Changes in regional and national market conditions combined with an unwelcoming political environment in the City of Falls Church have caused two major developers to withdraw large-scale and large revenue-generating projects in the City over the summer. A third, just outside the City, is now on hold.
The News-Press has learned that Madison Homes, which had a contract on the downtown W. Broad St. property that is currently the site of the Stratford Motel, walked away from a work session with the Falls Church City Council earlier this year and spiked a proposal it crafted for a dense residential project there, along with the provisional deal for purchase of the land. The Council had made it clear it was unhappy with the company’s plan.
In a second case, smarting from a more recent rebuff by the City Council, the Hekemian Company, another major developer with impeccable credentials, is now drawing up plans for a scaled back, “by right” use of property it has leased on N. Washington St. “By right” means that it would require no significant approvals from the City to build it, and therefore would also require no proffers from the developer to the City. It would also yield significantly less in annual tax revenues to the City.
A third case, involving property just outside the Falls Church city limits, reports are that proposed major mixed-use project, not yet under construction just over the border in Arlington, has been put on ice. That project promised to bring significant new retail revenues to Falls Church from its occupants. After sending out hundreds of invitations to prospective condo buyers to an introductory event at a hotel in Arlington, the meeting was abruptly cancelled earlier this month.
The developer in that case has already purchased the property, and according to sources, is not likely to redraw the condo project for rentals. It will probably have to sit on the property until the condo market rebounds or sell it.
“The reality is that unless a footing is already in the ground, there is simply no financing for anything involving a condominium now,” one major developer told the News-Press this week. “You can’t borrow a dime to build a condo now,” another said.
Chris Bell, a senior vice president at Hekemian, said that after the City Council voted 4-3 last month to cut off further deliberations on its mixed-use rental proposal on the site of the former Pearson Funeral Home, “the people who write the checks for us reviewed all the transcripts from the City Council meeting and said, in effect, we’re not going to waste any more time on this.”
“We’ve put a lot of time and money into this already, and we’re now exploring some keen interest from pad retailers we could put on the site by right,” he said.
“The problem is that you either have to invest $35 million in a major project, as we’d proposed doing, or the only other way we can achieve a return on our investment is with a $2 million pad,” he said.
In the latter case, rather than investing in a major construction effort, all Hekemian has to do, in effect, is pour the concrete for a pad. The retailer, whether a gas station or drug store, as has been suggested, does the rest.
The return is far less, but so is the cost. It can work, financially, Bell indicated. The big losers are the City, which will enjoy a fraction of the tax revenues and none of the some $3 million in cash and other proffers Hekemian had promised, and the neighborhood, which will live with a likely-unattractive, vehicle-oriented retailer next door with lots of concrete cover for parking.
The only alternative to this now, Bell said, would be a guarantee of a fresh, smooth-sailing “special exception” application for a variation on their original proposal. He said Hekemian would announce its final plans for the site by the end of September.
In the case of Madison Homes, the prestigious company took a tentative contract on three properties, including the Stratford Motel, the Christian Science Reading Room property and a Park Avenue house converted into a law office, and came before the City Council in January with a plan for an eight-story 168 condo structure, ground floor retail and a separate, six-story office building.
It was swiftly rebuffed by all Council members for being “too dense” and “massive.”