F says: (3/8/11 10:08 PM)
It's interesting that the brochure does not mention its close proximity to a soon-to-be-designated-historic-deli.

G says: (3/9/11 10:13 AM)
As long as they keep that name - "Onyx!" - I'm happy.

Charles says: (3/9/11 11:29 AM)
It is interesting that the rental rate maxes out with a $3.25/sf cap on income. Meanwhile, assuming the common area expenses, taxes, payroll, property management and CapEx run at or near 40% of income (fairly generous), we are talking a bottom line of roughly $2/sf.

Meanwhile, Rep Garber still has failed to respond to the financial modeling detailing the gross economic failings of his proposed "Corner Grocer", which, it should be noted, fails despite assuming an aggressive $3.80/sf NNN. (For those that might need clarification, NNN stands for triple-net and requires the tenant to pay all taxes, insurance, utilities, regular maintenance and repairs.)

It seems to me that Rep. Garber has proffered nothing more than a recipe for an abandoned building remaining as such for years and years to come. At best, we will be saddled with a “historic” eyesore.

In other news, one has to wonder if Onyx's new owner will continue offering the very healthy rent incentives and whether such owner is bound to the existing tenant’s – many of whom received verbal assurances that they would remain in place. It is not a stretch to believe that many residents might be looking at a very different picture than they originally contemplated when their renewal date arrives.

Very interesting times abound for those that live at the intersection of 1st and L Streets!

Ishmael says: (3/9/11 11:59 AM)
"...and whether such owner is bound to the existing tenant’s – many of whom received verbal assurances that they would remain in place."

I'm no lawyer, but if it is not written into someone's lease, then I can guarantee that the new owner will not have to honor it. I doubt that a verbal assurance from a low-level Onyx employee, who may or may not have a job once the building is sold, carries no legal weight.

Jenniferpdc says: (3/9/11 5:02 PM)
Charles - since you seem interested. The effective rental rate at the Onyx is considerably less than the $3.15/psf that the broker is listing as the "market" rental rate. At this time the newest and best located apartments in DC are topping out at around $3.50/psf for the market rate, but concessions in this building are probably still running close to 10%. I'm betting their economic occupancy is considerably less than 90%. Operating expenses for a high-rise of this nature generally range from 25% to 30%. I generally can't comment on this site, because I'm party to confidentiality agreements (I work for commercial real estate investors - and believe me I have alot to say about 225 Virginia Ave) but I don't have ths book yet. If taking the potential gross rent of about $7.2M, minus vacancy, concessions, etc. (based on the location, I would estimate at about 12%)and adding other income (parking, etc.) of about $2K/unit and then deducting operating expenses estimated at 30%, you would get an NOI of about $4.8M. DC multi-family is very hot right now, and Fannie/Freddie are giving out long-term money very cheap (although it's gone up significantly in the past couple of months), someone will probably pay for this based on a capitalization rate around 5.25%, estimating the value at around $90M ($340K/unit - which actually seems a little light on a price per pound basis).

Charles says: (3/10/11 9:24 AM)
Jennifer - Thanks for the insights. I really like your math and perspective. Your trading value of $91,429,000 does seem light on a per unit basis, but does translate to roughly $478 a square foot - a number that feels more palatable to me. Plus, this number does provide a buyer some upside (as the significant concessions should slowly disappear) against a relatively low cap-rate.

In regard to your 30% number, I totally agree. I should have done a better job of clarifying that the 40% number proffered included concessions, which I understand are generous on this particular property. At $2/sf the annualized NOI number at which I arrived was a bit lower than your $4,800,000 - coming in at about $4,590,000.

One final thing, if you have the time and given your knowledge about this specific marketplace, I would really appreciate your thoughts on realizable retail rents. My understanding is that between BID and DC taxes, there is a stiff headwind, which might partially explain the lack of real restaurant options.

Jenniferpdc says: (3/11/11 12:50 PM)
Retail has been a little funny the past couple of years given the economy, but generally 1st floor retail in office downtown, asking rates range from about $40 to $50 NNN, depending on the location. Banks pay higher (sometimes alot higher for prime corner locations), larger tenants less. Grocery stores and pharmacies are generally less than $10 NNN. I've seen a couple of deals in prime downtown location on Metro in about the mid-$50's, in the mid-$40's for restaurants or lesser locations, but new buildings. The thing is, the landlords are buying alot of these deals by very large tenant improvements packages, $125+ for only five year deals with free rent added in.

The owners around here are actually asking on average higher than downtown, in the high-$40's, which is highly unlikely. My guess is they will go alot lower than that if they could find a tenant.

My understanding, although I haven't seen the actual comp, is that Bureau of Land Management signed for about $33-$34 FS for the space they took in Lerner's building, signficantly lower than the orginal $46 they were asking.

58Model says: (3/11/11 3:22 PM)
I was told there would be no math...

Charles says: (3/11/11 4:21 PM)
Jennifer: Thanks for the tremendously useful information. As you might have seen in other posts, in addition to believing the "historic" bases for the Market Deli's nomination severely lacking, I have made arguments elsewhere that there is simply no economic underpinnings supporting David Garber's claim that a corner grocer will return to the space.

These numbers go a long way to proving out the fallacies in his logic and demonstrate that should such nomination prove successful, the only result with be the slow and continued dilapidation of the existing structure.

Thank you! Charles

David Garber says: (3/11/11 5:27 PM)
Charles,

Although I applaud your dedication to this cause, let me clear something up: I never claimed that a corner store would return to the space. I did say that if restored (and if it is landmarked, it is likely that it will eventually be restored), then it will be a desirable retail space.

My dedication to quality design and development in this neighborhood remains the same as it was during my campaign. If all land-use and design decisions were made with only the $/sf in mind, we would have a very sad looking city. I have been very supportive of Akridge's work in the neighborhood, and have kept them in the loop on all of my acclamations and concerns for each of their projects. I hope you all will do the same for me, as I am constantly meeting with and working with the people who are shaping the neighborhood.

I don't expect us to agree on every issue, but I do hope that our conversations will remain civil. I'll continue to do my best to keep the neighborhood informed about the initiatives I engage with here.

Again, I hope to see any and all at the Market Deli tomorrow morning, if only to have the chance to meet in person.

Charles says: (3/11/11 6:20 PM)
David:

David, in all civility, I think you have made a huge mistake, which has only been compounded by your subsequent actions. I have been vocal and consistent about this and I regret if my passion in believing your actions egregious and fully considered basis offends.

However, words and actions have meanings and I am afraid that you merely stating your "dedication to quality design and development" does not make it so. The quality design in the instant case is a ramshackled building that has gone without upkeep (or a tenant) for roughly 14-years. And your "support" for development is to sandbag the developer by filing this only upon their requesting a raze permit.

Again, words have meanings. While you protest that you constantly meet with people shaping the neighborhood, you conveniently avoided such public meetings prior to scurrying to the NW to find someone to sponsor your initiative. This despite openly acknowledging that this would be a subject of controversy.

Finally, you have failed to provide any reasonable set of economic analysis which sets forth a viable plan for the space at issue to find a tenant. Even if successful, your efforts would do nothing other than protect an empty and decaying structure, which should probably be condemned, undermining the growth and positive directions found elsewhere in our area.

Again, in case you missed it, you did this without calling a meeting and consulting your constituents.

Regards,
Charles

Charles says: (3/11/11 6:23 PM)
Sorry. Typo.

I meant to say "not fully considered basis" at the ending of the second sentence of the first paragraph.