Arch Street Capital Buys DC-Area Office Tower

As part of a partnership with VEREIT, formed on behalf of a Kuwait-based institutional client, the company acquired a majority interest in the fully leased property.
12975 Worldgate Centre. Image courtesy of Arch Street Capital

Arch Street Capital has added the 100 percent occupied 12975 Worldgate Centre office building in Herndon, Va., to its holdings, courtesy of a programmatic joint venture with VEREIT. Arch Street, which controls an 80 percent equity interest in the partnership, purchased the majority stake in the 167,000-square-foot, Washington, D.C.-area asset from VEREIT.

READ ALSO: Offices Reopen, but Downtowns Are Still Quiet

Neither Arch Street nor VEREIT have publicized the specific financial terms of the transaction; however, VEREIT announced in a September 8 press release that it had completed a handful of dispositions during the third quarter, including its share of a property contributed to the office partnership of $39.8 million. 

Originally known as Monument I at Worldgate, 12975 Worldgate reached completion at the hands of Akridge in 1998. The seven-story tower last changed ownership in May 2005, when CLF Herndon LLC, an entity of CapLease Inc., purchased the asset for approximately $42 million, according to Fairfax County records. VEREIT came into possession of the property in 2013 when the company, then known as American Realty Capital Properties Inc., acquired CapLease. Today, 12975 Worldgate is leased in its entirety to national security company Peraton, which inked a renewal deal in 2017 to continue to occupy the building as its global headquarters.  

The net-lease factor

Arch Street and VEREIT formed the programmatic joint venture in January 2020, with Arch Street acting on behalf of its institutional client, Kuwait-based Gatehouse Capital K.S.C.C. The partnership targets long-term leased, single-tenant office assets across the U.S., and remains undeterred by the uncertainty in the office market as a result of consequences of the pandemic. Although many commercial real estate investment players have taken to the sidelines since the arrival of COVID-19, single-tenant properties—office, industrial and retail alike—are leading overall CRE investment activity.

“Net-lease investment fell significantly in the second quarter of 2020 but comprised the highest share of total volume on record amid a sharp decline in commercial real estate investment activity caused by the COVID-19 pandemic,” according to a report by CBRE. “The net-lease sector’s performance relative to the rest of the commercial real estate asset class reflects investors’ attraction to the long-term leases and creditworthy tenants considered safe attributes during an economic downturn.”