GreenBarn, FarmView, Farallon Acquire D.C. Office at Auction With $60.5M Credit Bid

The trophy office building at 1625 Eye Street in Washington, D.C., has officially changed hands, Commercial Observer has learned. 

A joint venture involving GreenBarn Investment Group, FarmView Ventures and Farallon Capital acquired the 405,000-square-foot building via foreclosure auction with a credit bid of $60.5 million. 

Westbrook Partners and American Real Estate Partners (AREP) previously owned the building, two blocks north of the White House. The auction took place in late June, and the deed was recently transferred, sources said. 

Westbrook bought the property in September 2019 for $259 million, borrowing $225 million from Brookfield at the time. Brookfield held on to the $50 million mezzanine interest but sold the $175 million senior mortgage to a banking syndicate led by ING. All in, together with money invested in the property, Westbrook’s basis was around $300 million, sources said. 

The senior loan went into maturity default at the end of 2023 and had been sitting in default for more than a year when Rithm Capital Corporation affiliate GreenBarn, FarmView and Farallon bought a discounted, 25 percent participation from one lender in the syndicate, China Construction Bank. 

The JV then worked on negotiating and recasting the loan with the other lenders in the syndicate, ING and Münchener Hypothekenbank, that would be put in place upon the foreclosure and successful credit bid on the property —recasting the loan so it was appropriately sized for the current value of the asset, which is around $150 million today, sources said. 

A source familiar with the transaction said the lenders had held back from foreclosing previously, partly because they liked the property, and partly as they didn’t have the ability to operate the asset and own the real estate themselves. 

GreenBarn, led by David Welsh and David Schonbraun, and FarmView Ventures, led by John Wolf, on the other hand,  have deep experience in owning and operating office properties, as well as creating value at the real estate level, and were prepared to take the driver’s seat. Coincidentally, Wolf worked at Westbrook for 20 years and was involved in the company’s 2019 acquisition of the asset. 

The transaction is just the latest example of institutional investor demand for the highest quality assets outperforming everything else in the D.C. market, sources said, with the JV resetting 1625 Eye Street’s basis and restabilizing it for its next chapter. Elsewhere, others have been doing the same, and tenants are signing up, renewing and extending their leases with the assets that have top-tier sponsorship and are well-capitalized today, sources said.

With direct views of the Washington Monument and Jefferson Memorial in addition to the White House from its roof deck, 1625 Eye Street also features a nine-story atrium and a 425-space parking garage — and it may be its prime location as well as its trophy categorization that’s allowed it to fare much better than others in the nation’s capital from a leasing standpoint.

Despite plenty of bleak headlines around D.C. office the past few years, the market has its ‘haves’ and ‘have-nots’, and 1625 Eye Street is firmly in the former category. It’s more than 80 percent leased, today with 130,000 square feet of leasing completed over the last 24 months alone. 

Law firm O’Melveny & Myers, which occupies 100,639 square feet across the building’s top three floors, anchors the asset. The second-largest tenant, National Fish & Wildlife, committed to 62,039 square feet — during COVID, no less — doubling its space and extending its lease to December 2039. Other key tenants include engineering firm Simpson Gumpertz & Heger, ULLICO and law firms Carlton Fields and McAllister & Quinn. All in, the building’s weighted average lease term is more than nine years. 

KLNB is being engaged to lease the retail spaces, sources said, including an 8,000-square-foot space previously leased to BLT Steak House. 

Sources familiar with the transaction said that Westbrook and AREP “did everything right” during the tenure of their ownership of the property but were hurt — like so many — by a market basis reset and an inability to restructure the property’s loan. As one source said: “You can’t outrun the capital markets, even if you’re Superman.” As such, the change of ownership happened smoothly and amicably, sources said. 

Indeed, even when the building was in limbo and in default, Westbrook and AREP continued to invest in 1625 Eye Street and sign new leases with approval from the lender group, sources said. Now that GreenBarn, FarmView and Farallon are at the wheel, there will be a reintroduction of the asset to the market, sources said. 

AREP and an affiliate of GreenBarn will take over property management.

Welsh also founded Normandy Real Estate Partners, which was sold to Columbia Property Trust (CXP) in 2020. PIMCO then acquired CXP in 2021 for $3.9 billion. 

In 2020, Welsh co-founded GreenBarn’s predecessor, Senlac Ridge Partners, with two other Normandy partners. Subsequently Welsh restructured the ownership of the business and brought in Rithm and Schonbraun as partners, rebranding the company as GreenBarn. Today, a vertically integrated investment firm with all services in-house (similar to Normandy). As part of its investment activities, GreenBarn has been focused on acquiring discounted distressed debt positions that allow the firm to reset disjointed capital stacks and pursue ownership of the real estate. In addition to credit and equity investments, GreenBarn also an active lender. 

 In September, GreenBarn — together with Rithm and FarmView — also bought Two Liberty Center, a 190,000-square-foot office building in Arlington, Va., for $28 million via a short sale from Bank of America, closing the deal within 12 days and increasing the building’s leasing by 30 percent within seven months. It’s not all office, though. In September, the firm —also together with Rithm — provided a $112.5 million construction loan for Kushner Companies’ Monmouth Square. 

 Westbrook couldn’t immediately be reached for comment. GreenBarn, FarmView and AREP declined to comment. 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com