Piedmont Acquires 334 KSF Office Building for $176M

By Gail Kalinoski, Contributing Editor

Piedmont Office Realty Trust boosted its Washington, D.C., area portfolio this week by acquiring Arlington Gateway, a 12-story, Class A office property and one of the top buildings in the Rosslyn-Ballston corridor, for $175.6 million.

The Atlanta-based office REIT purchased the 333,948-square-foot building at 901 North Glebe Road in Ballston, Va., from Arlington Gateway Investors L.L.C., which had owned it since 2005. The LEED gold and Energy Star-certified trophy property located about 10 minutes from Washington, D.C., sold for $526 per square foot, not a record for the area, but still considered on the high end.

“We achieved excellent pricing for our client while providing Piedmont the opportunity to execute its expansion plan into the Washington, D.C., region with a trophy asset that has strong cash flow,” Gerry Trainor, executive managing director of Transwestern, who represented the seller along with his D.C. Commercial Sales team, said in a news release.

Trainor declined to offer more details on the seller but the Washington Business Journal identified Arlington Gateway Investors, L.LC., as an affiliate of Dweck Properties, Ltd., which has been moving out of office properties into residential.

The building, located at the corner of Fairfax Drive and North Glebe Road, is two blocks from the Ballston Metro station, close to I-66, and next to the Westin Arlington Gateway hotel, which has 336 guest rooms and 10,000 square feet of meeting space. The area has a substantial retail and restaurant presence and a growing housing unit base. It is 99 percent leased to private-sector tenants including Towers Watson, a global professional services company, and Nixon & Vanderhye, a law firm.

“Rents are below market so there is an upside to push the rents up in the future,” Trainor told Commercial Property Executive.

Trainor said his team marketed the property for about a month in January and had “extremely strong” interest from more than 20 well-diversified bidders.

“The five that were in the final were very strong,” he said.

“People believe in the Washington market long-term,” Trainor said. “There is a flight to quality right now because people are still uneasy about the economy and sequestration. This is one of the finest buildings in Ballston. It’s almost fully leased. It’s what people are looking for – a Class A property in a Class A location.”

Bob Wiberg, executive vice president, MidAtlantic region and head of development for Piedmont, also talked about the superior quality of the building and the strong location.

“The RB Corridor is one of the most desirable and high performing submarkets in the Washington, D.C. region,” he said in a Piedmont news release. “Arlington Gateway’s strong position in this submarket, evidenced by its 99 percent leased status, makes this an ideal strategic investment for Piedmont.”

Piedmont focuses on Class A properties located primarily in the 10 largest U.S. office markets, including Chicago, New York, Los Angeles, Boston, Dallas and Washington, D.C. As of Dec. 31, 2012, the REIT’s 74 wholly-owned office buildings comprised more than 20 million rental square feet. The addition of Arlington Gateway gives the REIT a third building in the Rosslyn Ballston corridor. It owns 3100 Clarendon Blvd. and 4250 North Fairfax Drive along with numerous other office properties in northern Virginia, Maryland and Washington, D.C.

“This acquisition demonstrates Piedmont’s strategic deployment of capital into one of our concentration markets,” Raymond L. Owens, executive vice president, Capital Markets, stated in the Piedmont release. “This transaction will provide us with stable income from a high-quality office building, and it builds upon our critical mass in a submarket that we feel has strong long-term potential growth.”