Demand Is High For Government Assets

LOS ANGELES—Demand is increasing for government occupied office assets. Easterly Government Properties has purchased a 326,614-square-foot building occupied by the Department of Veterans Affairs Ambulatory Care Center in Loma Linda. While the details of the transaction were not disclosed, it is a significant transaction and highlights the increasing demand for these assets.

“Our Capital Markets Government Solutions team tracks a multitude of national opportunities and we had discussions with the seller about their Government developments for several years,” Brian Saal, an EVP at JLL, tells GlobeSt.com. “We provided advisory work on one of their other properties that we believe really impressed their team and solidified our ability to compete for Loma Linda.  Given the chance to formally pitch, we were able to win the assignment.” Saal along with senior managing director Bill Prutting represented the seller along with managing directors Lucy Fletcher, Mike Yavinsky, Joe Brennan and EVP Marc Rampulla, Ryan Smith and Tom Bohlinger.

The property was built in May 2016, and JLL used a targeted marketing effort to sell the property. “Most Government buildings are single tenant and highly specialized so the marketing effort is predominately focused on the specifics of the occupying agency,” says Saal. “Also, Government leasing is a regimented process that is unlike traditional office leasing.  Sophisticated buyers of Government assets expect brokers to provide expertise related to every part of the current and future tenancy in order to bid with confidence.  When we market a government building, we work hard to provide all the relevant tenant background and credible renewal assumptions to ensure the most accurate value.  We find this marketing approach lends itself to the most successful transactions.”

Overall, there is increasing demand for these assets. “There is a strong demand for high quality, long-term leased Government assets but a limited supply, particularly for buildings and deals of this size,” says Saal. “Our view was this asset had an absolutely ideal investment profile for our sector and buyers would recognize and appreciate the value. That's just what happened and we believe it underscores all trends we are currently seeing in the market.”

The sales team got interest from foreign investors as well as domestic. “We canvased the domestic buyer pool in key international investment markets which allowed us to personally present the offering to foreign investors,” adds Saal. “As a result, we received strong, diverse interest from virtually all types of buyers.  Our offer package was very thorough and included some enhanced media, which we believe added to the overall level of participation and deal excitement.”