Vacant Downtown D.C. Office Building Finds Buyer After Hines Handed Control To Lender
The building above the Metro Center station, 725 12th St. NW, is under contract to sell to a partnership of Madison Marquette and Highland Square Holdings, which filed a Board of Zoning Adjustment application to turn it into live-work loft units, the Washington Business Journal first reported.
A source close to the deal told Bisnow the sale price is around $70M, well below the $135M loan that Hines had taken out on the building from lender Allianz Real Estate in 2016.
The office building at the corner of 12th and G streets NW, also called 700 11th St., became vacant last year after law firm Williams & Connolly completed its relocation to the second phase of The Wharf. The ground-floor retail space is also dark at the building.
Last September, Real Estate Alert reported that Hines was handing back the keys to the lender. It reported at the time that Allianz retained Eastdil Secured to market the property and was seeking a $90M sale price.
Allianz effectively took control of the asset, leading the sale process and paying the building's bills, the source said, though Hines continued to serve as property manager and never formally went through a foreclosure transfer, an arrangement the source described as a "friendly foreclosure."
Allianz declined to comment. Hines didn't respond to a request for comment.
The Madison-Highland partnership, formed last year, is bringing the live-work concept to the Skyline Center office complex in Fairfax County. Its purchase of 725 12th represents its first deal in the District.
The venture is proposing to turn the 12-story, 315K SF building into 239 units with 9,600 SF of retail and a new rooftop amenity space.
The conversion of struggling downtown office buildings to residential has become a focal point for Mayor Muriel Bowser and the DowntownDC Business Improvement District as they look to revitalize the area. A growing number of developers are taking on projects, and Amazon contributed funding to a conversion a few blocks north of 725 12th in June.
But to some office brokers, the inability of a building at a traditionally prime location above Metro Center to succeed as office represents a worrying sign for the market.
"It pains me, but that will likely be converted to residential," Behr said of the Metro Center building. "It's an unbelievably awesome office site, but the economics don’t support it today."