Liberty Property Trust acquired 2100 M St. NW, a Class B+, 290,762-square-office building in Washington, D.C., that has the potential to add more than 100,000 square feet, for $133.5 million from Hines.

“We have been seeking well-located acquisitions in D.C.’s core submarkets where we can apply our leasing, property management and development capabilities,” Ben O’Neil, Liberty Property Trust vice president, said in a news release. “Our existing downtown properties are 99 percent occupied and the acquisition of 2100 M Street NW provides us with an infusion of leasable space, in addition to future redevelopment and expansion possibilities.”

O’Neil said the transaction, which closed Monday, includes the conveyance of 105,000 square feet of development rights.

“The site’s zoning would permit a potential future redevelopment of the building to a maximum of 415,000 square feet,” he added.

“It’s important to note that we looked at the building from its current state as a B+ building that we think is in a very good location that we can lease at market rents,” O’Neil told Commercial Property Executive. “There are some things we could do to bring it up to an A-, but that’s probably not the best use of capital.”

The eight-story building in the Central Business District is 77 percent leased with 66,366 square feet available. Tenants include The Urban Institute, George Washington University, Social Security Administration, and the Stewart & Stewart law firm. The UPS Store and M Street Store are among the retail tenants. Rents are about $48 per square foot.

Built in 1969, the property was renovated between 2007 and 2010 by Hines, which bought the site in May 2007 through its U.S. Office Value Added Fund. Hines acquired it from Prudential Real Estate Investors, who sold it on behalf of German institutional investors in its U.S. Property Fund III. At the time, Hines officials said the Houston-based privately owned real estate firm planned to develop an additional 100,000 square feet at the site. But Hines did not add to the building during its ownership.

The site, which has an underground garage with about 275 parking spaces, is located at the convergence of three main roads in the city: M Street, New Hampshire Avenue and 21^st Street. It is four blocks from both the Red and Orange/Blue Metro rail lines and has restaurants, stores and hotels within three blocks.

Liberty Property Trust owns several office buildings in the Washington, D.C., metro area including three others in the city: 1100 17 Street NW, The Liberty Building at 1129 20^th Street NW and 1425 New York Avenue NW. The Malverne, Pa.-based REIT’s 81 million-square-foot portfolio includes 666 properties with about 1800 tenants in office, distribution and light manufacturing facilities in the United States and the United Kingdom.

The REIT bought 1100 17^th Street NW, a 12-story, 146,472-square-foot building, in December 2011 for about $50 million. When Liberty Property Trust bought the property, it was 82 percent leased. It is currently about 97 percent leased. O’Neil told CPE the REIT would use a similar strategy at 2100 M Street NW to bring the leasing up.

Hines also has substantial holdings in the Washington, D.C. metro area, including 10 office buildings and the 10-acre CityCenterDC site, where it is developing a 2.5 million-square-foot, mixed-use project. The first phase, which will include two office buildings with a total of 514,000 square feet, is under construction. In March, Hines acquired the ownership interest of its former partner Archstone Enterprises, L.P.

Philadelphia-based real estate investment company Lubert-Adler recently partnered with The Laramar Group to purchase the Huntington Point apartment complex in Alexandria, Va., for $78 million.

Located on the Potomac River, just south of Old Town Alexandria, the complex had been owned by the Virginia Department of Transportation since 2002. It sold the 530-unit apartment complex to the partnership for about $147,000 per unit. Hardly the first building the two companies acquired together, in April they bought the 376-unit Woodvale Apartments for $53.2 million.

In a release, Lubert-Adler said that, despite Huntington Point’s superior location, unit interiors and amenities have been untouched for years and rents are 30 to 40 percent below market rate. The company believes it can transform the property into a Class A apartment community.

The new owners plan to invest about $14 million in capital improvements over the next three years, with upgrades that will include new lobbies, corridors, rooftop entertainment areas, building systems, mechanical repairs, façade improvements and riverside pool amenities. Individual apartments will also be renovated, with new kitchens, baths, windows, flooring and other improvements.

Lubert-Adler launched its Fund VI in January 2010. To date, it has invested $2 billion invested on behalf of domestic institutional investors, having acquired, among other things,  almost 70 multifamily properties totaling more than 20,000 units. “In 2010, we made a strategic decision based on the belief that multifamily rental apartments provide one of the best opportunities to create risk-adjusted superior returns, because a substantial portion of the overall return is in the form of current yield,” Dean Adler, co-founder & CEO of Lubert-Adler Partners L.P., said in a statement for the press.

