Wachovia flipping DC offices

Real Estate Alert, Feb 18, 2004

Wachovia is apparently flipping a single-tenant Washington office building it acquired in September.

Local brokers say the bank has struck a deal to sell the 353,000-square-foot Edison Place at 701 Ninth Street NW to Brookfield Properties of Toronto for about $166 million, or $470/sf. Brookfield's initial annual yield would be about 5.8%.

Wachovia acquired the 10-story property just five months ago for $151 million, or $428/sf, for a cap rate of 6.4%. The seller was Potomac Capital Investment, a unit of Pepco, the Washington-area electric utility. Cassidy & Pinkard brokered the deal. Wachovia is not using a broker with the Brookfield transaction.

Wachovia outbid a host of German players for the property, including Kan Am, Blue Capital and Real Estate Capital Partners, which was acting on behalf of Commerzleasing. But the yield in the Brookfield transaction is too low for those players to consider.

The building, which was constructed in 2001, is fully leased to a unit of Pepco, PHI Service, through 2025. It is estimated that PHI pays a triple-net rent of roughly $27/sf. The property consists of 329,000 sf of office space, 24,000 sf of street-level stores, a small amount of storage space and a 416-car underground garage.