This 563,000 square foot 11-story building is located on prestigious K Street in the center of Washington’s Golden Triangle business district. J Street partnered with Starwood Capital to purchase the building in August 2003 for $186 million.
The property was under-performing for its A location, primarily due to poor lease planning with vacancy scattered throughout the building, deferred maintenance that allowed prime tenants to be lured away to better buildings and, while on the market, having its lead tenant file for Chapter 11.
J Street began by evaluating the current operating expenses, achieving savings of approximately $400,000 through the re-bidding of contracts such as cleaning and security and re-staffing the property. A key component to the initial plan was a three pronged leasing / management / tenant retention plan. To improve tenant retention, management started an aggressive tenant relations program designed to keep those tenants we wanted to retain in place. Our engineers designed a preventive maintenance program for all systems and cured the deferred maintenance issues that had disturbed existing tenants for years. They also improved the common area cosmetics and restructured staffing, lowering building operating expenses and re-directing money to tenant services. Tenant retention rose dramatically.
The leasing plan required that the brokers re-negotiate existing leases to reconfigure the spaces and create larger blocks of leasable space. The building was now positioned to offer prime lease space to large tenants in the market.
The property was offered for sale in the fourth quarter of 2005, long before the owners had anticipated a sale, and closed for $250 million in cash in January 2006. Our leasing and management teams were directly responsible for the early successful sale of the property.