Canal Center Trades for $176M

ALEXANDRIA, VA—We reported earlier this summer that Tishman Speyer had Canal Center, a 540,000-square foot office complex, under contract and American Real Estate Partners was  the hopeful owner-to-be. Today American Real Estate Partners confirmed exclusively to GlobeSt.com that the deal closed last week, with the property trading for $176 million. American Real Estate Partners acquired the property with Investcorp through its through its Strategic Office Fund.

The fact that Canal Center was acquired through this fund is telling: basically its strategy is to target suburban assets that have, or will have after a repositioning, an urban-like orientation with a strong mixed-use component.

Canal Center, although it is located in Old Town Alexandria, falls in this category, CEO Brian Katz tells GlobeSt.com.

Canal Center's four buildings were originally developed in 1987 and the complex is currently 83% leased with no major tenant expirations until 2018.

The four-building complex is located in Alexandria's Old Town – specifically on the north side of Old Town, which is undergoing a massive repositioning and where retail has not quite reached the same saturation point as it has in other areas of this submarket. In other words, American Real Estate Partners hopes to extend Old Town's retail core to the north side.

"We see the north side of Old Town developing into a version of the Washington Harbor, attracting more restaurants and other retailers to the waterfront," Katz says. "We intend to put together a merchandising plan to activate that."

Before that happens, the company is commencing on an extensive capital renovation program that will address both deferred maintenance and cosmetic improvements that will run about $10 million.

In between that project and its longer-range merchandising plan, stay tuned for news about another American Real Estate Partners' deal: according to Katz the company will announce the acquisition of a similar type of project – an Northern Virginia existing office building to which it plans to add mixed-use retail – within the next 30 days.