But Requires Optimism from Its Lenders
The Akridge Company, the highly-regarded Washington, D.C., development company, came to City Hall in Falls Church this week confirming its eagerness to build a large, mixed-use project in the teeth of the current housing downturn, and cautiously optimistic that it can sell 150 condominiums.
But for now, Akridge representatives told a joint work session of the Falls Church City Council and Planning Commission they remain unsure whether the residential units would be sold or rented.
Akridge’s Mike Gill and Joe Svatos noted that the proximity to the East Falls Church Metro station of their so-called “Gateway” project, right on the Falls Church City side of the border with Arlington on N. Washington St., could make it a winner for condo sales in a market where condos, generally, are still not moving.
The project was first presented to the City two summers ago, and went through some significant revisions before awaiting its turn to come to bat before City officials following their lengthy review and decision-making efforts on the Atlantic Realty City Center project and the Jefferson One Hilton Garden Inn.
Among the modifications, the height of three predominantly residential buildings was lowered from seven to five levels, to accommodate neighborhoods behind the site, and the proportion of space dedicated to commercial and retail drew to 31%. The total number of residential units remains the same, despite lesser space, by making each unit 230 square feet smaller than originally planned. The office building will be six stories.
But, Svatos pointed out, Akridge doesn’t want to make a decision on condos or rentals before it absolutely has to.
But for the City Council, there is quite a difference, in terms of anticipated tax yield to the City, between a condo or a rental. If the project is condos, then, according the City’s Economic Development chief Rick Goff, the net annual tax yield would be about $619,991. But if they’re all rentals, that number would shrink to $369,665.
The differential is almost equal to a penny on the residential real estate tax rate, but either number is significantly above the $101,499 annually derived from the current three older office buildings on the site.
But the question of whether the residential units are condos or rentals is really not up to Akridge, Svatos explained to the News-Press, in comments following the work session.
“There is simply no financing for condos right now,” he said, referring to current policy of the major New York lending institutions. “The condo market is so dead, that there’s not a dime available for it.”
Clearly, Akridge is hoping that mood might begin to change. The fact that the Westlee, a large condo project right next door to where the “Gateway” will go, is sold out could be a signal.
Just like the “Gateway,” it is the Westlee’s proximity to the East Falls Church Metro that is a big part of its special appeal to its tenants, especially as gas prices top $4 a gallon. The walk to the station is less than five minutes.
Svatos said that the New York lenders have not yet shown any signs of differentiating between locations where new condo projects might stand a far better chance of success, even in the current market, and others which are less likely to enjoy an early rebound.
For the time being, they’re only sensitive to the difference between for-sale condos and rentals, he said.
So, while the City Council may decide it wants to “get tough” and insist that Akridge commit to condos on the site, it will not be that simple. Apparently, the wider real estate market is going to have to move first, then the lenders will move, then the developers, then the local jurisdictions.
In the “Gateway” case, it would be ideal if the developer were able to move first, proving it can move the market (at least in this location), and thus the lenders. But the developer simply can’t move without the lender.
Svatos conceded that if Akridge built rentals at the “Gateway,” converting them to condos in a few years would be “virtually impossible.”
Meanwhile, builders of The Easton, a half-block into Arlington along N. Washington, are beginning construction there after a significant delay when it was determined that project would not fly as condos. It’s been revamped for all rentals, and with approval from Arlington County, is now ready to go.
Following another work session on Aug. 4, the Council will take up the Akridge proposal for a preliminary first reading at its only official business meeting in August, on Aug. 11. Second reading, or a vote on final approval, will not come before Oct. 27, giving plenty of opportunity for review after Labor Day.