Two Developers Buy Into Downtown Bethesda
Two major complexes in downtown Bethesda have been sold, both to purchasers who intend to upgrade them.
* A partnership led by Blackstone Real Estate Advisors, the big New York investment firm, bought part of Bethesda Metro Center, the complex atop the subway station, for $120 million. The purchase includes the Hyatt Regency Hotel and Three Bethesda Metro Center, a 17-story office building, as well as an underground parking garage and the outdoor plaza, with its fountain and skating rink. Meridian Group, a Bethesda real estate investment firm, will be a minority owner.
The purchase did not include the land under the buildings, which is owned by Metro, according to Paul Dougherty, one of the Insignia/ESG brokers who handled the deal along with colleague Patti Earnest.
The seller was a partnership led by CRI Inc. of Rockville. According to Dougherty, one of the partners in that group was Alan Kay, the developer who built the buildings between 1983 and 1985.
Dougherty said Blackstone and Meridian are going to "reposition the office building and do some renovations on the hotel."
* District-based Quadrangle Development Corp. and partner Rockwood Capital Corp. have purchased the three-building East-West Towers complex in Bethesda for $78.6 million.
Downtown Bethesda "was a market we've been coveting to be involved in for a number of years," said Christopher Gladstone, president of Quadrangle.
In Bethesda, a building moratorium limits how much office space can be constructed over the next few years. A few large buildings are under construction; they are completely pre-leased, Gladstone pointed out. The combination of limited supply and high demand makes the area irresistible for a developer, he said.
Quadrangle is largely a development firm, not just an investor. The 1970s-era East-West Towers give the company a chance to "do what we do best -- add value" by updating systems and appearance, Gladstone said.
The buildings at 4330, 4340 and 4350 East-West Highway total 532,000 square feet, so the purchase price works out to about $148 per square foot.
Seller Principal Financial Group acquired the properties in 1992 for $49 million.
Robert D. Faktorow, Richard F. Siegel and Lawrence E. Thau of Insignia/ESG were the brokers in the transaction.
Internet Company Leases Space
Frontier GlobalCenter, a company that provides Web hosting and other behind-the-scenes Internet services, has signed a lease on a 136,250-square-foot building in Herndon.
The one-story flex building at 544 Herndon Parkway will be a Web-hosting facility -- a building that houses mostly computer equipment, not workers. Such facilities are becoming increasingly common around the region.
"All of a sudden, there's many, many of these," said Mark Larsen, one of the CB Richard Ellis brokers who represented Frontier GlobalCenter. Other companies to announce new data centers recently include AboveNet Communications Inc., which has rented space in Reston, and Intel Corp., which plans to build a Web-hosting facility in Chantilly.
Both AboveNet and Intel were considering the Herndon building that Frontier leased, according to Larsen. "We got into a bidding war," he said.
The building was desirable both because of its location and because it is physically suitable, Larsen said.
"Herndon Parkway is very robust with fiber," the buried infrastructure of the Internet, Larsen said. "Every major telecom company is going down the road with their fiber."
Frontier also had an existing facility nearby, making the location even more attractive.
Physically, companies looking for data centers want one-story buildings, with floors that can carry heavy loads, plenty of heavy-duty electricity available, and space outside for generators and fuel storage, Larsen said.
Frontier GlobalCenter is a Sunnyvale, Calif.-based arm of Frontier Corp., a long-distance and fiber-optic company recently acquired by Global Crossing Ltd., which has set out to build a worldwide fiber-optic giant.
Larsen worked with Cathy Delcoco, another CB broker, to represent Frontier. Neil Alt and Doug McLearn of Lincoln Properties represented the landlord, W9/LWS2 Real Estate L.P.
Arlington Leases Office Space
The Arlington County government has agreed to lease 145,777 square feet of office space at Clarendon Square, 3033 Wilson Blvd.
The lease is the largest signed in the county this year, according to Cassidy & Pinkard, the brokerage that represented the landlord.
The county will use the building to consolidate its 450-employee Department of Human Services in the spring. The space is now rented by the Marine Corps; the interiors will be renovated after it leaves.
Pat Cassidy, Jim Hunter and Jill Goubeaux were the Cassidy & Pinkard brokers representing the landlord. The county represented itself.
Eight-Screen Theater Planned
Landmark Theatres, the Los Angeles-based art movie house chain, plans to open an eight-screen theater in downtown Bethesda in the Bethesda Row retail complex being developed by Federal Realty Investment Trust of Rockville.
It's the second project Landmark has announced for this region; the other is the new eight-screen Biograph Theater under construction at 555 11th St. NW in downtown Washington.
Construction on the Bethesda multiplex is scheduled to start next month.
The theaters, which will feature stadium seating and a lobby espresso bar, should be open in early 2001.