Apollo JV inks deal to buy site for new office development

Real Estate Weekly, June 6, 2007

Apollo Real Estate Investment Fund V, L.P. and Van Ness Property Group, an affiliate of the Polinger Company, have acquired a land site from Stephen A. Goldberg Co. for the development of Capitol Plaza II and III in the North of Massachusetts Avenue (NoMa) submarket in Washington, D.C.

Zoned for nearly 600,000 s/f of office development, the site encompasses 1.46 acres. The purchase price was not disclosed.

The parcels are adjacent to Capitol Plaza I, the recently constructed 290,000 s/f Class A office building, which Apollo's Value Enhancement Fund VI acquired in partnership with Van Ness Property Group. As envisioned, the Capitol Plaza II and III buildings will feature a modern design with a combination of pre-cast and glass window and curtain walls, according to Apollo.

Washington, D.C. is the second largest office market in the country, with rising demand and scarce land available for new development in the central business district and Capitol Hill markets. The central business district has experienced declining vacancy rates, increasing absorption rates and rising rental rates. In light of the improving market dynamics and the barriers to entry in the CBD submarket, NoMa is a likely candidate for new development and an attractive alternative to the many tenants looking for space. Capitol Plaza is part of the new NoMa Business Improvement District, approved by the District of Columbia Council in March. The BID enhances the area through neighborhood cleaning services, marketing, event planning, and development coordination for the more than 20 million square feet of new office, residential and retail development planned for NoMa.

"Given the expected growth of the NoMa marketplace and our ability to deliver new product, we felt it was advantageous to expand beyond Apollo VEF Fund VI's Capitol Plaza I investment and secure control of Capitol Plaza II and III," said John Jacobsson, Apollo managing partner. "Our funds now control a significant block of space in an emerging submarket within a historically strong urban market."