A long-gestating office-to-residential conversion in the nation’s capital is closer than ever to moving forward after the joint venture behind the project landed a sizable loan.
International private equity firm Henderson Park and Los Angeles-based developer Lowe landed $180 million in construction financing for Portals I in Southwest Washington, D.C., the Commercial Observer reported. Deutsche Bank led the lending for the project at 1250 Maryland Avenue SW.
Lowe previously proposed converting the 536,000-square-foot office building in 202, but the developer didn’t own the property at the time and couldn’t close on an acquisition.
Henderson Park purchased the site in 2023 for $26 million, a bargain compared to its assessed value of $164 million. It’s next to the Salamander Washington, D.C., formerly a Mandarin Oriental before Henderson Park acquired it in 2022 for $129 million and rebranded.
Prior to that, LNR Partners — the special servicing affiliate of Starwood Properties Trust — bought the Portals property for $84 million. It couldn’t turn around the office fortunes of the property, where occupancy dipped to 35 percent in the summer of 2023, according to Morningstar.
As it stands, the plan is to turn Portals I into an 11-story, 658,000-square-foot apartment complex. It will include 428 units and 53,000 square feet for commercial and retail use. The residences will average more than 1,000 square feet, from studios to three-bedroom apartments.
Many of the residences will also include large balconies or terraces spanning the width of the unit, which Lowe executive vice president Mark Rivers attributed to the property’s existing floorplates.
A timeline for the project was not disclosed.
While conversions are becoming more commonplace — particularly in Washington, D.C. — they are not without their challenges. A few months ago, Post Brothers received a foreclosure notice for its 300,000-square-foot office project in the district, which was on the path towards a residential conversion.
The developer ultimately regained control of the property with a $60 million bid at a foreclosure auction, a move Post Brothers president Matthew Pestronk admitted to the Washington Business Journal “defies logic.”
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