Mitsui Fudosan Takes 80% Stake in D.C.'s Homer Building for $252M

January 17, 2012
By Barbra Murray, Contributing Editor

Mitsui Fudosan America Inc. has completed the acquisition of an 80 percent interest in The Homer Building, a premier office property just blocks from the White House in Washington, D.C. MFA acquired the majority stake in the 422,000-square-foot asset from Investa Office Fund for $252 million.

Investa had owned the controlling interest in the iconic 12-story tower at 601 13th St. since 2005, when the company’s previous incarnation, ING Office Fund, made the purchase in two tranches in a deal that valued the property at $210 million. Mitsui’s new partners in the ownership of the office destination are Kann Sons Co. and 13th and G Street Ltd., an entity of commercial real estate company Akridge, which each own a 10 percent stake.

Developed in 1913, the Homer Building experienced a renaissance through a comprehensive redevelopment program in 1990 and, today, it serves as home to such creditworthy tenants as Amgen, General Mills and Toyota. The architectural landmark, sited atop a major Metro hub, features ground level retail space and a four-level parking facility. Additionally, the property achieved LEED Gold certification by the U.S. Green Building Council in 2011.

“The Homer Building is a trophy property, and this acquisition marks a second, important phase in the expansion of Mitsui Fudosan in the U.S. market,” Yukio Yoshida, president and CEO of MFA, said. MFA is the U.S. subsidiary of Mitsui Fudosan Co. Ltd., Japan’s largest real estate company. “The building’s rich history, historic architectural design, and premier location are central to our strategy to invest in high quality assets in established, growing markets. We are evaluating further such acquisitions and development opportunities.” With the purchase of the historic property, MFA has increased its commercial real estate holdings in the U.S. to 3.8 million square feet.

MFA is among a hoard of entities with deep pockets seeking to make cross-border investments in U.S. real estate. According to the Association of Foreign Investors in Real Estate’s recently released annual survey, the U.S. continues to hold its position as the country offering the most stable and secure option for investment and providing the best opportunity for capital appreciation. New York and Washington, D.C. take the first and third positions on the list of the top global cities for foreign investment. In the U.S., the top five target markets are New York, Washington, D.C., San Francisco, Boston and Los Angeles.

The geographic scope of cross-border shopping sprees in the country, however, is headed for expansion.

“For the past 18 to 24 months or so, we’ve seen a large number of investors strategically competing for the preeminent assets in the top core markets–those in New York, Washington, D.C., and San Francisco, for the most part,” Steve Collins, international director with Jones Lang LaSalle’s International Capital Group, commented regarding the real estate services firm’s findings in October. “Now, we’re experiencing a notable thinning of the peloton as those same investors move slightly further out the risk continuum into solid, well-located properties in secondary markets, or staying within core markets, but broadening their search to include value-add or even distressed assets within those markets.”

In terms of searching beyond the top metropolitan markets, a recent example involves the 1.4 million-square-foot Three First National Plaza office high-rise in Chicago, which with a South Korean consortium and Downtown Properties, the U.S. associate of Hong Kong-based Gaw Capital Partners, purchased from Hines for $348 million. Chicago, as well as Seattle, are also high on MFA’s radar, the company told Commercial Property Executive.