Ares US Real Estate Opportunity Fund III
1425 New York Avenue NW, Washington, D.C. - Closed
Acquisition of a 13-floor office asset located proximate to the White House in Washington, D.C.
Acquisition Date:
Location:
Gross Capitalization: (¹)
Equity Committed:(2)
Capital Value:
Key Metrics
Investment Theme:
Jan-2020
Washington, D.C.
$137 million
$36 million
$475 PSF
Office repositioning in gateway city
As of June 30, 2020 unless otherwise noted. Please refer to the endnotes on page 64.
Confidential - Not for Publication or Distribution
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Investment Summary and Rationale
Acquisition of a 13-story, 277K SF vacant office building located in Washington, D.C.
one block from the White House with significant pre-leasing in place
Ares believes this is a compelling opportunity to achieve opportunistic returns
through implementing a capital improvement plan on a well-situated office asset
Ares is partnering with a Washington, D.C. based operator that has a successful track
record in repositioning office assets
Deferred portion of the purchase price tied to timing of executing GSA lease,
significantly mitigating risk of delay in executing base case business plan
Value Drivers
Attractive basis significantly below replacement cost
All-in basis of $475 PSF is well below replacement cost
Capture value through leasing to GSA Federal tenants with strong credit
The asset is currently 100% vacant, but there is a GSA tenant nearing lease
execution for 65% of the rentable area
There is additional pre-leasing interest from several other GSA prospects, which
would bring occupancy to 83%
Asset enhancement through capital improvement plan
Renovation initiatives include a lobby upgrade, elevator modernization, restroom
refurbishment, roof improvements, and other base building costs
Investment Status
The asset was awarded to Ares in November 2019 and closed in January 2020
JV continues pre-development to upgrade base building systems (phase I) and build
out tenant improvements (phase II)
Recently received confirmation from the GSA that they are preparing to execute the
lease in the near term
ARES
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