The acquisition of Huntington Point fits perfectly into the company’s strategy. “In order to execute that strategy, we sought out one-off middle-market acquisitions through local entrepreneurs, focusing on transactions that are too large for local operators but smaller than those that would interest the very large funds,” Adler added. “Our goal was to buy assets opportunistically, preferably from sellers who are not in the everyday business of improving real estate, and then work with our local partners to increase current yield by renovating and repositioning the assets. Now that we have achieved our initial goal, we plan to continue this value-add program into the future.”

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Photo credits: LHB Communications

Modus Hotels, a Washington, D.C.-based owner and operator of lifestyle hotels, partnered with Alex. Brown Realty (ABR), a real estate manager based in Baltimore, to purchase the Normandy Hotel in Dupont Circle. ABR Chesapeake Fund IV, a value-added real estate fund sponsored by ABR, invested in the venture. The hotel sold for $16 million, or $213,000 per key.

The Normandy Hotel, located at 2118 Wyoming Ave., N.W., recently renovated its 75 rooms to the tune of $6 million, according to Aaron Katz, president & CEO of Modus Hotels. They feature 100 percent natural down-and-feather beds, marble bathrooms, upscale bath products, Nespresso coffee makers, flat-screen TVs and complimentary high-speed Internet.

The hotel is close to such D.C. attractions as the Phillips Collection and the National Museum of Art, the National Mall, the Library of Congress, the Lincoln Memorial, the Washington Convention Center, the Smithsonian and some of the best bars, restaurants and lounges in town. Katz said the Normandy’s residential feel ”allows guests to feel at home in the midst of the busy city and is the perfect retreat for leisure and business travelers.”

“The Normandy reflects a sophisticated personality and style and is a perfect complement to our expanding collection of distinctive, lifestyle hotels,” Katz said in a statement for the press. “We continue to have a strong appetite for properties in destination marketplaces with high barriers to entry at below replacement costs where we feel we can add value through a combination of superior management and, when necessary, material property improvements.”

This is Modus’ third acquisition in 12 months. Its portfolio now includes 13 hotels, seven of them in the metro D.C. area. Its collection of upscale lifestyle properties includes such hotels as The River Inn, Avenue Suites Georgetown, The Quincy, The Windsor Suites and The Brookshire Hotel and Suites, Inner Harbor Baltimore.

Photo credits: www.facebook.com/NormandyHotel

Greensboro, N.C.-based REIT Tanger Factory Outlet Centers Inc. and The Peterson Cos., one of the largest privately owned real estate development companies in the Washington, D.C., region, on April 16 announced they have joined forces to bring a new, upscale outlet center to the Washington, D.C., metro area.

The new outlet center will be branded as a Tanger Outlets. It will be located at the interchange of I-270 and Stringtown Road in Clarksburg, Md., 27 miles northwest of Washington, D.C., and 36 miles west of Baltimore. Currently, the outlet center is in the pre-development stage.

Tanger Outlet Centers and The Peterson Cos. will co-own the property. The two companies will provide site development and construction supervision services. Tanger will also manage, lease and market the retail space. For the time being, the developers have not released any information regarding the project’s cost or size.

“This partnership with Peterson Cos. is strategically designed to deliver a world-class outlet center to this exciting Mid-Atlantic market. We believe this new Tanger Outlet Center will be a must-visit value destination and an exceptional experience for our shoppers,” said Steven Tanger, Tanger’s president & CEO, in a statement to the press.

“We have a strong track record of creating dynamic lifestyle centers in Montgomery County, and we are excited about the opportunity to incorporate Tanger Outlets into our vision for a dynamic mixed-use project that Clarksburg will be proud of,” added Taylor Chess, senior vice president of retail for Peterson Cos.

Tanger Outlet Centers and The Peterson Cos. are also jointly developing Tanger Outlets National Harbor, on which they broke ground in November. The  $100 million center is one of the largest economic development projects in the county and will create an estimated 600 jobs during construction and almost 1,000 full- and part-time retail jobs upon completion. With 350,000 square feet of retail space, it is expected to open for the 2013 holiday season and will be home to more than 80 retailers. According to Marcus & Millichap, this year the Washington, D.C., metro area planned store openings will reach a three-year high.

