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REA
December 12, 2018  

Virginia Rentals Pitched Near Amazon's HQ2

A UBS Asset Management partnership is shopping an apartment property near Amazon.com’s planned Northern Virginia headquarters campus as a value-added play.

The 534-unit Meridian Pentagon City encompasses two high-rise buildings in Arlington, adjacent to one of the parcels where Amazon plans to develop a campus and close to existing office space the technology giant is slated to lease. The company is splitting its “HQ2” between Virginia’s Arlington County and the Long Island City section of Queens, N.Y.

Bids for the apartments are expected to come in around $210 million, or $393,000/unit, which would translate into an initial annual yield in the low-4% area. UBS and its partner, locally based Paradigm Cos., have given the listing to HFF.

The complex, at 1221 South Eads Street, was developed in phases in 2001 and 2003, and the units are ripe for value-added upgrades. The occupancy rate is 95%, and rents run about 30-40% below those at the newest properties nearby.

The main pitch is that Amazon will soon be its neighbor, with plans to build eight office buildings spanning 4.1 million square feet on parcels along South Eads Street. It will start by leasing 500,000 sf in three buildings near the Crystal City Metro station, about a quarter-mile away. Eventually, Amazon plans to house about 25,000 employees at its campus in National Landing, a newly christened area that combines parts of Arlington County’s Crystal City and Pentagon City neighborhoods and the Potomac Yard section of Alexandria.

The studio, one- and two-bedroom apartments at Meridian average 846 sf and rent for an average of $2,104. Amenities include concierge service, a fitness center, two rooftop pools and a clubhouse. There are more than 500 parking spaces in an underground garage. In addition to upgrading the units, the marketing campaign highlights the potential to modernize the common areas, clubhouse and fitness center.

The UBS team bought the property in 2009 for $109.5 million, or $205,000/unit, from Northwestern Mutual in a deal brokered by First Capital Realty. At the time, it was known as Warwick House.

The complex is near the confluence of Interstate 395 and Route 1, which connect to Washington about 3 miles away. Within a mile of the complex are 12.5 million sf of offices and 1.9 million sf of retail space, including a Whole Foods store across the street. Arlington County’s population has grown 20% since 2010 and is projected to grow 8% over the next four years.