HERNDON, VA—Federal Capital Partners just closed on One Dulles Tower for $84 million. Corporate Office Properties Trust is the seller of the 397,000-square foot property and calculates the per square foot price to be $212. The building, which is located in the Woodland Park master planned development, has been fully leased to Booz Allen Hamilton until the end of this year, at which point the security consultant will be vacating to a consolidated office in McLean, VA.
Once the company leaves, FCP plans to begin a repositioning and rebranding of the property, Principal Erik Weinberg tells GlobeSt.com.
The company will be upgrading the amenity package, adding an on site café and fitness center, as well as improving the aesthetics of the building, he says.
The building will most likely transition to a multi-tenant one, as FCP targets large tenants that would be interested in the location and in the efficiencies that could be gained from consolidation, he says.
FCP also expects to see potential tenant activity from the Herndon and Reston submarkets, both of which are seeing more organic growth.
As for why FCP might be able to lease up the building when COPT couldn't, Weinberg had this to offer: Actually accessing the building can be difficult due to Booz Allen's security requirements; even FCP had issues during its due diligence. Trying to arrange tours while the company is still in residency is nearly impossible.
In its last corporate earnings call, held the end of July, COPT CEO Roger Waesche briefly discussed his thinking about One Dulles in response to a question.
He said that the REIT had been trying to re-tenant it, targeting both the private sector and the federal government. Selling it was also an option, he said, "as long as we could receive an attractive price. Fortunately, we paid $71 million for the building back in 2003, or just under $180 a square foot, and have had significant cash flow for the last 12 years. So we're in good shape with respect to how we felt on that building, and we would consider selling it, but only for an attractive price."
At the presumably attractive price of $84 million, COPT is recognizing an approximately $42 million gain on the sale in the quarter ending December 31, 2015. It will be reporting its third quarter earnings later this week.
This transaction is a significant one for FCP as well; its acquisition of One Dulles Tower is its largest office deal in the region, Weinberg says. FCP is known for its value-add multifamily plays but the company is willing to invest in most asset classes, if the price and opportunity is right, he said. "We have big plans for this building."
Bill Collins, Paul Collins, James Cassidy, Jud Ryan and Drew Flood of Cushman & Wakefield represented the seller in the deal.
Cushman & Wakefield's Matt Bundy and Josh Masi will be providing leasing services for One Dulles under FCP.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
