Diversified Realty Ventures (DRV) of Bethesda, MD has acquired a 120,000 SF secure office building in Greenbelt, MD adjacent to NASA Goddard Space Flight Center. The seller, represented by Transwestern’s Robert Filley, was C-III Asset Management, LLC, as special servicer for the former mortgage lender. The acquisition is subject to a ground lease that runs through 2075 with possible extensions. Greentec IV, located at 7700 Hubble Drive, is fully occupied by government employees and contractors working on the Joint Polar Satellite System (JPSS).
JPSS is the next-generation multi-functional satellite system intended to replace today’s long-range weather satellites. In addition to weather monitoring and forecasting, JPSS will have advanced research and defense capabilities. The first JPSS satellite is expected to be launched in 2017. JPSS is a joint mission of NASA, NOAA, and the Department of Defense. Government contractor TRAX International has leased Greentec IV on behalf of the JPSS program.
“We see Greentec IV as a long-term hold,” said Elliot Liffman, Principal, DRV. “JPSS, like any mission-oriented user, is a finite tenant. But even when the JPSS mission is complete, the building is well-positioned to attract new tenants. While the Greenbelt office market as a whole still has a long way to go toward full economic recovery, this building’s specialized infrastructure and close proximity to Goddard — which is space-constrained by its master plan– provide significant competitive advantages.”
Despite these competitive advantages, investing in Greentec IV had its challenges, Liffman went on. “At the outset, this investment seemed to pose a lot of risk with its ground lease, single tenancy, 27 percent vacancy in the Greenbelt submarket, and the possibility of Federal government budget-cutting that could affect JPSS and its mission,” he explained. “When the building went to market, JPSS was facing funding uncertainty at a critical point in its life-cycle due to the Congressional budget deadlock. All of these factors made the asset difficult to underwrite, and undoubtedly caused many buyers to pass on it.”
“With the help of TRAX and JPSS staff, we were able to drill down on these issues and develop a deep understanding of the opportunity,” Liffman continued. “We emerged feeling very comfortable about the investment. This acquisition provides an excellent example of how our flexibility across asset classes, ownership types, and geographical markets allows us to focus on the best deals in the market.”
Built in 1994 as two low-rise structures linked by a common lobby, Greentec IV enjoys a convenient location just off the Washington Beltway and I-295, just minutes to the MARC commuter rail line serving Washington, DC, Baltimore, and Baltimore Washington International Airport. Virtually next door, the 1,100-acre Goddard Space Flight Center houses over 10,000 employees, with thousands more people working for government contractors nearby. Douglas Development Corporation has purchased the land parcels surrounding the Greentec buildings and has gained approval for development of 850 housing units along with retail and office space, as well as an age-restricted community.
Greentec IV is the second asset that DRV has acquired from C-III; last fall, DRV acquired Circuit City’s former headquarters building, Deep Run III, in suburban Richmond, VA for $12.4 million. Vacated by Circuit City following the company’s bankruptcy, Deep Run III is now being renovated and re-tenanted as part of a $25 million repositioning strategy.
Diversified Realty Ventures is a privately held real estate investment and advisory firm with offices in the Washington, DC metropolitan area and Richmond, VA. The firm maintains flexible investment criteria to respond quickly to changing market conditions, specializing in assets that are undervalued due to operational or financial distress. Since its founding in 2010, DRV has amassed a portfolio of 1.1 million square feet of office, flex, and retail space as well as over 625 units of multifamily and student housing. The portfolio spans almost all property types — office and medical office, flex, multifamily, student housing, and retail – throughout six southeastern states: Virginia, Maryland, North Carolina, South Carolina, Tennessee, and Georgia. The company’s principals, Elliot Liffman and W. Spilman Short, Jr., have a combined total of nearly 50 years of experience in commercial real estate, including work with such firms as CB Richard Ellis and Charles E. Smith Commercial Realty. For more information, visit www.drv-llc.com