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

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This transaction follows a December 2009 deal in which Edge andHSBC made a 90% joint venture investment in 1625 Eye St. Bothassets were acquired at less than $600 per square foot, at caprates over 6%, Mark R. Keller, head of Edge Funds, tellsGlobeSt.com, which is "well below replacement costs."

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The companies had started working on the 1350 Eye St. deal firstthen put it aside when 1625 Eye St. came on their radar. Founderand former head of Republic Property Trust, Keller is tracking aselect group of top markets--including San Francisco, New York andBoston--with an eye to making additional investments with HSBC. "Wethink we will have the opportunity to acquire similar trophy-likeoffices in these markets at attractive pricing."

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

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

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

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For all of the complexity that has gone into the pricing, it isstill a welcome data point, Bill Kaye, with CBRE, tellsGlobeSt.com. "We know that core properties are holding their valuein our market but I definitely think the market is eager to seeother data points."

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