Colliers Insights Team
Last year I published a list of the 10 largest owners of GSA-leased properties. In this post, I chronicle the top 10 list again, along with a few new honorable mentions. The ranking looks a lot like last year’s but we see some pending property trades that could shake things up in 2015.
Some notes regarding this list:
- We have ranked owners by square footage and not rent or any other measure because square footage is the most unimpeachable metric available to us.
- Our ranking is based solely on GSA-leased properties. So it doesn’t include owners of buildings leased directly by agencies under their delegated, statutory or independent authority. However, we track those leases too, and in some instances we’ve noted how the rankings might change if we took this analysis further.
- We have tallied only leases that have commenced. If a lease has been awarded but not yet commenced (as in a lease-construct project, for example), we haven’t counted that in this list.
- Determining “ownership” is tricky business. We have typically defined the owners as those operating partners who are the face of these properties — the people who ultimately manage the assets. However, we recognize that in most instances there are behind-the-scenes equity partners whose ownership stake is far larger than that of the operating partners. We have not attempted to identify these equity partners in this list.
- If you think we’ve miscounted your portfolio, email me or leave a comment below.
The Owners:
1. Government Properties Income Trust (NYSE:GOV)
Government Properties Income Trust remains the undisputed leader in the government-leased property sector. The REIT owns 91 buildings totaling 11 MSF. Some of this space is leased to state agencies and non-GSA federal agencies. So, for the purposes of this ranking, GOV controls 5.75 MSF of GSA-leased space in 52 buildings. The firm remains an active buyer of government properties.
JBG is, hands down, the most active property developer in the Washington, D.C., area. So it is no surprise that it would also be an active builder and owner of GSA-leased buildings. Although JBG sold four GSA-leased office buildings over the past year, it also delivered new build-to-suit projects for the National Institute for Allergy and Infectious Diseases (491,000 SF) and the Social Security Administration (538,000 SF).
3. Vornado Realty Trust (NYSE: VNO)
If there is an award for resilience, Vornado would win it. The firm, which has significant holdings near the Pentagon, was one of the worst to suffer from Department of Defense relocations due to Defense Base Closure and Realignment Commission (BRAC). Though BRAC was enacted into law in 2005, most of the space vacated by DoD went dark last year. In response, Vornado has been aggressively courting new GSA tenants. Earlier this year, it was awarded the 183,000 SF U.S. Fish and Wildlife Service lease in Falls Church, Va., and it was also awarded a 75,000 SF Department of Labor lease in Crystal City, Va. We don’t count these yet in our ranking stats, but they should further solidify Vornado’s position on this list as those awarded leases become active.
Since 2007, UrbanAmerica has owned a portfolio 14 properties that are primarily leased by GSA. The firm is now moving to dispose of those assets, and next year we can expect the contract purchaser, Princeton Holdings, to replace UrbanAmerica on this list.
5. NGP V
NGP (formerly National Government Properties) returns again to our ranking based upon its ownership of 40 GSA-leased properties. These properties are owned by NGP’s fifth fund (thus the Roman numeral “V” in the name), which has been pretty much completed. The firm is completing fundraising on its sixth fund and should be ready to begin buying properties again before the end of this year.
6. LCOR
LCOR makes this list again based on its role as the face of an investment group of high-net-worth individuals that owns the 2.4 MSF headquarters of the U.S. Patent and Trademark Office, the largest GSA lease in the United States. Last year, LCOR was also credited with the new 358,000 SF lease-construct project for the Nuclear Regulatory Commission (NRC) in Montgomery County, Md. That building has since traded to its equity partner, USAA Realty (see below).
Saban Capital is a Los Angeles-based private investment firm founded by billionaire Haim Saban. Although most of Saban’s investments are in the entertainment, communication and media industries, the firm made its entry into the government property sector in 2010 with the purchase of the Record Realty Trust portfolio. Saban now owns 24 GSA-leased properties.
8. Boston Properties (NYSE: BXP)
Boston Properties owns 20 GSA-leased office buildings, nearly all of them in the Washington, DC area. However, that will soon change. Its largest holding, the 700,000 SF three-building Patriots Park project in Reston, Va., is under contract to a Korean investor.
Space Center provides underground records storage in facilities carved from underground limestone formations in the Kansas City suburbs. The naturally cool, humidity-controlled environment is perfectly suited to archival storage for agencies such as the National Archives and Records Administration, IRS and the Social Security Administration. These agencies have proven to be stable, long-term tenants, maintaining Space Center’s position on this list.
10. HPI Capital
HPI Capital was No. 10 on the list last year and is again this year on the basis of the sale of a single property: a 153,000 SF NARA records facility in Pittsfield, Mass. The HPI portfolio also features a number of direct agency leases that we do not count in this ranking. Overall, HPI owns 15 government-leased buildings with 1.5 MSF of GSA-leased square feet.
Honorable Mentions:
USAA has been a quiet and dominant investor in the federal space for years. The firm has invested equity in several GSA lease-construct projects, and now it has purchased several of those outright, along with some other strategic investments. With its acquisition earlier this year of the 358,000 SF Three White Flint, leased primarily to FDA in North Bethesda, Md., USAA is poised to appear in the top 10 ranking next year.
Centerpoint merits an honorable mention this year due to the delivery of a single yet remarkable build-to-suit asset: the National Nuclear Security Administration (NNSA) campus located south of Kansas City. This $750 million, 1.5 MSF facility replaces the NNSA plant at the Bannister Federal Complex. See more of Kansas City here.
Easterly Partners is a Washington, D.C.-based real estate investment firm established solely for the purpose of federal property investment. In just a few years, the firm has amassed a portfolio of 15 properties, including three new purchases since last year. At the rate it is currently underwriting investments, we expect Easterly to crack the list of top 10 investors next year.
One of the earliest dedicated investors of government-leased properties is Lee Elman, who has been buying and selling assets leased by federal, state and municipal government tenants for the past two decades. Elman Investors recently closed on their 80th government-leased property. Few investors have been as active over the long run, especially in the past few years.
Kurt Stout is the national leader of Colliers International’s Government Solutions practice group, which provides government real estate services to private investors and federal agencies. He also writes about federal real estate on his Capitol Markets team blog. You can contact Kurt by email or on Twitter.
