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WASHINGTON, DC-A year ago, many in the District considered it immune to the ebb and flow of the capital markets. A tier one market that is also a global destination city and home to the federal government would always be attractive to capital. That was then. While the District is faring better than most cities, projects are definitely feeling the pinch. For some developers, the answer is to move to plan B with projects still on the white board. Anecdotally, some brokers and developers are reporting that smaller sized projects–$50 million and less–appear to be the sweet spot for a lot of lenders now.

“I don’t want to de-emphasize or minimize the severity of the credit environment right now–it is very tough,” one locally-based developer tells GlobeSt.com. “A lot of lenders are still sitting on the sidelines–that is very clear.” Still, this person continues, “there is money to be had for smaller projects–$50 million seems to be the unofficial ceiling for some; other lenders are only going as much as $25 million.”

For value add projects, financing is almost impossible to get, a broker tells Globet.com, agreeing with the observation that $50 million has become an unofficial ceiling for many lenders. “Anything over $100 million is at a standstill.”

“I just closed a $15 million land loan for a project in Alexandria,” Cassidy & Pinkard Colliers’s David Webb tells GlobeSt.com. “Just bringing them to the table was an accomplishment in this market.”

Still, though the news is not completely grim; top projects are still attracting capital–even from beleaguered sources. Insurance companies, for instance, still have an appetite for real estate, despite AIG’s troubles HFF senior managing director Bill Asbill tells GlobeSt.com. “It takes top quality real estate and sponsors and they generally lend at lower leverage than we have had in the past, but they are still out there.”

HFF recently placed $36 million through AIG Investments for 1401 K St., a 124,706-sf class A office in the East End recently acquired by Guardian Realty Investors. Proceeds from the five-year, fixed-rate financing were used to acquire the property and establish reserves for future tenant improvements, leasing commissions and capital expenditures. Bob Donhauser and Cary Abod also worked on the deal. The deal closed before the federal government made its loan, Asbill says, but that probably wouldn’t have mattered anyway as the insurance company subsidiary was the actual lender.

Also, borrowers can take heart from Brian Schaefgen, CFO of Norkfolk, VA-based Harbor Group International’s recent experience. Last month the company made two significant acquisitions in the local market: the World Trade Center, nine-story, 366,106-sf office building located at 101 W. Main St., and Town Point Center, a 131,259-sf, 12-story class A office tower located at 150 Boush St. “We secured our financing through Hypo Real Estate Holding AG just before their bailout was announced,” he tells GlobeSt.com.

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