Mortgage bankers group sells D.C. offices to Bethesda company
Saturday, February 6, 2010
Even the pros are taking a beating. The Mortgage Bankers Association, its membership expert in real estate, sold its $90 million headquarters in downtown Washington on Friday for $41 million.
The three-year-old, 10-story building at 1331 L St. NW -- built just before the office market soured -- was bought by the CoStar Group, a commercial real estate information firm that plans to move its headquarters from Bethesda to the District. The city, which has been negotiating with CoStar for several months, offered the company a $6 million break on its property taxes to lure it from Maryland.
"We have a huge demand for space for our headquarters. This was too great an opportunity to pass up," said Andrew Florance, chief executive of CoStar Group. "It's a quality building at a rock-bottom price," he added. "We think we'll save tens of millions of dollars over the next decade."
The sale comes as commercial real estate troubles are rapidly multiplying in the Washington area. At least 20 percent of commercial properties in the region are worth less than their mortgages, experts say, compared with less than 1 percent before the recession.
The Mortgage Bankers Association moved into the building in 2008 just as the real estate market was crashing, and ended up paying millions of dollars more when interest rates rose. Moreover, the leasing market slowed considerably and the association had trouble getting other tenants into the 168,000-square-foot building.
The industry lobbying group has struggled financially in recent years, as the market collapsed and lending dried up, with members dropping out as they lost their jobs. Its membership fell to 2,500 from 3,000, officials said in 2008.
Florance said the association will remain in the building for about six months and then find a new home.
Messages left with the Mortgage Bankers Association seeking comment were not returned.
"It's a little bit of irony that in the middle of the mortgage crisis brought on by the bad lending practices of many members of the Mortgage Bankers Association that they got caught up in the same problem," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group.
Northern Virginia in recent years has become home to several major corporations, including Volkswagen Group of America, SAIC and CSC. District officials have stepped up their efforts to draw companies, recently luring Radio One from Prince George's County and enticing National Public Radio to build a new headquarters in the city rather than move elsewhere.
"There was an exodus [of corporations] out of the city 10 years ago," said Ernie Jarvis, managing director of the D.C. office of real estate firm CB Richard Ellis. "Now companies are rediscovering Washington as a great place to do business."
As part of the deal to obtain the $6 million in tax breaks, the D.C. Council is requiring that CoStar hire city residents, an effort to address the District's 12.1 percent unemployment rate. The city's rate far surpasses the 6.2 percent level in the greater Washington region and the 9.7 percent national level.
"Any incentive that they get will not be given until they demonstrate" that they've hired 100 people, said council member Kwame R. Brown (D-At Large), who chairs the committee on economic development. "That's one way to create jobs in the city."
About 1,500 people work for CoStar, 700 of whom are assigned to the Bethesda office. Florance said he expects that the D.C. headquarters will occupy 80 percent of the building and that the rest will be leased to outside tenants.
The firm eventually will employ 900 people downtown and plans to sponsor job fairs to recruit D.C. residents.
CoStar, Florance said, is offering incentives to staff members who live in the suburbs to encourage them to move into the District.
Florance recently relocated from suburban Maryland to the District's Cleveland Park neighborhood, buying the home of former Fannie Mae chief executive Daniel H. Mudd at a discount.