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Monday, March 22, 2010, 1:22pm EDT | Modified: Monday, March 22, 2010, 1:27pm
Monument Realty, lenders sell Palatine building at auctionWashington Business Journal - by Tierney Plumb Staff Reporter
Monument Realty sold The Palatine for $118 million by auction, closing on its fourth building transaction in the last four months.
Miami-based developer Crescent Heights Inc. was the winning bidder at the foreclosure auction, prompted because the sellers were foreclosing on a construction loan to a Monument Realty venture with an investment fund managed formerly by Lehman Brothers. The sale closed March 12.
Monument built the 262-unit Courthouse building at 1301 N. Troy St. from the ground up, using at least $94 million in financing from Fremont Investment. iStar Financial, a New York-based commercial real estate finance company, later bought that loan.
When the condo market heated up in 2004 and 2005, Monument marketed the units as condos, preselling some of the units. But then condo sales hit the recessionary wall, and Monument cancelled those contracts and converted the units to rentals. The units delivered in August 2008, and Monument completed the initial lease-up of the apartments in October 2009, resulting in 95 percent of the building now being occupied.
The building was sold at an auction on Feb. 10 amidst the Washington area’s record-setting snowstorm. Ten bidders posted the $9 million deposit required to bid on the property. But bidding was quick with three bidders still actively pursuing the property at $112 million before Crescent amped up the price to $118 million.
The buyer is expected to realize a rock-bottom capitalization rate of about 4.5 percent.
The D.C. office of HFF Inc. (NYSE: HF) represented the seller. Crescent, which is notorious for embarking on condo conversion projects, is “an all-cash buyer and prefers fast closings,” according to its Web site.
“We had an indication before the auction that the sale price would be over $100 million, but no one ever expected the number to get to $118. As you can imagine, we are very pleased with this result as the sale price is well above the loan balance,” said Michael Darby, Monument Realty’s owner, in a statement. “Maybe we should always sell our assets at auction.”
It marks the fourth major transaction that Monument has closed in the past four months. Most recently, Monument sold Monument Corporate Center I, a 200,000-square-foot office building in Gaithersburg, for $42.8 million in December.
“The future is looking a lot brighter, and it feels like we are picking up some real momentum with these recent deals. We have a lot of additional deals pending and are actively pursuing new acquisitions with several new investment partners,” Darby said.
Monument Realty has developed more than 5 million square feet of Class A office space, nearly 3,500 residential units and three hotels valued at more than $5 billion.
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