The 10 Biggest Stories Of The Summer In D.C. Commercial Real Estate
This summer was an unusually busy one for commercial real estate, and nowhere was that more true than in the nation's capital. In the District, the season usually marked by slower deal flow saw record-setting transactions, massive mergers and increased activity from the federal government. If you took a week off for summer vacation, chances are you missed some big D.C. real estate news. As we turn the page to the fall, Bisnow took a look back at the 10 biggest stories from the busy summer of 2017.
GSA Cancels Search For FBI HQ
The decision that had developers and local officials on the edge of their seats for months was canceled as the General Services Administration in July scrapped its search for a new $2B FBI HQ in the D.C. suburbs. The selection of where to build the 2.1M SF campus, which had been narrowed down to three sites in Greenbelt, Landover and Springfield, was not made because the GSA said Congress had not appropriated the necessary funds.
The federal government is now starting from scratch on a plan to consolidate the FBI, but it appears to have some sense of urgency. The GSA and FBI on Aug. 2 committed to a 120-day window to craft a plan to move forward on the project.
Xceligent Brought An Antitrust Countersuit Against CoStar
The dispute began with CoStar's intellectual property suit against its competitor in December, in which it claimed Xceligent had stolen and republished thousands of its proprietary images and data points. It escalated in late June when Xceligent responded with an antitrust countersuit against CoStar. The Kansas City, Missouri-based data firm claims CoStar has violated federal antitrust law, and restrictions the Federal Trade Commission placed on the company, by preventing its users from sharing their data with other services.
The case now includes other major commercial real estate firms. In August, Xceligent subpoenaed CBRE and Newmark Knight Frank, ordering the firms to produce 10 years of communications and agreements with CoStar. CoStar has moved to dismiss the antitrust countersuit and called it a "smoke screen," but the firm has recently bolstered its legal team with a top antitrust attorney.
JBG Smith Completes Merger, Becomes Public Company
The company will move its HQ to downtown Bethesda in 2019 upon the completion of its office development at 4747 Bethesda Ave., which broke ground in July.
The developer in August completed 13|U, a 129-unit apartment building with some units fetching more than $10K per month. Also in August, one of JBG's private funds completed the $509M sale of the Mark Center portfolio, a 2,664-unit series of apartment communities that was left out of the merger, one of the largest commercial real estate transactions in Virginia history.
GSA Gets New Leadership
As the GSA was making consequential real estate decisions this summer (more on that later), the agency was also transitioning to new leadership.
In late July, former congressional staffer Dan Mathews was appointed to be Public Buildings Commissioner, the GSA official who oversees real estate for the federal government. His appointment comes after Norman Dong stepped down from the role in March to join the private sector.
Then on Sept. 1, as first reported by Bisnow, President Donald Trump nominated Emily Murphy to be the next GSA administrator. Murphy served as senior adviser to Acting Administrator Timothy Horne, who after the inauguration filled the position previously held by Denise Turner Roth. Murphy also served as the GSA's chief acquisition officer between 2005 and 2007.
The Purple Line Finally Broke Ground
The long-awaited Purple Line project was finally able to begin construction in August following the completion of a $900M federal funding agreement. The 16-mile rail line will have 21 stops from Bethesda to New Carrollton and is expected to open in 2022.
The new east-to-west connection is already sparking major development activity along the route. On the Purple Line's eastern terminus in New Carrollton, Urban Atlantic is moving forward on the first phase of its 2.7M SF mixed-use development. After signing Kaiser Permanent to lease 176K SF, the developer plans to break ground in September on the office building, following that with the groundbreaking of an adjacent multifamily building expected next year.
On the Purple Line's western terminus in Bethesda, Carr Properties began construction this summer on its Apex Building project, a 937K SF development that will include 460 residential units, 360K SF of office and ground-floor retail.
GSA Selects Springfield Site For New TSA HQ
While the FBI move was sent back to the drawing board, the GSA did move forward on another major federal agency relocation. On Aug. 25 it announced its selection of Boston Properties' 10-acre site in Springfield, Virginia, to be the next home for the Transportation Security Administration. The 15-year lease was valued at $316M.
The developer hopes to break ground in September on the 625K SF facility and complete the project by mid-2020. The property sits next to the GSA warehouse site that was in contention for the FBI HQ, and Boston Properties also owns an adjacent seven-acre office development site, meaning the TSA move has the potential to spark a big wave of development activity, either private or public, around the Springfield-Franconia Metro station.
Also in late August, the GSA finalized the deal to move U.S. Citizenship and Immigration Services into a new 575K SF office building that developer Peter Schwartz will build at the heart of the major mixed-use town center he is developing close to the Branch Avenue Metro station in Prince George's County.
First Potomac Realty Trust Acquired In $1.4B Deal
First Potomac Realty Trust, the D.C.-based REIT with a portfolio of 39 properties totaling 6.5M SF, is in the process of being acquired. Boston-based Government Properties Income Trust on June 28 announced it reached an agreement to buy First Potomac for $1.4B.
The deal would pay out $11.15 per share to First Potomac investors, but not all of them are pleased. One of the REIT's shareholders, John Geml, filed a lawsuit against First Potomac in August, claiming it did not provide enough information to investors ahead of a Sept. 26 vote on the merger.
Meanwhile, former First Potomac CEO Doug Donatelli and Chief Investment Officer Nicholas Smith in July announced they were starting a new real estate firm, DSC Partners, which will focus on acquiring value-add and Class-A assets.
Georgetown Retail Sale Shatters D.C. Record
The sale of a prime Georgetown retail property in early August set a D.C. record for price per SF. Capital One bought 3150 M St. NW for $50.2M, more than $5,720/SF, from Sagamore Development. Kevin Plank's development company had spent more than a year renovating the property after buying it in 2014. Dochter & Alexander Retail Advisors brokered the record-setting deal on behalf of the seller, and CBRE represented the buyer.
Shortly after the acquisition, Capital One unveiled its plans for the property. The McLean-based bank plans to introduce its new Capital One Café to the District. It is opening two D.C. locations of the concept, a hybrid of a bank and a coffee shop, in the Georgetown building and in Chinatown.
Unizo Continues D.C. Buying Spree With Future Wawa Building
Japanese investor Unizo Holdings continued its D.C. buying spree with the acquisition of 1111 19th St. NW. It entered into a contract on Aug. 3 to buy the building for $203M from Clarion Partners. Tokyo-based Unizo has been a driving force behind D.C.'s office sales market, buying nine buildings for more than $1.4B since March 2016.
The 1111 19th building, in addition to being Blackboard's HQ, is also where Wawa plans to open its largest store in December. The Pennsylvania-based convenience store and hoagie shop chain in June announced its ambitious plans to break into the D.C. market, opening five to 10 locations in the next two years.
The Wharf Signs New Retail Tenants Ahead Of October Opening
The Wharf will celebrate its grand opening on Oct. 12, and Hoffman-Madison Waterfront has spent the summer announcing a deluge of new retail tenants that will open at the $2.5B Southwest Waterfront development.
In June, The Wharf unveiled its fourth live music venue, the 450-person Union Stage, opening this fall on the Pearl Street entertainment district.
In August alone, The Wharf's developer announced deals with bookstore Politics & Prose and with a series of soft-goods retailers, and it announced the opening of a rooftop cocktail bar atop its Canopy by Hilton hotel and a new restaurant from chef Kwame Onwuachi.