Nuveen Swallows 76% Price Cut On Northern Virginia Office Building
Another institutional investor has shed a Washington, D.C.-area office building for a fraction of what it paid for it.
Nuveen sold the office building at 4350 N. Fairfax Drive in Arlington, two blocks from the Ballston Metro station, on April 1 to Arlington-based Rooney Properties for $20.2M, property records show. That price equates to $103 per SF for the 197K SF building.
It was developed in 1989, and the Teachers Insurance and Annuity Association of America, which has since branded its real estate arm as Nuveen, acquired it in 2006 for $85M.
Nuveen didn't hold any debt on the building. Nuveen declined to comment. Rooney didn't respond to requests for comment.
The building is roughly 50% vacant, and more tenants are expected to leave, Newmark Executive Managing Director James Cassidy, who brokered the sale along with Jud Ryan and Grant Marley, told Bisnow. The building's tenants include Tax Matters Associates, Marine Acoustics and the National Association of State Departments of Agriculture.
Cassidy said the building's vacancy and the overall struggles of the D.C. office market contributed to Nuveen's decision to sell it.
"They have a lot of exposure to office in the D.C. region, and this was an asset they had struggled to re-lease, and so because of the cost of that going forward, it was an inflection point of whether they continued to reinvest or sell it to someone else with a fresh perspective," Cassidy said.
He said the property has optionality to add density or redevelop to another use. But he said Rooney sees its best use as office, and given that it acquired it for such a low basis, he expects it will make investments to try to fill the vacancy.
The building has roughly 84K SF of offices listed as available on Avison Young's page marketing it for lease.
The Ballston submarket has a vacancy rate of 23.7% across its 7.3M SF of office inventory, according to CBRE's first-quarter report.
Arlington's office market is expected to see more pain in the near future from the Trump administration's cuts to the federal workforce and real estate footprint, local officials and developers said at a Bisnow event last week. More than 25,000 federal employees work in Arlington, and it has a large base of contractors that rely on government funding.
The federal cuts have made the D.C. area a less appealing market for institutional investors, commercial real estate experts told Bisnow last month. TIAA is one of the three largest institutional investors ranked by real estate allocation, according to PERE.
Cassidy said he expects the market will see more institutional investors sell assets in cases like this where they had acquired it at a higher basis than it is now worth.
Brookfield last month sold an office building at 1005 N. Glebe Road in Arlington for $47M, down from its 2021 price of $50M. It also sold a D.C. building last month at 750 Ninth St. NW for $153M, down from its 2005 price of $158M.
"There are legacy assets that investors are going to have to sell and meet the market, whether it's distressed or recycling capital," Cassidy said. "In addition, we're seeing a growing list of investors eager to look at the potential of owning office in this market."
