WASHINGTON, DC-More than a year ago, during the depth of the investment sale freeze here, 1501 M St. traded for $60 million and a 8% cap rate. The sale was among a handful that gave the market hope that a recovery was in the offing. Indeed, that trade did appear to break the ice and slowly others began to follow suit.
Now, the CBD/East End building has sold again, for $79 million and a 6.9% cap, a source tells GlobeSt.com. This time, though, market participants would be wise not to read too much into those numbers. The partial ground lease in place took much of the risk off the hands of the buyer, therefore driving up the sales price.
Last week, the John Buck Cos.’ JBC Opportunity Fund III sold the 11-story, 177,525-square foot Downtown building to institutional investors advised by J.P. Morgan Asset Management. Bill Collins, Paul Collins, Drew Flood, Jud Ryan and James Cassidy of Cassidy Turley represented the seller.
Flood declined to discuss pricing with GlobeSt.com, but he did say that the building traded at a profit for the seller. “John Buck took on a fair amount of risk in buying the asset in 2009,” he says. “We are fortunate that the markets have recovered significantly since then.” The asset is 93% leased with the majority of tenants in-place through at least 2017.
The deal is another win for the DC market, Jones Lang LaSalle’s research director Scott Homa tells GlobeSt.com. “Investors continue to aggressively pursue core assets in Washington, DC due to its stable economy, sound market fundamentals and a virtually recession-proof tenant base,” he relates. “We expect investor demand to remain robust over the foreseeable future, with tremendous amounts of cash on the sidelines and limited investment alternatives drawing buyers into the market.”
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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.
