Seller Of Amazon HQ2-Adjacent Apartments Doubles Its Money
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Amazon is driving up prices for apartment buildings around its second headquarters site in Arlington.
HFF announced Tuesday its team of Walter Coker, Brian Crivella, Stephen Conley and Matthew Lawton brokered the deal on behalf of the seller, and HFF's Jamie Leachman worked with the buyer to secure a $127M acquisition loan from MetLife Investment Management.
The sale, which pencils out to about $428K/unit, is more than double the $109.7M, or $206K/unit, Paradigm paid for it in 2009. The Aura Pentagon City, recently rebranded from Meridian Pentagon City, was built in 2001 and consists of two buildings at 1221 and 1331 S. Eads St. It sits just one block from one of the sites Amazon is buying from JBG Smith to build its HQ2 campus.
JBG Smith CEO Matt Kelly cited the deal in the REIT's Q1 letter to investors as an indication that Amazon is impacting prices in the market. He said it recently went under contract at a 3.7% cap rate, a metric that measures a building's value relative to its income, compared to Arlington's average cap rate of 4.6%.
"We believe this aggressive pricing was driven by substantial investor depth and the expectation of outsized rent growth fueled by Amazon-related demand," Kelly wrote.
HFF began marketing the property on behalf of Paradigm and its partner, UBS Asset Management, in the weeks following Amazon's Nov. 13 HQ2 announcement. The marketing brochure for the property included Amazon's name on nine out of its 12 pages, showing that the brokerage team viewed HQ2 as a major selling point.
After the property hit the market, a Real Estate Alert report pegged the expected sale price at $210M or $393K/unit. Transwestern Executive Vice President Dean Sigmon, a multifamily sales expert, told Bisnow in December he thought a $393K/unit price tag seemed aggressive for Pentagon City, but he expected investors would pay it because of the shortage of product on the market. The deal ultimately closed for $18M more than that reported price.
UPDATE, MAY 14, 2:25 P.M. ET: This story has been updated with information on the HFF brokerage team and the acquisition loan.