How Fannie Mae Won DC's Senate Square Deal

WASHINGTON, DC-This past summer LaSalle Investment Management acquired the financially-troubled Senate Square, a luxury apartment house in Downtown DC for $162.3 million, or $375,741 per unit. Backing the purchase – which, despite its distress condition was one of the highest per unit comps to trade in the District – was $78.4 million in senior acquisition financing from Fannie Mae DUS Lender Grandbridge Real Estate Capital. The 4.21%, fixed-rate, seven-year term loan was priced at par. Jones Lang LaSalle’s Dave Hendrickson, Wes Boatwright and Chuck Hoag arranged the financing.

LaSalle Investment Management acquired the note on the two-building complex from Westbrook Partners and then foreclosed on it in a simultaneous structured deal, in order to avoid a double closing, according to Hendrickson.

There were quite a few lenders interested in providing the low-leveraged acquisition financing, he tells GlobeSt.com, including life insurance companies. Despite life companies’ growing willingness to take on more risk, Hendrickson doubts a life company would have financed a deal in foreclosure if it were any other market than the District.

Despite the competition, Fannie Mae won out because it was willing to increase the loan amount in the future – at the same terms and rate --  if the property’s NOI increased, Boatwright tells GlobeSt.com. Some life companies will say this is a possibility, he explains, but there are no guarantees. “Fannie tells you ahead of time what the perimeters will be.”

LaSalle is planning to hold the property for 15 years so there is a good chance it may want to take some proceeds out at some point, he says.

Senate Square was built in 2007 as condominiums but was converted to rental apartments when the condo market crashed. Located on 201 & 225 I Street NE in the H Street Corridor, it has a total of 432 units.