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Credit Crunch Pinches D.C. Office Sales
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Blackrock Realty, an affiliate of the New York investment firm Blackrock, declined to purchase the building because it was uncertain how much of the purchase it could finance and at what interest rates, said Ken Finkelstein, a managing partner with JBG Cos., said. A spokeswoman for Blackrock declined to comment.
Instead of selling, JBG is now looking to lease about two-thirds of the space in the building, at 1101 K Street NW.
"We wanted to wait and see how the markets were going to shake out," Finkelstein said.
In Virginia, the market showed some signs of resiliency. The Verizon Tower in Falls Church was sold to the ING Office Fund and Tennessee Consolidated Retirement System for $105 million. The sale was notable because the price was struck during the credit market turmoil, said Warren Dahlstrom, senior director of investment sales at Cushman & Wakefield. In Maryland, Prudential Real Estate Investors completed its purchase of Democracy Center for $280 million.
Despite the effects of the credit crunch, the basic fundamentals underlying Washington's commercial real estate remain strong, several brokers said. Throughout the region, office space continues to command high rents despite slowing demand for such buildings and rising supply.
Jayne Shister, a senior vice president in the Washington office of Cassidy & Pinkard, said, "Prices are still not flattening. The national real estate press is saying it and, I don't think we're seeing it yet here in Washington."
Unlike the residential market, commercial real estate is better positioned to weather a credit downturn because of the rent-producing nature of the properties, said Dionisio E. Meneses Jr., managing director and portfolio manager of Charles Schwab Investment Management, who oversees Schwab Global Real Estate Fund.
"Cash flow is king, and that's what saves commercial real estate in general," Meneses said. "It is driven by cash flow and that's what makes it less risky than other ventures out there."
