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byline: Paula C. Squires

New physical rehab hospital uses innovative tech

Michael Lowery pushed off gingerly at first and then gained confidence as he walked upright with the assistance of Andago, a mobile robot in the rehab gym of Central Virginia’s newest hospital.

Strapped into the machine by a harness, Lowery, a 38-year-old Martinsville native suffering from paralysis, made his way around the track at Sheltering Arms Institute — a hospital in Goochland County dedicated solely to physical rehabilitation.

Lowery is one of nearly 400 people who have been treated at the facility since it opened in mid-June in the middle of the COVID-19 pandemic. He came after injuring his neck while weightlifting, which paralyzed him from the waist down. After three hours of physical therapy per day for three months, Lowery could move his thigh muscles and his right foot from side to side. “My goal,” he says, “is that I’m walking one day.”

Robotics, electrical stimulation and body-weight support systems to enhance physical training are among the advanced technologies available at the $95 million, 114-bed hospital located on a 46-acre campus in West Creek Medical Park. “There’s nothing really like this in the whole mid-Atlantic,” says Stephanie Sulmer, the institute’s vice president of marketing and business development.

A joint venture between Sheltering Arms and VCU Health, the hospital is a destination for survivors of strokes, spinal cord injuries and brain injuries, including out-of-state patients, Sulmer says.

Opening a hospital during a pandemic required intensive planning. Its four major units are opening in phases, and the spinal cord wing is still waiting for ventilators, which have been in short supply. As of late September, the hospital was operating with a capacity of 90 beds and had not experienced any active cases of COVID-19, says Sulmer.

Medical office expansion has been a primary driver in Richmond’s commercial real estate market. While the future of general office developments remains uncertain, with the pandemic forcing many employees to work from home, medical care is an essential business that’s expected to grow.

“We’re seeing a lot of the larger practices looking to [plant] a flag in all the suburbs of Richmond,” says Malcolm Randolph, a senior vice president with Colliers International in Richmond and the broker who assisted Sheltering Arms in finding its site along the Short Pump retail corridor.

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Landing Amazon

Stephen Moret had just finished speaking to the annual meeting of the Virginia Association of Counties at The Omni Homestead Resort in Hot Springs when his phone buzzed just before 11 a.m. The text said: “We’d like to sign today. What time can you talk?” 

Moret, president and CEO of the Virginia Economic Development Partnership, was the lead negotiator behind Virginia’s effort to win Amazon’s $5 billion second headquarters, a once-in-a-generation prize that initially promised as many as 50,000 jobs. 

The previous Thursday, Nov. 8, he sent Amazon a final draft of Virginia’s incentives package. The follow-up text on Nov. 12, a Monday, was a positive sign.

“Yes. We can sign right away,” Moret texted back.

A conference call was set for 2 p.m. Moret and his colleagues hit the road, driving through mountainous Bath County on their way to Northern Virginia in case the big news broke. An Amazon attorney emailed him the agreement at 12:34 p.m. “I had one of those mobile, Wi-Fi hotspot things, but when you are in rural Virginia, the service is in and out,” says Moret.

When his signal dropped from three bars to zero, the irony wasn’t lost on Moret. His own technology was failing at the moment he was trying to seal the “deal of the century” with a tech giant. 

He stopped the car and opened the door to improve the signal. Moret reviewed the document, signed it electronically, and hit send.  “The first time we submitted it, it didn’t go through. It was stressful,” he says.

On another try, the document — also signed electronically by Secretary of Commerce and Trade Brian Ball — successfully transmitted at 12:45 p.m. Four minutes later, Amazon sent back a signed memorandum of understanding (MOU) for one of the most sought-after corporate investments in U.S. history. 

Shortly before 2 p.m., Moret’s car pulled into a Wendy’s for lunch in Verona, near Staunton in the Shenandoah Valley. While the others went in for burgers, Moret stayed in the car for the conference call. 

It was official. On the call, Moret, Ball and other officials learned Seattle-based Amazon would locate half of its headquarters in Arlington County and Alexandria, bringing 25,000 jobs, an investment of $2.5 billion and the leasing  of 4 million square feet. The other half of the headquarters was headed to Queens in New York City, but the second location wasn’t revealed on the call.

Gov. Ralph Northam and Amazon announced the headquarters decision the next day, ending 14 months of wild speculation on where the e-commerce and cloud computing giant would land. The competition sparked a fierce bidding war with 238 localities vying for what came to be known as HQ2.

While the hunt is over, a new and transformative chapter is beginning in Virginia, say state officials and business leaders.  They expect the deal to change Virginia from a slow-growth state — too long dependent on federal government contracts — into a fast-growth technology leader.

In addition to Amazon’s 25,000 high-paying jobs, a report by Richmond-based Chmura Economics & Analytics predicts the ripple effects of the project will create another 33,687 jobs and have an annual economic impact of $14.2 billion by 2030. By that time, the Amazon headquarters could generate $346.7 million annually in state revenues.

If implemented as envisioned, Moret says, HQ2 would generate at least 15 to 25 percent of the additional jobs needed for Virginia to regain a top-10 state ranking in economic growth. For the past five years, the commonwealth has ranked No. 30 among the 50 states. Moret also expects the project to keep thousands more college graduates in Virginia — reversing an out-migration trend.

“Here’s this huge, private sector- focused tech opportunity across multiple sectors. Amazon is not just a web retailer. This is unmanned systems, robotics, artificial intelligence. There are so many businesses they are getting into,” he says.

Amazon also has a growing presence in cloud computing and is competing for more federal contracts.  The state’s MOU with the company includes a clause limiting the number of new jobs at the headquarters that can be focused on the public sector. If more than 10 percent of the jobs are primarily engaged in supporting federal government contracts, then the state will reduce any grant incentive payments for that calendar year.

Education incentives key
While some regions dangled goodies like Amazon-only executive lounges at busy airports, the hallmark of Virginia’s incentive package was a $1.1 billion investment in higher education during the next 20 years. That commitment is expected to greatly expand the pipeline of tech talent, benefiting not only Amazon but the state’s entire technology sector.

