JBG buys Wardman Park Hotel in D.C.
July 8, 2005
Jeremy Bond
Special to The Gazette

Submitted photo

JBG Cos. of Chevy Chase, which bought the Marriott Wardman Park Hotel in Washington, D.C., for $300 million, plans to convert some of the guest rooms to condominiums.

The Chevy Chase company purchasing the massive Marriott Wardman Park Hotel in Washington, D.C., is converting a portion of the property to condominiums, demonstrating the strength of the residential market.

The JBG Cos., along with the CIM Group of Los Angeles, has bought the 1.5 million-square-foot property in the Woodley Park neighborhood for $300 million, according to the seller, the Thayer Lodging Group of Annapolis. JBG will undertake a $50 million renovation that will include switching 199 of the more than 3,000 guest rooms to condominiums for sale.

Ken Finkelstein, a partner at JBG, said the company was taking advantage of a booming residential market in the area.

"It's a great piece of real estate in a great location," he said.

Other developers also are looking at condo conversions; for example, Monument Realty wants to convert the historic Watergate Hotel farther south in the city. But the focus on adding residential space has not dug very deeply into the hospitality sector.

"We were also very optimistic in the hotel markets in Washington," Finkelstein said.

The Marriott Wardman Park suffered a 40-day stretch of 4 percent occupancy after the jetliner attacks of Sept. 11, 2001, according to Thayer, a real estate investment company. But Thayer's investment in the hotel, which dated from January 1999, still generated 2.4 times the return on invested equity and a 17 percent compound return. Marriott International, based in Bethesda, will continue to manage the hotel.

The acquisition expands JBG's hotel portfolio to seven, including two under construction. Finkelstein noted that hotels rarely are up for sale in Washington.

"This is a unique opportunity," he said. "I don't see a lot more things like this coming along."

The hotel, which includes three towers with the largest in the middle, was built in 1918 and represents the old-style grand hotels of an earlier era. Finkelstein said the hotel would be better positioned in the market and run more efficiently by downsizing somewhat.

He anticipates attracting more medium-sized groups rather than large-scale conferences. The Marriott Wardman Park competes with hotels in downtown Washington for events, and more recently began competing with the Montgomery County Conference Center in North Bethesda.

The renovation of the Marriott also will include eliminating an above-ground ballroom and parking garage and replacing it with additional parking; enhancing the exhibition and meeting space; upgrading and renovating the guest rooms; and building a new fitness center, according to JBG. Additional residential units could be added to the site of the former parking garage.

The purchase represents the third joint venture between JBG and the CIM Group, after the L'Enfant Plaza Hotel in Washington and the Hotel Palomar Waterview under construction in Arlington, Va. JBG also owns and operates the Sheraton Four Points and Hampton Inn in Washington and the Reston (Va.) Sheraton. JBG's Weston Arlington (Va.) Gateway Hotel also is under construction.

The Marriott Wardman Park is not JBG's largest property; the company is currently building new 1.5 million-square-foot headquarters in Southeast Washington for the U.S. Department of Transportation, Finkelstein said.

Downtown Silver Spring leases announced

Social & Scientific Systems has signed on for an additional 14,895 square feet at its headquarters at 8757 Georgia Ave., Silver Spring, according to Atlantic Realty, which brokered the lease for the landlord. The property is now nearly 100 percent leased, making the downtown Silver Spring office market even tighter.

The biomedical research contractor now occupies a total of 116,571 square feet at the site. The Bethesda office of Transwestern Commercial Services represented the company.

Other recent leases at the same address include 7,554 square feet for Bid4Assets, represented by Cushman & Wakefield; 6,686 square feet for the Residential Loan Corp., represented by AMR Commercial; and 2,397 square feet for Synergy Enterprises, represented by Scheer Partners.

Atlantic Realty completed a $20 million renovation of the 245,000-square-foot Class A office building in 2001. Before the renovation the building had been almost entirely vacant, according to Atlantic Realty President David A. Ross.

Down the street, at 801 Roeder Road, Atlantic Realty brokered a lease for the entire third floor -- 13,278 square feet -- for the Children's Hospital Foundation. The 10-story, 91,715-square-foot office building, in the middle of the newly renovated downtown and across from a new parking garage, still has space available, according to Atlantic Realty.

In another development, Affinity Network Solutions has signed a lease for a 2,969-square-foot space at 1010 Wayne Ave., across from Discovery Communications headquarters, according to broker Scheer Partners. The information technology company moved from 8555 16th St.

"I definitely wanted to be a part of the new downtown Silver Spring," company President Nicholas W. Brown said in a statement.

Scheer had helped Affinity negotiate a one-year extension of its existing rental rate while company officials decided whether to move. Rents were increasing 10 percent per year, according to Scheer.

ViaSat moving

to Germantown

ViaSat, a satellite communications company, will move from the Comsat building in Clarksburg to the Seneca Meadows Corporate Center in Germantown by the end of August, according to the company.

The company is vacating a space of about 39,000 square feet at 22300 Comsat Drive, a building in the midst of a battle between the owners who want to raze it and build residential properties and those trying to save it for historical value. Company officials considered renewing the lease for its existing space but had the advantage of a longer lease -- six-and-a-half years -- in Germantown, according to a ViaSat official. The new space, at 20511 Seneca Meadows Parkway, is about 45,000 square feet. The new space is more efficient, as the company used two floors at the Comsat site, the official said.

Minkoff Development Corp., which is adjacent to the Seneca Meadows Corporate Center, owns the 156-acre industrial park. NAI KLNB of Ellicott City represented ViaSat in the lease.

Commercial real estate news items may be mailed to: Jeremy Bond, The Business Gazette, 1200 Quince Orchard Blvd., Gaithersburg, MD 20878; e-mailed to jbond@gazette.net; or faxed to 301-670-7183.