Photo credits: The Peterson Cos.

Charts courtesy of Marcus & Millichap.

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Apartments in the Washington, D.C., metro area are selling fast and for a lot of money. Just this past month, investors paid close to $1 billion for properties totaling around 3,500 units.

The District apartments at 14th and S streets, N.W., and Silver Spring’s Woodvale Apartments are just the latest names on the list. According to the Washington Business Journal, The District apartments sold for $76 million, or roughly $608,000 per unit, while the Woodvale Apartments traded for $53.2 million, or roughly $141,489 per unit.

The JBG Cos. was the owner and developer of The District. The Chevy Chase-based company sold the complex less than a month after finishing construction to JP Morgan. JBG Cos. developed the property under a partnership with Grosvenor Americas. Construction started in 2011.

The District has 125 studio, one- and two-bedroom units. It is LEED Silver certified and features such amenities as garage parking, wi-fi, bike storage, a private on-site fitness center, a sundeck and more. Shalom Baranes Associates was the architect for the project. The Bozzuto Group is leasing the property.

Federal Capital Partners and Angelo, Gordon & Co. sold the Woodvale Apartments to the Laramar Group L.L.C. and Lubert-Adler Partners L.P. The transaction was brokered by Jones Lang LaSalle Inc. managing directors Al Cissel and Scott Melnick.

The 376-unit garden-style apartment community is located at 13831 Castle Blvd., near Columbia Pike and Briggs Chaney Road. The complex was constructed in 1981 and was most recently renovated in 2006. Its amenities include a swimming pool, business center and fitness center.

The list of recent important multifamily transactions in the greater Washington, D.C., area also includes Rockville’s 564-unit Avalon Decoverly and Arlington’s 828-unit Crystal House. AvalonBay Communities Inc. sold both properties for a total of $332 million. Last week, Keith Loria reported on Multihousingnews.com on the record-setting sale of the Archstone Crystal Towers in Arlington. At $322.25 million, the 912-unit apartment community went for the largest sum ever paid for a single multifamily property in the region. In addition, the JBG Cos. acquired the 450-unit Falkland Chase apartments in Silver Spring for $98 million, while Waterton Associates sold its Aston Woods apartment community to Azure Partners for $40.8 million.

Rendering courtesy of The District

Spanish-style Montecito in Valencia, Calif.

Ivanhoé Cambridge of Montreal has made its largest multi-family investment, joining a partnership of Goldman, Sachs & Co. and Greystar Real Estate Partners in the $1.5 billion acquisition of 8,010 multifamily units in the United States from Equity Residential.

The announcement comes three months after Greystar and the Real Estate Principal Investment Area of Goldman, Sachs & Co. agreed to buy the 27 high-quality properties featuring Class A and Class B units in core U.S. locations with high barriers to entry and strong economic and job growth potential. More than 1,500 units are located in Phoenix and over 1,000 are in Denver. Other regions include Washington, D.C.,  northern New Jersey, South Florida, and the San Francisco Bay Area.

The amount of Ivanhoé Cambridge’s investment in the partnership was not disclosed.

“I can say that this is our largest investment in the multi-residential segment, globally speaking,” an Ivanhoé Cambridge spokesperson told Commercial Property Executive.

A real estate company that invests, develops, manages assets, and offers leasing and operations services, Ivanhoé Cambridge is a real estate subsidiary of the Caisse de depot et placement du Quebec, a leading Canadian institutional fund manager. The firm has assets in 20 countries valued at more than $35 billion. The Ivanhoé Cambridge representative said about $3.7 billion has been invested in the U.S. office market and more than $2 billion in U.S. multi-family assets.

“Ivanhoé Cambridge’s significant participation in this transaction aligns perfectly with our strategic plan to seize promising real estate investment opportunities and increase our critical mass with a well-distributed diversification in priority U.S. markets,” Sylvain Fortier, executive vice president, Residential and Hotels, said in a news release.

“We are pleased to begin this relationship with new partners who believe in the strength and growth of this market segment in the United States,” Bob Faith, Greystar’s chairman and CEO, said in the release.

