Boston Properties On D.C. Hot Streak With 5 Major Build-To-Suit Deals Signed
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Ray Ritchey's development legacy has spanned nearly four decades and has created projects that have transformed the D.C. region, but the Boston Properties senior executive vice president is hard-pressed to remember a period of time when the company has signed as many major deals as it has over the last year.
Since July, Boston Properties has closed deals for the next headquarters of Marriott International, the Transportation Security Administration and Leidos, along with major office deals with WilmerHale and Fannie Mae. These five D.C.-area, build-to-suit leases total nearly 3M SF.
While Ritchey said the team has celebrated the string of big wins, the never-satisfied executive said that for every success there is a tenant the company misses out on.
"You're only as good as your last deal," Ritchey said. "We've been in Washington for 38 years and assembled a great track record of corporate headquarters, but we have to face every one of these as if it's the most important build-to-suit we're involved in, and it is."
Boston Properties began assembling the site near its pioneering Reston Town Center mixed-use development 22 years ago, and has been involved in planning it ever since. Fannie Mae only started engaging with prospective developers late last summer, Boston Properties Senior Vice President of Leasing Jon Kaylor said, and it went through the selection and closing process at a rapid pace.
"They probably were doing a lot of background work without it being public, because that deal was probably the largest and fastest from hitting the market to being finalized that I think I've ever experienced in my 20 years at Boston Properties," Kaylor said.
In January, Boston Properties signed Leidos to a 276K SF lease to fill a 17-story trophy Reston office tower. The project represents the final component of Reston Town Center, which it has been developing for three decades.
"It's bittersweet to see that specific mixed-use development come to an end," Ritchey said. "But now, with the Fannie Mae deal, we're going forward with a whole new Reston Town Center, a different phase and we can build upon the strengths that made the original town center so successful and integrate new dynamics because things have changed over the last 25 to 30 years."
Last year, Boston Properties finished the yearslong process of landing the TSA in Springfield, a bid it originally lost but then successfully protested in court. After the judge voided the TSA's lease at Alexandria's Victory Center, Boston Properties emerged victorious with its 10-acre site near the Franconia-Springfield Metro station.
"That site was uniquely positioned to win the TSA procurement and gives them the kind of secure, state-of-the-art environment they were looking for," Boston Properties Senior Vice President of Development Pete Otteni said. "Those types of procurements are more complicated, they take longer than you'd like, but we're pleased the end result was the right one."
Fairfax County Economic Development Authority CEO Jerry Gordon said landing the TSA was an especially important win for the county, given its location.
"The fact that it is located in Springfield was really important for us," Gordon said. "That quadrant of the county has lagged behind in economic growth over the years, so to get a big win like that, which will attract other companies and the service sector around it, that was really enormous."
In December, Boston Properties signed law firm WilmerHale to a 288K SF lease to anchor an 11-story Foggy Bottom office building it is constructing on land it ground-leased from George Washington University. The developer also partnered on a Bernstein Cos. bid that won Marriott's search for a new Downtown Bethesda HQ, a deal that closed in July.
The company is now slowing its pursuit of new leases, Ritchey said, electing not to bid on some recent opportunities to make sure it pays sufficient attention to the five large-scale projects in its pipeline. Ritchey is focused on executing those projects and looking for sites where Boston Properties can build its next wave of future development.
"When you get on a run like we have where we're delivering 3M SF-plus, I want to restock and replenish," Ritchey said. "Our raw materials are development sites, like car manufacturers need steel and plastic. For us to continue to be pre-eminent developers, we've got to restock the development pipeline."
Building this series of projects and teeing up the next generation may be the final act for the legendary D.C. developer.
"I'm turning 68 this year, I'll be 72 when these projects deliver," Ritchey said. "Maybe I'll figure out something else, the next chapter. But for now, I'm very happy doing what I'm doing."
Ritchey said he has particularly enjoyed developing in the D.C. market because of how congenial the commercial real estate community is, even in what he said is an intensely competitive city. Between the déluge of strong local developers, roughly a dozen office REITs and several national private developers operating in the D.C. market, Ritchey said there are more companies to compete with for a deal than in any other city.
"This is by far the most competitive development community in the United States," Ritchey said. "It's a chainsaw death match with the development community we have here."
What keeps Ritchey up at night most, he said, is the imbalance of the D.C. market, with its massive stock of aging office buildings becoming vacant without enough new demand coming in to fill them.
While its recent five deals are big wins for Boston Properties, they do not represent net new office demand for the D.C. market, something the region has struggled to generate in recent years. Ritchey said Reston has been the exception in the area, having companies like Google, Microsoft and Oracle grow their footprints at the town center, but he worries about why D.C. does not attract more tech companies.
"The U.S. government is the largest consumer of technological services in the world, and why we don’t keep or attract more tech tenants here is a mystery to me," Ritchey said.
He attributed that in part to D.C.'s universities being focused on professions like law, medicine and foreign affairs and not producing technological entrepreneurs who will start businesses in the area. But Ritchey believes D.C. is well-suited to attract more companies and thinks it has a good shot at landing Amazon's second headquarters, which he said would be a game-changer.
Boston Properties does not own any of the D.C. area's proposed HQ2 sites, but the developer has plenty on its hands already with the five new pre-leased developments starting at once. Whether or not Ritchey decides to hang up his cleats after this wave of projects, Otteni said his impact will reverberate through generations with the myriad of young development professionals he has mentored. Ritchey just hopes that he has improved the Washington region.
"I like to think that our team had a positive impact on the built environment of the city, and it's better for us being here than not being here," Ritchey said.
Gordon, who has led Fairfax County's economic development arm since the 1980s, certainly believes Ritchey has left his mark on the county.
"Ray is the best of the best," Gordon said. "Boston Properties has contributed quality development over a long period of time. They've gone through the good times and the bad times with the county and are the kind of a developer that you want in your community."