WASHINGTON, DC-One of the two office buildings in the Watergate office and residential community--perhaps the most iconic complex in a city of famous structures--has traded for an undisclosed price to Penzance. The acquisition is a value-add play for the firm, which is acquiring the 200,000-square-foot building at 2600 Virginia Ave., NW with 80,000 square feet of office space still available to lease.
The building is also home to Safeway--one of the few grocery stores available to residents in Foggy Bottom--which has just announced plans to leave the Watergate. Safeway is not a major component of the building’s approximate 65,000 square feet of retail, but its departure is still a significant loss to the community, Tom Ikeler, managing director of Capital Markets for Penzance, tells GlobeSt.com.
Safeway, however, is not the anchor of the complex. “That would be the hotel, which has been dark for four years and is now coming back to life,” he says. “When a major anchor is dormant for a long period of time and then starts to move again, it can infuse a lot more energy and excitement for the rest of the project.”
The Safeway at Watergate, Ikeler goes on to say, had not been renovated or upgraded in several years, much like the Watergate office building itself. The building last traded in 2005 when BentleyForbes, a Los Angeles-based investor, paid $84.5 million for it. More recently, it surrendered the building to the mezzanine lender, Capri Capital. Penzance acquired the building from Capri, closing on the transaction just before the Thanksgiving holiday.
“We plan to breath new life into the building,” Ikeler says. “The prior owner was not locally-focused and was undercapitalized. We, on the other hand, are locally-based and have enough capital to see a repositioning through.” Ikeler declined to discuss both pricing of the acquisition and specifics about the repositioning, though data from Real Capital Analytics places the price at $76 million. In the case of the latter, he says, it is still too early to discuss.
One hint he gives about the former is to say that Penzance has completed, or is in the processing of closing, some $600 million in transactions in the DC area--a number that includes the Watergate acquisition. The firm recently acquired 1555 Wilson Blvd., a Rosslyn office building for $67 million.
It is also in the process of selling 1130 Connecticut Ave., NW for a reported $98.4 million. Earlier this year, Penzance and partner Greenstreet Real Estate secured a $61 million loan to refinance the joint venture’s first mortgage on the 218,571-square-foot office building that they acquired in 2004.
“We are also getting ready to commend development on a new trophy office building one block from the Clarendon metro,” he says--a project that is also part of the $600 million he cited.
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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.
