BXP Completes Acquisition of 725 12th Street in Washington, DC

Rhea-AI Summary

BXP has completed the acquisition of 725 12th Street in Washington, DC for $34 million. The company plans to demolish and redevelop the 300,000 square foot property into a 320,000 square foot premier workplace. McDermott Will & Emery has signed a lease for 150,000 square feet, occupying the top five floors of the future building.

The property is strategically located in DC's Central Business District, three blocks from the White House and near Metro Center Station. The building will feature private terraces and outdoor spaces, with expected delivery in late 2028. BXP is currently negotiating with another client for the majority of the remaining space.

Positive

• Strategic acquisition in prime DC location for only $34 million
• Pre-leased 47% of space to McDermott Will & Emery
• Potential tenant for majority of remaining space under negotiation
• Property expansion from 300,000 to 320,000 square feet

Negative

• Significant capital expenditure required for demolition and redevelopment
• Extended timeline until revenue generation (delivery in 2028)
• 53% of space remains unleased

Insights

Real Estate Investment Analyst

The $34 million acquisition and redevelopment of 725 12th Street represents a strategic value-add opportunity in Washington DC's prime East End submarket. The pre-leasing of 50% of the space to McDermott Will & Emery, a prestigious law firm tenant, significantly de-risks the development. The property's location near Metro Center Station and the White House commands premium rents and ensures stable occupancy. The planned expansion from 300,000 to 320,000 square feet maximizes the site's potential. With construction costs and market conditions considered, this deal structure could generate substantial ROI, especially given BXP's track record in the DC market and their negotiation for additional pre-leasing. For context: Class A office properties in DC's East End typically trade between $700-1000 per square foot, making this acquisition at approximately $113 per square foot particularly attractive for redevelopment.

Commercial Property Development Expert

This development showcases excellent market timing and positioning. The demolition and reconstruction strategy, rather than renovation, enables BXP to deliver a modern trophy asset that meets post-pandemic workplace demands. The building's design incorporating private terraces and outdoor spaces aligns with premium tenant preferences, while the three-block proximity to the White House creates irreplaceable location value. The transportation hub access at Metro Center Station, where four major lines converge, provides exceptional connectivity. The 2028 delivery timeline allows for market recovery and positions the asset to capture pent-up demand for premium office space. The setback from 12th Street enhances the building's appeal through superior views and natural light - important differentiators in today's competitive office market.

Market Research Analyst

This transaction signals continued institutional confidence in DC's office market recovery, particularly for trophy assets in prime locations. The pre-leasing to McDermott Will & Emery, coupled with advanced negotiations for remaining space, demonstrates sustained demand from legal sector tenants who traditionally anchor DC's office market. BXP's ability to secure significant pre-leasing prior to development reflects their strong market position and the project's appeal. The deal structure - acquiring an existing asset for redevelopment rather than ground-up development - provides cost advantages and faster time-to-market. For investors, this project represents BXP's strategic focus on value-creation through development in core markets, potentially leading to NAV growth and increased FFO upon completion.

150,000 SF Lease with McDermott Will & Emery Kicks Off Redevelopment of the Property

BOSTON--(BUSINESS WIRE)-- BXP (NYSE: BXP), the largest publicly traded developer, owner, and manager of premier workplaces in the United States, announced today that on December 27, 2024, it completed the acquisition of 725 12^th Street, a 300,000 square foot, 12-story property in the East End of Washington, DC, for a gross purchase price of $34 million. BXP plans to demolish and redevelop the property into an approximately 320,000 square foot premier workplace. In conjunction with closing, BXP has executed an approximately 150,000 square foot lease with global law firm McDermott Will & Emery for the top five floors of the future newly constructed trophy property and is currently negotiating with a client for the majority of the remaining space.

