fit within our portfolio," a spokesperson for Pembroke told Bisnow in a written statement.
The building, a block north of McPherson Square, also features 4K SF of ground-floor retail. The new owner plans to house approximately 89 multifamily units in the property. Savills' Lindsay Stroud arranged the loan.
“Repurposing and repositioning properties for updated market needs is proving to be a core focus to move forward post-pandemic,” ACRES CEO and President Mark Fogel said in a statement. “With the increase of office vacancies, 1010 Vermont Avenue NW presented a great opportunity for an adaptive reuse project that supports the market’s demand transition from office space to residential in the DC area.”
Pembroke acquired the building in April 2008 for $22.4M, according to property records. Pembroke bought the adjacent 1000 Vermont Ave. NW the same day for nearly $40M, but the spokesperson told Bisnow it will continue to operate that building as office.
Pembroke previously renovated the two properties to add new main entries and lobbies and refresh the retail storefronts, according to its website. Combined, the buildings total 149K SF.
The renovations followed a playbook Pembroke has employed in the past to renovate aging offices, particularly in areas like CityCenter, where rising office rents pushed out government tenants. Properties like 1201 New York Ave. NW and 1801 Pennsylvania Ave. NW landed tenants like The Wilderness Society employing those renovations.
The future for properties that have large vacancies in D.C.'s historically office-heavy downtown are cloudier than in years past. The District's slumping office market has spurred a wave of office-to-residential conversions, including Foulger-Pratt's planned conversion of 1425 New York Ave. NW and Post Brothers' plans for the Universal North buildings in Dupont Circle.
Market leaders say the office market in D.C. may have reached a tipping point where more owners cut their losses and sell a struggling office property for conversion rather than attempt a costly renovation.
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