Brookfield Nabs $443M Financing for 8 WashREIT Offices in DC

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Brookfield Asset Management has secured $443.1 million in debt originated by JPMorgan Chase and Wells Fargo to acquire seven office properties and the ground lease for another in the Washington, D.C., region from WashREIT, according to Kroll Bond Rating Agency (KBRA) data. 

JPMorgan supplied just over $288 million of the loan proceeds, while Wells Fargo covered the remaining funds, which amounted to nearly $155.1 million, according to KBRA. The commercial mortgage-backed securities (CMBS) deal closed on July 26. 

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The two-year, interest-only loan, along with $150.5 million in equity from Brookfield, allowed the mammoth investment manager to acquire fee simple interests in seven D.C.-area office properties and a 99-year ground lease associated with the eighth asset — 2000 M Street NW in D.C. — which expires in 2070. 

JLL Capital Markets arranged the financing, the firm said.

D.C.-based WashREIT has been wrapped up in a campaign to transition to a pure play, multifamily real estate investment trust in the wake of the depths of the coronavirus pandemic. In June, the REIT announced that it had plans to offload the bulk of its office and retail holdings for nearly $1 billion across two separate transactions, as Commercial Observer previously reported. 

Brookfield was in line to pick up WashREIT’s 12 office holdings — which altogether span nearly 2.4 million square feet in D.C. and Virginia — for $766 million. There was an undisclosed buyer set to purchase the REIT’s eight retail properties for around $170 million. 

As of June, WashREIT had assembled 21 fully stabilized, D.C.-area multifamily properties within its portfolio, and it said it was planning to deploy $450 million in 2021 to expand even further in the sector. 

According to KBRA, the eight properties securing Brookfield’s CMBS acquisition loan include the 394,141-square-foot Arlington Tower in Arlington, Va., which captured more than a third of the loan balance ($164.8 million); the ​​191,219-square-foot office at 1775 Eye Street NW in D.C.; the 108,216-square-foot Army Navy Building at 1627 Eye Street NW in D.C.; the 150,186-square-foot Fairgate at Ballston at 1005 North Glebe Road in Arlington; 1600 Wilson Boulevard, a 171,863-square-foot office in Arlington; the 104,388-square-foot 1220 19th Street NW in D.C.; and the 120,178-square-foot Courthouse Square office in Alexandria, Va. The ground lease at 2000 M Street rounded out the eight-property bundle.

The eight buildings were built between 1912 and 1988, and five of the eight had been renovated between 2014 and 2020, per KBRA. Brookfield secured a $30 million leasing and capital expenditure letter of credit from Bank of America to cover future upgrades to the portfolio. 

As of June, the portfolio was 77.3 percent leased out to more than 170 tenants, and despite the lackluster occupancy figure, the properties have a strong leasing history — an average annual occupancy rate of 89.4 percent in the nine years from 2011 through 2020. 

According to KBRA, Brookfield is anticipating ample leasing momentum in this portfolio, based on recently strong leasing activity within its other office holdings in the region.