A partnership between Westbrook Partners and Normandy Real Estate Partners has sold a 511,500-square-foot office building in Washington DC to the US General Services Administration (GSA) on behalf of the US State Department for $99.8 million, according to a report by Globe St.
The State Department is the sole occupant of the property, with the GSA being the government entity that signed the lease. The department has occupied the 15-story building at 2401 E Street NW since 1992. The lease contained a provision that entitled the tenant to buy the building at a below-market rate at the end of its term. The GSA opted to buy the building instead of renewing the lease to save costs.
Westbrook and Normandy initially acquired the asset in 2004 for $118 million. Although both Normandy and Westbrook declined to comment, sources familiar with the situation revealed that the partnership made a profit off of the building through the interim cash flow generated from the accumulated rent. Westbrook was the majority partner in the joint venture owning the property.
Westbrook’s investment was made on behalf of Westbrook Real Estate Fund V, its 2004 vintage $500 million value-added global vehicle. For Normandy, the deal was done directly and reflected its first foray into the local DC market.
This acquisition follows news of another government agency purchasing the building it occupied to save on costs. It was announced in late February that the Federal Reserve Bank of New York purchased the property at 33 Maiden Lane in New York from Merit US Real Estate Fund III, a closed-end German fund managed by Invesco Real Estate and Hannover Leasing, for $207.5 million. The New York Fed had been the primary tenant of the 623,000-square-foot building since 1998.
Both Westbrook and Normandy are currently amidst fundraising. Westbrook Real Estate Fund IX is seeking $2 billion in equity commitments, and Normandy Real Estate Fund III is targeting $500 million.