“This transaction fits perfectly in our investment strategy to acquire assets with strong existing cash flows at values below replacement cost located in markets with high employment and population growth,” Faith added.

In February, Greystar and Goldman, Sachs worked with CBRE Capital Markets Debt & Equity Finance group to secure more than $1 billion to finance the portfolio purchase. CBRE secured seven-year Freddie Mac loans for each of the 27 properties, loans that were non-crossed and floated over 30-day Libor. The two-stage funding was to have concluded in late March, allowing Greystar and Goldman, Sachs to close on the acquisitions.

The transaction valued the properties at about $187,000 per unit. Most of the multi-family properties were built in the years 1999-2000. The partners have agreed to fund a multi-year maintenance and renovation program for all the assets.

While most of Ivanhoé Cambridge’s recent acquisitions, both in the U.S. and abroad, have been in the office market, the firm did invest $234 million in the Silicon Valley multi-family market in October. The company acquired Kimberly Woods, a 208-unit apartment building in San Jose, Calif., and teamed up with Shea Properties to develop a $171 million, luxury, two-building apartment community in the same city. ICS Transit Village wall have 648 units, when it is completed in spring 2015.

In what reportedly is a record-setting deal, Dweck Properties Ltd., of Washington, D.C., has purchased Archstone Crystal Towers, located in Arlington, Va., for $322.25 million, it was announced Thursday. The two 12-story multi-family towers, which total 912 units, were sold by Equity Residential, represented by Jones Lang LaSalle Capital Markets.

The transaction reportedly breaks the record for the priciest sale of a single multi-family property in the Washington, D.C., region. The deal closed on March 28, a JLL spokesperson told Commercial Property Executive. JLL managing directors Al Cissel and Scott Melnick led the brokerage team.

The Washington Business Journal reported in early January that Dweck Properties, which had just listed for sale its Arlington Gateway office property in Arlington’s Ballston neighborhood, has been working to rebalance its office-heavy portfolio.

Built in 1968 on a site of about 10 acres, Archstone Crystal Towers underwent a comprehensive renovation in 2002, followed by $8.7 million of capital improvements during the last five years. The community is less than a mile from The Pentagon and only a block from the Crystal City Metro station. Amenities include a swimming pool, 24-hour sport club, rooftop deck and business center.

JLL’s marketing brochure noted that despite the steady improvements, just more than half of the complex’s units remain unrenovated, giving investors the opportunity to drive revenue growth through further modernization. The 912 units consist of 122 efficiency, 412 one-bedroom, 305 two-bedroom and 73 three-bedroom apartments, with monthly rents as of mid-2012 running $1,635, $1,924, $2,651 and $3,539, respectively.

A recent JLL report on multi-family markets in the Mid-Atlantic region cited the D.C. metro area’s “33 consecutive months of positive job growth and rock-bottom unemployment rate (5.2 percent)” as factors that “helped solidify DC’s position as one of the most durable and attractive investment markets in the world.”

JLL was also involved in two other recent metro D.C. apartment deals. Earlier this month, it was announced that Home Properties Inc. had sold its 450-unit Falkland Chase apartments in Silver Spring to The JBG Cos. for $98 million. The Rochester, N.Y.–based REIT reportedly has sought to downsize its holdings in metro Washington.

And in March AvalonBay Communities Inc., of Arlington, Va., closed on its sale of Avalon Decoverly in Rockville, Md., for $135 million.

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The JBG Cos., a Chevy Chase-based private real estate firm that develops, owns and manages office, residential, hotel and retail properties, has acquired the Falkland Chase apartments, a prominent apartment community in downtown Silver Spring. Home Properties of Rochester was the seller.

Falkland Chase is a 450-unit apartment community located at 8305 16th St., in the heart of one of Montgomery County’s busiest downtowns. It is close to the Silver Spring Metro station and a stop on the future Purple Line, as well as The Fillmore Music Hall, AFI Theater, Discovery Communications and an array of dining and shopping options. Amenities include fully equipped kitchens, fitness center, ceramic tiles in baths, hardwood floors and more. The community is also pet friendly.

“Falkland Chase is a great addition to our residential portfolio,” said David Paul, a JBG partner, in a statement to the press. “This is a well-located, transit-oriented community that we are proud to own. We are committed to providing excellent customer service to the residents at Falkland Chase from day one.”

