Montgomery County Office Building Sells At 34% Discount
A 124K SF office building next to the former Lakeforest Mall in Gaithersburg has sold for roughly two-thirds of its prior sale price.
Bethesda-based The Premier Cos. purchased the Montgomery Executive Center property from PMRG for $8.2M earlier this month, according to Maryland land records. The sale works out to $66 per SF.
PMRG had owned the six-story Montgomery County property, built in 1983, for just over a decade. It paid $12.4M for the property in 2013, meaning this month's sale is 33.8% less than the prior price.
Premier Cos. President Adam Santos said in an emailed statement the firm expects to see increased demand for office and medical space that should benefit the asset.
"We are excited by our purchase of Montgomery Executive Center (MEC) and see the property as a great addition to our growing portfolio," he said. "Our plan for the property is to keep it as office and continue to build off the leasing momentum prior ownership experienced over the last 12+ months."
Madison Marquette managed the property on behalf of PMRG. In 2018, PMRG merged its management business with Madison, but PMRG's principals held on to its real estate assets and didn't include them in the sale, PMRG principal Rick Kirk told Bisnow.
He said the PMRG principals are now planning to sell their few remaining assets, but he declined to provide their addresses.
"The plan was delayed by first Covid and then the capital markets decline," Kirk said. "We're waiting for the appropriate time. ... The value of that portfolio had diminished significantly post-Covid."
JLL was marketing the property in February, the Washington Business Journal reported at the time. It was advertised as 69% leased to 29 tenants, with more than 39K SF of leasing activity in the trailing 15 months.
A JLL marketing brochure that already lists The Premier Cos. as the property owner advertises 40K SF available with a first-year rental rate of $18 per SF.
The building’s tenants include Adventist Healthcare, Maryland Eye Institute, Re/Max Realty Group, State Farm, Firehouse Deli and CitiBank, according to their websites. More than 400 surface parking spaces surround the building.
The office building is to the west of the shuttered Lakeforest Mall, a site where WRS plans to build 1,600 residential units, 750K SF of employment uses, 250K SF of large-format retail and 220K SF of commercial uses, The MoCo Show reported in June.
"With the former Lake Forest Mall redevelopment imminent and many other older office properties ripe for conversion, we expect to see an increase in demand for office and medical space over time, which we believe MEC will be able to capitalize on given its position in the market as a premier Class A building with more affordable rates," Santos said in his statement.
The Premier Cos., founded by CEO Jonathan Cutler in 1992, specializes in the "turnaround of under-performing office, medical, retail, and mult[i]-family assets from 10,000 to 150,000 square feet in the mid-Atlantic region," according to its LinkedIn profile.
Office properties across the D.C. area have been trading at substantial discounts this year as remote work upends the sector and high interest rates impact the capital markets. A 200K SF building in nearby Rockville sold in April for $14M, well below its 2003 sale price of $37.2M.
CORRECTION, AUG. 30, 5 P.M. ET: A previous version of this story misstated the previous owner of the asset. PMRG owned the building, and Madison Marquette managed it. This story has been updated.
