The largest landowner in Tysons Corner has inked three deals for hundreds of new apartments with major development partners in recent months, signaling continued and possibly growing interest in the suburban city by housing builders from around the country.
Cityline Partners, a crew of veteran Tysons developers, is managing the redevelopment of the Westgate and Westpark office parks for DLJ Real Estate Capital Partners, a Credit Suisse company that bought the property in 2010. Cityline recently finalized contracts for new apartment developments with three builders that could mean hundreds of new units for the area in coming years if they are approved by the county. [View map of DLJ’s empire.]
The rush to build apartments in Tysons, where four Metro stations are set to open in late 2013 or early 2014, could pave the way for the area to add 80,000 residents by 2050, a goal adopted by Faifax County in 2010. County officials anticipate that high-density development near the stations will help the area evolve from a traffic-strangled mess to a series of walkable urban neighborhoods.
Already, the Georgelas Group announced that it had tapped South Carolina-based Greystar to build a 400-unit, 25-story apartment tower at the intersection of Leesburg Pike and Spring Hill Road. AvalonBay is building 354 units in mid-rise buildings at its Avalon Park Crest development.
Cityline’s deals to sell land to Rochester, N.Y.-based Home Properties, Irving, Texas-based JLB Partners and Houston-based Hanover Co. are part and parcel of Cityline’s strategy to acquire zoning approvals from Fairfax County — a process its executives know intimately — and then sell parcels to developers that have expertise to match, according to Thomas D. Fleury, Cityline executive vice president.
“What we’re trying to do is sell what we don’t do. We’re not residential developers, we’re not hotel developers,” he said.
Cityline already has sold off parts of the portfolio that have existing office buildings and lack redevelopment opportunities in the near term. Fleury said the company plans to retain sites suitable for office development. In the meantime, it has taken a leading role in figuring out the parameters of the county’s development guidelines, with Keith Turner, a Cityline senior vice president, serving as chairman of the Tysons Partnership, an advocacy group formed by Tysons employers and landowners.
“At the end of the day, we’ll be left with the office parts, and that’s what we do do,” Fleury said.
Officials from Cityline and its development partners declined to share some details of the deals and plans, citing confidentiality agreements governing the contracts.
The plans furthest along are from Home Properties, a real estate investment trust that specializes in multifamily residential development. In December, Cityline filed a final development plan application for Home Properties with the county that calls for replacing a 75,000-square-foot office building at the intersection of Westpark and Westbranch drives with four apartment buildings totaling 669 units. All the units would be within half a mile of the planned Tysons Central 123 Metro station.
Ruth Hong, Home Properties’ director of development, confirmed the plans but declined to comment.
JLB Partners, a national owner, developer and manager of apartment buildings, plans to build two apartment buildings at the corner of Route 123 and Anderson Road, to replace another existing office building. Graham Brock, JLB development partner, said the first 14- or 15-story building would have 425 units and three levels of underground parking. The second building would be six stories and have 201 units.
The project, Brock said, “will have everything from small studios to some larger three-bedrooms.”
Hanover Co., an apartment firm whose Washington area work includes the Hanover College Park apartments, also has a deal with Cityline to build housing. Adam Harbin, acquisitions and development partner, confirmed a contract with Cityline but declined to comment further.
Low vacancy rates and construction costs have driven swarms of companies to build or plan new apartments for the Washington area, prompting concerns of an apartment bubble. Builders broke ground on more than 14,000 units in 2011, according to the research firm Delta Associates, and more than 12,000 units are projected to be completed this year.
Tysons Corner is one of the largest office markets in the country with more than 26 million square feet. Its attractiveness to government contractors, tech firms and Fortune 500 companies frequently make office buildings — Cityline’s speciality — the most attractive to build. Indeed, despite the slowdown of office development nationwide and relatively high office park vacancy rates still prevalent in Loudoun County and around Dulles Intertional Airport, Lerner Enterprises has begun building an 18-story, 476,000-square-foot office building with no tenants lined up to lease space there. The building is designed to meet platinum classification under the LEED environmental rating system, the greenest level available, and is to be ready for occupancy in 2014. It is one of only a handful of speculative office projects in the area.
Fairfax County officials, concerned that Tysons would continue to add offices and retail but not housing, included housing requirements in the amended master plan for the area. The timing couldn’t be better. Barbara Byron, director of the Fairfax County Office of Community Revitalization and Reinvestment, said the apartment market has strengthened to the point that it is the most easily financed type of development at the moment. Suddenly, apartments are more attractive to build than office buildings in Tysons for perhaps the first time in decades.
Byron said she was encouraged by the deals that Cityline and other developers were lining up. “It’s obviously so office-dominated right now that getting residential in is a very important first step for us,” she said.
Byron also said she was pleased to see a mix of apartment density plans, from high-rise to garden style, depending on proximity to Metro stations.
“They are consistent with what the plan envisioned for those locations,” she said.