DC Office Buildings Marketed as Conversion Targets
Lenders are selling two properties they say are ripe to go residential.
Two office properties that have been put on the market in Washington’s East End are being marketed by the lenders who want to sell them as assets that perfectly suited for an office-to-residential conversion.
A Prudential Financial unit is offering to trade a $155M CMBS loan backed by a 500K SF building at 450 Fifth Street NW in a deal being marketed by Newmark.
According to greenstreet’s latest alert, the loan on the Fifth St. building is scheduled to mature in December and the property’s sole tenant plans to vacate the building in 2025. The loan is expected to trade at a discount to its face value, with a buyer likely moving to take over the property from its unidentified owner, the report said.
Eastdil Secured, on behalf of lender Allianz Real Estate, is marketing a 320K SF vacant office building at 700 11th Street NW. Bids are expected to approach $90M, or $281 per SF.
According to reports, Hines and its partner Sarofin Realty Partners, signed a deed-in-lieu of foreclosure agreement with Allianz—which holds a 10-year, $135M loan on the property—when the tenant at 700 11th St., the law firm Williams & Connally vacated the building in a relocation.
The Fifth Street and 11th St. buildings both are being marketed as multifamily conversion opportunities.
The wave of adaptive reuse projects involving office conversions to apartments continues to grow in Washington, DC, which has a glut of aging office inventory in the middle of a severe housing crunch.
Last month, Lowe Enterprises announced a $100M deal for Portals 1, a 536K SF building at 1250-1280 Maryland Ave. SW, with plans to convert the office campus into 446 residential units. JLL brokered the deal on behalf of lender LNR, which seized the property in 2017.
Philadelphia-based Post Brothers—which specialized in office-to-residential conversions—made its entry into the DC market in June with the $226M acquisition of a complex of two Class B office buildings that fill an entire city block near Dupont Circle.
The complex on Connecticut Avenue NW includes the 12-story, 368K SF Universal North building and the 10-story, 291K Universal South building. Post Brothers plans to convert the 2.5-acre office complex into a residential development in a high-income neighborhood of Northwest DC that has a tight supply of multifamily units.
A bevy of office-to-apartment conversions have been initiated in Washington this year, including Foulger-Pratt’s conversion of a 14-story office tower on New York Ave. into 225 apartments, and the conversion of two downtown office buildings into apartments by a partnership of Lincoln Property and Cadillac Fairview.
Washington DC Mayor Muriel Bowser has been a strong advocate for office-to-residential conversions. Bowser has pushing for the rezoning of office-only districts and the introduction of more mixed-use properties in submarkets including the East End, West End and DC’s central business district.
The central business district is filled with old office buildings, including numerous facilities the General Services Administration has vacated. DC officials estimate that as much as 4M SF of office space may be ripe for conversion to multifamily.