WestGroup deal to sell Tysons Corner property collapses
Friday, January 15, 2010
The deal to sell WestGroup's holdings in Tysons Corner to a McLean shopping mall developer is dead because the buyer could not secure financing, the parties said Thursday.
The collapse of one of the biggest real estate sales in the Washington area in recent years leaves the empire built by Gerald T. Halpin in limbo as he approaches 88 and looks to cash out his portfolio.
It's also a reminder that the recession could continue to slow one of the nation's most closely watched redevelopment efforts even as a subway is built through Tysons to Dulles International Airport. WestGroup, the largest landowner in Tysons, had signed a contract six months ago to sell 142 acres to an investment group led by Robert Pence.
"We understand the challenges of closing any transaction of this scope and magnitude," Halpin, the company's chairman and chief executive officer, said in a statement.
WestGroup is now marketing three of its 24 buildings in Tysons -- a total of 500,000 square feet of office space -- as it pursues piecemeal sales of its holdings. Eric Berkman, executive vice president at Grubb & Ellis Co., who is handling the sale, said the property should fetch upward of $100 million.
Another vacant building WestGroup owns near the Freddie Mac headquarters, with 235,000 square feet of office space, is under contract. WestGroup officials said they could not name the buyer until the sale closes.
The company's land in Tysons is a mix of office towers now occupied by corporate giants, including Freddie Mac, Mitre and Northrop Grumman, empty land and older buildings ripe for redevelopment.
Pence, president of Pence-Friedel, had floated plans to build big-box stores and other retail and residential projects modeled after Reston Town Center on the WestGroup property. Halpin was intent on selling to a developer with roots in Fairfax County, WestGroup officials said, and has a long friendship with the Pence family.
But with capital markets jittery about lending money for a transaction estimated by real estate experts at $500 million to $800 million, Pence could not secure financing. He said he hopes to revisit the deal with a smaller purchase.
"We still love the property," Pence said in an interview. "We would hope to be in the position soon to reopen negotiations with the seller for a significant portion of it."
For 47 years, Halpin has been an engine of Tysons Corner's growth into a sprawling suburban office park. He built office towers on what were two dairy farms he bought with a group of partners in 1962. Tysons now draws 100,000 workers.
WestGroup developed two major pieces of Tysons Corner's current landscape: WestPark, about 100 acres outside the Capital Beltway, and WestGate, 44 acres inside. That land sits at one of the four Metro stations under construction in Tysons, Tysons East at Route 123. Much of it will benefit directly from higher densities that Fairfax officials plan for land near the stations.
Despite the economic downturn, Halpin and local officials said they remain confident about opportunities in Tysons, Virginia's largest job center. WestGroup has developed 13 million square feet in the region, most of its in the Washington suburbs.
"Tysons is a good story, and it's capturing more and more attention from global investors," Halpin said. "The responses to our current offering appear to be strong, and that reinforces my belief that the best is yet to come in Tysons."
Berkman said the three buildings the company is marketing would probably be sold to institutional investors. Although they are a half-mile from a Metro station, "this is like having the dream seats to a sporting event," he said. "At some point, they will be ripe for redevelopment."
Sharon Bulova (D), chairman of the Fairfax Board of Supervisors, said the vision of a more urban Tysons "will be realized," no matter who owns the land.