Amendments To West Falls Church Project Approved By Council

FALLS CHURCH, VA — On Monday, Falls Church City Council voted 6-1 amendments to the agreement with the developers of the West Falls Church mixed-use project. Council member David Snyder voted against the proposal.

Falls Church Gateway Partners, which has a comprehensive agreement with the city to redevelop the nearly 10-acre old George Mason High School site, requested the amendments to the agreement due to COVID-19 pandemic's impact on commercial real estate markets. The amendments had been presented to City Council on Dec. 14 and include delaying the project delivery date by approximately six months.

"The amendment arises out of needs by the developer in trying to finance the project in an environment where financing for commercial real estate, for the hospitality sector, retail sector, office sectors, is particularly difficult," City Manager Wyatt Shields told City Council on Monday.

Shields said the biggest impact is the reduction of the capitalized ground lease payments over four years, bringing the total down from $34.5 million to $25.5 million. The first payment of $6.5 million has already been received by the city and is going toward debt service for the new George Mason High School. The next payments, in fiscal years 2022, 2023, 2024 and 2025, will be $4.5 million. In fiscal year 2026, there will be a $1 million payment, and ground rent lease payments would begin.

Under the amended agreement, ground rent lease payments would start earlier and escalate at a higher rate. The $200,000 ground rent payment starts in 2025 instead of 2029 and escalates at 2.75 percent instead of 2 percent.

The developer has a target date of closing on the ground lease on Dec. 31, 2021, but they are able to extend that up to April 30, 2022. City Attorney Carol McCoskrie clarified that the closing is expected to happen on the Dec. 31 date, but the senior housing developer may not be involved at that time.

"That closing is when we basically hand over control of the acreage to the development team," said Shields. "Before that happens however the developer needs to get all their financing in place, and with that financing comes the completion guarantees and the other guarantees that make it clear to the city that we're getting the development with the economic vibrancy and the mix of uses that we signed up for."

Other key components of the agreement have not changed. The ratios of the hotel, office space, civic space, senior housing, condos and apartments in the mixed-use development will stay the same. The demolition of the old George Mason High School in what Shields called the "trapezoid" area will be completed by May 29, 2021, and the remainder will be completed by the fall. In addition, the developer must complete transactional agreements with the grocer, office developer and senior component developer by March 1, 2021.

Evan Goldman, vice president of acquisition and development at EYA, one of the developers of Falls Church Gateway Partners, told City Council that while the retail market is changing, developments should have a minimum amount of retail to create a sense of place. He expects services that people need to obtain in person like restaurants and coffee shops to survive when the pandemic is over.

"The retail world has generally been successful at reinventing itself time and time again," said Goldman. "Retail will not look like it looks today certainly in the future, but it's one of the most entrepreneurial and creative sectors of any industry, and so there will be reinvention, there will be different types of places, different types of retail services."

Before City Council voted on the amendments, Snyder said he viewed the amendments as monetary and time giveaways to the developer and a shift of "significant risk to the city certainly over the short to medium term, if not forever." The council member said he isn't confident that the developer won't again seek to revise the agreement and shift more risk to the city.