In 2011 the seller Penzance acquired the Watergate from mezzanine lender Capri Capital for $76 million when it was only 45% leased. The building had been surrendered by Los Angeles investor BentleyForbes, which paid $84.5 million for it in 2005.

Penzance invested millions of dollars to reposition it. As it improved, tenants began rethinking the building's possibilities. In 2013, for instance, the National Trust for Historic Preservation decided to relocate its headquarters at the Watergate. And in 2016 George Washington University signed a full floor lease at the office building, bringing the Watergate to more than 90% leased.

One could suppose it is still in the value add category with a 90% lease rate but GlobeSt.com asked Rockwood for clarification.

Tyson Skillings, a partner at the firm told us that Rockwood has a nuanced approach to value-add investing in which a portfolio includes current income to counterbalance the risk inherent in other assets where income production is expected to be slower.

“Having invested in Washington DC for decades, we think fundamentals in the DC market will improve over the next few years and we believe that the Watergate office building is a high quality asset with cash flow that we were able to acquire at a compelling basis,” he told GlobeSt.com.

“We will implement a value enhancing business plan with the goals of completing the lease-up and executing targeted capital improvements as the already strong submarket continues to improve.”

WASHINGTON, DC–As we have reported in the past, Rockwood Capital has acquired the Watergate office building, with the final purchase price clocking in at $75 million. What wasn't clear until recently was that the purchase was made through its latest fund — Rockwood Capital Real Estate Partners Fund X, which surpassed an $800-million target to close at a hard cap of $1.1 billion. As of the final closing, Fund X was approximately 30% committed and had completed nine investments.

It is a value-add fund that will target growing and evolving neighborhoods, according to Rockwood, “especially those driven by some combination of education, wealth and favorable population-based socioeconomic trends.”

All of which is fine, but the Watergate acquisition jars a bit with that picture.

At one time, sure, the iconic building was definitely a value-add play. But now?

In 2011 the seller Penzance acquired the Watergate from mezzanine lender Capri Capital for $76 million when it was only 45% leased. The building had been surrendered by Los Angeles investor BentleyForbes, which paid $84.5 million for it in 2005.

Penzance invested millions of dollars to reposition it. As it improved, tenants began rethinking the building's possibilities. In 2013, for instance, the National Trust for Historic Preservation decided to relocate its headquarters at the Watergate. And in 2016 George Washington University signed a full floor lease at the office building, bringing the Watergate to more than 90% leased.

One could suppose it is still in the value add category with a 90% lease rate but GlobeSt.com asked Rockwood for clarification.

Tyson Skillings, a partner at the firm told us that Rockwood has a nuanced approach to value-add investing in which a portfolio includes current income to counterbalance the risk inherent in other assets where income production is expected to be slower.

“Having invested in Washington DC for decades, we think fundamentals in the DC market will improve over the next few years and we believe that the Watergate office building is a high quality asset with cash flow that we were able to acquire at a compelling basis,” he told GlobeSt.com.

“We will implement a value enhancing business plan with the goals of completing the lease-up and executing targeted capital improvements as the already strong submarket continues to improve.”