The Watergate office building, home of the infamous break-in that led to President Richard M. Nixon’s resignation, is under contract to be sold to District-based private equity real estate investor Penzance Cos., according to two sources familiar with the deal.
The deal is expected to close later this fall according to the sources, who spoke on the condition of anonymity because the sale has not been completed.
The sale would mark the second sale of the building, at 2600 Virginia Ave. NW, in six years, following a 2005 deal in which a group led by BentleyForbes, a private Los Angeles-based investor in high-end office buildings, bought the property for $84.5 million from TrizecHahn Corp.
A spokeswoman for Penzance declined to comment, citing a company policy against discussing deals that have not closed. Penzance is an investor and owner of office buildings in the District and Northern Virginia, including 1101 and 1130 Connecticut Avenue, and plans to develop a new 300,000-square-foot office building in Clarendon.
The 11-story, 198,000-square-foot office building was still new in 1972 when thieves broke into the sixth-floor offices of the Democratic National Committee, alerting a security guard and beginning a chain of events that drove Nixon from the presidency and gave the building’s name to the historic scandal.
The 10-acre Watergate complex has six buildings and overlooks the Potomac River, but recent attempts to upgrade its properties have not fared well.
Last year Euro Capital Properties bought the neglected Watergate Hotel, its 251 rooms vacant since 2007, for $45 million, with plans to restore it to a luxury property. The hotel became available after another developer, Monument Realty of D.C., purchased the hotel in 2004 with plans to transform the rooms into luxury condominiums, but lost the building to foreclosure after defaulting on a $40 million loan amidst the financial crisis.
When BentleyForbes purchased the office building in 2005, it issued a press release saying, “the underlying market fundamentals, stable tenant base and quality of the asset made this investment a strong addition” to the company’s portfolio.
But four years later, one of the firm’s investors in the deal, Capri Capital Partners, the Chicago-based investment managers of the Capri Urban Investors private equity fund, sued BentleyForbes in the circuit court of Cook County, Ill., in an effort to remove BentleyForbes as manager of the Watergate building.
Phone calls and e-mails to BentleyForbes were not returned. Capri representatives referred calls to Eastdil Secured, which is brokering the sale. Eastdil did not return calls for comment.