BISNOW: Foreign Invasion: Will DC Prices Spike?

On July 02, 2013.

In all the recent buzz about JLL's report that foreigners pumped $2B into DC office acquisitions so far this year (double all of 2011), an elephant is walking the room: Are we about to see way higher prices like NYC and Miami?

This morning, Lacy Ltd. chief Debra Lacy (with husband and firm chairman Ben) told us foreigners may be more interested in DC because they can buy even a trophy asset for "only" $100M to $200M whereas in NY that could run $1B or more. Also, office rents are more volatile there or in SF so sales prices are, too. She says DC's slow leasing market won't last forever, making it a perfect time to scoop up assets: "The opportunities to buy are now. It will get more expensive later."

But observers note the lack of tech demand in DC compared to SF, Boston, and the Midtown South market of Manhattan, making some watch with interest how 555 12th trades, a property that Arnold & Porter will vacate for Boston Properties' 601 Mass. Instead, law firms and GSA are DC's biggest space drivers and they're in a state of reduced demand. Another reason prices aren't higher? BP's Ray Ritchey reminds us DC doesn't have the "super-wealthy" NYC finance kings or SF techies to create the ultra high-end residential that might attract international interest. (Think daughters of Russian oligarchs paying $90M for a 57th Street penthouse. But if it did, Rehoboth could be the new Hamptons.)

Cassidy Turley's Bill Collins (flanked by teammates Jud Ryan, Paul Collins, and James Cassidy) tells us that while DC isn't competing with NYC on cap rates, pricing here remains historically high, both among foreign and domestic buyers. And he says leasing activity is actually much better than 12 months ago, adding that in several buildings his team is listing, new leases and tenant renewals are happening during the marketing period. "Leasing activity has picked up, but people are so beaten down they're not willing to recognize it," he tells us.

Sales Wrap

In the past week, two DC mega deals officially closed, according to public record (or as we call it, beach reading). Onyx on First, a 266-unit apartment complex in Southeast owned by Magic Johnson-backed Canyon-Johnson Urban Fund sold for $82.3M last Wednesday to an affiliate of JPMorgan Investment Management—an interesting turn since Equity Residential had reportedly been under contract last year to purchase the property.

And on Friday, one of 2013's big office deals came to a thrilling conclusion, with Hines officially selling 1200 19th St to Kuwait-related Fosterlane Management for $296M, according to DC public records. 1200 19th, as we reported a few weeks back, traded at a cap rate a just below 5%, according to sources.

35 Under 35

Continuing our 35 under 35 feature, CBRE's Bill Hill (holding six-month-old daughter Selah) joined the firm's Federal Lessor Advisory Group last year, and the Duke grad has already worked with big time federal agencies like NASA, FBI, USPS, Interior, and the CDC. He's also an auxiliary board member with the Washington Jesuit Academy and in the last year not only welcomed Selah but got married as well.

UMD grad Ezra Weinblatt of, you guessed it, the Ezra Co, has completed over 150k SF of office deals in the past 24 months. Ezra (snapped at Lake Tahoe's Kirkwood resort) was also recently engaged, with a 2014 wedding in the works. He works with several nonprofits such as the Jewish Federation of Greater Washington.

1800 M Delivers

Prudential and leasing agent Cassidy Turley rolled out a new look at 1800 M St last week and celebrated the property's $20M renovation. (It's right across the street from Bisneyland, so we're grateful they were able to do it without closing Caribou Coffee.) Snapped here: the Cassidy leasing team of Eli Barnes, Bobby Schwartz, and Jimmy Collins flanking Prudential's Sarah Downey. Bobby tells us there's a large block of about 300k SF still to lease, but there's been plenty of activity as well as recent deals with Cresa and Emily's List.

Mark Warner Added to Bisnow Event

We're delighted to announce that Sen. Mark Warner has been added as a special speaker for our annual Northern Virginia State of the Market next Friday at the Fairview Park Marriott. (Above, he and investor Russ Ramsey wonder why we thought they'd need so much water at an event they headlined for us back in 2009.) Sign up here to hear Mark, real estate oracle Peter Linneman, and a pantheon of other huge hitters and water drinkers.

Seen at Washington Harbour

Yesterday, a new broker info alternative arrived in DC. We snapped CompStak CEO Michael Mandel (right, with MRP Realty's Zach Wade and Bob Murphy and Berman Enterprises' Casey Berman) at Tony & Joe's at Washington Harbour for the company's DC launch last week. The skinny on the Stak, according to Michael: It's a crowdsourced database of lease comps, provided by brokers, appraisers, and anyone else in the know about a deal. Berman is an investor in CompStak, Casey tells us, and MRP helped sponsor the DC launch.

Also on hand: Ezra's Mark Brody and Marilyn Brody and Ricoh's Chris Tosh.