Home Properties retained Jones Lang LaSalle Inc. to market the property. The price of the transaction has not yet been disclosed.

JBG has more than $10 billion in assets under management and development in the Washington, D.C., area. The company invests almost exclusively in urban-infill, transit-oriented developments. Its portfolio includes nearly 7,000 apartments among its 30 million square feet of office, residential, hotel and retail space. The Veridian apartments and the Silverton condominiums are JBG’s most recent developments in Silver Spring.

The Silver Spring apartment market has seen some action this past week. On March 28, Waterton Associates sold its Aston Woods apartment community to Azure Partners for $40.8 million. Aston Woods is a 261-unit community that was built in 1986. The asset is 94 percent leased and has seen almost $3 million in capital improvements during the past five years.

Photo credits: www.falklandchase.homeproperties.com

Charts courtesy of Marcus & Millichap.

Full-service real estate firm Akridge and Mitsui Fudosan America, the U.S. subsidiary of Mitsui Fudosan Co., Japan’s largest publicly traded real estate company, celebrated the groundbreaking of a new trophy-class office project at 1200 17th St. on March 26. Mitsui Fudosan America CEO Yukio Yoshida,  Pillsbury Winthrop Shaw Pittman Managing Partner Christina Kearns, and Akridge Chairman Chip Akridge and Senior Vice President P. Brian Connolly spoke at the event.

1200 17th St. will total 168,000 square feet and will be located near the red, blue and orange Metro lines in Washington, D.C.’s central business district. It will feature contemporary finishes, with column-free client space, efficient floor plates, floor-to-ceiling glass and state-of-the-art amenities such as a full-service client-only fitness center, a green roof with entertainment space, bike storage and changing facilities, and ground-floor retail.

The boutique building is 63 percent pre-leased, with law firm Pillsbury Winthrop Shaw Pittman L.L.C. signing a 105,000-square-foot lease there in January. Four floors, totaling almost 60,000 square feet, remain available.

“This groundbreaking underscores the strength of the Washington real estate market and our city’s economy. The coming together of Mitsui Fudosan America, Pillsbury and Akridge demonstrates that true professionals, working together, will create the trophy-quality office building that Washington deserves,” said Connolly in a statement for the press.

1200 17th St. is targeting LEED Platinum certification. It was designed by Zimmer Gunsul Frasca Architects L.L.P. and will have Balfour Beatty as general contractor. The project is expected to be completed in the fourth quarter of 2014.

Mitsui Fudosan America joined Akridge on the project in August of last year, when it acquired First Potomac Realty Trust’s 95 percent stake in the property for $43.7 million. And it wasn’t the first project the two companies had partnered on. They also joined forces on 700 Sixth St., 1090 Vermont Ave. and The Homer Building at 601 13th St., N.W.

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Rendering courtesy of Mitsui Fudosan America.

Campus Apartments L.L.C., the oldest and one of the largest privately held student housing companies in the nation, announced on March 19 it will develop two new on-campus residential facilities for Howard University. The project has an estimated cost of $107 million and is expected to energize the southeast core of the campus.

The two residence halls are designed to accommodate 1,360 students and will be built close to existing campus facilities to bring underclassmen closer to the vibrant core of the Howard University campus. They will include two-person semi-suites for underclassmen, communal social and study lounges, game rooms, laundry facilities and independent apartment units for faculty, staff and guests.

“The residence halls are designed to foster a true live-learn environment for underclassmen and will attract new generations of students for years to come,” said Daniel Bernstein, executive vice president & chief investment officer at Campus Apartments, in a statement for the press. Plans also call for a 200-person multipurpose room, classrooms and academic advisory offices. The facilities will provide a new home for Howard University’s Office of Residence Life, as well.

Campus Apartments and Howard University are working on the $107 million development together with Provident Resources Group, RBC Capital, Clark Construction and McKissack & McKissack. The project was financed through tax-exempt bonds issued by the District of Columbia and is slated for completion by August 2014.

“The addition of these state-of-the-art residential facilities will help to revitalize the Fourth Street corridor of our campus and establish a physical community for students to live, learn and socialize,” said Sidney Ribeau, president of Howard University. “By improving the quality of our housing, this project will aid in the recruitment and retention of students and enhance the overall collegiate experience at Howard University.”

Photo credits: McKissack & McKissack via Campus Apartments

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