IN-DEPTH: Meridian pays $315m for two D.C. buildings

The Meridian Group has bought Techworld Plaza at 801 Eye St. in Washington, D.C. Here’s an in-depth look at the deal.

THE DEAL

The Bethesda, Md.–based firm paid $315 million, or $416 per square foot, for two neighboring 12-story office buildings with a total of 760,000 square feet in Washington, D.C. The purchased was made on behalf of its Meridian Realty Partners I.

Sage Capital Advisors represented the seller, JBG Cos., which acquired the property in 2009 for $275 million.

A $189 million loan was lined up, representing 60 percent of the purchase price, from Helaba Bank. Previously, All State Life Insurance provided a $145 million loan in 2005 and was assumed in 2009.

Meridian plans for a series of upgrades to the property, including façade changes and upgrades to the mechanical system and lobby. Techworld Plaza’s ground-floor space will be converted into retail.

THE ASSET

The complex was built in 1989. It sits adjacent to Hines’ 2.5 million-square-foot CityCenter development in D.C.’s East End. The properties are 94 percent occupancy and anchored by the U.S. Department of Homeland Security, the Department of Veteran Affairs and the Drug Enforcement Administration.

Previous owners include joint venture Akridge and Seaton Benkowski Partners, which purchased it for $162.1 million in 2002. The partnership invested $3 million of improvements to the properties.

THE MARKET

The Washington, D.C., office sector has been showing up-and-down investor activity, according to data by Real Capital Analytics. The first quarter 2014 ended with $1.38 billion in sales volume spread across 10 deals. In fourth quarter 2013, office transactions totaled $486 million, a drop from third quarter 2013’s $1.7 billion in sales prices.

THE PLAYERS

Meridian is a real estate investment and development firm. Meridian Realty Partners I is a value-added fund that launched in 2009 and closed in January 2013 with $160 million equity commitments. With leverage, Meridian has the capacity to invest more than $500 million. It is considered one of the largest equity funds focused on real estate in the Washington, D.C., metropolitan area. Other assets include the One Ballston Plaza in Arlington, Va.; Cameron Run in Alexandria, Va.; and Tysons Technology Center in Tysons Corner, Va.

JBG Cos. is a privately owned real estate investment and management firm based in Chevy Chase, Md.