Developer still lack tenants as it build region's tallest building
Monday Properties is set to build what might be the tallest office building in the Washington area, but the most striking aspect of the plan has little to do with size.
Monday has no tenants signed for the 580,000-square-foot building it plans to begin erecting Oct. 14 at 1812 North Moore St. in Rosslyn, and rather than identifying banks or other lenders to share the risk of the $300 million project beforehand, is paying the first $30 million for construction itself.
Putting up such speculative office buildings during the most aggressive years of the real estate boom is, of course, what got many developers in trouble, and there are still distressed and empty office buildings in the area to serve as evidence.
Other than two office buildings being constructed by the U.S. development arm of Skanska, the international construction giant, virtually no other office buildings are being built without tenants lined up because of the lack of interest among banks and other lenders.
Anthony Westreich, Monday Properties president and chief executive, said he was confident the company would find investors with the final $200 million needed to complete construction, but if not, he said the development firm and its partner, Lehman Brothers, would put down the money itself. Monday values the land at about $70 million.
"The reality is as soon as you ask someone to finance it for you, you lose some control," Westreich said. "And we have what we think is the best site" in the area.
Several office owners and consultants say that if Monday gets the 390-foot building up by 2013, as expected, it should be a success, given the prime location.
"I think they'll be very successful on the leasing side but I think the question is whether they can get it financed and move it forward," said Gregory B. Meyer, senior vice president at Brookfield Properties Corp., a major office owner in the Washington area.
"No one else is building so now is the time to build," said Steven Gewirz, principal with Potomac Investment Properties. "I suspect it will work out well for them."
Scott Homa, research manager at Jones Lang LaSalle, said the strong Rosslyn-Ballston market has been "a kind of an anomaly on really a national scale." Vacancy runs about half that of the rest of the region.
"What Monday has realized, and I think other developers are beginning to realize, is that speculative building is supported by the Rosslyn-Ballston corridor," he said. The tenants will come, he said, because there are virtually no new, big spaces available in the area. "There is certainly large tenant demand that is circling around Rosslyn-Ballston," he said.