Investcorp Real Estate has sold the first mortgage on the $169 million US coast guard headquarters in Washington DC just 15 months after acquiring it.
The New York-based property arm of the Bahrain and London-listed alternative investment firm said it had sold the senior note on 2100 2nd Street, which had a face value of $100 million, to Talos Capital.
Investcorp bought the mortgage in March 2009 for a “steep discount”, reportedly around 75 to 80 cents on the dollar. A spokesman for the firm declined to talk about financial details but said the note sale to Talos resulted in a “substantial profit” for Investcorp.
The 607,700-square-foot office was originally acquired by developer Monday Properties and private equity real estate firm AREA Property Partners in December 2006 for $169 million or $278 per-square-foot. According to a Monday Property briefing note, AREA and Monday invested $38 million of equity in the property and financed $135 million through a Citigroup senior loan. The senior mortgage matures in 2014.
The property is leased solely to the US coast guard, which reportedly renewed its lease in 2008 for a 10-year term. However, the service is expected to vacate the property in 2015 as a new 1.17 million-square-foot headquarters is developed in South East Washington DC for the USCG and Department of Homeland Security.
Jon Dracos, co-head of Investcorp Real Estate said investor interest in commercial real estate and a “dearth of quality assets” provided the firm with an “opportunity to sell this mortgage at a strong profit”. The capital will be used as an investor distribution or to make additional investments, the firm added.
Investcorp acquired the note through its $1 billion Investcorp Real Estate Credit Fund, which raised $850 million from an unidentified sovereign wealth fund in 2008. The fund targets mortgages, subordinated debt and senior mezzanine positions.
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