Virginia’s focus on deveoping a talent pipeline  “did make the proposal stand out,” says Holly Sullivan, Amazon’s director of worldwide economic development, who led the company’s site selection team.  Sullivan told Virginia Business, “We looked at the talent from day one: what’s here, how to build the talent pipeline and the migration of people moving into the region to see what those skill sets were.”

The state plans to spend $710 million to double the annual number of bachelor’s and master’s degrees conferred in computer science and related fields during the next two decades.

Virginia Tech, which already had plans to expand in Northern Virginia, agreed to establish a $1 billion Innovation Campus at Alexandria’s Potomac Yard. The commonwealth and the university each will kick in $250 million for the project. The education initiative also includes $125 million for the expansion of George Mason University’s campus in Arlington.

In terms of direct cash incentives, Virginia offered a total of $573 million, considerably less than the $1.5 billion in subsidies offered by New York. The commonwealth’s direct incentives include $550 million, or $22,000 per job. Amazon is eligible for another $200 million in grants if it creates an additional 12,850 jobs in a second phase of development. 

The grants would be paid four years after the jobs are created so that additional tax revenues could be generated by Amazon to cover the cost. 

Arlington offered a performance cash grant of $23 million over 15 years based on incremental growth of an existing tax on hotel rooms.

Besides jobs and education, the incentives focused on housing and traffic concerns that could result from the project. Arlington and Alexandria plan to fund more than $570 million in transportation projects serving Amazon’s newly branded National Landing site, which includes Crystal City, the eastern part of Pentagon City and Potomac Yard.

The two localities also plan to use tax revenues generated by Amazon to make annual investments of $15 million during the next decade to create and preserve 2,000 to 2,400 units of affordable housing.

The state’s package offers $195 million of non-general fund money for five multimodal transportation projects, including additional entrances to Metro stations at Crystal City and Potomac Yard.

Asked about the importance of incentives in the search, Sullivan says, “The way we approached incentives for this project was: ‘How can we utilize them to invest in our workforce and to invest in the real estate side to create an innovative development with open space and opportunities?’”

While reaction to the HQ2 deal has been primarily positive, there are some critics, including Del. Lee Ware, R-Powhatan, the General Assembly’s House Finance Committee chair and a former member of a state legislative commission that reviews state financing for major economic development projects. 

Ware was so strongly opposed to  Amazon subsidies that he resigned from the Major Employment and Investment Project Approval Commission (MEI) in February. “I believe the scale of the governmental incentives and subsidies for both the commonwealth and Northern Virginia localities is imprudent given the fragility of the economy, the mounting pressure to both the state and federal budgets posed by expansion of Medicaid coverage and the fact that Amazon is a huge corporation headed by the wealthiest individual in the world,” Ware said in an email to Virginia Business.

Vote on incentives
State and local incentive packages still must be approved. The General Assembly is expected to vote on the state’s proposals in January, while Arlington’s Board of Supervisors is scheduled to vote in February on its performance agreement with Amazon.

Del. Chris Jones, R-Suffolk, House Appropriations Committee chairman and a member of the MEI Commission, expects broad support from the General Assembly. “If the jobs aren’t created, then the incentive payments aren’t paid. We felt that was a good hedge for the commonwealth,” he says.

Front and center in the minds of the commission, adds Jones, was the fact that Virginia had been burned before on deals involving upfront grants.

The state remains in litigation over a project in Appomattox where a Chinese company, Lindenburg Industry, was paid $1.4 million upfront in 2014 to open a manufacturing factory that promised 350 jobs. Lindenburg never began the project and has yet to pay the money back.

That debacle was one of the reasons behind a VEDP overhaul that led to Moret’s hiring. Moret took the agency’s reins in January 2017, eight months before Amazon announced a request for proposals on its second headquarters. “Stephen has done a fabulous job,” says Jones.  “Had we not reformed VEDP, we would not have been successful in landing Amazon because we wouldn’t have had the confidence to undertake a deal of that magnitude given the past track record of VEDP.” 

Moret says VEDP and its statewide economic development project team of about 40 people couldn’t have done it without the MEI Commission. “It would be difficult to overstate the role that the commission played in terms of helping us craft the Amazon package,” says Moret. “The questions they asked, the pressure they raised, helped us create something that was better and politically palatable.” 

Michael Farren, a research fellow and economist at GMU’s Mercatus Center, says academic research and experience show that “corporate subsidies don’t drive corporate location decisions.” If that were the case, he continues, Amazon would have taken the $8.5 billion offered by Montgomery County, Md.

Access to a skilled workforce and customer markets and synergies with supply-chain companies all matter more than subsidies to a company’s long-term profitability, he says.

While Amazon coming to Virginia “is generally going to be a good development for Virginia, Virginia did get a bad deal,” asserts Farren, because Amazon very likely would have chosen to locate in Virginia without the subsidies. That’s because Northern Virginia already has the second-largest supply of tech talent in the country. New York has the most.

If companies selected corporate headquarters locations based on which areas offered the most generous terms, Farren says: “It would be a like a farmer who chooses to grow their oranges in Alaska rather than Florida. You could do it, but the expense and the waste would be enormous.”

Crystal City’s revival
Besides transforming the state’s economy, HQ2 is expected to reinvigorate Crystal City, a once-thriving area of federal government office tenants.

Amazon is working with JBG Smith Properties Inc., a Chevy Chase, Md.-based real estate investment trust, as its leasing and development partner. “Our view is that this could change the center of gravity for the whole metro area,” says Matt Kelly, JBG’s CEO. “This is the largest-single employment driver we’ve had in this market in the form of one company coming in. We do expect a coattail effect with additional job growth and corporation relocations that we might attract here.” 

Amazon will lease 500,000 square feet of existing space in a JBG-owned building in Crystal City. The company also plans to buy two development sites owned by the REIT — PenPlace and Metropolitan Park in Pentagon City — for $294 million. Amazon has said that the campus eventually could expand to a total of 8 million square feet.

The Amazon team visited the Arlington site three times, says Kelly, to walk the neighborhoods and to learn about the company’s repositioning strategy for the 150-acre National Landing. “Their observation was that the neighborhood had a great location [right across the Potomac River from D.C.], but it felt dated,” he says.

