Bisnow Exclusive: Monday CEO Anthony Westreich on 1812 North Moore and His Timely Exit from NYC
The tallest building in the Washington region, Monday Properties' 1812 North Moore in Rosslyn, has been empty since it opened in October 2013. But Monday CEO Anthony Westreich isn't panicking despite the poor market conditions in Arlington. And we're excited to learn more about it at BOLD: Bisnow's full-day national Office Leasing, Development and Investment Series at 4 Times Square in Manhattan on Dec. 1.
Monday Properties owns 10 office buildings in Rosslyn totaling 3M SF, and Anthony’s family has been developing on the Virginia bank of the Potomac since 1959. Every project they’ve done there has been built on spec, he says.
But 1812 is different: construction began in 2010 when costs were rock-bottom, and it seemed to have been timed perfectly to deliver as the recession ended. Then sequestration and BRAC hit Arlington’s office market like a 1-2 haymaker and it still hasn’t recovered. “It’s really interesting and frustrating,” Anthony tells us. “There’s just no demand in the marketplace.”
1812 was in the running for The Advisory Board Co’s new HQ, but lost that race to Douglas Development Co and DC. “Sitting and not getting it done has been a very hard period for us,” he says. But the DC office market is correcting course and Anthony is confident that will spread to Rosslyn soon.
So far, Anthony says he’s not considering changing tactics: he still is targeting an anchor tenant of at least 100k SF. “If you start doing floor-by-floor deals, which I’m not opposed to, you’re really starting to bastardize the rest of our buildings in Rosslyn,” he says.
But it’s anyone’s guess when a private sector client of significant size might target Rosslyn again. Anthony isn’t panicking, however, despite what market observers might believe.
Monday and partner Goldman Sachs are patient owners and recognize the Rosslyn portfolio's long-term value. It's moderately leveraged and has no near-term debt maturities. “It makes better sense for us to bird-dog it and wait for the right tenants to come,” he says. And when they come, "they’re getting as good a building as you’re going to see.”
The views from the top floor truly are breathtaking, the building is über-efficient, technologically cutting edge and sits on top of Virginia's busiest Metro stop. “If we had developed that building in any other market in the US, it would be the highest price point in the market,” he says. “It’s not a pricing issue. It’s not like if we dropped our pricing, we’d lease the building. There's just a lack of demand right now. That will change.”
Looking beyond the 35-story trophy building, Monday has decided to exit the New York City office market entirely, with its last disposition—the $1.2B sale of 230 Park Ave (above)—earlier this year. That building sold with a cap rate of 3.7%, and market conditions like that are unsustainable, Anthony says.
The building is a 100-year-old landmark, leased up until 2020 and has little near-term growth potential. “I can’t make any sense of underwriting New York City,” he says. “Because I'm not buying, I'm a net seller. We've made the strategic decision to sell into this bull market.”
Monday’s entire office portfolio is now those 10 Rosslyn properties. Anthony is targeting multifamily in value markets, making plays in North Dakota and outside Charleston, SC. But as far as office goes, he doesn’t anticipate any more deals coming soon.
“We always want to be in liquid markets, gateway markets” like DC and NYC, he says. He’s also looked at Dallas, Austin, Chicago, Kansas City. “The challenge is, there’s so much capital that wants to be in fixed assets in liquid markets. All of those markets, including DC, cap rates are tight. We see the same value issues in the markets we would want to be in.”
Anthony's take on the office market is sure to cause a stir at BOLD: Bisnow's full-day national Office Leasing, Development and Investment Series at 4 Times Square in Manhattan on Dec. 1. Sign up here!