ROSSLYN, VA–Paramount Group has entered into an agreement to sell Waterview, a 24-story, 647,000 square foot office building for $460 million. When the deal is complete it plans to use the proceeds to finance a like-kind exchange for its acquisition of One Front Street, a 38-story office tower San Francisco earlier this year.
The Waterview sale will give Paramount a financial statement gain of $110 million and a tax gain of approximately $393 million, the latter of which will be deferred as part of a like-kind exchange for One Front Street. The transaction, subject to customary closing conditions, is expected to be finalized in the second quarter of this year.
Paramount Group is paying $521 million or about $800 per square foot for the 651,000-square-foot building in San Francisco.
One Front Street has a 99.4% occupancy, but many of the building's leases are close to expiring. These leases are about 20% below market value, representing a significant upside for Paramount, according to CEO Albert Behler. “By recycling the capital from this stabilized asset into our recent, more accretive, One Front Street acquisition, we believe shareholders will benefit from our team's ability to add value by capitalizing on expiring leases…” he said in a prepared statement.
The Waterview is currently 99% leased to a single tenant whose lease expires in January 2028. The last time it sold was in May 2007 for $413 million.
Morgan Stanley Real Estate won the bidding for the Waterview, according to a report in Real Estate Alert. It is a record price for the Washington DC suburbs, it noted and with a valuation of roughly $725 per square foot, the initial annual yield would be around 5%.
ROSSLYN, VA–Paramount Group has entered into an agreement to sell Waterview, a 24-story, 647,000 square foot office building for $460 million. When the deal is complete it plans to use the proceeds to finance a like-kind exchange for its acquisition of One Front Street, a 38-story office tower San Francisco earlier this year.
The Waterview sale will give Paramount a financial statement gain of $110 million and a tax gain of approximately $393 million, the latter of which will be deferred as part of a like-kind exchange for One Front Street. The transaction, subject to customary closing conditions, is expected to be finalized in the second quarter of this year.
Paramount Group is paying $521 million or about $800 per square foot for the 651,000-square-foot building in San Francisco.
One Front Street has a 99.4% occupancy, but many of the building's leases are close to expiring. These leases are about 20% below market value, representing a significant upside for Paramount, according to CEO Albert Behler. “By recycling the capital from this stabilized asset into our recent, more accretive, One Front Street acquisition, we believe shareholders will benefit from our team's ability to add value by capitalizing on expiring leases…” he said in a prepared statement.
The Waterview is currently 99% leased to a single tenant whose lease expires in January 2028. The last time it sold was in May 2007 for $413 million.
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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.