JBG is moving to change that. The building Amazon will lease on Crystal Drive is getting a new façade, and construction begins soon on an adjacent 130,000-square-foot retail building that will house an Alamo Drafthouse Cinema and a specialty grocery store.

In 2019, Amazon expects to hire 400 people for the new headquarters, with annual salaries of $150,000. 

Tim Helmig, a managing partner in Monday Properties’ D.C. office, says Amazon’s presence will change the narrative of Northern Virginia’s commercial real estate market. “Amazon’s headquarters locating in Arlington is a massive lift for the entire market,” he adds, which has suffered in recent years from the lingering effects of federal budget cuts, including sequestration and the Base Realignment and Closure (BRAC) process.

That desire for a new major employment driver saw the region pull together to land Amazon. For instance, to improve transportation, Virginia, Maryland and the District of Columbia recently agreed to fund nearly $500 million annually to shore up the region’s aging Metro subway system.

The collaborative spirit paid off, says Russ Ramsey, founder and CEO of Ramsey Asset Management and chairman of the Greater Washington Partnership, an alliance of CEOs from the Baltimore, D.C. and Richmond corridor. “If Amazon had gotten the message that this was going to be a divisive environment, they might have made a different decision.” 

Ramsey says businesses in the Washington area are excited about the new growth opportunities promised by the HQ2 project, but there is concern about pressure on wages for some IT jobs. “I do think there are some CEOs who are nervous about competing with Amazon for talent,” he says, “but I think it will make everyone raise their game.”

A winner in a split decision

Now that NoVa is getting half of Amazon Inc.’s second corporate headquarters, state and local economic development officials and commercial real estate leaders are turning their efforts to implementation.  Most people still haven’t come down, though, from the emotional high of winning one of the most sought-after corporate projects of the 21st century.

Victor Hoskins, director of economic development in Arlington, was on the call Nov. 12 with state economic development officials when Amazon informed the group that half of its $5 billion project was coming to Northern Virginia. “It was a huge feeling of exhilaration,” he recalls. “It was like an emotional outburst of ‘yahoo.’ It was amazing.”

The deal, which wasn’t finalized until less than 24 hours before it was announced on Nov. 13, has Amazon investing $2.5 billion in a 4 million-square-foot campus in Arlington County and Alexandria that’s expected to create 25,000 high-paying jobs over 12 years.

The Long Island City area of Queens in New York landed the other half of the much-coveted project that came to be known as Amazon HQ2. The split decision for the project, which promised 50,000 jobs, came to light late in a site-search saga that lasted for more than a year.

The search prompted frenzied speculation and a bidding war among 238 cities across North America.  Northern Virginia’s proposal had included four sites.

When the fateful call came, Hoskins says he was anxious. “This is the largest, single transaction that I have been involved with in my life,” notes the 25-year industry veteran. “I was thinking to myself, ‘I hope this is the good call. Maybe they just want more information.  They had asked for clarifications before. ‘”

Not this time. “Much of the conversation is a blur, but what I remember is that they said, ‘You guys are one of the selected sites, and there’s one other.’ They didn’t tell us who the other site was, and I was fine with that. I was just delighted that they said yes to us.” 

Hoskins says Amazon’s massive new headquarters will be a transformative project for Arlington. “It moves us into the position that we were trying to reach — jobs of the future. Amazon is known for its innovation. It’s taking up a spot in a big place with a high vacancy rate, bringing new energy to that area, bringing in new development. This is the boost that we needed for the region.”

Now that the location has been picked, officials are focusing on making the deal happen. “The real work is about to start.  The real estate, the move in. There’s a lot of work ahead of us,” says Stephanie Landrum, president and CEO of the Alexandria Economic Development Partnership.

Amazon’s headquarters will be housed at National Landing, a newly branded site that includes Crystal City and the eastern portion of Pentagon City in Arlington and the northern piece of Potomac Yard in Alexandria.  

In the first phase of what’s expected to be a 20-year project that could morph into 8 million square feet, the Seattle based e-commerce and cloud-computing giant will lease 500,000 square feet of existing space in Crystal City and Pentagon City from JBG Smith, a Chevy Chase, Md-based commercial real estate firm. According to JBG Smith, Amazon also plans to buy two sites, Pen Place and Met 6, 7, 8 land, for the construction of new buildings.

JBG Smith owns 6.2 million square feet of existing office space and 7.4 million square feet of future development sites in National Landing. Situated across the Potomac River from Washington, D.C., it’s considered one of the region’s best-located, urban mixed-use communities.

In a statement, company CEO Matt Kelly called Amazon’s selection a “game changer” for the region that will “breathe new life into a market that’s still recovering from the headwinds of BRAC, the global financial crisis and sequestration.”

Business and state leaders say the win boosts NoVa’s national profile as an East Coast hub for technology. The project also is prompting strategic public-education investments to turn out more computer-savvy graduates who will benefit not only Amazon but other companies in the years ahead.

In fact, expanding Virginia’s tech talent pipeline in computer science was one of the hallmarks of Virginia’s Amazon proposal. While the company’s headquarters will anchor the north end of National Landing, a $1 billion Virginia Tech Innovation Campus will anchor the south end in Potomac Yard.

Virginia Tech and the state have agreed to pay $250 million each to help fund what would function as a new graduate campus to develop high-tech talent in the region. Much of the rest of the money is expected to come from private philanthropy and industry partnerships.

That project is part of a long-term investment of more than $1 billion in public education by Virginia. That includes up to $710 million to double the annual number of graduates with bachelor’s and master’s degrees in computer science and related fields, ultimately yielding 25,000 to 35,000 additional graduates above current levels during the next two decades. As part of this effort, George Mason University would get $125 million for an expansion of its campus in Arlington.  

The package also includes $25 million for technical education in K-12 schools and $25 million for a higher education internship program.

“Virginia put together a proposal for Amazon that we believe represents a new model of economic development for the 21st century,” Gov. Ralph Northam said in announcing the selection of the Arlington site. “The majority of Virginia’s partnership proposal consists of investments in our education and transportation infrastructure that will bolster the features that make Virginia so attractive: a strong and talented workforce, a stable and competitive business climate, and a world-class higher education system.”  

Incentives
Amazon has said that its investment and job creation should produce more than $3.2 billion in new state general-fund revenues during the next 20 years.

