Lehman-Seized Office Asset Fetches $60.3M

Some investors may shun an office property burdened by a sizable mortgage that is soon to expire. However, a debt-laden property with a full tenant roster such as One Fair Oaks in Fairfax, Va., is nothing to sneeze at, according to First Potomac Realty Trust.

April 13, 2011
By Barbra Murray, Contributing Editor

Some investors may shun a property burdened by a sizable mortgage that is soon to expire, but such a debt-laden property with a full tenant roster, like One Fair Oaks in Fairfax, Va., is nothing to sneeze at, as First Potomac Realty Trust apparently believes. Lehman Brothers Holdings Inc., which had seized the 214,200-square-foot office building from borrower Broadway Partners, just sold the property to the REIT in a transaction valued at nearly $60.3 million, including $52 million of debt.

Occupied in its entirety by CACI International Inc. under a lease that expires upon the start of 2016, One Fair Oaks sits at 4114 Legato Rd., across from the 1.6 million-square-foot Fair Oaks Mall where I-66 and Rte. 50 converge. The location provides quick and easy access to downtown Washington, D.C., the Pentagon, Reagan National Airport and Dulles International Airport. Most recently upgraded in 2005, the 24-year-old property’s Class A office space is enhanced by a 565-space parking facility, in addition to a conference center, cafeteria and fitness facility.

Broadway Partners had come into possession of One Fair Oaks in 2007 with its $5 billion acquisition of a 24-property office portfolio from Beacon Capital Partners L.L.C., which had purchased One Fair Oaks in 2004 for $53.2 million. Broadway, having fallen victim to the credit crunch, was forced to turn over control of the suburban Washington, D.C., office building to Lehman in 2009.

First Potomac took One Fair Oaks off the hands of Lehman in a deal financed with cash and the assumption of the accompanying first mortgage loan, which carries a 6.3 percent interest rate and matures in June 2012.

According to Cassidy Turley, the commercial real estate services firm that represented Lehman in the transaction, more than a few investors were eager to fork over cash and pick up debt for One Fair Oaks. “We got a great deal of response,” William M. Collins, senior managing director with Cassidy Turley, told CPE. “It is a high-quality building with lots of amenities in a great location and it has a great tenant.” A building with a 100 percent occupancy level belies the current condition of the Fairfax market, where the direct vacancy rate is 12.5 percent, according to a fourth quarter report by real estate research firm Delta Associates.

Collins anticipates that the number of sales transactions in Northern Virginia in 2011 will surpass that seen since real estate took a nosedive. “We’ll get into more of a normal sales market than we’ve seen in the last couple of years.”