DC Office High-Rise Changes Hands for $338M

Invesco Real Estate sold the 331,000-square-foot trophy building near the White House. Safety, Income & Growth Inc. originated a $150 million ground lease on behalf of the buyer.
1111 Pennsylvania Ave.
1111 Pennsylvania Ave. NW

PRP, a Washington, D.C.-based real estate investment company, has partnered with GMF Capital, a New York-based private equity firm, to acquire a 14-story office building in D.C. Invesco Real Estate sold the asset for a reported $338 million.

Located at 1111 Pennsylvania Ave. NW in D.C., the 331,000-square-foot building, which is also known as the Presidential Building, is fully leased to the international law firm of Morgan Lewis and Bockius through 2032. Situated at the corner of Pennsylvania Avenue and 12th Street, it is one of the only privately owned office buildings between the White House and U.S. Capitol on Pennsylvania Avenue. Since 2010, $35 million has been spent on base building and tenant spaces. SKB completely redesigned the interior space in 2017 as part of Morgan Lewis’ lease renewal.

Invesco had owned the trophy tower since October 2010, when it paid $220 million to previous owner Shorenstein, according to Yardi Matrix data. Completed in 1966, the property underwent renovations in 2002, when Morgan Lewis moved in.

 “The 1111 Pennsylvania Avenue investment furthers our efforts to build upon our net lease mission-critical office portfolio,” PRP President Paul Dougherty said in a prepared statement. “Over the past year, we have acquired seven office buildings leased to credit tenants in Washington, D.C., Northern Virginia and Dallas. We remain incredibly bullish on the positive fundamentals for this sector given the myriad of investment opportunities available to us.”

In February, PRP purchased two foreclosed office buildings totaling 420,000 square feet in the Mark Center submarket of nearby Alexandria, Va., The first, 4900 Seminary Road, has 12-stories and 200,000 square feet, and the second is an eight-story, 220,000-square-foot property at 4825 Mark Center Drive.

Last November, a joint venture of PRP and AXA Investment Managers-Real Assets Texas acquired a four-story, 264,000-square-foot Class A office building in Plano, Texas, for $79.7 million. The property is fully leased to FedEx Corp. as the global headquarters of FedEx Office and Print Services. The building located at 7900 Legacy Drive in Legacy West, a 250-acre mixed-use development.

PRP focuses on value-add multifamily apartments, office and mission-critical headquarters leased to investment-grade companies on a long-term basis. Since its founding in 2005, it has invested in 38 assets valued at more than $2 billion across all property sectors. It considers a variety of equity and debt investment structures.

SAFE originates ground lease

Safety, Income & Growth Inc., a leading company focused on ground leases, said this week it originated a $150 million ground lease, the largest single asset in its portion, to assist with the acquisition of 1111 Pennsylvania Ave. NW. The leasehold was purchased by a venture with majority ownership from PRP and leasehold financing from GMF Capital.

“We’re pleased to see that our ground lease product is starting to gain attraction in the Washington, D.C. market, where this year we’ve closed five deals for nearly $270 million,” Jay Sugarman, chairman & CEO of SAFE, said in a separate statement. “This deal demonstrates that SAFE can deliver its value-enhancing product to its customers at any scale.”

The New York-based REIT, which is managed by its largest shareholder, iStar Inc., is the first publicly traded company focused on ground leases. The SAFE Ground Lease features fixed annual escalations over 99 years with CPI-based adjustments. In January, SAFE entered into a 99-year flexible ground lease with Urban Investment Partners and Atalaya Capital Management when they bought Onyx on First, a 266-unit apartment building in the Capitol Riverfront neighborhood of Washington, D.C. for $95.5 million. At the time of the closing, UIP and Atalaya separated the fee and leasehold and sold the fee to SAFE.

Image courtesy of Safety, Income & Growth Inc.