In return, Amazon will receive performance-based direct incentives of $573 million based on the company creating 25,000 jobs with an average pay of more than $150,000 over the next two decades. This includes a workforce cash grant from the commonwealth of up to $550 million based on $22,000 for each job created. Amazon would receive the incentive only if it meets the projected employment goals. This must be approved by the General Assembly.

The company also is slated to receive a cash grant from Arlington of $23 million over 15 years based on the incremental growth of the existing local transient occupancy tax, a tax on hotel rooms. 

To woo Amazon, Virginia also offered $195 million in transportation projects to improve mobility in Northern Virginia. In addition, Arlington and Alexandria plan to fund more than $570 million in transportation projects, including rail connections and transit facilities serving the site.

The quest to land Amazon involved hundreds of people working collaboratively across the state. Stephen Moret, president and CEO of the Virginia Economic Development Partnership, lauded the cooperative efforts, saying it laid the groundwork for Virginia’s successful bid. 

State Sen. Frank Ruff, R-Mecklenburg County, said winning Amazon’s headquarters is “a significant accomplishment for Virginia and its technology sector. The jobs might be in Northern Virginia, but the revenues that will come are going to help us finance education, public safety, mental health, all the important issues.” Ruff is chairman of the General Assembly’s Major Employment and Investment Project Approval Commission, which reviews and approves major state incentive packages.

From the start, Northern Virginia was considered a top contender for HQ2 because of its deep pool of tech talent. According to Cushman & Wakefield’s 2018 Tech Cities report, the metro D.C. region has 327,273 tech workers, second only to New York with 491,419. With an office market of more than 300 million square feet that in recent years has seen higher-than-normal vacancies as a result of the federal budget cuts, it also has enough space to absorb a large headquarters.

Amazon already employs more than 2,000 people in Northern Virginia in technical and corporate jobs, and it has nearly 100 data centers in Loudoun County that are either on the ground, being constructed or in the planning stages.

Plus, Amazon’s founder and CEO Jeff Bezos has ties to the region. He owns The Washington Post and a $23 million property in D.C.’s Kalorama neighborhood that he’s renovating into a home.

In addition, Amazon is locating the East Coast campus for its cloud-computing service, Amazon Web Services, in Fairfax County. While the company is best known as the world’s largest online retailer, the fast-growing cloud-computing division generated $1.6 billion, or 55 percent, of the company’s third-quarter operating income of $3.7 billion.

When Amazon announced its short list of 20 cities in January, Northern Virginia, Washington, D.C., and Montgomery County, Md., all made the list. Jason Miller, CEO of the Greater Washington Partnership, characterized Amazon’s decision as “an incredible win” for the entire region. “It is an important affirmation of our talent, our diversity, and our incredible potential … When one wins, we all win.”

Besides transportation improvements, Arlington and Alexandria also have committed to fund affordable housing, workforce housing and public infrastructure, relying on revenues generated from Amazon’s presence in their communities. Combined, the localities project annual investments of more than $15 million during the next decade, resulting in the creation and preservation of 2,500 to 3,000 units in and around the Crystal City, Pentagon City and Columbia Pike areas and throughout Alexandria.

National Landing
National Landing checks off many requirements Amazon had in a second headquarters, namely an urban site with access to public transit that’s close to an airport. The area is within walking distance of Ronald Reagan Washington National Airport. It has three Metro stations and a commuter rail station. Plus, Crystal City’s proximity to the Pentagon is seen as a plus at a time when Amazon’s cloud computing unit is vying for billion-dollar federal defense and intelligence contracts.

Recently, Arlington approved major upgrades to Crystal City’s commercial center, Crystal Square. JBG Smith plans a new four-story retail building anchored by an Alamo Drafthouse Cinema and a specialty grocery store. The company already has tried to punch up the area’s drab public exteriors by covering some office high-rises with colorful building wraps. Crystal City offers 8.6 million square feet of rentable space and has a vacancy rate of 20 percent.

“The bones are there; it just needs to be built out,” says Sarah Dreyer, regional director of research for Savills Studley’s D.C. office. “There’s an opportunity for whoever comes to craft it on their own.”

Background
Amazon’s site selection sweepstakes began on Sept. 7, 2017. That’s when the company issued a request for proposals (RFP) inviting cities in North America to respond with bids. The deadline for submitting proposals for what came to be called HQ2 was Oct. 19. The process drew proposals from 238 localities across the U.S., Mexico and Canada.

Bezos said at the time that its second headquarters campus would be “a full equal” to the company’s global headquarters campus in Seattle. That campus employs about 45,000 people in 33 buildings and is still growing. According to Amazon, the company has had an indirect impact of $38 billion in additional investment on Seattle’s economy. Yet, some residents there have been critical of the company, saying its presence has driven up housing prices and swamped the city’s infrastructure.

Perhaps because of those sentiments, Amazon may have wanted to reduce its impact with two new headquarters instead of one. In a statement about the two locations, Bezos said, “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come.”

To win the headquarters, some states such as Maryland and New Jersey reportedly each offered economic incentive packages of more than $5 billion. Following the open call, though, the quest to win HQ2 was shrouded in secrecy. Until November’s announcement, most states, including Virginia, refused to disclose what incentive offers had been made for fear of tipping their hand to the competition. Nor would they make public what sites were being offered, in part because state officials and developers had signed nondisclosure agreements with Amazon.

Groups opposed to having Amazon’s second headquarters in the D.C. area didn’t take kindly to being kept in the dark about what was being offered to a company headed by the world’s richest man. Bezos took the top spot this year on Forbes magazine’s annual list of America’s wealthiest people with an estimated net worth of $160 billion.

Two local community groups, Our Revolution Arlington and the Northern Virginia branch of Metro DC Democratic Socialists of America, have been vocal about their opposition to Amazon.  DSA NOVA’s Alex Howe says his group opposes providing incentives to Amazon. “Virginia, Arlington and Alexandria shouldn’t be subsidizing or giving money to the largest corporation in the world.”

Our Revolution Arlington and DSA NOVA are working to make sure Amazon pays its fair share of the deal. That includes providing enough money for infrastructure improvements across the entire region and ensuring enough money for affordable housing.

