Vornado Realty Trust
Constructed in three phases between 1986 and 1990, Tysons Dulles Plaza consists of three, six-story Class A office buildings totaling 487,775 square feet. The property is situated on a 15-acre campus located right off the Dulles Toll Road in Tysons Corner, Virginia and was 92% leased at the time of sale. The buildings feature efficient designs, towering 6-story atrium lobbies, extensive window lines and balconies. The sale also included a development site that can accommodate a fourth building. Vornado Realty Trust retained Cassidy & Pinkard Colliers in November 2007 due to our experience in selling core assets in suburban markets.
One challenge in marketing Tysons Dulles Plaza came from the rising vacancy rates west of Tysons Corner along the Dulles Toll Road that stemmed from a recent building boom. Additionally, with recent lease deals signed at rental rates 17% below market, Cassidy & Pinkard Colliers had to convince investors that these market rates could be achieved. Parking income presented another challenge, as most office buildings in Tysons Corner are not currently charging for parking. Convincing investors to buy in to the idea that the market could support the parking income that Cassidy & Pinkard Colliers pushed was key to reaching pricing expectations. Finally, given the tightening of the credit markets at the time of sale, and that the value of the asset was well over $100 million, finding a low-leveraged buyer that could reach Vornado’s pricing expectations in spite of the conditions in the financial markets was critical to a successful transaction.
The marketing process focused on highlighting the asset’s competitive advantage over other buildings in Tysons Corner due to the building’s premier visibility on the Dulles Toll Road, as well as easy access to the major roadways while avoiding the Tysons Corner congestion. This story was further supported by its long history of operating at a high occupancy level. With 8% vacancy in the building at the time of sale, Cassidy & Pinkard Colliers emphasized that strategically spending capital on the building would enhance the leasing effort and help reposition the retail space. In addition, Cassidy & Pinkard Colliers supported market rents by demonstrating that rental rates in Tysons Corner have increased more than 15% annually over the last three years. Future price appreciation from the anticipated Metrorail-related development and a staggered expiration with below market rents when coupled with a price point of $313 per square foot, well below replacement cost, provided further support. Additionally, Cassidy & Pinkard Colliers created upside potential by undergoing an in-depth parking study which showed that the property could collect parking income based on comparables in the area. In doing so, Cassidy & Pinkard Colliers was able to maximize pricing and find a buyer that could meet pricing expectations in a challenging financial environment.
