Innovatus Capital Buys Suburban DC Office Asset for $114M

June 2, 2021

Office Mid-Atlantic News Washington D.C.

The nearly 385,000-square-foot Class A property was 94 percent leased at the time of the sale.

Dulles Executive Plaza. Image courtesy of JLL.

Innovatus Capital Partners has acquired the 384,336-square-foot Dulles Executive Plaza in Herndon, Va., for $113.5 million. The seller was a partnership between affiliates of Lionstone Investments and funds advised by a subsidiary of Columbia Property Trust.

A team of JLL brokers represented the seller. The firm also worked on behalf of the buyer to secure acquisition financing. At the time of the sale, Dulles Executive Plaza was 94 percent leased, with a 5.5-year weighted average remaining lease term, according to JLL.

Dulles Executive Plaza comprises two six-story buildings at 13530 and 13560 Dulles Technology Drive. The Class A property was finished in 2001 and received upgrades totaling $4.7 million in 2019. Floorplates measure 31,617 square feet, and amenities include a conference center, a fitness facility, a lounge and on-site food service. The property has a parking ratio of 4.0 spaces per 1,000 square feet.

Transit-oriented value-add

According to JLL, the property’s in-place rents are approximately 10 percent below the market rate, offering investors the opportunity to tap more income. Lockheed Martin has been a tenant for over 20 years at Dulles Executive Plaza, currently occupying 50 percent of the rentable area with a lease expiring in November 2024. The defense contractor invested capital in improving on-site infrastructure and established the location as a mission critical operation for its Space Systems division. Constellis, a private security company, occupies 28 percent of the asset with a lease through June 2031.

The buildings are located less than 2 miles from the upcoming Innovation Center Metro Station, an extension to the Silver Line that is slated for completion in the first quarter of 2022. Dulles International Airport is 4 miles away. Nearby major thoroughfares include state routes 28 and 267.

Dulles Executive Plaza traded at approximately $295 per square foot, notably higher than the average, $271 price per square foot recorded year-to-date in the Washington, D.C. market as of April. About $450 million in assets had traded in the market through the end of April, the latest CommercialEdge report shows.

The office landscape is changing, as the overall economy is on track to recover from the pandemic-induced recession. The Washington, D.C. market recorded its fifth consecutive quarter of occupancy losses, according to a recent JLL report. The market’s vacancy reached 17.4 percent at the end of the first quarter, while leasing volume dropped 72 percent year-over-year. Nationwide, office absorption is expected to move back into positive territory by the end of the year, according to NAIOP.