Monday Properties Back In Buy Mode With Alexandria Portfolio Deal

Monday Properties has acquired a five-building office portfolio along North Beauregard Street in Alexandria for an undisclosed price, marking the company's shift back to acquisition mode after spending the past few years selling instead of buying.

The developer closed earlier this month on its acquisition of the 300,000-square-foot portfolio, located between Rayburn Avenue and Seminary Road along North Beauregard Street. The buildings are about 55 percent leased to a range of tenants including Inova Health System, Virginia Hospital Center and DXC Technologies.

"For the last several years, we've been a net seller across our entire portfolio," said Anthony Westreich, founding managing partner of Monday Properties. "This is really the first one in a while and it's kind of indicative of our strategy going forward."

Monday Properties turned its focus to potential acquisitions in the D.C. area and elsewhere about a year ago. The developer plans a series of renovations over the next year to help boost occupancy, including adding on-site amenities and improving the common areas and landscaping. Monday Properties acquired the buildings with an undisclosed investment partner that Westreich would only say was different from Goldman Sachs, its partner on other properties including the Towers in Rosslyn.

The buildings were part of a larger pool of pre-recession commercial mortgage-backed securities, or CMBS, set to expire over the next year or so, an issue I explored in depth in the WBJ's May 19 print edition. The buildings Monday Properties acquired were part of a set of nine collectively known as Lafayette Property Trust, and they initially backed a $203.25 million loan taken out in 2007 by a partnership between Duke Realty Corp., Belcrest Capital Fund and Eaton Vance.

"I think with plenty of these CMBS loans, where values were impaired, current ownership wasn't able to invest or be proactive on leasing," Westreich said. That included needing capital to invest in tenant improvements needed to help land new tenants, which Monday Properties is now positioned to do. Included in the acquisition were 1500, 1600, 1800 1900 and 2000 N. Beauregard St. The Clyde's at Mark Center building at 1700 N. Beauregard St. was not part of the deal.

The debt on the buildings had been transferred to special servicer C-III Asset Management and at least three buildings have since been foreclosed on, according to Alexandria property records and Bloomberg data. The loan carried an outstanding debt of $176.8 million, according to Bloomberg. Other properties in the trust included 1701 and 1705 N. Beauregard, which the Alexandria City Public Schools plans to convert into a new elementary school.

The Lafayette Property Trust portfolio was part of the same pool of CMBS debt issued in 2007 that included the Towers, which Monday Properties refinanced for $888 million, and Vornado Realty Trust's Skyline complex in Fairfax County, which sold at a foreclosure auction in December. Moody's Investor Service, in an April rating, noted Lafayette Porperty Trust was the largest loan still in special servicing as part of that group.