NEW YORK CITY—With the first phase of a 14-asset portfolio having closed Tuesday, locally based Princeton Holdings has set its sights firmly on the national scene, although it has invested across US markets before. “We're probably best known as an owner, investor and developer in New York City,” David G. King Jr., managing director with Princeton Holdings, tells GlobeSt.com. “We've got about five million square feet of either investments or development projects in New York City. With this, we're going national.”

“This” is a three-million-square-foot portfolio of office properties net leased to the General Services Administration that Princeton is buying in partnership with the Bluestone Group. Industry data, as well as previous reporting by GlobeSt.com, indicate the sellers are another partnership, a joint venture of Urban America Advisors and Fisher Brothers.

The Princeton/Bluestone partnership is paying $250 million for the first four assets in that pool, which total 850,000 square feet and are located in Washington, DC, Houston, San Diego and Sacramento. The pool as a whole is rumored to be worth about $500 million.

An investment group led by Howard Sorkin also participated in the initial transaction. Jefferies Loan Core provided first mortgage financing for the transaction.

“We had looked at the portfolio, and it was very complicated by the capital structure,” King says. “So it took us a while to figure out how we could execute on acquiring the portfolio.”

The format that the partnership would use had to work for both pools. “So we used a defeasance structure to remove the debt on the first group,” King explains. “Now we've got to work on the second group. We've got a little wood to chop on that,” a factor that is likely to delay the closing on the second phase of the acquisition.

Two aspects of the portfolio stood out as far as King and CEO Joseph Tabak were concerned. “One, it's a portfolio of GSA assets, which are generally in pretty hot demand,” King says, adding that it's unusual to find them offered as a group. “Two, GSA assets are often in tertiary, second-rate locations, and often they're special purpose facilities. So they don't have intrinsic real estate value. These are assets that are in seriously real markets, office assets that are suitable for tenancy by anybody. If the US government moved out tomorrow, a private sector tenant could move in the next day. That was very appealing in terms of why we jumped on this portfolio.”

As Princeton Holdings turns its eye to investing on a more national level, King says it will apply the modus operandi it has used over the years. “Princeton has a strategy of looking for value investments,” King explains. By that, he means “those deals where either there is a complex story that we can rationalize, a complex financial structure that we can fix or some significant value that we can add to the project through development or redevelopment.”

The precedent of making that first major foray into nationwide investing with a partner is likely to be followed in the future. “We like working with financial partners and other operating partners,” says King. “So I wouldn't be at all surprised if we're executing our strategy with partners on board, whether they're financial or operating partners.”

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.