In a $228 million deal, Post Brothers acquired Universal North and South, two Class B office buildings occupying an entire city block near Dupont Circle in downtown Washington, D.C.
Although the 659,459-square-foot acquisition was announced Tuesday by Newmark, which arranged the sale, the closing had taken place in early April, a Newmark spokesperson confirmed to Commercial Property Executive.
The seller was JBG Smith, a publicly traded REIT based in Bethesda, Md.
The deal was Post Brothers’ first acquisition in the metro Washington, D.C., market after developing several projects in Philadelphia.
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Universal North and South comprise a two-building office complex at 1825 and 1875 Connecticut Ave. NW. Universal North is a 12-story, 368,071-square-foot value-add asset that is 40 percent leased. Universal South is a 10-story, 291,387-square-foot, cash-flowing asset that is 98 percent leased.
The project reportedly can accommodate a further 73,428 square feet of by-right density. The assets’ profile and location, according to Newmark, “presented an opportunity for investors to execute multiple strategies, including renovating, repositioning or redeveloping for alternative uses.”
Newmark Executive Managing Directors Jud Ryan and James Cassidy represented the seller in the transaction.
In a prepared statement, Ryan called the deal “one of the District’s largest outright office property sales in 2022.”
Offices vs. apartments
Post Brothers could not be reached for comment, but the suggestions regarding repositioning or redevelopment are intriguing, given that the company is known primarily for multifamily projects.
Starting in late 2019, for example, Post Brothers redeveloped a former warehouse at 900 N. Ninth St., in the North Philadelphia submarket, into The Poplar, a project including both office space and 285 apartment units.
Though better than it was a year ago, the District of Columbia office market has “softened modestly” since the beginning of the year, as evidenced by asking rent compression and net occupancy losses, according to a first-quarter report from Newmark.
The average asking rent slid in the first quarter to $56.63 per square foot, under what Newmark described as “the prolonged stress of the low-demand market.”
In contrast, the District’s apartment market has reached record net absorption, driven by such factors as plentiful high-paying jobs; an influx of young, educated workers; and one of the nation’s most expensive single-family housing markets, according to second-quarter figures from Marcus & Millichap.
Apartment absorption over the 12 months ending in March totaled more than 32,000 units, “contracting availability to the lowest rate in over two decades,” the firm stated in its report.