Steinbridge JV to buy Watergate buildings for $107m

Washington DC’s most infamous offices, the Watergate buildings, are reportedly under contract to be sold to Steinbridge Group and Lincoln Property.

The joint venture is purchasing 2500 and 2600 Virginia Avenue for $107 million, according to Bloomberg, which reported the acquisition on Wednesday. The properties are part of a six-building complex bearing the Watergate name that also includes a hotel and co-op apartments, which have separate owners. The Watergate Hotel reopened earlier this month after a New York couple bought the property at auction six years ago for $45 million and spent $125 million renovating the space.

A spokesperson for Steinbridge declined to comment on the acquisition, and a spokesperson for Lincoln could not be reached. The sellers comprise a partnership led by Greenfield Partners, a Westport, Connecticut-based private equity real estate firm, according to Bloomberg. The group also includes Washington-based Penzance, which bought 2600 Virginia Avenue for $76 million in November 2011, according to real estate data provider Real Capital Analytics (RCA). The sale history of 2500 Virginia Avenue, a building of cooperative apartments, was unclear at press time.

2600 Virginia Avenue, a 12-story, 200,000-square-foot office and retail property that fronts the Potomac River, was constructed in 1967 as one of six buildings comprising the 10-acre Watergate complex, the first mixed-use development in the city. Just five years later, in June 1972, five men were arrested for burglary and for wire-tapping the headquarters of the Democratic National Committee, then located on the building’s sixth floor. The incident, which helped to expose a broader campaign of political spying, sabotage and cover-up by the administration of President Richard Nixon, ultimately led to the unprecedented resignation of Nixon in August 1974.

While best known for the political scandal that bears its name, 2600 Virginia Avenue has also been the subject of legal troubles in recent years. In 2005, BentleyForbes, in a joint venture with Chicago-based real estate investment firm Capri Capital Partners, purchased the building from Trizec Properties (now part of Brookfield Office Properties) for $86.5 million. But the partnership unraveled, with Capri suing BentleyForbes in December 2009 for the controlling interest in the property. In its suit, Capri alleged that BentleyForbes violated the partnership agreement by failing to make payments to the Capri Select Income II fund, which had invested more than $14 million in the building. Penzance’s 2011 purchase “resolved a troubled situation,” according to RCA.

New buyer Steinbridge is a New York-based private real estate firm that is seeking to institutionalize what was previously a consortium of individual investors. The firm brought on Tawan Davis as its first chief executive in May. Davis was previously the president and chief investment officer at the Peebles Corporation, a Miami-based developer. Earlier in his career, Davis was a real estate private equity investor and asset manager at PGIM for four years and worked for three years in investment banking at Goldman Sachs.