WASHINGTON, DC—New York City-based Princeton Holdings has closed on the first phase of a 14-asset portfolio on Tuesday. The three-million-square foot portfolio consists of office properties net leased to the General Services Administration, which Princeton is buying in partnership with the Bluestone Group.

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.

The DC asset is 999 E St., NW. Earlier this year we reported this deal was in the works, with this building part of the mix. The 162,038-square foot, nine-story office building houses the Federal Election Commission along with the Hard Rock Café in the street level retail component.

"We had looked at the portfolio, and it was very complicated by the capital structure," David G. King Jr., managing director with Princeton Holdings, tells GlobeSt.com. "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."

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