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Falcon Closes Purchase of $75 Million Property in Alexandria, Virginia

In January 2003 Falcon Real Estate Investment Company, LP closed the purchase of the Crescent at Carlyle, a major office building in Alexandria, Virginia. This property is located in the master-planned Carlyle development, which includes the new 2,000,000 square foot home of the U.S. Patent and Trademark Office as well as the headquarters of Time-Life. The six-story Crescent building is located on a 1.4-acre site, and includes a three-story underground parking garage with 414 parking spaces.

Oblon, Spivak, McClelland, Maier and Neustadt, one of the premier patent and trademark law firms in the United States, occupies 207,836 square feet under a 15-year lease, which began upon completion of construction and their occupancy of the building. In addition, a restaurant has leased the 5,053 square foot ground floor retail space for 15 years, resulting in 100% occupancy of the property.
Oblon, Spivak chose this location so that they would be immediately adjacent to the new home of the Patent and Trademark Office and would also be close to the Federal District Court which is situated in the Carlyle development in Alexandria. The 15-year lease that was signed by the law firm is triple-net, and is supported by a letter of credit. The property was purchased at a price of $74,750,000, equal to a going-in capitalization rate of 8.75%. The lease provides for annual rental increases of 2.25%. The property was purchased from Monument Realty and Apollo Partners, the developers of the property.

Credit Suisse First Boston provided a first mortgage on the property, with the interest rate being fixed at 5.8%. This is an interest-only mortgage for five years, so that the cash-on-cash return to the investor will average over 14% during the initial five-year holding period.

David Hill, Senior Vice President of Falcon Real Estate responsible for acquisitions in the Washington D.C. market, stated, “ We are very pleased with this acquisition since we have delivered a first class investment with a premier tenant in a superb location. In addition, this purchase has surpassed our client’s return expectations by providing an extraordinary income return.”

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Announcements
January 2003