Shuwa Corp., a Japanese real estate company, has purchased an undisclosed interest in the partnership that owns the U.S. News & World Report magazine headquarters, according to Fred Drasner, president and chief executive officer of the magazine.
Drasner refused to give the price of the sale. The Wall Street Journal reported that the purchase price was about $80 million, or $480 a square foot, which would make it the highest price per square foot for any office building in Washington. Drasner said the figure cited was "incorrect," but he added that it was close to the sales price.
The previous record in Washington was the sale of the Olmstead building last year for $303 a square foot to a group of British investors.
Drasner added that the company had not sold the building, but rather had sold interests in the partnership that owns the building, so that the title would not change hands.
He said the value of the building was increased by an agreement by the magazine to lease back the building for 25 years.
Shuwa officials refused to comment on the sale. Yoshio Yamashita, vice chairman of the board of Shuwa, said he had heard about the sale but did not know the details.
U.S. News was purchased by real estate developer Mortimer Zuckerman in 1984 for $176.3 million. In addition to the building, the sale included about 3.5 acres of land.
Other developments on the property include a hotel leased to the Park Hyatt and an office building between 23rd and 24th on N Street.
Because of the weak real estate market in the mid-1980s, U.S. News had to make considerable concessions to get a tenant in the office building and the Park Hyatt into the hotel, according to testimony last year by Zuckerman in a suit filed in U.S. District Court in the District of Columbia by former U.S. News employes against the former owners.
Zuckerman said the hotel, located at 24th and M St., faced a particularly tough time. There were two other hotels on that corner, and operating losses were anticipated at the hotel because of the overbuilding.
In order to get a tenant in the new office building, Zuckerman said he gave the law firm of Shaw Pittman Potts & Trowbridge an inducement of 50 percent of the equity in the building and 100 percent of the tax shelter in the building.
Zuckerman testified that the remaining U.S. News property included a lot on the other side of N St., between 23rd and 24th streets.
It is a parking lot where he was originally going to build 18 town houses. He has, however, had the property rezoned to build 78 smaller units, plus some commercial development.
The other parcel is located next to the U.S. News headquarters, on N St., opposite a school, between 24th and 25th streets. There is a parking lot there also.
Zuckerman said that the lot was to have been residential, but "it simply is not economically feasible so it remains as a parking lot.