Some residents also are worried that housing prices will spike, much like what happened in Seattle. While the Northern Virginia suburbs have some of the highest median household incomes in the country, they also boast some of the most expensive home prices. During the third quarter, the median price for a single-family home in Arlington was $855,000, according to a market report from the Long & Foster Cos. The median price for a townhome came in at $565,950, and buyers could expect to pay $360,000 for a condo or co-op.

The Metropolitan Washington Council of Governments says the region needs to add 235,000 housing units by 2025 to respond to expected job growth, even without Amazon.

Hoskins has a rebuttal for the naysayers. “This is an opportunity to transform our region, to diversify our economy and move away from the government concentration. This is what our region needs, and we should embrace it.”

He notes that that Maryland, Virginia and the District of Columbia came up with a package of historic funding earlier this year to shore up the aging Metro system.  “Our region came together to deal with the transportation problem on a scale that they had never done before, and they did that because they saw a company like Amazon interested in our region. We could do the same thing for affordable housing. When you are challenged, you change. That’s when you do your greatest work.”

Northern Virginia lands a big chunk of Amazon’s second corporate headquarters

After a year-long search and frenzied speculation over where Amazon Inc. would locate a second corporate headquarters, Northern Virginia beat out a slew of other contenders Tuesday to land a fat slice of the pie.

In separate announcements, Gov. Ralph Northam and Amazon said the tech giant will invest $2.5 billion to establish a major headquarters in the state that is expected to create more than 25,000 high-paying jobs over 12 years.

The headquarters will be housed at National Landing, a joint site in Arlington County and Potomac Yard in Alexandria.

The announcements ended months of suspense over where Amazon would locate a second, $5 billion headquarters that promised 50,000 high-paying jobs and an 8 million-square-foot campus. Ultimately, the tech giant decided to split the headquarters between Northern Virginia and the Queens neighborhood of Long Island City in New York.

While news of the split decision leaked over the past few days, Tuesday’s announcements brought new details about one of the most highly anticipated corporate location decisions of the 21st century.

“This is a big win for Virginia — I’m proud Amazon recognizes the tremendous assets the commonwealth has to offer and plans to deepen its roots here,” Northam says. “Virginia put together a proposal that we believe represents a new model of economic development for the 21st  century … The majority of Virginia’s partnership proposal consists of investments in our education and transportation infrastructure that will bolster the features that make Virginia so attractive: a strong and talented workforce, a stable and competitive business climate, and a world-class higher education system.”

Amazon said it plans to locate in 4 million square feet in Northern Virginia, with the opportunity to expand to 8 million square feet. The company said its investment and job creation should produce more than $3.2 billion in new state general fund revenues during the next 20 years.

In return, Amazon said it will receive performance-based direct incentives of $573 million based on the company creating 25,000 jobs with an average pay of more than $150,000 in Arlington. This includes a workforce cash grant from the commonwealth of up to $550 million based on $22,000 for each job created. Amazon would receive the incentive only if it creates the projected high-paying jobs. According to state officials, the package comes out to 6 to 1 return on investment over the term of the performance-based agreement.

The company also is slated to receive a cash grant from Arlington of $23 million over 15 years based on the incremental growth of the existing local transient occupancy tax, a tax on hotel rooms.

In its announcement about selecting two cities, Amazon said it can recruit more top talent by being in two locations. “These are fantastic locations that attract a lot of great talent,” the company said.

To woo the much-coveted headquarters, Virginia also offered $195 million in transportation projects to improve mobility in Northern Virginia, including additional entrances to Metro stations at Crystal City and Potomac Yard. In addition, Arlington and Alexandria plan to fund more than $570 million for transportation projects, including rail connections and transit facilities serving the site.

Virginia officials and business leaders celebrated the news, saying Amazon’s presence will make Northern Virginia a top East Coast technology hub and lift Virginia’s national profile as a desirable location among corporate recruiters. “Anyone that moves in 25,000 jobs will move the needle and make this much more of a tech hub. It will be great for this marketplace,” says Bob Kettler, chairman and CEO of Kettler, a commercial real estate development company in McLean.

Holly Sullivan, Amazon director of WW economic development, said in a statement: “We are looking forward to joining the community and are excited to be creating high-paying jobs in Arlington. We believe that northern Virginia is a great place for our teams to keep inventing on behalf of our customers.”

The quest to land Amazon involved hundreds of people working collaboratively across the state. The Virginia Economic Development Partnership (VEDP) collaborated with Arlington County, the city of Alexandria, the General Assembly’s Major Employment and Investment (MEI) Project Approval Commission and local, regional and state partners.

Northern Virginia’s proposal included four sites in the Alexandria, Arlington County, Fairfax County and Loudoun County. National Landing, the winning location, was proposed as a joint partnership between the Alexandria and Arlington.

Stephen Moret, VEDP’s president and CEO, lauded the cooperative efforts, saying that it laid the groundwork for Virginia’s success. “The tech-talent pipeline investments that Gov. Northam and the General Assembly are launching will position communities across the commonwealth for healthier, more diversified economic growth,” he says.

The backbone of the cooperative pitch for Amazon’s headquarters is a long-term strategic investment of more than $1 billion in public higher education institutions to double the annual number of graduates with bachelor’s and master’s degrees in computer science and closely-related fields, ultimately yielding 25,000 to 35,000 additional graduates, above current levels, during the next two decades.

“Winning Amazon’s major new headquarters is a significant accomplishment for Virginia and it’s technology sector,” says Sen. Frank Ruff, R-Mecklenburg County and chairman of the MEI Commission, which reviews and approves major state incentive packages. “The jobs might be in Northern Virginia, but the revenues that will come are going to help us finance education, public safety, mental health, all the important issues,” he says in an interview with Virginia Business.

‘Deal of the century’
“In some ways, it is the deal of the century,” says Bill Quinby, vice chairman and co-regional manager of the Washington, D.C., office of Savills Studley, a commercial real estate services firm with offices across the country. “It’s tech; it’s retail; it’s everything. Consequently, Amazon is going to be as competitive and a bit of a monopoly maker as some of the greats going back a century.”

