12/07/2011

Akridge Dealing Core Office Building in DC

(SEE CORRECTON BELOW) A developer is shopping the leasehold interest in a fully occupied office building in Washington’s East End.

The 178,000-square-foot property, at 975 F Street NW, is expected to draw interest from core investors, who have been bidding up comparable buildings to capitalization rates in the 5%-6% range. Based on recent deals, the property, called Carroll Square, could fetch roughly $125 million, or $700/sf. The owner, locally based Akridge, has given the listing to HFF, which declined to comment.

The site, which is next to historic St. Patrick’s Church, originally consisted of 19th Century townhouses. Akridge redeveloped the site in 2007, constructing a 10-story office building that incorporates four of the townhouses and the facades of two others. The property is subject to a 90-year ground lease from the Archdiocese of Washington.

A buyer must assume a $66 million loan with a 6.2% coupon. The interest-only mortgage, originated by MetLife, matures in November 2017. But it can be prepaid, subject to a penalty.

The 10-story building, which has no significant lease expirations until 2017, is occupied mostly by law firms. Two tenants — Seyfarth Shaw (77,000 sf) and Holland & Hart (13,000 sf) — are subleasing from Dewey & LeBoeuf until 2022. Fitzpatrick Cella is leasing 17,000 sf until 2017.

There is almost 13,000 sf of street-level retail space that is fully occupied by Leica Camera and Le Pain Quotidien, a restaurant. There is also a public art gallery and 6,500 sf of artist studios.

Carroll Square is at 10th Street, two blocks from the Metro Center and Gallery Place-Chinatown Metro Stations and near shops, hotels and restaurants in the F Street Corridor and the Penn Quarter neighborhood.

In a recent deal in the same East End submarket, Mitsui Fudosan America agreed to buy an 80% stake in the leasehold interest in the 422,000-sf Homer Building, valuing it at just under $750/sf.

The 46 million-sf East End is 92% occupied, making it one of the city’s top-performing submarkets. New office space commands rents north of $80/sf.

CORRECTION (12/14/11): This article incorrectly identified Akridge as the owner of Carroll Square, a Washington office building up for sale. Akridge developed the property and continues to handle leasing and management for the current owner, Seaton Benkowski & Partners of Bethesda, Md. Also, the 13,000 square feet of retail space is occupied by multiple shops and restaurants, not just two.

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