JBG Smith has acquired a discounted three-property portfolio in the Tysons area of Northern Virginia for its first office investment outside of National Landing in over a decade, with plans to convert one of the buildings for residential use.
The Bethesda, Maryland-based real estate investment trust disclosed last week it bought Tysons Dulles Plaza, a 15-acre office campus with around 500,000 square feet of office space at 1410, 1420 and 1430 Spring Hill Road.
The REIT spent $42.3 million on the acquisition, less than a third of the $130.3 million that Boston-based Rockpoint paid to purchase the buildings in 2017, according to CoStar data. Rockpoint declined to comment to CoStar News on the deal when reached by email. The company also recently sold a pair of nearby office buildings in Tysons to Real Capital Solutions in a court-appointed receivership sale.
Much of JBG's portfolio has been centered around National Landing, the Northern Virginia district home to Amazon's second corporate headquarters. While JBG has offloaded properties outside of National Landing — from office buildings in the nation's capital to a multifamily property in Maryland — this latest acquisition shows it sees an opportunity to replicate what the REIT has done at National Landing, where it serves as Amazon's primary landlord and development partner.
The company declined to confirm the transaction price with CoStar News, though it said the Tysons deal marked its first pure office acquisition outside of National Landing in 13 years, noting that the few office properties it has acquired in that time, such as 1861 Wiehle Avenue in Reston, Virginia, were bought for the land.
"Our recipe for success in National Landing has informed our blueprint for investing in and redeveloping underperforming assets elsewhere in the region," Evan Regan-Levine, chief strategy officer at JBG, said in a statement. National Landing encompasses parts of the Crystal City and Pentagon City neighborhoods of Arlington County and Potomac Yard in the city of Alexandria.
Tysons Dulles Plaza comprises three 6-story office buildings constructed between the late 1980s and early 1990s and renovated in 2020, CoStar data shows. While in the short term, Tysons' office market is expected to face a high vacancy rate like much of the rest of the Washington, D.C., region, the long-term outlook is more positive as it continues to transform into "a live-work-play environment," according to CoStar's latest market report.
JBG said it intends to re-entitle and redevelop one of the three Tysons Dulles Plaza buildings for residential use while enhancing and modernizing the other two office buildings.
"Notwithstanding regional economic headwinds and the negative impact of remote work on the office sector, we see distress leading to extremely attractive office investment opportunities for the first time in more than a decade," George Xanders, chief investment officer at JBG, said in the statement. "We are actively exploring additional office investments, similar to Tysons Dulles Plaza, especially where we can apply our proven mixed-used redevelopment expertise."
For the record
CBRE's Thomas E. Cleaver, Stuart Kenny and Daniel Grimes served as listing brokers, according to CoStar data.