From the start, Northern Virginia was considered a top contender because of its deep pool of tech talent. According to Cushman & Wakefield’s 2018 Tech Cities report, the metro D.C. region has 327,273 tech workers, second only to New York with 491,419. With an office market of more than 300 million square feet that in recent years has seen higher-than-normal vacancies as a result of the federal government’s sequestration, it also has enough space to absorb a large headquarters.

Amazon already employs more than 2,000 people in Northern Virginia in technical and corporate jobs, and it has nearly 100 data centers in Loudon County that are either on the ground, being constructed or in the planning stages.

Plus, Amazon’s founder and CEO Jeff Bezos has ties to the region. He owns The Washington Post and a $23 million property in D.C.’s Kalorama neighborhood that he’s renovating into a home.

In addition, Amazon is locating its East Coast campus for cloud computing, Amazon Web Services, to Fairfax County. While the company is best known as the world’s largest online retailer, the fast-growing cloud computing division generated $1.6 billion, or 55 percent, of the company’s third-quarter operating income of $3.7 billion.

When Amazon announced its short list of 20 cities in January, Northern Virginia, Washington, D.C., and Montgomery County, Md., all made the list. Jason Miller, CEO of the Greater Washington Partnership, characterized Amazon’s decision as “an incredible win” for the entire region. “It is an important affirmation of our talent, our diversity, and our incredible potential. It also proves that the unprecedented unity among Maryland, the District, and Virginia sent a loud and clear message that we’re all in this together… When one wins, we all win.”

Arlington County Board Chair Katie Cristol said Amazon’s selection of the National Landing site validates the county’s strengths: sustainability, transit-oriented development, affordable housing, and diversity. “The strength of our workforce coupled with our proximity to the nation’s capital makes us an attractive business location,” she said in a statement.

Besides transportation improvements, Arlington and Alexandria also have committed to fund affordable housing, workforce housing and public infrastructure, relying on revenues generated from Amazon's presence in their communities. Combined, the localities project annual investments of more than $15 million over the next decade, resulting in the creation and preservation of 2,500 to 3,000 units in and around the Crystal City, Pentagon City and Columbia Pike areas and throughout Alexandria.

A key player in Amazon’s new home in Northern Virginia is JBG Smith, a real estate investment trust based in Chevy Chase, Md., and the main property owner of National Landing. The site offers more than 12 million square feet of existing office space and 13,000 residential units. It’s a walkable neighborhood that includes Crystal City, the eastern portion of Pentagon City and the northern portion of Potomac Yard. Situated across the Potomac River from Washington, D.C., it's considered one of the region's best-located, urban mixed-use communities. 

JBG Smith controls more than 6.2 million square feet of the project’s development, primarily in Crystal City. Amazon intends to lease existing space and purchase land for development from the company in Crystal City and Pentagon City, while a new Virginia Tech Innovation Campus is expected to be developed in the Alexandria portion of National Landing.

“We are incredibly pleased to partner with Amazon on their new headquarters,” JBG Smith CEO Matt Kelly said in a statement. “It validates our placemaking and repositioning strategy in National Landing and will accelerate our plans to revitalize the area in a dramatic way.”

National Landing

National Landing checks off many requirements Amazon had in a second headquarters; namely an urban site with access to public transit that’s close to an airport. The area is within walking distance of Reagan National Airport. It has three Metro stations and a commuter rail station. Plus, Crystal City’s proximity to the Pentagon is seen as a plus at a time when Amazon’s cloud computing unit is vying for billion-dollar federal defense and intelligence contracts.

Many of the older office buildings in Crystal City originally were built for government agencies and contractors in the 1970s. After 2005, many large government tenants left as part of the Pentagon’s Base Closure and Realignment Commission (BRAC) process.

Recently, Arlington County approved major upgrades to Crystal City’s commercial center, Crystal Square. JBG plans a new four-story retail building anchored by an Alamo Drafthouse Cinema, the addition of a specialty grocery store and a public park. The company already has tried to punch up the area’s drab public exteriors by covering some of the office high-rises with colorful building wraps.

“The bones are there; it just needs to be built out,” says Sarah Dreyer, regional director of research for Savills Studley’s D.C. office. “There’s an opportunity for whoever comes to craft it on their own.”

Amazon says it would need at least a half a million square feet by the end of next year. Crystal City alone offers 8.6 million square feet of rentable space and has a vacancy rate of 20 percent.

JBG became the largest owner of commercial real estate in Crystal City as part of its July 2017 merger with Vornado Realty Trust’s D.C. business.

Dealing primarily with a single landlord “will make Amazon’s life a lot easier,” says Quinby of Savills Studley. “Putting these projects together is not simple. It’s time consuming and very capital intensive.”

Background

Amazon’s site selection sweepstakes began on Sept. 7, 2017. That’s when the company issued a request for proposals (RFP) inviting cities in North America to respond with bids. The deadline for submitting proposals for what came to be called HQ2 was Oct. 19. The process drew proposals from 238 localities across the U.S. and Canada. Amazon CEO and founder Bezos said at the time that its second headquarters campus would be “a full equal” to the company’s global headquarters campus in Seattle.

The Seattle site employs about 45,000 people in 33 buildings and is still growing. According to Amazon, the company has had an indirect impact of $38 billion in additional investment on Seattle’s economy. Yet, some residents there have been critical of the company, saying its presence has driven up housing prices and swamped the city’s infrastructure.

Perhaps because of those sentiments, Amazon decided to reduce its impact with two new headquarters instead of one. “We are excited to build new headquarters in New York City and Northern Virginia,” Bezos said in a statement. “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come.”

To win the headquarters, some states such as Maryland and New Jersey reportedly each offered economic incentive packages of more than $5 billion. Following the open call, though, the quest to win HQ2 was shrouded in secrecy. Until Tuesday’ s announcement most states, including Virginia, refused to disclose what taxpayer incentive offers had been made for fear of tipping their hand to the competition. Nor would they make public what sites were being offered, in part because state officials and developers had signed nondisclosure agreements with Amazon.

According to Quinby of Savills Studley, who has been involved with several large corporate headquarter locations during his 40-year career, secrecy is typical on mega deals.

“To the public, I’m sure it does look like Amazon was the big bad wolf coming to town, and now it’s changing the rules,” he says since the company opted later in the game to split the headquarters.

