Sheraton OK’d for Conversion Into 544 Studio Apartments

The former Sheraton Hotel in Tysons Corners, for years the tallest structure there, is now OK’d to be converted into permanent housing. With no objections, the Fairfax County Board of Supervisors last week approved a plan to convert the now vacant hotel into 544 residential units.

The units are expected to be small studios, but because the developer is repurposing an existing building instead of constructing a new one, they will provide a “naturally occurring” affordable housing option for Tysons, according to Walsh Colucci land use attorney Robert Brant, who represented JBG Tysons Hotel at the public hearing.

“All of the infrastructure and existing conditions will be preserved, resulting in a product type that is naturally more affordable than market-rate products,” Brant said at the hearing.

The decision to reuse the hotel, rather than demolishing it and building something new, necessitated some negotiations over the dedication of land to allow a future Boone Blvd. ramp from the Dulles Access Road, according to a staff report. The developer agreed to put aside $250,000 in escrow to cover the cost of relocating the hotel building’s loading facilities.

Rubenstein Sets New Fund To Invest in Real Estate

An investment firm backed by Carlyle Group co-founder David Rubenstein has launched a new fund to invest in commercial real estate, as falling property prices have created buying opportunities.

Declaration Partners is seeking to raise $400M to invest in multifamily and industrial properties as part of the firm’s second real estate fund. Rubenstein, who is the largest backer of the New York-based firm, provided an anchor allocation along with other investors from the firm’s first fund.

The first fund also targeted multifamily and industrial properties. It closed in 2022 with $240 million raised from wealthy individuals and family offices from the U.S., Middle East and Latin America.

This fund’s first investments included an industrial property in the Inland Empire, California, an apartment complex in Charlotte, North Carolina, and a student housing joint venture project in Pittsburgh, Pennsylvania.

Apartments Market Set for Defaults, Fitch Forecasts

A major ratings agency is predicting that the U.S. multifamily market is on the verge of a surge in loan defaults, Bisnow has reported.

Apartment delinquencies for CMBS loans could hit $1.3B this year, exceeding the losses seen during the height of the pandemic, Multifamily Dive reported, citing a Fitch Ratings report.

Apartment landlords are experiencing headwinds due to a record onslaught of new supply, with 900,000 units under construction and more than 440,000 set to deliver this year in the U.S., according to CBRE.

That influx of inventory is diminishing revenue growth and escalating expenses that are hitting cash flow, according to the Fitch report. The net result is more apartment owners will be underwater on their loans.
The delinquency rate on multifamily CMBS loans has already ticked up, rising to 2.6 percent in December from 1.6 percent six months prior, according to Trepp.

The once high-flying U.S. apartment market is feeling the impact of new supply. The vacancy rate in the U.S. dropped year-over-year in December a full percentage point to just under 95 percent, according to Yardi Matrix data. Rents also dropped $6 in that period, leaving the average rent at more than $1,700 per month as of November.

New Game & Puzzle Center to Open Nearby

An entertainment complex that will bring puzzle and video game-like challenges is taking over the former Old Navy at Tysons Corner Center.

Next year, Level99 will open a 40,000-square-foot playground and restaurant on the mall’s second floor adjacent to Barnes and Noble, the company jointly announced last week.

Originally opened in Natick, Massachusetts, in 2021, Level99 describes itself as a “first-of-its-kind destination for live-action, challenge-based entertainment, craft beverages and farm-to-table dining designed for grown-ups.”

Visitors can work together to complete various physical and mental games in “challenge rooms,” or they can compete in duels. The Tysons location will have 40 rooms that can collectively accommodate up to 600 players, along with a 300-seat taproom and scratch kitchen.

Permit Parking Slated for F.C.’s Falls Avenue

A letter circulated this week from Jeffrey Sikes, senior planner for the City of Falls Church, has indicated a permit-parking situation will soon be enforced on Falls Ave. in the CIty. A survey found that 35 to 44 percent of parked vehicles on the street were non-residential, causing the erection of signage that will say “2-Hour Parking, Except City Permits” soon. The adjacent Offutt Dr. did not have such a high number of non-local cars, so will not be subject to the new rule.