Strong D.C. Fundamentals Help Attract $104M Office Financing

Washington, D.C., is feeling the effects of the economic slump, but the area office market remains attractive enough to help reel in lenders willing to part with the big bucks. Perseus Realty L.L.C., with the assistance of affiliate Perseus Realty Capital L.L.C., has obtained $103.5 million in financing for its 309,500-square-foot Class A office property at 1110 Vermont Ave. N.W. in D.C.’s Central Business District.Developed in 1980, 1110 Vermont (pictured) is a 12-story structure featuring approximately 20,000 square feet of ground-level retail space and a two-level parking facility. Perseus had owned a 5 percent stake in the property until 2005, when the company joined forces with GMAC Institutional Advisors to take a majority stake for $82 million. According to the District of Columbia Office of Tax and Revenue’s Real Property Tax Administration, the property has a current assessed value of nearly $124.9 million. Perseus’ new three-year loan comes with a fixed rate. The company will use the proceeds from the 75 percent loan-to-cost financing to replace an acquisition rehab loan and, as 1110 Vermont is presently 78 percent occupied, to have funds on hand while in the process of stabilizing the property. Lenders aren’t throwing money around Washington, D.C., the way they did two years ago, but they are still keen on the city’s office market. According to a report by real estate services firm Cassidy & Pinkard Colliers, the average vacancy rate in the CBD increased from 8.8 percent in the last quarter of 2008 to 9.7 percent in the first quarter of 2009, but as a whole, the District experienced positive absorption during the first quarter, and asking rental rates held steady. Despite the inevitable consequences of the economic downturn, Washington, D.C., continues to have relatively healthy fundamentals, and with the expectation of 10,800 new jobs this year–mostly as a result of federal government spending–the future of the office market looks good. With continued faith in the market, more than a few office property owners have recently been able to get their hands on financing. As reported by CPN, Dividend Capital Total Realty Trust Inc. attained a $36.5 million loan for the $63.6 million purchase of the 125,900-square-foot building at 1300 Connecticut Avenue N.W. last month. In March, a joint venture involving The JBG Cos. and Rockwood Capital L.L.C. obtained $100.5 million in financing for the 310,800-square-foot property at 1101 K Street N.W., which allowed the partners to replace a construction loan and have funds available pending the asset’s stabilization. “Washington, D.C. is arguably the best real estate market in the country,” Lindsay Stroud, vice president of Perseus Realty Capital, told CPN. “More investors are looking here because of government growth and the stability of the market. Globally, they’re flocking to Washington as a place to invest in commercial real estate.”