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Hamilton Square Scores with $93M Price Tag
By Barbra Murray - GlobeSt.com
WASHINGTON, DC - In a deal valued at $93 million, the 240,000-sf office property known as Hamilton Square gets a new owner. Shorenstein Co., a San Francisco-based private owner and operator of class A office properties, has committed to taking the building off the hands of seller F Street Real Estate, an offshore entity--described in previous news reports as involving a group of Saudi Arabian investors--advised by Lend Lease Real Estate and represented by Grubb & Ellis Co. in the transaction. "Hamilton Square presents us with the opportunity to acquire one of the top class A office buildings in the much sought after East End submarket of Washington, DC at a price below replacement cost," Shorenstein officials note in a statement.
A historic structure just a stone's throw away from the White House, Hamilton Square first rose up at its spot at the corner of 14th and F streets in 1929 as Garfinckel's Department Store. The nine-story landmark structure continued as a luxury retail destination until 1990, after which point it sat vacant for several years. CarrAmerica Development handled the redevelopment of the property on behalf of F Street Real Estate in a massive $55-million endeavor in 1999, converting the structure to accommodate offices, 46,000 sf of ground-level retail space, and four new levels of subterranean parking to hold nearly 400 vehicles. Current office tenants include global management consulting firm McKinsey & Co., law firms Pepper Hamilton LLP and Shook, Hardy & Bacon LLP, and investment management concern US Trust Corp. Borders Bookstore and high-end restaurant Butterfield 9 are the retail tenants.
While the prime central business district location and physical quality of Hamilton Square rendered it a hot property, other factors have kept many potential investors at bay since the building hit the market in 2001. "It has in-place debt that matures in 2010 with a very low LTV, a high loan constant, a substantial prepayment penalty and a prohibition on mezzanine debt," Shorenstein officials explain. Despite the drawbacks, however, there are significant and lucrative advantages to the purchase of Hamilton Square, and Shorenstein zoomed in on those. "This asset provides solid cash flow over the short term and also the opportunity to add value by rolling rents to market and restructuring the debt over time."
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