This story was updated on Feb. 15, 2013.
Alexandria Real Estate Equities has sold two office buildings and some land for $41.1 million in Gaithersburg, where it is shrinking its presence as the I-270 bioscience market cools.
The Pasadena, Calif., company said it realized only a $100,000 gain on 25/35/45 W. Watkins Mill Road and 1201 Clopper Road, both of which face major vacancies. The sale included a 282,523-square-foot office portfolio and a 4.9-acre parcel.
The 147,135-square-foot Clopper Road property is about to lose its build-to-suit major tenant, said Peter Moglia, Alexandria’s chief investment officer, during a Feb. 7 earnings conference call. The Dutch diagnostics company Qiagen, which acquired Digene in 2007, plans to relocate elsewhere in the I-270 corridor within a “couple of years,” he said.
Moglia told stock analysts: “We took a look at that strategically and said, ‘This is Gaithersburg. It’s not Rockville, which is really the place where people want to be these days. Do we really want to sink a large amount of capital into re-tenanting that building?’ And the answer was no, it didn’t make sense. So we found a buyer who was really willing to put in the work and the capital to reposition it.”
The Watkins Mill complex also faces 60,000 square feet of vacancies this year.
The buildings are 95 percent leased to major life science tenants including MedImmune, Qiagen and Amplimmune, according to the buyer, Equus Capital Partners of Philadelphia, formerly BPG Properties. The 4.9-acre parcel can accommodate development of 125,000 square feet of office/lab space.
“With this portfolio, Equus will enjoy stable cash flow for the next few years from brand-name life science tenants while providing us the opportunity to add value over the long-term through re-leasing and potential development of the land parcel,” George Haines, vice president of Equus, said in a news release.
The portfolio is near the southern entrance to the Watkins Mill Town Center, a 200-acre, mixed-use development that is to include 4.5 million square feet of class A office, hotel, restaurants, retail and residential space. Additionally, a new cloverleaf interchange has been approved at the intersection of I-270 and West Watkins Mill Road, providing better access.
Alexandria was represented by HFF and Scheer Partners.
The mix of office, warehouse and lab space traded at a time when many companies are reassessing their need for space. Qiagen, for one, intends to add a 244,000-square-foot building to its Germantown campus, with plans to occupy half the space and leave the rest for future expansion.
“The disposal of large blocks of space and federal budget cuts earlier this year swelled vacancy in the area and diminished rental rates from the peak achieved in 2010,” broker Jones Lang LaSalle noted in its 2012 year-end Life Sciences Cluster Report.
Maryland landlords probably shouldn’t look to federal tenants to take up the slack, according to the Delta Associates/Transwestern 2013 Trendlines report. The study notes that the General Services Administration accounted for only 12 percent of Washington-area leasing activity last year, down from 65 percent in 2010. The company expects “GSA leasing activity to remain around 10 percent to 15 percent of office market demand in the near future,” the report concluded.
Overall, suburban Maryland experienced positive net absorption of 297,000 square feet last year, “due in part to Bethesda Center North delivering 358,000” square feet to the Nuclear Regulatory Commission, Delta said.
The report predicted that the overall vacancy rate for the Maryland suburbs will change little, falling to 14.2 percent by the end of 2014, from the current 14.7 percent.
The Washington regional life science cluster ranks sixth nationwide in the Jones Lang LaSalle report, primarily from the I-270 corridor. But the immediate future is choppy, even if state and local incentives might buoy the market in the long run, the report said.
“Given historically modest growth in election years, a decrease in the federal budget and an apprehensive posture toward new investment among most businesses across the country, tenant demand in the I-270 Corridor’s life science sector has stagnated. ... In light of these conditions, real estate investors would be well advised to continue monitoring the life sciences industry to ensure that supply/demand trends are optimized in their favor,” the report concludes.
The Washington Metropolitan Area Transit Authority’s real estate committee on Thursday reaffirmed support for a relocation of FBI headquarters to Greenbelt’s Metro station by approving the possible transfer of development rights to Prince George’s County to give officials flexibility to bid for the move.
The approval allows the county to negotiate with the General Services Administration without having to go through Renard Development, which holds the development rights, according to Stan Wall, Metro’s director of real estate.
“We want to help the county facilitate its pursuit,” he said. “We would do that same if approached by Fairfax (Va.) or Montgomery County. We want to see development happen at all our sites.”
The panel’s vote amends the existing 2011 agreement with Renard, which was struck to pursue the FBI headquarters.
The move follows the Prince George’s County Council’s approval last week of a new Greenbelt sector plan that would make the FBI or another federal agency the central element of redevelopment of land surrounding the Metro station.
