Tysons Corner awaits a Metro stop that will connect it more closely to Washington, but the sprawling shopping mall is already linked to a place even farther away: Alaska.
The Alaska Permanent Fund, the state’s sovereign wealth fund, owns half of Tysons Corner Center, just one piece of a $38 billion portfolio amassed in the four decades since the state’s coffers started overflowing with oil revenue.
In 1969, Alaska received a $903 million check from the first sale for oil and gas drilling leases on the North Slope. The check was more than five times the size of the state’s annual budget.
The North Slope has turned out to be one of the richest oil areas in the country, and the giant fields known as Prudhoe Bay are on state land. Today, 90 percent of Alaska’s government revenue comes from the oil industry in the form of severance taxes, income taxes and royalties.
But unlike many oil-rich countries and states, Alaska has squirreled away some of its oil riches in a tax-exempt fund for the citizens of the state. The state channels a quarter of its oil and gas royalty payments to the fund. Today, the Alaska Permanent Fund owns shares of about 2,000 public companies, domestic and international bonds, a few hedge fund investments and a vast real estate empire that includes half of Tysons Corner.
“We average 75,000 people a day through the [shopping] center,” said Mike Burns, the executive director of the fund. “I like to remind our partners that that would be the second-largest city in Alaska.”
At a time when most states are scrambling to cover budget deficits, Alaska and its permanent fund are enjoying the fruits of high oil prices and years of prudent investing.
This month, the fund shelled out more than $400 million in cash to buy a 49.5 percent stake in the 42-story North American headquarters of UBS on Park Avenue in midtown Manhattan. Last week, the fund announced the annual dividend it will pay to every Alaska resident this year: $1,174.
Tysons Corner Center, with more than 2 million square feet of space, is one of the fund’s best investments, Burns said. The Alaska Permanent Fund’s half of the property is worth about $800 million, five times the initial investment. The decision two decades ago to move the truck port that was underneath the mall and transform that space into additional retail added value. Replacing J.C. Penney with movie theaters, a food court and new retail space added more.
Now Tysons is poised to benefit anew from the extension of the Metro, which will stop “literally right at our front door,” Burns said.
Plans to develop homes and turn Tysons Corner into a place where people might live as well as shop could enhance the mall.
“ ‘Live, work, play’ they call it in real estate terms,” Burns said. But, he added, the mall’s main purpose will always be shopping. “Peripheral development can enhance the retail,” he said, but “the goose that’s laying the golden egg is the retail, the shopping experience.”
“It’s probably one of maybe a handful of what they call ‘fortress malls’ around the country,” Burns said. “There’s really no place around it to build a competitor. And the demographics are just fabulous.”
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