D.C.’s Market Square Fetches $615M

March 2, 2011
By Barbra Murray, Contributing Writer

Market Square, a 679,700-square-foot office property in downtown Washington, D.C., is about to come under new ownership in a transaction valued at $615 million. Wells Real Estate Investment Trust II has entered into an agreement to acquire the two-building class A complex from Avenue Associates L.P., an affiliate of Beacon Capital Partners L.L.C.

Developed in 1990, Market Square last changed hands in 2007, when Beacon acquired a portfolio featuring 5.3 million square feet of Washington, D.C.-area office properties from The Blackstone Group just after Blackstone had come into possession of the assets through its $39 billion buyout of Equity Office Properties Trust. According to District of Columbia records, Market Square has a current assessed value of approximately $421.4 million.

Market Square’s two 13-story towers occupy 2.2 acres between the U.S. Capitol and the White House at 701 and 801 Pennsylvania Ave. The property is LEED Silver-certified by the U.S. Green Building Council and holds the distinction of being home to the United States Navy Memorial. Market Square also stands out for its strong tenant base, which includes the likes of Bayer Corp., Novartis, Procter & Gamble and United Healthcare.

Wells Real Estate Funds represented Wells REIT II in the transaction, while commercial real estate services firm Eastdil Secured stood in for Beacon. By all accounts, the contest to purchase Market Square was fierce. “This was an extremely competitive process with strong interest from around the globe,” Fred Seigel, president and COO of Beacon, noted. “It resulted in a very good outcome for Beacon’s investors and for Wells REIT II.”

Wells REIT II will finance the acquisition of Market Square with proceeds from its $500 million line of credit with JPMorgan Chase, N.A., combined with proceeds from a bridge loan that is presently in the works. If all goes as planned, the transaction will close this month.

Washington, D.C., is high on investors’ lists. The city ranks as one of the top three buyers’ markets in the country, as per the ULI Emerging Trends in Real Estate 2011 survey. The recent flurry of office transactions includes Washington Real Estate Investment Trust’s $80 million acquisition of the 184,100 square-foot property at 1140 Connecticut Ave.; CoStar Group Inc.’s $101 million sale-leaseback of its 169,400 square-foot headquarters building at 1331 L St.; and Lincoln Property Co.’s purchase of the 279,000 square-foot building at 2300 N St. for $140 million.