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Sticker prices surge with trophy sales
Washington real estate is synonymous with
dollar signs as the region's economy continues to thrive and other
investment vehicles can't match the return of D.C.'s office buildings.
The most recent case in point: The Gallup
Building, 901 F St. NW, two blocks west of MCI Center, has sold for $56
million, or $493 a square foot, the second-highest price per square foot in
the region this year.
"It's a trophy asset with a lot of
character," says John Norjen, senior vice president of real estate
brokerage firm CB Richard Ellis.
In the deal, Norjen and colleague Bill
Prutting Jr. represented the seller, a partnership between Infrastructure
Capital Group and Northridge Capital.
New York-based Binswanger/CBB acted as
the buyer on behalf of foreign investors, sources say.
Spaulding & Slye represented the
seller.
The building was developed in 2000,
connecting a new eight-story office tower to the Masonic Temple, which was
built in 1868 and recently restored. The Gallup Organization, Fannie Mae and
Northrop Grumman are major tenants in the fully leased building.
At 113,000 square feet, the Gallup
Building's comparatively small size contributed to the hefty square-foot
price because more investors were able to make a play for it.
The 204,000-square-foot Acacia Building
at 51 Louisiana Ave. NW fetched the highest per-square-foot figure this
year. It sold for $600 a square foot and included rights to double the
rentable space.
"It's not surprising or a shock to
see prices at $490 or $500 a [square] foot," says Tyler Blue, senior
vice president at Bethesda-based real estate financing firm Walker &
Dunlop.
And prices won't fall anytime soon:
Rumors are swirling that 1001 Pennsylvania Ave. NW will sell for more than
$500 a square foot, and 1900 K St. NW will go for more than $600 per square
foot, sources say.
"These deals are so tight on the buy
side," Blue says. "But investors notice that real estate, as an
asset class, has outperformed other classes over the last four years."
With the expectation that interest rates
will rise, brokers don't expect sales to slow significantly. Instead,
underwriting terms will only get more competitive.
"It's a result of the recognition
that downtown Washington is one of the most stable office markets
fundamentally with low interest rates, tremendous job growth," Norjen
says.
And investors are taking notice as
money pours in from all over the world. In the top five-priced deals of the
year, out-of-town money made the winning bid three times.
- by Tony Mazzucca WASHINGTON
BUINESS JOURNAL 8 Nov 2004
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