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HERNDON, VA-Republic Property Trust has entered into a binding agreement to acquire the fee interest in Dulles Park Technology Center from Cornerstone Real Estate Advisors, a private equity investment management company in Hartford, CT, for $48.3 million or $267 per rentable sf.

With a 30% vacancy–which was reflected in the initial capitalization rate of 5.23% on the purchase price–the acquisition is a value-add play for the Washington, DC-based company. The firm’s stabilization plan for the 2180 Foxhill Rd. asset calls for a projected rent increase for the tenants, which include US government agencies, IBM and government contractors. The stabilization plan includes the possibility of leveraging zoning densities to secure additional office and mixed-use clearance for the property.

Dulles Park is a five-story, class A office building totaling 181,000 rentable sf on 7.6 acres. It is next to Campus at Dulles Technology Center, a seven-building office park also owned by Republic Property Trust. “Our acquisition of Dulles Park is in keeping with our strategy to pursue office building assets in close proximity to our existing properties to obtain potential operating efficiencies, and therefore, an improved return on investment,” Republic’s CEO Mark Keller says in a statement. “We see Dulles Park as an exceptional opportunity to increase FFO through our leasing and management efforts.”

For instance, the company says the average in-place rents of $25 per sf at Dulles Park are below he market, which is $28 per sf, and that there are significant leasing opportunities as market rents are projected to rise in the area, particularly for space near the Dulles Toll Road.

Also, Dulles Park is within one city block of the proposed Route 28 Metrorail Station, Republic Trust’s executives note in the release. After a preliminary analysis of existing and comprehensive plan zoning densities for the Metrorail Station areas, the company might be able to secure additional development by combining the land areas of Dulles Park and the campus properties. For the moment, Republic Trust only plans to pursue increased densities for the site, with no immediate plans to develop a new office building. Keller says “The potential to develop additional office space at no additional land costs is a big benefit for us.”

Once the property is stabilized, the capitalization rate on the purchase price is projected to surpass 7%. The transaction is expected to close in September.

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