GREENBELT, MD-Diversified Realty Ventures, a private commercial real estate investment firm with offices in the Washington, DC area and in Richmond, has acquired a 120,000-square-foot office building out of special servicing for $6.3 million, or $53 per square foot. The seller was C-III Asset Management, and was represented by Transwestern’s Robert Filley.

The building, Greentec IV, is located at 7700 Hubble Dr., next to the NASA Goddard Space Flight Center. It is fully occupied by government employees and contractors working on the Joint Polar Satellite System. JPSS is a joint mission of NASA, NOAA and the Department of Defense. Government contractor TRAX International has leased Greentec IV on behalf of the program.

Under normal circumstances a building fully leased to a government agency would have bidders lining up with checkbooks in hand. This particular property, though, came with some distinct drawbacks, only a few of which were resolved toward the end of final bidding, DRV principal Elliot Liffman tells GlobeSt.com.

For starters, the acquisition was subject to a ground lease that runs through 2075 with possible extensions. Ground leases are simply not palatable to many investors, Liffman points out.

“You take on the additional expense of paying ground rent, which is baked into the price, but that assumes everything is running smoothly,” he says. “If the building goes vacant, which is what happened to the previous owner, it can be a problem.” A ground lease also forecloses the owner from pursing other options in that scenario. Another negative is the Greenbelt office market, which has been soft for several years, clocking in with 25% to 27% vacancy rates.

The biggest issue, though, for DRV was the uncertainty about the project’s government funding. In general, Congress has been preaching austerity, making the commercial real estate community hesitant to assume anything. The future of the JPSS project, specifically, had a lot of questions marks, Liffman says.

When the building went to market, the project was in a state of flux, with NASA getting involved in what was once a NOAA-only managed project. It was also at a point in its lifecycle where it couldn’t move forward unless its budget was increased. Luckily for Liffman, Congress passed new spending legislation at the very end of the bidding process and gave the project the funding it needed. The other issues, however—the ground lease, the soft submarket—are still there, he notes.

An entrepreneurial-style investor, DRV is finding the best opportunities in commercial real estate right now to be in the distressed category. “We tend to invest in emerging opportunities and then get outpriced when the institutional investors move in,” he says. That happened to the company several years ago when it was investing in student housing.

So far the firm has acquired three assets out of special servicing and has a fourth, in Richmond, that is under contract. “When we recognize a market opportunity we run for it,” Liffman says.

Built in 1994, Greentec IV consists of two low-rise structures linked by a common lobby. Douglas Development has purchased the land parcels surrounding the buildings and received approval to develop 850 housing units, retail and office space, as well as an age-restricted community.