New York Investor Pays Carlyle Group $175M For 40-Year-Old D.C. Office Building
An investment fund run by the former heads of Morgan Stanley's real estate division, after raising a $1.6B real estate fund this spring, has made a major D.C. office acquisition.
GreenOak Real Estate, through its affiliate, New Hampshire Ave Owner LLC, bought the office building at 1200 New Hampshire Ave. NW from The Carlyle Group and Aion Partners for $174.5M.
The buyer obtained a $123M loan from Citibank to make the purchase, a document posted to the Recorder of Deeds shows. GreenOak partnered on the deal with the Glick Family, a New York-based family office. The sale of the 311K SF building, recorded on Friday, comes out to roughly $561/SF.
The office building, constructed in 1979, last sold in 2007 for $165M, property records show. It was then renovated in 2011 to include a two-story lobby with a 22-foot-tall glass facade, a green roof and a fitness facility. At the corner of New Hampshire Avenue and M Street NW, the building sits just under a half-mile from the Dupont Circle Metro station. It is part of the Golden Triangle Business Improvement District.
The building is fully leased to office tenants, including Al Jazeera International, law firm Weisbrod Matteis & Copley, The Harbour Group, STEMconnector, Diversified Search, the National Academy of Social Insurance and Susan B. Anthony List. Its ground-floor retail includes seafood restaurant Grillfish, Chinese restaurant Meiwah and Potbelly Sandwich Shop. The office building sits next to two hotels, the Hyatt Place Washington D.C. and the Washington Marriott Georgetown.
Cushman & Wakefield Executive Vice Chairman Bill Collins represented the seller in the deal, which he said was an off-market transaction. He said the building offers a good opportunity to launch a new renovation and raise rents while still remaining cheaper than new trophy product.
"The desire for West End properties has been very attractive to people," Collins said. "If you look at all the core trophy properties that are being developed and leased, this provides you with an opportunity with the same location to reposition and take advantage of a $10-$15/SF delta between new and repositioned [buildings]. It has all the benefits of the location and the price point tenants want."
GreenOak, a Manhattan-based real estate investment firm founded in 2010 by former heads of Morgan Stanley Real Estate John Carrafiell and Sonny Kalsi, in May announced it raised $1.55B for its third U.S. real estate fund. Investors in the fund include the New York State Common Retirement Fund, the Teachers’ Retirement System of Oklahoma, the Tennessee Consolidated Retirement System and the City of Austin Police Retirement System.
The company previously partnered with PRP on the acquisition and conversion of an office building at 2501 M St. NW into condos, with Japanese restaurant Nobu on the ground floor.
The firm's portfolio includes four properties in New York City, seven in Madrid, five in Tokyo, two in Barcelona, two in Italy, and single assets in San Francisco, Boston, Los Angeles, London and Okinawa, Japan.
The deal continues the momentum for D.C.'s office investment sales market, which began 2018 with a flurry of deals, slowed down during the second quarter and then picked back up in August following the $415M sale of Washington Harbour. The office building at 1399 New York Ave. is under contract to be sold by JBG Smith, the fourth D.C. office sale for the REIT this year as it looks to unload properties during what it perceives as a seller's market.
Collins said there are several other properties on the market as sellers look to take advantage of a large pool of buyers looking for a safe investment in D.C.
"There's a good amount of product that is coming to market, and it's a combination of both domestic demand and foreign demand for quality product in a market they perceive as good in good times and even better in bad times," Collins said.
