Japan’s Mori Makes US Capital’s Biggest Deal of 2022 with $531M Office Buy

Mori Trust, one of the largest developers in Japan, has made its second office acquisition in the Washington DC metropolitan area in picking up 601 Massachusetts Avenue NW for a reported $531 million to score the district’s biggest deal for desk space this year.

According to records from MSCI, Mori snatched up the 479,000 square foot (44,500 square meter) office building in the Mount Vernon Triangle neighborhood from Boston Properties, surpassing Nuveen Real Estate’s $375 million acquisition of Patrick Henry Building in March to become the district’s priciest thus far in 2022. The transaction was reported earlier in the Commercial Observer.

Mori which entered the DC market in March with the purchase of a pair of suburban office buildings in Northern Virginia, is expanding its portfolio around the US capital as the metro area notched is third straight quarter of positive leasing momentum in the three months ending 30 June.

Leasing activity in the DC area increased by 30 percent in the second quarter, compared to the preceding three months, and was up 15.5 percent for the first half compared to the same period last year, according to a report by Cushman & Wakefield.

Expanding Abroad

The Japanese firm is paying the equivalent of $1,108.6 per square foot of leasable floor area fpr 601 Massachusetts Avenue NW, which serves as the headquarters of law firm Arnold & Porter and Entertainment Software Association, a US association dedicated to the video game industry.

The 11-storey block is within 15 minutes walk of the mall connecting the White House with the Capitol and was 98.7 percent occupied at the end of 2021, based on data from Boston Properties, with Arnold & Porter’s lease in place through 2035.

Completed in 2015 for a total cost of $350 million, the site formerly hosted the headquarters of US media organisation National Public Radio and is located just a few blocks away from the 20,000-seat Capital One Arena which is home to the Washington Wizards NBA team and the Washington Capitals of the NHL. The arena is located directly above the Gallery Place metro station

Mori’s central DC acquisition is roughly 27 miles (43 kilometers) away from the Arboretum II office complex which the company purchased in Herndon, Virginia during March. The two-building property’s 323,700 square feet of office space at at 2235, 2245 Monroe Street were 100 percent leased at the time of purchase.

“Our company will continue to actively promote overseas real estate investment with an emphasis on stability, sustainability and growth potential, with the aim of building an optimal asset portfolio that is less susceptible to global economic fluctuations,” the firm said in a March statement.

Mingtiandi reached out to Mori and Boston Properties for comment but did not get a response by the time of publication.

East Goes West

Mori, which operates businesses ranging from office leasing to hotel operations and residential sales, has been expanding its US portfolio since its American debut in 2017 with the purchase of two office blocks in Boston, Massachusetts spanning 825,000 square feet.

In July of last year, the Tokyo-based firm notched one of the largest asset sales in the San Francisco Bay Area when it sold the HQ@First office complex in the Silicon Valley hub of Menlo Park to private equity giant KKR for a reported $535 million.

In announcing its first DC acquisition in March, Mori had reiterated its goal set in 2016 of buying as much as JPY 200 billion (now $1.4 billion) worth of properties overseas by 2027.

Mori DC deal was the second major acquisition of US office assets by an Asian investor this past week, with Singapore’s GIC said to have backed Workspace Property Trust’s $1.13 billion purchase of 41 suburban office properties earlier last week.