Hines Acquires Archstone Enterprises’ Interest in CityCenterDC Project

Hines has acquired Archstone Enterprises' ownership interest in the two companies’ CityCenterDC mixed-use project, currently under construction in downtown Washington, D.C.

Hines has acquired Archstone Enterprises L.P.’s ownership interest in the two companies’ CityCenterDC mixed-use project, currently under construction in downtown Washington, D.C., Hines announced Thursday. But the deal, whose price was not disclosed, is really another facet of last year’s acquisition of Archstone by Equity Residential and AvalonBay Communities, according to Hines.

In late November, Commercial Property Executive reported on Equity Residential and AvalonBay’s agreement to acquire Archstone from Lehman Brothers Inc., in a transaction valued at an aggregate $16 billion in cash, shares and debt.

As of the end of the second quarter 2012, Archstone owned or had an ownership interest in 182 operating and under-construction multi-family communities totaling nearly 60,000 units in the United States, as well as parcels of developable land and a European operating platform through which Archstone managed and owned apartments in Germany.

In the CityCenterDC deal, a Hines spokesperson told CPE, Hines and Archstone had equal interests, and Hines’ purchase (which was simultaneous with the Equity/Avalon Bay transaction) was of Archstone’s entire stake in the development, in other words, not just the multi-family portion.

Hines will assume development responsibility for the two large apartment buildings, totaling 458 units, at CityCenterDC. Neil Brown, Archstone’s chief development officer, noted in a press release that “Many …  Archstone employees, who have been a part of this project for so many years, are being absorbed into the Hines organization, which will insure a seamless transition and minimize disruption to the project.”

Part of Hines’ motivation in purchasing Archstone’s interest, beyond its existing involvement in CityCenterDC, according to the spokesperson, was Hines’ objective of building a multi-family business in the United States. Since establishing that aspect of its business in January 2011, Hines has put about 5,500 multi-family units into development in 12 U.S. cities, representing more than $1 billion of construction.

A partnership between Hines and Archstone was chosen by the District of Columbia in 2003 to develop the $700 million CityCenterDC on the site of the former Washington Convention Center, a 4.5-block parcel bounded by New York Avenue and 9th, H and 11th streets NW.

In 2011, the partnership secured equity financing from its anchor investor, Qatari Diar Real Estate Investment Co., the real estate investment arm of the Qatari Investment Authority, and the financing was put in place by Barwa Bank’s investment banking subsidiary, The First Investor.

Construction on Phase I began in March 2011; that phase consists of two office buildings, two apartment buildings and two condominium buildings, which are expected to be completed by the third quarter.

CityCenterDC’s two phases will ultimately comprise more than 295,000 square feet of retail space at the base of seven buildings with 520,000 square feet of office space, 458 rental apartments, 216 condominium units and a 350-room luxury hotel, along with nearly an acre of open space. Construction on Phase II is expected to start in the first half of 2014.

CPE reported last June that international law firm Covington & Burling had signed a letter of intent to lease about 420,000 square feet as its new global headquarters at CityCenterDC beginning next year, becoming the project’s anchor office tenant.

Foster + Partners, of London, and Washington, D.C.– based Shalom Baranes Architects are the master-plan architects. A joint venture between Clark Construction Group and Smoot Construction, both of Washington, D.C., is the general contractor.