Ballston Tower

Casting the Right Player in the Right Role.

In 1998, Forest City Enterprises solicited offers from third-party developers to construct a 225,000 SF speculative office building at the Ballston Common Mall, which Forest City owned and operated. The proposed office building would be constructed in an air-rights parcel atop a newly built retail pavilion, which presented a number of challenges regarding the construction, ownership and operation of the property. The mall was governed by a spiderweb of covenants, easements, and ground leases existing between three private owners, two department store anchors, and Arlington County, which owned and operated a public garage that served the project.

Monument Realty and our investment partner, Apollo Real Estate Advisors, succeeded a number of local and national developers by structuring a transaction that allowed each party to focus on its strengths and assume any mandated risk. We also worked out a commitment from Prudential Insurance Company of America to fund 100% of the project costs upon substantial completion of the base building, as well as 100% of leasing costs thereafter—a structure that we would later replicate on numerous other projects.

With that commitment in hand, we were able to negotiate a non-recourse construction loan from Bank of America for 100% of construction costs, allowing Forest City to construct the office building and act as the construction borrower.  This allowed Forest City to control a complicated construction project above a valuable retail asset. Meanwhile, Prudential, Apollo Real Estate Advisors, and Monument Realty assumed 100% of the market risk in a booming R-B Corridor office market while Bank of America provided construction financing with a rock-solid take-out commitment.

In March 2000, eight months prior to the completion of construction, Monument Realty signed a 12-year, triple-net lease with E*Trade Bank for the entire building, beating pro forma rents by over 10% on a net effective basis. The partnership received leveraged returns that were off the charts and Forest City welcomed the foot traffic from over 1,000 new office workers.