Alexandria City Virginia (Washington D.C. Suburb) Buy and Hold Investment Thesis

[Peter Firehock]

Hey everyone,

My name is Peter Firehock, a lifelong resident of Alexandria, Virginia. I work as an acquisitions associate with BPG Holdings, a local real estate investment fund in Alexandria, and also work as a realtor for our fund's brokerage team, assisting clients with investment properties in the D.C. metro area.

I've recently created a series of reports focused on the city of Alexandria and its sub-market development prospects, which I believe alongside other macro trends will make the city an amazing buy-and-hold investment for real estate investors. I’m sharing a brief overview of these reports below. 

If any of the specific areas catch your interest and you’d like more details, these are only portions of the full reports I wrote on each submarket and I am happy to send the full report to you, feel free to send me a private message

After conducting thorough research on the economic and infrastructure developments in Alexandria, Virginia, I believe it holds strong potential as a long-term buy-and-hold real estate investment over the next 20 years. Below each snapshot of the sub-market reports I wrote, you will find all sources cited below each sub-market report.

Here is an overview of Alexandria Virginia:

- Old Town Alexandria is a major tourist attraction, with constant demand from businesses especially given its easy access to D.C. via the G.W. Parkway to Georgetown and North West D.C. or Woodrow Wilson Bridge to the Capitol.

- Multiple other thriving business district areas (Carlyle / Eisenhower, Potomac Yards, National Landing), but especially Old Town Alexandria, are experiencing massive infrastructure and business development over the next decade, which will greatly boost tax revenue for the city over time.

- Generally landlord-friendly state, no rent control

- Secure government jobs/contracts make the real estate market much more resilient to recessions / major corrections

- 15-minute drive to the Capitol of the United States

- 4 Seasons

- 15-minute drive to Arlington, Virginia (Amazon Headquarters 2 ((2017 announced, 2030 is bringing 25,000 new high-paying    jobs to the area)), Boeing Headquarters (2022), Microsoft Headquarters (2021), CoStar Headquarters (2024), Bloomberg    Headquarters (2017 expanded), Deloitte, and the list goes on)

Thesis:

Although more companies continue to go back to the office, there will be a shift toward a good amount of workers being able to be in hybrid roles. This is becoming more true for government employees clearly given the recent "Use It" act which will require 400,000 government employees to go from a remote to a hybrid role which started in January of 2024 and will continue to ramp up as time goes on (Source 1, Source 2)

This trend will continue as companies realize more increasingly they need to be at least hybrid to be competitive. However, between the work-from-home ability and the recent crime spike in D.C. post covid, many businesses have moved just outside the city to areas like Alexandria and Arlington, which in their own regard already had thriving business environments.

This macro trend, along with the massive amount of economic and infrastructure development happening in Alexandria will lead to massive rent growth and home price appreciation over time. Below I will delve into exactly what the major developments are in the city of Alexandria Virginia. Although the market is a low cash flow market due to its very low risk being so close to Washington D.C., long-term holders who participate in the upcoming rent increases and leveraged home price appreciation will see a strong opportunity to create Alpha in the market.

Deep Dive into the Developments.

As you will see, there are many different amazing sub-markets in Alexandria to invest in right now. To learn more about which one may be best for you, feel free to send me a private message.

Old Town North: An Unused Eye Soar Transforming into a 2.5 Million Square Foot Community Center
The GenOn coal power plant, which opened in 1949 and was shut down in 2012 due to concerns by residents about local pollution, has occupied an unused 20-acre lot in Old Town North for the last 12 years. The plant has added no value to the area during this time but rather has served as wasted space and an eyesore for residents. That all is changing now, ever since Hilco Redevelopment Partners purchased the property in 2020, and received concept and development site plan approvals in 2022 and 2023. These plans call for six blocks, with buildings totaling 2.5 million mixed-use square feet, and a renovated 14.2 acres of open space with brand-new amenities and improved access. The project will be a mix of 20-60% commercial space, and 40-80% residential units, including a 15,000 square foot expansion of the Old Town North Arts District.

