D.C.'s Metropolitan Square Office Building Changes Hands
An office building one block from the White House has been handed back to one of its lenders.
Metropolitan Square at 655 15th St. NW, one of D.C.'s largest office buildings, was taken over by Artemis Real Estate Partners through a deed-in-lieu-of-foreclosure transaction, as documents filed with the D.C. Recorder of Deeds show and the Washington Business Journal first reported.
Blackstone previously owned 80% of the property and Boston Properties owned 20%.
Boston Properties Executive Vice President and co-head of the D.C. region Jake Stroman told Bisnow Friday the REIT is staying on as an investor in the building, but Blackstone is no longer involved. Artemis owned a mezzanine loan tied to the building.
A Blackstone spokesperson confirmed that the firm exited its investment.
“We effectively wrote this investment off last year and continue to actively manage our portfolio to deliver the best possible investment outcomes based on evolving market conditions," the spokesperson said in an email.
Stroman said the prior partnership between Blackstone and BXP handed control of the building to Artemis, but BXP is now investing in a new partnership with Artemis in which it will also have a 20% stake, and they have agreed to invest up to $100M in total. BXP will also continue to manage and lease the property.
"Boston Properties isn't going anywhere," Stroman said. "We’re investing capital on go-forward basis. We still manage and lease the property, and there’s fairly significant leasing momentum that exists today."
The 12-story, 657K SF property was 58% leased as of the end of Q2, according to BXP’s financial supplement for investors. Its retail space includes politico magnet Old Ebbitt Grill.
In early 2022, the owners refinanced their loans on the building, with the new debt totaling around $420M. In its Q2 supplement, BXP said the property had $83M of loans maturing in April 2024, and it had negative net equity on the asset of $37.6M.
Metropolitan Square lost WeWork as a tenant at the end of 2022, WBJ reported at the time. The coworking company once occupied 226K SF across four floors. The building previously lost tenants Miller & Chevalier and Kirkland & Ellis, and it underwent a $60M renovation that was completed in 2020.
Boston Consulting Group signed a 98K SF lease in the building in a move to relocate its Bethesda office in 2021, Bisnow first reported at the time.
D.C.-based Artemis closed a $2.2B fund in June with plans to invest in distressed real estate across the country, including office assets.
The office investment sales market has remained stagnant amid rising interest rates and uncertainty about the sector's future, and investors and lenders have been waiting to see how far values will drop before doing more deals, experts said at a Bisnow event in D.C. last month. Commercial real estate investment volume in D.C. was $353M during the first half of 2023, less than a quarter of the average volume from the prior four years, according to Avison Young.
CLARIFICATION, OCT. 6, 10:30 A.M. ET: A previous version of this story characterized the deal as a sale, but it was actually a deed-in-lieu-of-foreclosure transaction in which the prior owners handed control to Artemis. This story has been updated.