But Wall said the WMATA vote doesn’t give Prince George’s County any advantage over the other jurisdictions and he noted that county officials made a request for the transfer when the GSA first invited developers’ proposals in December. The deadline for developers to respond to the GSA is March 4.
The Montgomery County Planning Board approved project and preliminary plans for a mixed-use project in downtown Bethesda that will include 475 apartments and 21,630 square feet of commercial space.
The JBG Cos. of Chevy Chase proposes 440,000 square feet of development at 7900 Wisconsin Ave., which is between Wisconsin and Woodmont avenues at St. Elmo’s Avenue.
The plan won praise from planning board members, who welcomed JBG moving forward at the site after pulling out of a land swap plan last year with the county to build a new 2nd District police station.
“Downtown Bethesda could be more exciting than anyone imagined,” said planning chairwoman Françoise Carrier.
The project will include a 17-story residential tower, underground parking, a public plaza and a pedestrian connection between Wisconsin and Woodmont avenues. The location is about a quarter-mile north of the Bethesda Metro station.
The multitiered T-shaped building would replace a four-story office building and two single-story retail buildings with surface parking.
The Howard Hughes Corp., Kettler and Orchard Development Corp. announced the groundbreaking for the Metropolitan Downtown Columbia apartment building, the first development to proceed under the new downtown Columbia plan approved in 2010.
The project will include 380 luxury apartments, garage parking and almost 14,000 square feet of ground-floor retail. The plan also includes the development of a 28,500-square-foot public promenade with a 6,000-square-foot children’s play area, creating a local gathering place.
“It is exciting to celebrate this pivotal first step in the revitalization of downtown Columbia,” John E. DeWolf, senior vice president of development for Howard Hughes, said in a news release.
The downtown Columbia plan allows for up to 13 million square feet of new density, including 5,500 residential units, 4.3 million square feet of office space, 1.25 million square feet of retail and up to 640 hotel rooms. The plan also includes a new multimodal transportation system and the redevelopment of the Merriweather Post Pavilion concert venue.
AMR Commercial announced that it will be the new leasing agents for 1300 Spring St. in downtown Silver Spring.
The 100,000-square-foot class A office building is owned and managed by the Bernstein Cos.
“With easy accessibility to Washington, D.C., suburban Maryland, and Northern Virginia, 1300 Spring Street is an excellent opportunity for value seeking tenants looking for Class A space at a Class B price,” Bill Montrose, an AMR principal, said in a news release.
The building has up to 9,000 contiguous square feet available on the first floor that is suitable for medical and nonmedical uses and up to 15,000 square feet available on the upper floors.
The long history of steel production at Sparrows Point in Baltimore County finally has ended, just a week short of the anniversary of the nation’s first union contract.
Commercial Development Co., on behalf of Sparrows Point LLC, last week announced the appointment of Cassidy Turley as the exclusive listing agent for 3,100 acres of industrial land where steelworkers have forged iron since Maryland Steel opened the first factory in 1887. Generations of workers toiled for Bethlehem Steel and successor companies until the former RG Steel Mill shut down last year.
The bankrupt firm’s plant equipment was auctioned off this month, just days before Thursday’s anniversary of the end of the Sons of Vulcan steel strike in 1865, which set the stage for national steel union contracts.
“Cassidy Turley is pleased for the opportunity to market one of the most significant parcels of industrial land on the entire East Coast,” David Gillece, regional managing principal of Cassidy Turley in Baltimore, said in a news release. “We intend to use our considerable national and international resources to market the site to marine port terminal operators as well as manufacturing, distribution, energy, and infrastructure companies around the world.”
Once the site of world’s largest steel mill, the Sparrows Point factory buildings and assets were bought last year by liquidation firm Hilco Trading.
The industrial property and marine terminal encompass four industrial buildings totaling 1.2 million square feet, a deep-water pier with a large-capacity turning basin and 3,000 feet of shoreline on the Chesapeake Bay. The site also has direct access to I-695, is served by CSX and Norfolk Southern railroads, and has its own short line railroad operation on site with more than 160 miles of railroad track.
Broker Jones Lang LaSalle announced that Kenco, an integrated logistic services firm, will operate a new regional distribution center for consumer products in Harford County, where it signed a 692,000-square-foot lease.
The building, at 521 Chelsea Road in Perryman, was completed at the end of 2012 by Ryan Commercial on a speculative basis and was leased by Kenco within a month of its completion. It had been the largest block of class A distribution space remaining in the Baltimore market.
The property is in the I-95 corridor and provides centralized access to the Baltimore-Washington market, Philadelphia, New Jersey and New York.
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