*the site currently needs to pass certain soil tests to make sure it is clear to develop, so this is a higher risk area for investment since it is not certain if the tests will come back positive till around the beginning of 2025.*

Sources: Old Town North Power Plant Redevelopment Frequently Asked QuestionsPotomac River Generating Station CITY COUNCIL HEARING (Detailed breakdown of the project here)

Old Town + All of Alexandria: Alexandria's RiverRenew Program Will Allow Residents to Swim and Eat Fish From the Potomac River by 2040
Alexandria's Potomac River waterfront properties have served residents with phenomenal views of the river, National Harbor, and Washington D.C., making the real estate there incredibly desirable. However, one major drawback of the Potomac River has long been its hazardous pollution. Due to past poor management of the environmental infrastructure, the river has become illegal to swim in in certain parts, and after rain falls the entire river is off limits to swim or fish in due to the heavy amounts of pollution ending up there that the city has not had the infrastructure to deal with in the past.

But this all began to change in 2017, when the Virginia General Assembly passed the largest infrastructure project in Alexandria's history to make the Potomac River swimmable, and fishable by the year 2040, and they have made significant progress recently with the completion of the 2 mile long, 100-foot deep Waterfront Tunnel named Hazel.
Named after environmental activist Hazel Johnson, the Hazel Waterfront Tunnel will prevent millions of gallons of combined sewage from polluting the region's waterways. The only development left for this part of the project is to add a new 12-story sewer interceptor to the tunnel, with completion set for 2025, at which point the plans for a new mixed-use community can go forward at the Robinson Terminal long abandoned warehouse, where the infrastructure connecting the tunnel to the river has been taking place.

There is no doubt that the Potomac River turning swimmable and fishable, along with the already spectacular views, that properties and activities along the waterfront will become much more attractive to locals and tourists. This is part of a larger trend of waterfront developments happening such as the Potomac River Generating Station turning into a 2.5 million square foot mixed-use community, the Montgomery Center turning into 327 new apartments, 25,000 square feet of retail, and 13,000 square feet of arts and cultural center starting July of 2024,

This puts Robinson Terminal North as the next big project developers are eyeing, with Rooney Property groups announcing their plans to redevelop the decade-long abandoned warehouse space into a 600,000 square feet multifamily, retail, and thriving park area by 2025 following the completion of Hazel Waterfront Tunnel at the site.

This new development, which received approval just a little over a month ago, has had many delayed development plans due to concerns about environmental hazards, which have now all been cleared up

Sources:Robinson North plan advances amid environmental concerns
Alexandria Waterfront Small Area Plan March 2024
Potomac River Generating Station
Swimmable Potomac River Campaign
Montgomery Center Redevelopment Approved
AlexRenew completes two-mile long, 100-foot deep tunnel

Alexandria City West, Landmark Mall Redevelopment (2028)

Alexandria's Landmark Mall, which at a time was a thriving 52-acre strip mall that was a major attraction in West Alexandria, has long been an eye soar and swath of unused space. This is all changing very soon with the construction of the Foulger Pratt's new "WestEnd Alexandria" Landmark mall redevelopment, a new 4 million square foot mixed-use redevelopment, including a new 1.1 million square foot Inova medical center already starting, with completion set for 2028.

The development notably won the Red Clay Development of the Year award.

On top of the +2,000 healthcare worker jobs the development will immediately bring to the area upon completion, the 120,000 square feet of office space will also bring a large number of jobs to the west end of Alexandria. The redevelopment also includes 250,000 square feet of retail, park areas, and a transit hub, which will make homes near the redevelopment highly desirable for future buyers. The project also includes a fire station, hotel, and high-end retail apartments which will turn this into a vibrant thriving community center.

