Arlington Signs Letter Of Intent To Extend Courthouse Area Leases

ARLINGTON, VA — Arlington County and developer JBG Smith have entered into a letter of intent to restructure the ground leases of two buildings on Clarendon Boulevard and the AMC Theatres parcel in the Courthouse Plaza complex.

The county owns the land under the three properties while JBG Smith owns the buildings. The letter of intent states the county will provide JBG Smith the option to extend the leases from the current expiration in 2062 to 2119.

JBG Smith approached the county before the pandemic about restructuring the leases.

Under the current leases, annual rent paid by JBG Smith to the county has varied significantly, from $100,000 to $3.9 million. The new agreement would modify the annual lease payments to fixed rates and will include a one-time lump sum of $18 million paid by JBG Smith upon execution of the leases.

“This revamped deal is great news for county taxpayers,” Arlington County Manager Mark Schwartz said Friday in a statement. “These terms will bring in additional revenue over the term of the extension. It also allows us to stay in the prime Courthouse location, which has been home to County Government operations since 1989.”

The current leases will be restructured into three ground leases for 2100/2200 Clarendon Boulevard, the theater building and 2300 Clarendon Boulevard.

JBG Smith would make a single $18 million payment at completion of the agreement. The funding was included in the county manager’s proposed fiscal year 2022 budget and primarily was used as a contingent to address COVID-19 economic impacts in the next fiscal year.

The $18 million payment would compensate the county for the extension of the lease terms and for the difference between the rent under the restructured leases and the anticipated rent under the existing leases. The existing rent is based on the properties’ net income and is highly variable. The new rent will be fixed but lower in the long run.

Rent would be $3.5 million per year, plus 2-percent annual escalations and 20-year inflation adjustments not to exceed 10 percent. For the first three years, though, the rent will be reduced to $2.5 million.