Premier Suburban D.C. Office Building Finds a New Owner in $122M Deal

AEW Capital Management L.P., acting on behalf of its open-end core fund AEW Core Property Trust (U.S.), has acquired Three Ballston Plaza, a premier 304,200-square-foot office property in Arlington, Va., just outside of Washington, D.C.

March 31, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user ninahale

AEW Capital Management L.P., acting on behalf of its open-end core fund AEW Core Property Trust (U.S.), has acquired Three Ballston Plaza, a premier 304,200-square-foot office property in Arlington, Va., just outside of Washington, D.C. According to a source familiar with the transaction, the asset traded for approximately $122 million. Boston-based AEW purchased the Class A building from Hartford, Conn.-based Cornerstone Real Estate Advisers L.L.C., which had snapped up the property in 1999 for $62 million on behalf of parent company Massachusetts Mutual Life Insurance Co.

Carrying the address of 1100 N. Glebe Road, Three Ballston Plaza sits off I-66 in Arlington’s Rosslyn-Ballston Corridor, about five miles west of downtown Washington, DC. The 20-year-old building is presently 92 percent leased, with anchor tenants CACI International Inc. and Jacobs Engineering Group Inc. occupying 115,000 square feet and 78,000 square feet, respectively. With CACI’s lease scheduled to expire in 2015, and Jacobs’ in 2012, the new owner will be positioned to negotiate higher rents, as in-place rents at the building are currently about 10 percent below market rate, according to real estate services firm Cassidy Turley, which represented Cornerstone in the transaction.

The sale of Three Ballston Plaza is indicative of a turnaround in sales activity in the area, industry experts say. “This is the third major transaction in the Rosslyn-Ballston Corridor in the last nine months,” Eric Berkman, Executive Vice President with real estate services firm Grubb & Ellis Co., told CPE.

In late June, the 212,000-square-foot office building at 3101 N. Wilson Boulevard sold for $71.5 million at an 8.3 percent cap rate, and the 195,000-square-foot office building at 4501 N. Fairfax Drive sold for $68 million at a cap rate of about 8.1 percent in October.

“Three Ballston Plaza sold at about a 7 percent cap rate, so in the course of the last nine months, there’s been a cap rate compression of 130 basis points,” Berkman said. “It’s back to 2006 pricing in that corridor. It’s the Rip Van Winkle effect; if you had fallen asleep three years ago, you wouldn’t know there had been a recession.”

A positive trend appears to be afoot. There were reportedly over 30 bidders for Three Ballston Plaza, and Grubb & Ellis is in the midst of orchestrating an office transaction in the area.