“Yet, it wasn’t an uncommon approach. What made it different was because of who it was and the sheer size.”

Still, groups opposed to having Amazon’s second headquarters in the D.C. area didn’t take kindly to being kept in the dark about what was being offered to a company headed by one of the world’s richest men. Bezos took the top spot this year on Forbes magazine’s annual list of America’s wealthiest people with an estimated net worth of $160 billion.

Two local community groups, Our Revolution Arlington and the Northern Virginia branch of Metro DC Democratic Socialists of America, have been vocal about their opposition to Amazon locating its headquarters in the area. DSA NOVA’s Alex Howe says he’s glad that Virginia’s not offering as much money as Maryland planned to if it landed the deal. However, his group still opposes providing incentives to Amazon.

“Virginia, Arlington and Alexandria shouldn’t be subsidizing or giving money to the largest corporation in the world,” Howe says.

Our Revolution Arlington and DSA NOVA are working to make sure Amazon pays its fair share of the deal. That includes providing enough money for infrastructure improvements across the entire region and ensuring enough money for affordable housing in the area. The groups are hosting a town hall in December where members of the community can ask questions and express their concerns.

Some residents also are worried that housing prices will spike, much like what happened in Seattle. While the Northern Virginia suburbs have some of the highest median household incomes in the country, they also have some of the most expensive home prices. During the third quarter, the median price for a single-family home in Arlington was $855,000, according to a market report from the Long & Foster Cos. The median price for a townhome came in at $565,950, and buyers could expect to pay $360,000 for a condo or coop.

Amazon’s announcement should give the Northern Virginia real estate market a shot in the arm, which has plateaued recently despite a strong economy and tight labor supply, says Nick Ron, CEO of House Buyers of America Inc., based in Chantilly.

He also expects new housing to create pressure on home prices. “There’s going to be a supply problem,” said Ron. “It’s really hard to build housing for 25,000 people quickly.”

Land prices also have been increasing, he adds, which makes construction of affordable housing nearly impossible. “When you’re trying to build affordable housing, it’s really hard when land prices are high.”

The Metropolitan Washington Council of Governments says the region needs to add 235,000 housing units by 2025 to respond to expected job growth, even without Amazon.

An unconventional path

Last book read: “Start with Humility,” Merwyn A. Hayes and Michael D. Comer
Favorite movie: “National Lampoon’s Christmas Vacation”
Favorite app: Google Maps
Hobbies: Hunting and fishing
Family: Married with three daughters
On the bucket list: Taking his family to the dude ranch in Wyoming where he worked.

By Matt Anderson’s senior year at Hampden-Sydney College, the political science major was dead set on a legal career until a lawyer gave him this advice: “Take some time off and do what you want to do, because you’re never going to get the chance to do it again.”

Following that suggestion, Anderson and three of his classmates headed for Wyoming to work at a dude ranch. Over the course of two summers, Anderson worked as a shooting instructor (skeet, trap and sporting clays) for A Bar A Ranch and later as a fly-fishing guide, a natural fit since Anderson has been fishing since childhood.

After the second summer ended, “I traveled around the world for 60 days and came home broke,” he says.

Looking back, Anderson doesn’t regret his hiatus. “It was a real-world, maturing process,” he recalls.

After his return to Richmond, Anderson thought about going to New York to look for a job, because he had friends there. Then a neighbor, a friend of his father, commercial real estate broker Marc Allocca, invited Anderson to visit his place of employment, CBRE’s office in Richmond. Anderson accepted and toured the office, talking with Allocca and another commercial real estate broker, Trib Sutton, who told him about the work. Anderson liked the fact that brokers weren’t required to sit at a desk all day. They were expected to be out, visiting sites and talking with people.

With no background or experience in commercial real estate, he was hired as a junior agent, where he began to learn the business from the ground up. 

Fast-forward 12 years. Anderson, now 36, is a senior vice president and partner at CBRE|Richmond. According to CBRE, he has negotiated more than 600 transactions, valued at over $325 million, since joining the firm in 2006. These deals have involved government agencies, national corporations, REITs, medical practices, and local businesses and developers.

The key to his success, says Sutton, CBRE|Richmond’s director of brokerage services, is organization. “He works smart. Time is his most precious resource. He sticks to a schedule and a routine. Matt is the kind of guy who will get through most of his to-do list.” 

To stay on top of his game, Anderson is an early riser. On a typical day, he’s up by 4 a.m. enjoying some quiet time before arriving at the office. “Some mornings I’ll run. Other mornings, I walk the dogs, or I’ll read. This is my time to get ready for the day.”  

Anderson is a big fan of nonfiction, preferring stories about survival. “To me it’s inspiring and motivational to hear how other people have excelled — from running ultra-marathons to building some of the largest, most successful businesses in the world.” 

One of his most challenging real estate deals was the recent sale of the Alleghany Warehouse Co. building in Richmond, an old industrial structure that had been used for tobacco storage by nearby Philip Morris USA.

The 2.7-million-square-foot property had a prime location on 109 acres next to Interstate 95, but a buyer was going to have to invest in demolition to reuse the site.  

Richmond-based Hourigan Development LLC bought the property for $8.5 million. Hourigan plans to develop the site into 1.5 million square feet of built-to-suit, high-bay warehousing units that will be known as Deepwater Industrial Park because of its proximity to the Richmond Marine Terminal. 

“The creative part of that deal, “says Anderson, “was telling the story of what the property could be and getting a buyer on board with that vision.”

During a recent awards banquet, the Greater Richmond Association for Commercial Real Estate recognized the transaction as Best Industrial Sale of 2017. In June, Anderson was named a top industrial leasing broker by the CoStar Power Broker Awards, an annual program that celebrates the top commercial real estate firms and brokers in the U.S. and Canada.  

While technology has made reams of information about properties available online, Anderson says real estate “is still a relationship business based on trust.”

That’s why he recently told a rising senior from the University of Richmond — whose parents wanted him to be a summer intern at a real estate company — to stick with his job as a golf caddie.

“You get so much one-on-one interaction with a variety of personalities whether you’re teaching someone how to shoot a shotgun, cast a fly or help them with their golf game,” he says.  In his opinion, honing these people skills is a good way to prepare for a career in real estate.

