WASHINGTON, DC—Boston Properties is well on its way to realizing the $750 million it expects to sell this year, according to comments CEO Owen Thomas made at the Citi Global Property CEO Conference earlier this month. Most notably, he said, it completed the sale of The Avenue, a mixed-use project in Foggy Bottom that impressed the DC market earlier this year with its $196 million price point. "[It] was a class A apartment building next to GW University in Washington, DC, which we sold for 4.1 cap, and it was on a 60-year ground lease to GWU," Thomas sasy.
To many the news does not come as that much of a surprise: Washington DC's apartment market is one of the tightest in the nation; indeed it along with New York, Los Angeles, Atlanta, Dallas and Houston drove nearly 50% of US deal volume last year, according to JLL. "Assets in those markets are trading at sub-5.0 cap rates, with some even pushing below 4," JLL noted in a report.
The 335-unit building has traveled a rather long path for this sale, though, and information about the details have come out in bits and pieces. To recap, last August Boston Properties pulled the 12-story property off the market, according to the Washington Business Journal.
It popped back on the general community's radar when the REIT announced in an earnings call earlier this year that the property was under contract. It also said it would provide up to $6 million in net operating income support if the property's net operating income fails to meet certain thresholds.
Later it was learned that the Kuwait sovereign wealth fund Wafra was the buyer.
A call to Boston Properties was not returned in time for publication.
Thomas, incidentally, has a nuanced view of the DC market, based on his comments during that conference. He called DC "obviously our weakest market."
"Although we continue to have a pretty strong ability to lease space to our incumbent tenants. We know that we have to be aggressive. Concessions are the biggest challenge in Washington, DC. They have widened and it really hasn't improved. It's not getting a lot worse, but it's not improving."
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
