Late Friday, City of Falls Church staff posted a proposed modification to the terms initially agreed to in November for the West Falls Church Economic Development project with the project’s tentative bid winners, the team of EYA, PN Hoffman and Regency. The initial terms, including a $44.5 million price for a 99-year lease on the 10.3-acre site.
The F.C. City Council is being asked to approve the modifications beginning at its work session this coming Monday.
The changes, according to the City’s document, “Will help ensure that the development can be financed. As a successful project is a benefit to the City, City staff and the Council have worked to ensure that these changes not only improve financeability, but also improve the City’s financial position and the proposed development.”
Five modifications, hammered out in five lengthy closed sessions held by the City Council during the last month, call for the following: 1. a real estate tax deferral offset by a ground rent increase, 2. an increase in residential density allowing an additional 50,000 square feet in senior housing and an additional 100,000 square feet in residential density of either condominiums or studio and one bedroom apartments, 3. profit sharing providing the City with 25 percent of any increase in land value during the financing period prior to the commencement of construction of Phase 1, 4. the establishment of a capital event fee of .25 percent applied to the sale of condos in the project, and 5. the requirement of a $1.5 million security deposit.
A deferral of real estate taxes during the initial construction and stabilization period will be paid back through an increase in ground lease payments starting in 2029 and continuing for the remainder of the 99-year lease, according to the modification terms. Over the deferral period, the developers are projected to pay $12 million in real estate taxes, $4.5 million less than would otherwise be due over the period. To compensate for this deferral, there will be an increase in the ground rent of $200,000 per year escalating at two percent per year for the remainder of the 99 year lease. This stream of additional payments has a nominal value of $48 million and a present value of $7.1 million, according to the proposed modification terms.