TMG Expands The Boro With Vacant Trophy Office Buy As It Eyes Phase 2

More than five years have passed since The Boro's first phase opened, creating a new hub in Tysons with high-rise office and apartment buildings above ground-floor retail, restaurants, a movie theater and a Whole Foods. 

But The Meridian Group has yet to break ground on the second phase, and it has turned to acquisitions to grow the project's footprint. It bought a 24-story trophy office tower developed speculatively next to The Boro in 2022 that has yet to secure any tenants, it announced Tuesday.

"It's an obvious next step for us to expand the Boro District," TMG Chief Investment Officer Gary Block told Bisnow in an interview Wednesday.

The Boro has become the exact type of vibrant mixed-use community that the developer envisioned when it broke ground in 2016, Block said. He boasted that its buildings have achieved strong rent growth, and its Boro Park has become a hot spot for teens taking TikTok videos.  

Despite that activity, the developer hasn't broken ground on any additional buildings in the five-plus years since its first phase opened.

"The macro environment for development is not ideal today, so we're patient," Block said.

That patience may soon pay off, as Block says it is finalizing a deal to break ground on the next two multifamily buildings. 

The 1.7M SF first phase is less than half of the roughly 5M SF that TMG has planned at The Boro. The development also features a separate 15-story senior living community on a parcel that TMG sold to Silverstone Senior Living. 

As higher interest rates and construction costs have made new development harder to finance, Block said TMG looked to acquire properties, and it zeroed in on Tysons Central, the 388K SF building that Foulger Pratt and USAA Real Estate developed next to the Greensboro Metro station. 

The deal hasn't appeared in property records, and Block declined to share the sale price, but he said the lender was involved in the deal and TMG bought the building below replacement cost. 

He attributes the building's lack of leases to it delivering "at a really bad time," as remote work depressed office demand and building values plummeted.

But the trophy office market has tightened across the D.C. region as tenants gravitate toward high-quality spaces with modern amenities. Block said Foulger Pratt was "elephant hunting" and looking for one tenant to fill the entire building, while TMG plans to seek single-floor users. 

"We're buying it at a much better time, we believe, in the market," he said. 

Foulger Pratt didn't respond to Bisnow's request for comment.

TMG said in its press release the deal is part of its "go-forward office strategy" centered on acquiring trophy assets and repositioning them. It hired Alex Cheek from Goldman Sachs to lead a new San Francisco office and brought back Andrew Pence — who previously spent eight years with TMG before a two-year stint at Monument Marine Group — to lead acquisitions from its Bethesda headquarters. 

Block said acquiring office buildings makes more economic sense than developing new office today, and it is on the hunt for other, similar deals in Tysons and throughout the D.C. region. 

"This acquisition is a playbook for future deals," Block said. 

While it seeks to buy office, TMG is still looking to develop multifamily at The Boro.

The developer has planned a pair of residential buildings totaling 543 units, plus 63 townhouses, for the remainder of The Boro's expansion site that includes the Silverstone senior living building. 

TMG brought on Akridge as an equity partner for the second phase in early 2021. It previously partnered with Kettler on the first phase's multifamily component and Rockefeller Group on the 20-story Boro Tower office building. 

Block said Akridge remains part of the deal, and the partners are "finalizing the capital stack as we speak." 

"We plan on breaking ground soon," he said, declining to specify how soon. 

TMG also has another 1.2M SF of development potential on parking lots and other unbuilt sites within The Boro, Block said. He said it is planning a pop-up entertainment venue on one of those sites, but it is prioritizing the 543-unit parcel as its next phase of construction.

"We want to get that up and leased up, and then we'll continue to focus on the other development sites when appropriate," he said.