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REIT Welltower Pays $78M To Acquire K Street Medical Office

The medical office building at 2021 K St. NW in Washington, D.C.

In the first major D.C. commercial real estate transaction of 2023, publicly traded senior housing and healthcare real estate owner Welltower has acquired the 214K SF medical office building at 2021 K St. NW.

The property sold for roughly $78.3M, according to a filing posted Monday in the D.C. Recorder of Deeds. The property was sold by an affiliate of TF Cornerstone, the New York City real estate firm founded in 2009 by Thomas and Fred Elghanayan.

Rockrose Development bought the building in 2005 for $70M from a LaSalle medical office fund, according to deed records. TF Cornerstone took control of the asset when it split from Rockrose Development, the firm run by Thomas and Fred Elghanayan's brother, Henry.

TF Cornerstone took out a $55M mortgage on the building with BNY Mellon in 2016, a loan that was paid off with the transaction, according to a certificate of satisfaction filed concurrently with the sale. 

The building is leased to medical tenants like Quest Diagnostics, Washington Orthopaedics & Sports Medicine and District Endodontists. The Froggy Bottom Pub occupies ground-floor retail space. More than 18K SF is available for lease, according to a JLL marketing brochure for the property.

Messages to TF Cornerstone and Welltower officials seeking comment weren't immediately returned.

Welltower, an Ohio-based REIT with a nearly $34B market capitalization, has a small footprint in D.C. already. It owned two senior housing properties in D.C. at the end of 2021 with a combined $87.5M total investment and $12.8M in annualized revenue, according to its most recent annual report filed with the Securities and Exchange Commission. It owned one senior housing property in Maryland and dozens of senior housing, outpatient and triple-net leased medical facilities in Virginia.

The REIT has come under scrutiny for its performance. A short-seller report released last month by Hindenburg Research alleged Welltower's management is hiding losses from investors in a "shell game," by transferring the operations of underperforming nursing homes to an unknown company that had been founded only months earlier.