The 1 billion dollar buildings that Inova is building include a 569,000 square foot hospital center, 110,000 cancer center, and an 83,000 square feet specialty care center will bring a large amount of specialized, high-paying jobs. The best part for investors about being near hospitals is that the staff tends to turn over frequently because of residences and travel nurses, providing stable rental and home buyer demand. Construction has already started, with the first building being completed in 2025.


Sources:Foulger Pratt WestEnd
WestEnd
Inova Alexandria Hospital
First phase of Landmark Mall redevelopment approved in Alexandria

Eisenhower / Carlyle Alexandria: 7.6 Million Square Foot Expansion of the Hoffman Town Center on the Horizon 

Hoffman Co, the current owners of the Hoffman Town Center on the border of the Carlyle District, have long owned six lots totaling 17 acres in the area that have been vacant to this day, and have long had plans in the works for a revolutionary vision for the Eisenhower East Neighborhood. With all six lots in walking distance of the Eisenhower Avenue Metro, the major government employers listed above, and Caryle Crossings, as well as The Foundry (another mixed-use development), the Alexandria Planning Development Division Chief Rob Kerns, described these 6 lot developments as the "next logical step" in the cities effort to further densify the area.

With that kind of sentiment from the city, the application to build a 6.9 million square foot expansion of the Hoffman Town Center, which is what the lots are all currently zoned for, is highly likely to be approved by the end of the year, possibly pushed to 7.6 million square feet, and will be completed over the next decade.

*Development plans for expanded Hoffman Town Center*
Although specific tenants have not been named yet due to the development being in the earlier design and planning stages, the vision as described by Hoffman Co. is a commercial and residential mixed-use development including a new public school, storage center, city agency training, a farmer's market, festival space, beer garden, and "other similar uses approved by the city".

Sources:Developer laying groundwork to go bigger in Alexandria’s Eisenhower corridor
Alexandria considering big plans for properties next to Eisenhower Avenue Metro station


Potomac Yards Alexandria: The 2$ Billion Sports Arena is not the Biggest Development in the Pipeline for Potomac Yards

The Sports Arena was a recent idea that was part of a bigger plan approved in 2017, that called for a massive shopping center at Potomac Yards and the surrounding area to be redeveloped into 1.9 million square feet of office space, 1.1 million square feet of residential space, 900,000 square feet of retail, 300 room hotel, and 9.3 acres of open space by JPG Smith. The below pictures are the outline for the approved plan released by the Alexandria Economic Development Partnership in 2020.

One of the head architects on the construction of the new business district/town center is Hickok Cole, making their recent 75,000 square feet of the new Virginia Tech office space acquisition very indicative of the seriousness of these development plans. Many major leases at the shopping center owned by JPG Smith are coming due in the next 5-7 years, so the development is not guaranteed at this point as much could change in the coming 5-7 years.

Even if JPG Smith does decide to renew the current leases instead of developing, there is a strong likelihood of office development being done on the vacant space adjacent to the new Tech campus. but between all of the development growth residentially, with employers like Amazon and Virginia Tech, and the new metro station, I would not be surprised to see JPG Smith move forward with the plan to develop this new business district. Especially in light of the new Innova Oakville Triangle Hospital coming this year, and its impactful surrounding developments as well. Below is a picture of the renderings for the completed town center.

Sources:Future for Potomac Yards
JBG SMITH, J.P. Morgan Form National Landing JV
Va. lawmakers remove Alexandria arena from budget deal
AEDP-Development-Map-Winter-2020.pdf

Thanks for reading my Thesis on investing in Alexandria City for long-term rent growth and home price appreciation. This is generally a low cash flow market due to the low risk being so close to the nation's capital, however strategic buyers that enter sub-markets of D.C. that is set for massive growth will be able to take advantage of future rent growth to evolve into a heavy cash flowing property over time, as well as home price appreciation as the area continues its trend of high buyer demand.

If you'd like more information on any of these submarkets within Alexandria or would like to learn more about investing in the D.C. Metro area or central Virginia, feel free to send me a private message.

Let me know what you think about the D.C. Metro area market, and what market's you're currently investing in and why!