WASHINGTON, DC-An East End office building, 1350 Eye St., NW, has been recapitalized by Edge Fund Advisors, HSBC Alternative Investments Limited and a syndicate of HSBC private banking clients, with the purchase of an 80% stake in the 11-story, 381,000-square-foot building. Located on Franklin Square Park and within three blocks of the White House, the fully leased office building qualifies as trophy status. Gerald P. Trainor with Transwestern represented the seller, Beacon Capital Partners.

This transaction follows a December 2009 deal in which Edge and HSBC made a 90% joint venture investment in 1625 Eye St. Both assets were acquired at less than $600 per square foot, at cap rates over 6%, Mark R. Keller, head of Edge Funds, tells GlobeSt.com, which is "well below replacement costs."

The companies had started working on the 1350 Eye St. deal first then put it aside when 1625 Eye St. came on their radar. Founder and former head of Republic Property Trust, Keller is tracking a select group of top markets--including San Francisco, New York and Boston--with an eye to making additional investments with HSBC. "We think we will have the opportunity to acquire similar trophy-like offices in these markets at attractive pricing."

The deal, which just closed after several months of waiting for the loan assumption to close, delivers yet another data point to a market that is still filling in the blanks on pricing. However, both Keller and Trainor warn, the pricing on this deal is reflective of several factors and perhaps not necessarily the best guide to the current market.

For starters, these are both structured transactions with debt assumptions. Also, in the case of 1350 Eye, the transaction was negotiated during the depth of the recession and credit crunch. Indeed, Keller points out that there are currently buildings under contract--or at least prices being discussed--that are in the $700 per square foot to $800 per square foot price range right now, with cap rates above 6%.

Trainor suggests that below $600 per square foot might have been too pricey for the time when the deal was first struck, but now pricing has more than caught up. "It turned out to be a good deal for everyone," he tells GlobeSt.com. Transwestern will provide management services moving forward, he adds.

For all of the complexity that has gone into the pricing, it is still a welcome data point, Bill Kaye, with CBRE, tells GlobeSt.com. "We know that core properties are holding their value in our market but I definitely think the market is eager to see other data points."