SAIC appoints two senior executives

SAIC has named two new senior vice presidents.

Christopher Donaghey has been named senior vice president of corporate development, and Tom Eldridge has been named senior vice president of strategic development and communications.

Donaghey will be responsible for executing the company’s mergers and acquisitions (M&A) strategy.

Previously, Donaghey was senior vice president of finance for SAIC’s operations and provided strategic leadership and business guidance to the organization.

Prior to joining SAIC, Donaghey was vice president of corporate strategy and development for KeyW Corp., a national security solutions company. He also was a senior research analyst for SunTrust Robinson Humphrey Capital Markets.

Donaghey earned his bachelor’s degree in mechanical engineering from Texas Tech University and served as an officer in the U.S. Navy.

Eldridge will be responsible for market intelligence, including technology, funding, and policy trends; strategy support and business development; sales enablement with related tools and processes; internal and external communications, marketing communications, and corporate social responsibility.

Currently, Eldridge leads SAIC’s Government Affairs office, where he has overseen several strategic initiatives including establishing the Technology Integration Gateway facility in Cookeville, Tennessee, and overseeing the evolution of the company’s strategy, known as Ingenuity 2025.

Eldridge joined SAIC in 2009 following jobs in the federal government, which included serving on the staff of the National Security Council, and as staff director for the U.S. Special Envoy for Middle East Regional Security at the U.S. Department of State.

He also served on the Commission on the National Guard and Reserves, was a senior counsel for the U.S. Senate Homeland Security and Government Affairs Committee, and was counsel for the National Commission on Terrorist Attacks Upon the United States (“9/11 Commission”). Eldridge also spent more than a decade serving as a federal and county prosecutor.

Eldridge earned his bachelor’s degree from Darthmouth College, a law degree from New York University, and an MBA from the University of Maryland.

Newport News Shipbuilding partners with the state to fill jobs at shipyard

Newport News Shipbuilding said Tuesday it is partnering with the state to hire almost 7,000 people over five years.

That will include the creation of 2,000 jobs. These new hires will support Newport News Shipbuilding’s contract to help build the Columbia- and Virginia-class submarines; the complex overhaul and fueling of the Nimitz-class aircraft carriers and the construction of Ford-class aircraft carriers. Newport News Shipbuilding also plans to retrain employees and invest nearly $1 billion in the company’s facilities and technology infrastructure.

This new partnership will be led by Secretary of Commerce and Trade Brian Ball. This partnership will be aided by various state agencies, including the Virginia Economic Development Partnership, the Virginia Community College System, the Virginia Employment Commission and the Virginia Office of Veterans and Defense Affairs.

Newport News Shipbuilding is the sole builder of U.S. Navy aircraft carriers and one of two providers of U.S. Navy submarines. The company, a division of Huntington Ingalls Industries, has $4 billion in revenues and more than 22,000 employees.

Virginia state employees to receive paid leave for new parents

State employees who are new parents will be eligible for up to eight weeks of paid leave, according to a new executive order signed by Gov. Ralph Northam on Tuesday.

The executive order authorizes paid parental leave for employees of executive branch state agencies. The new benefit provides up to eight weeks of paid parental leave to enable employees to bond with a newborn, or to care for a child under 18 that has been newly-placed for adoption, foster or custodial care. The paid leave may be used in combination with other leave benefits and will apply to both parents if both are eligible state employees.

Northam also signed a second executive order, which will create the Advisory Commission on Quality Child Care to study child care and early learning options for state employees with young children. The commission will study the feasibility of providing evidence-based early care and learning programs for young children of state employees working on or around Capitol Square in Richmond.

The commission will also explore the creation of similar programs for state workers in other parts of the commonwealth, evaluate benefits related to supporting the early care and learning of employees’ children, and provide recommendations on policies that will help Virginia attract and retain talented state employees with young children.

“The steps we are taking today will support the growth of our children, help parents in managing a work-life balance, contribute to a healthier and more productive workforce, and make the government of this commonwealth an even more attractive place to work,” Northam said in a statement. “Paid parental leave and quality childcare options are critical to the health and wellbeing of children and their parents. Through these actions we are hoping to set an example for other government and private sector employers and send a message to our fellow Virginians and people across the country about what kind of state we are working to build.”

Custom Ink adds seven new retail locations in Northern Virginia

Online custom apparel company Custom Ink said Monday it has opened seven new locations in Northern Virginia. The Fairfax County-based firm also announced plans to open a new store in Alexandria this summer.

The stores will allow customers to get advice and design assistance in creating custom apparel, as well as the ability to see, touch, and compare clothing options.

A new standalone store at 11130-I South Lakes Drive in Reston also will offer in-store, same-day digital printing for select products. The upcoming Alexandria store will be a standalone shop.

The other six locations — in Gainesville, Leesburg, Manassas, Sterling, Springfield, and Woodbridge — are located in Michaels’ arts and crafts stores.

“Both of our companies are known for helping customers turn their creative visions into personalized art and products, and Custom Ink’s new spaces in six of our Virginia stores will offer an easy and innovative way to discover and create custom clothing and accessories,” Steve Carlotti, the company’s executive vice president of marketing, said in a statement.

The new locations join Custom Ink’s existing stores in Charlottesville, Fairfax, Fredericksburg and Richmond, as well as other locations in Texas and Nevada.

Dominion Outsourcing LLC expanding in Henrico County

Dominion Outsourcing LLC, a provider of outsourced services for the health-care industry, is investing $370,000 to expand its customer engagement center in Henrico County. The project is expected to create 190 jobs.

The Glen Allen-based company’s services include providing workers to perform insurance verification and other customer-service tasks.

Dominion Outsourcing is an industry-leading outsource provider specializing in the medical and contact center industry. The company specializes in a host of health care-related business operations, and its range of services and expertise has served the health care and medical supply industry for many years.


“We looked at expanding into numerous other cities and based on the economic conditions of Henrico County, I am excited to continue our expansion in the Old Dominion,” Casey Thomas, chief operating officer of Dominion Outsourcing, said in a statement.


The Virginia Economic Development Partnership (VEDP) will support Dominion Outsourcing’s new job creation through its Virginia Jobs Investment Program, which provides consulting and funding to companies creating for employee training activities.