06/09/2010

Honeywell Lists Office Complex in DC Area

A joint venture led by Honeywell International's corporate pension fund is shopping a suburban Washington office complex that could command bids of roughly $160 million.

The 540,000-square-foot property, in Bethesda, Md., is 97% occupied. At the estimated value of $296/sf, the buyer's initial annual yield would be slightly below 7%. CB Richard Ellis has the listing.

Honeywell teamed up with local player Moore & Associates in 2005 to buy the three-building complex, called Bethesda Towers, for $127.4 million from a partnership led by Rockwood Capital's third value-added fund.

The tenants include the U.S. Consumer Product Safety Commission (114,000 sf until 2013), National Opinion Research Center (34,000 sf until 2017) and Europ Assistance USA (34,000 sf through September 2018). Leases for an average of 11% of the space are scheduled to expire annually through 2015.

Last year, the Class-B property generated $9.2 million of net cashflow, well above the $5.5 million needed to cover loan payments on its $87.2 million securitized mortgage. The cashflow is currently higher, because the occupancy rate has climbed by 6 percentage points, from 91%, at the end of last year.

The interest-only mortgage, which has a 6.2% coupon, matures in November, so there is no assumable financing.

The three 11-story towers are at 4330, 4340 and 4350 East West Highway, two blocks from a Metro subway station. They were developed from 1973 to 1977, and underwent some $20 million in renovations from 1999 to 2006.

Honeywell, which is advised by Urdang Capital Management of Plymouth Meeting, Pa., and Moore shopped the property in 2007, just as the credit crunch caused the sales market to dry up. The Honeywell team pulled the complex off the market after bids came in at $185 million to $190 million, below the expectations of about $200 million. CB also handled that listing.

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