LINCOLN SQUARE GETS A NEW OWNER — AND A NEW LEASE ON LIFE
Oct. 31, 2014 - Washington Business Journal.com
Latham & Watkins LLP has signed on for another 15 years at Lincoln Square, a roughly 422,400-square-foot trophy building near Metro Center, but it won’t be paying another dime in rent to the company that has owned 555 11th St. NW for the past decade.
That’s because the law firm’s lease renewal, for about eight floors and 238,000 square feet in the 14-story building, was structured to kick in when the building sold to a new owner committed to making substantial upgrades. The condition was triggered Oct. 30, when an affiliate ofDweck Properties Ltd. closed on its sale of Lincoln Square to New York-based Rockrose Development Corp. for $300 million.
Acquiring 555 11th St. NW for about $710 per square foot elevates the profile of Rockrose’s portfolio, which now includes about a half-dozen buildings. The developer has been seeking out high-end buildings in the District for the past few years, with acquisitions including 1776 Eye St. NW. Rockrose President Justin Elghanayan said Lincoln Square was a strong addition and comes with the opportunity to make upgrades for future tenants.
“We’ve been focusing on the higher end of the market, and this is at the top,” Elghanayan said. “It’s very nice to begin with, but we are going to do some improvements to the lobby, we’re going to completely redo the health club and we’ll do some common area renovations as well.” In addition to its office space, the building also includes a Jos. A. Bank, a Starbucks and Landmark Theatres’ E Street Cinema.
The sale represents a positive turnaround for 555 11th St. NW, which Morningstar Credit Ratings LLC reported nearly a year ago had been placed with a special servicer for “imminent default” as Latham & Watkins’ lease was coming due in January 2016. The building is now about 94 percent occupied.
Transwestern broker Gerry Trainor, who marketed the building for sale on behalf of Dweck, said the transaction was a complicated one for a number of factors, including that its debt had been placed with special servicer LNR Partners and Latham & Watkins had a pending lease expiration. CBRE brokers Randy Harrell and Scott Frankel were able to represented the landlord in the lease renewal with Latham & Watkins, which was in place but tied to several conditions as Transwestern brought the building to market. Rockrose competed against three other groups, including one backed by foreign capital. CBRE’s Scott Gamber and Mark Minich represented Latham & Watkins in the lease renewal.
-Daniel J. Sernovitz