“We are pleased to complete this creative deal, which underscores BXP’s uniquely competitive position in the property and financial markets,” stated Pete Otteni, EVP, Co-Head of the Washington, DC Region, BXP. “Our extensive history of successful execution, coupled with the resources, relationships, and expertise to design, construct, and fund a world-class property that delivers on the high expectations of our clients and counterparties, were key components to successfully completing these transactions.”

“We’re incredibly excited for the next chapter for our DC office,” said McDermott Chairman Ira Coleman. “From the time we first opened our office in the District in 1978, our DC team has been an indispensable partner to clients in both the public and private sectors, consistently raising the bar in all that we do. It’s clear that 725 12^th Street also promises to set a new standard for excellence, and we are delighted for it to be our new home, providing an exemplary space for our clients and people.”

“McDermott’s commitment is indicative of the importance they place on providing spaces that enhance client and employee experience,” stated Jake Stroman, EVP, Co-Head of the Washington, DC Region, BXP. “Leading organizations utilize premier workplaces to support the growth of their business and their team. We are thrilled that McDermott chose 725 12^th Street as the place that powers progress for their organization for years to come.”

Ideally located in the Central Business District of Washington, DC, the property sits three blocks from the White House and steps from Metro Center Station, the transportation hub for the City’s Metrorail service, where the Red, Orange, Blue, and Silver lines converge. A large setback from 12^th Street and frontage on 11^th and G Streets provide excellent views and the opportunity for private terraces and outdoor spaces for building clients to enjoy in the newly designed building. BXP expects to deliver the building in late 2028.

Lou Christopher, Jordan Brainard, Rob Copito, and Clay Hammerstein of CBRE represented McDermott Will & Emery in the lease transaction. Evan Behr of JLL represented BXP.

About BXP

BXP, Inc. (NYSE: BXP) is the largest publicly traded developer, owner, and manager of premier workplaces in the United States, concentrated in six dynamic gateway markets - Boston, Los Angeles, New York, San Francisco, Seattle, and Washington, DC. BXP has delivered places that power progress for our clients and communities for more than 50 years. BXP is a fully integrated real estate company, organized as a real estate investment trust (REIT). As of September 30, 2024, BXP’s portfolio, including properties owned by unconsolidated joint ventures, totaled 53.0 million square feet and 184 properties, with nine properties under construction or redevelopment. For more information, visit www.bxp.com or follow us on LinkedIn or Instagram.

This press release contains forward-looking statements within the meaning of the Federal securities laws. You can identify these statements by our use of the words “future,” “will,” “would,” “expects,” “intends” and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond BXP’s control. Should one or more of these known or unknown risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those expressed or implied by the forward-looking statements. These factors include, without limitation, the Company’s ability to complete the redevelopment project within budget, on schedule or at all, the uncertainties of real estate development activity, the Company’s ability to lease any of the remaining space in the future developed building on favorable terms, on schedule, or at all, other difficulties or delays related to the leasing of the building, and other risks and uncertainties detailed from time to time in BXP’s filings with the SEC. BXP does not undertake a duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250106022045/en/

BXP Contacts

Laura Sesody

Senior Vice President, Corporate Marketing & Communications

lsesody@bxp.com

Helen Han

Vice President, Investor Relations

hhan@bxp.com

Source: BXP

FAQ

What is the purchase price of BXP's 725 12th Street acquisition in Washington, DC?

BXP acquired 725 12th Street for a gross purchase price of $34 million on December 27, 2024.

How much space has McDermott Will & Emery leased at BXP's 725 12th Street property?

McDermott Will & Emery has leased approximately 150,000 square feet, occupying the top five floors of the future building.

When will BXP complete the redevelopment of 725 12th Street in DC?

BXP expects to deliver the redeveloped building in late 2028.

What is the size increase from BXP's redevelopment of 725 12th Street?

The property will increase from its current 300,000 square feet to approximately 320,000 square feet after redevelopment.

Where is BXP's new 725 12th Street property located in Washington, DC?

The property is located in DC's Central Business District, three blocks from the White House and near Metro Center Station.