PRP eyes $100m first close for government property fund

PRP Real Estate Investors is expected to hold a first close on its $400 million US Government Properties Income and Growth Fund in the next week, PERE has learned.

The Washington DC-based firm is eyeing a first close on just shy of $100 million, having garnered capital commitments from roughly a dozen investors. PRP declined to comment.

PRP – founded by president Paul Dougherty in 2005 – started fundraising for the vehicle about 10 months ago, and has one deal already under contract, according to data provider Real Capital Analytics. PRP acquired the FBI-leased office at 5740 University Heights in San Antonio, Texas, from ML Harris & Co for an estimated $42.3 million. The property, which is leased to the FBI until 2021, has a cap rate of around 8 percent, according to media reports.

Appetite for government-leased offices in Washington DC and major US markets has increased markedly over the past year, with expectations that government departments will continue to grow in the coming years helping drive demand for office space and other real estate sectors.

Earlier this month, AREA Property Partners sold a 130,000-square-foot government leased office in Washington DC to US REIT First Potomac Realty for $68 million. The property was acquired in May 2008 for $44.9 million in a joint venture with Van Ness Property Group, an affiliate of the property management group, Polinger Company.

That same month, Investcorp Real Estate sold the first mortgage on the $169 million US coast guard headquarters in Washington DC, 15 months after acquiring it, while in June StonebridgeCarras and Walton Street Capital sold part a 589,000-square-foot office in their seven-acre Constitution Square redevelopment project in DC to insurance firm, Northwestern Mutual. The entire property was leased to the US Department of Justice.

PRP is expected to exit its value-add fund investments by taking the government-leased portfolio public or selling to a REIT.