Washington, D.C. – The Meridian Group announced today that it has closed on the purchase of three Class A office towers occupied by Science Applications International Corp. (SAIC). Eastdil Secured assisted Meridian in capitalizing the transaction by procuring $105 million of debt financing and assisting in the equity component of the investment. JM Zell, the corporate advisor to SAIC, arranged for the sale to be made between SAIC and Meridian.
The Meridian Group, a real estate investment and development firm based in Bethesda, MD, agreed to buy the buildings from SAIC in May. The buildings, located at 1707, 1709 and 1710 SAIC Drive, are part of SAIC’s 18-acre corporate headquarters campus at Tysons Corner.
“We had exceptional interest from a broad array of investors and institutional partners for these offerings,” said John Kevill, Managing Director of Eastdil Secured. “They were drawn by a unique opportunity to partner with an established ‘best in class’ operator in Meridian and invest in properties positioned to take advantage of the near-term growth in Tysons Corner fueled by Metro.”
The purchase was made through Meridian’s $160-million discretionary real estate fund -- Meridian Realty Partners I. It is one of the largest equity funds focused on real estate in the Washington, DC metropolitan area.
“Our fund, together with co-investment from our limited partners, provided $75 million of equity for the towers’ acquisition and repositioning, together with the first anticipated land takedown,” said Gary Block, Managing Director of The Meridian Group, who sourced and led the transaction.
“We are excited to move forward with this acquisition, which represents a unique opportunity to capitalize on the growth of Tysons,” Block added. “It is a tremendous investment opportunity thanks to its repositioning potential and its ideal location next to Metro and a whole host of amenities.”
Block worked closely with Jeffrey Zell, president of JM Zell, on putting together and completing the transaction.
“Working with SAIC has been a pleasure, and we have a very good working relationship with SAIC,” Block said. “This is our second transaction that we have completed with SAIC, and we look forward to working with them in the future.”
The property is located on Route 7 at the new Greensboro Metro station, which is expected to open in early 2014. Bounded by Westpark Drive and Greensboro Drive, the property sits in a major submarket of Tysons known as “The Hill” near Tysons Galleria Mall. The three buildings – called Towers I, II and III -- total 640,000 square feet on 3.4 acres adjacent to the Metro station. As part of the sale, SAIC is committing to occupy Tower III for the long term and Meridian will be renovating and repositioning Towers I and II. The repositioning will provide for over $20 million in capital improvements to the properties, ensuring a Class A experience for tenants seeking proximity to Metro along with the amenities of Tysons Corner. Among the significant upgrades: new lobbies and common areas, elevator cabs, HVAC systems, and pedestrian walkways and plazas near the Metro station.
“With a $20 million renovation to rebrand and reposition the complex, these towers will cater to tenants seeking first-class space at highly competitive pricing,” said David Cheek, Co-founder and President of The Meridian Group. “We expect significant demand from tenants in the area and throughout the DC region. We’ve already been contacted by a number of high-profile tenants interested in moving into the towers.”
Over the next several years, Meridian will develop 3.2 million square feet of mixed-use space near the office towers. Plans include more than 1.3 million square feet of residential space and over 1.1 million square feet of office space, as well as a 400-room hotel and up to 200,000 square feet of retail space adjacent to the Towers.
“Tysons Corner is the downtown of Northern Virginia and one of the most coveted areas in the country. It is the 12th largest office market in the country and has the largest concentration of retail space between Washington, DC and Miami,” said Bruce Lane, Co-Founder and Executive Vice President of The Meridian Group. “And it’s only going to get better with new HOT lanes and four new Metro stations. This is an incredible place to be a part of.”
Meridian has completed three other office acquisitions with the fund as well as a loan purchase, all in Northern Virginia. The office acquisitions include One Ballston Plaza (148,000 square feet) in Arlington, Cameron Run (144,000 square feet) in Alexandria, and Tysons Technology Center (280,000 square feet) in Tysons Corner.
Since 1993, the Meridian Group has acquired over 7.5 million square feet of office, industrial, retail, and hotel properties, as well as over 400 acres of land – all totaling over $2.5 billion in value. Prior to the formation of Meridian Realty Partners I, Meridian’s transactions were capitalized through joint ventures. Meridian’s partners have included The Blackstone Group, Goldman Sachs, The Carlyle Group, and Northwestern Mutual Life Insurance Company. Meridian, a direct real estate operator, has a successful 20-year track record on value-add transactions with opportunistic returns – primarily in the Washington metro area. Meridian’s investment strategy is oriented to value-add opportunities across all asset types and capital structures, including acquisitions of underperforming properties and distressed debt as well as providing equity, preferred equity and mezzanine debt for recapitalizations. Founded in 1993 by David Cheek and Bruce Lane, the Meridian Group is a real estate investment and development firm focused on the metropolitan Washington, D.C. market. Meridian grew its business by investing with and on behalf of institutional capital partners, including many of the premier insurance companies, real estate private equity funds and other institutional capital sources. Meridian took its successful track record of investing as a fiduciary for institutional capital partners and formed Meridian Realty Partners I, a fully discretionary investment fund focused on value-add and opportunistic investments across all asset types and capital structures. Meridian's conviction and transparency in decision-making, and keen local market intelligence, allows it to source and timely execute on attractive investment opportunities and to achieve superior risk-adjusted returns for its investors. Gary Block, Managing Director, is the third principal in Meridian Realty Partners I. Block was previously a partner for 10 years in The Carlyle Group’s real estate funds. The three principals combined have been responsible for over $15 billion of real estate investments over their careers.