Meridian and Harrison Street start a secure-facility platform in Chantilly

The Meridian Group and Harrison Street Asset Management have made the first acquisition for their secure-facility platform: the Stoneleigh and Newbrook campuses, a five-building, 431,000-square-foot office portfolio in Chantilly, Va., announced with HLM Associates in the Westfields submarket, one of northern Virginia's most important national security and defense corridors. Harrison Street, an alternative investment manager with roughly $109 billion in assets under management, is the capital partner; Meridian brings the secure-facility specialty, and CIO Gary Block called Westfields 'an ideal first investment for the platform we have been building.'

The joint venture plans to invest additional capital to expand secure-facility capabilities and modernize infrastructure, shifting the buildings from generic office to mission-critical space. Block said the goal is to become a landlord of choice for both traditional government contractors and the growing universe of nontraditional defense and technology companies, a conviction anchored in the submarket's dense concentration of U.S. defense and intelligence contractors. PRED reported that the portfolio trades at $155 a foot, and the underwrite is a bet on those tenants and the national security budgets behind them, not on a general office recovery.

The trade fits the pattern now setting the office clearing price: a specific building, a specific tenant base, and a buyer willing to underwrite the mission. Office has been bifurcating into trophy and commodity, and this asset sits on the trophy side for reasons that have little to do with glass or height. Sellers get an exit priced to the tenants' credit; buyers get the first asset in a platform that will need follow-on capital for hardening and certification. Secure facilities demand power, redundancy, and approvals that ordinary office stock does not, and the modernization costs could outrun the rent premium cleared tenants will pay. Whether the platform can deliver those will determine if this is a one-off or the beginning of a new bidding pool for mission-critical space in Westfields.

For office landlords waiting for a broad recovery, the trade is a reminder that the recovery, where it exists, is narrow and mission-specific. The announcement does not name the seller or a purchase price beyond the $155-a-foot mark PRED has reported.