Pandemic Slows West End Project Timeline

F.C. COUNCILMEMBER Ross litkenhous (lower right) talks with one of the West End developers, Robin Bettarel (top right) about alternatives they’ve explored to the project’s design plan (Screenshot: News-Press)

The West End Gateway Partners, who over the last two years have come to contract with the City of Falls Church to undertake an ambitious 10-acre mixed use development at the City’s west end, has requested major revisions in their plans under conditions of the global Covid-19 pandemic.

A special public town hall to outline the changes is scheduled to be held online this Thursday, Dec. 17 at noon.

The Council held two lengthy closed sessions on the subject prior to Monday’s public announcement, which was made in the interest of transparency.

The changes involve a reduction in the partnership’s annual capital ground base payments to the City from $7 million to $4.3 million, and with ground rent increases, a net $3.2 million loss to the City and a six-month delay in its implementation.

One major concern by the Council was the group’s commitment to the demolition of the old high school on the site by May 29, 2021, and the developers — representatives of EYA and Hoffman — provided assurances that it would happen by that target date.

Otherwise, the developers assured the City Council of its ongoing commitment to the overall project, although some modifications in the mix might reflect changes in the economic trends post-Covid, such as a glut of office space. They said they’ve already sunk $13 million into the project and will have invested another $9 million in the next year as evidence they are committed to completing the project.

It was also noted by City Manager Wyatt Shields that the changes will not impact the next fiscal year’s expected revenues and the residential real estate tax rate.

A final decision by the Council on whether to agree to these modifications will be made on Jan. 11, 2021.

Thursday’s scheduled town hall, set up with a minimum of advanced notice but in order to precede the onset of full holiday season, will be online but open to the public and there will be a question-and-answer period with City staff and F.C. Gateway Partners representatives.

Following the changes proposed at this Monday’s Council meeting and today’s town hall, the Council will hold a public hearing on Jan. 11 and take up the matter for a final vote on the proposed non-binding new Memorandum of Understanding.

In Monday’s powerpoint presentation, the developers outlined what has not changed with the modifications and what will. Of the unchanged components, the hotel, office, civic space, senior housing, condos and apartments remain in the ratios discussed in the site place, and the developers will carry out the demolition of the high school by May 29.

What has changed in the request for modifications include the delivery date (with the exception of the demolition) by about six months, a reduction in capitalized ground lease payments, and increase in ground rent payments over a 99 year term, and new and/or revised profit share provisions.

The capitalized lease payments will be reduced from $7 million to $4.5 million, totaling a reduction from $34.5 million to $25.5 million.

Ground rent payments will start earlier and escalate at a higher rate, with $200,000 in payments starting in 2025 instead of 2029, and escalating at 2.75 percent instead of 2.0 percent, increasing by $25,000 in 2031 and increasing nominal value to $45.7 million.

Minus the profit sharing provisions, it results in a $3.2 million decrease in present value against a nominal value increase of $35.8 million.

Profit share provisions include a 30 percent City participation in net condo sales over a $750 net square foot average, currently estimated at $2.25 million, 50 percent of “Land Lift” at the closing of the construction loan (increased from 25 percent in the Comprehensive Agreement), elimination of a .50 percent capital administration fee for leasehold elements, and a .25 capital administration fee kept on the condos.

Washington Gas or the City will cover the $2 million cost of the Washington Gas Regulator Station at the site, and the pilot tax abatement program will remain unchanged.

The next payment by the developers to the City will be due Dec. 31, 2021.
With these modifications, the City will be able to cover the debt service for the high school as planned and will maintain adequate capital reserves, as previously planned.

Between Fiscal Year 2020 and 2030, the reserves will actually grow from $16,7649,121 to $21,723,057.

In addition to the completion of the demolition and rough grading of the old high school property by May 29, 2021, the terms include the completion of the negotiation of agreements with the grocer, office developer and senior component developer on or before March 1, 2021.

The identity of the grocer long proposed for the corner of Haycock and Route 7 will be revealed to the Council by next week.