Premier 146,000-SF D.C. Office Building Trades for $93.5M

September 10, 2010
By Barbra Murray, Contributing Editor

Investors continue to flock to the Washington, D.C., office market, and Falcon Real Estate Investment Company L.P. is one of the latest to snap up a premium property. Acting on behalf of Italy’s Generali Immobiliare, the advisory and management services firm snapped up the 146,000-square-foot Farragut Building in a $93.5 million deal with New York’s ING Clarion Partners.

Located just a short jaunt from the White House at 900 17th Street, N.W., the Farragut Building first opened its doors in the early 1960s and has since undergone a series of upgrades, the most recent having taken place in 2009. Presently, the 12-story structure is 99 percent occupied by a long tenant roster of businesses including non-profit environmental policy institution The Heinz Center, which, with nearly 13,500 square feet, inhabits nearly 10 percent of the building’s net office space under a lease agreement that is scheduled to expire in 2016.

Cassidy Turley Commercial Real Estate Services oversaw the marketing of the Farragut Building, and Falcon was only one of many eager investors vying for the office facility. Larry Welsh, a vice president with the company, noted that Falcon was able to acquire the property through longstanding local relationships in the D.C. area.

The change in ownership of the Farragut Building marked a win-win situation. ING Clarion, which had acquired the property in 2005 for approximately $58 million, walked away with a tidy profit, and Falcon secured a high-quality office asset in advance of the Washington, D.C., office market’s full recovery. As Cassidy Turley reported in its mid-year forecast, “Pricing for office buildings appears to be stabilizing, as cap rates gravitate more towards historical levels.”

Cassidy Turley also notes in its report that “interest in investment sales has come back to life.” Recent office deals include StonebridgeCarras and Walton Street Capital’s sale of the 589,000-square-foot Two Constitution Square, new home of the U.S. Department of Justice, to Northwestern Mutual Life Insurance Company for $305 million, and Prudential Real Estate Investors’ sale of the 533,000-square-foot Washington Harbour complex in Georgetown for $244.5 million to MRP Realty Inc. and Rockpoint Group L.L.C.

Also gracing the relatively lengthy list of transactions over the last few months are Edge Fund Advisors’ $209.2 million purchase of 1350 I Street, a 381,000-square-foot property; TIAA-CREF’s acquisition of the 225,500-square-foot Evening Star Building in a $180 million deal with KanAm Grund; and First Potomac Realty’s $68 million purchase of the 129,000-square-foot building at 500 First Street from AREA Property Partners.