Request for Information Response - Virginia Department … · Request for Information Response ......

Request for Information ResponseDevelopment of Air Rights at the Rosslyn and East Falls Church Metro Station Areas September 30, 2013

Air rightS Development informAtion | tAble of ContentS

1. Point of Contact

2. Firm Backgrounds: Akridge and Jefferson Apartment Group

3. Case Studies

A. Burnham Place

B. Gallery Place

C. Half Street

4. Request for Information Response

Table of Contents

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1Point of Contact

1 Point of Contact

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Air rightS Development informAtion | point of ContACt

1. Point of Contact Sarah KnutsonVice President Akridge 601 Thirteenth Street, NW Suite 300 North Washington, DC 20009 202.207.3914 [email protected]

2Firm BackgroundsAkridge and Jefferson Apartment Group

2 Firm B

ackgrounds

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Air rightS Development informAtion | 2. firm bACkgrounDS

AKRIDGE

Akridge’s 39-year track record represents the solid performance of a superior, full-service real estate group. As one of the strongest real estate service firms in the mid-Atlantic region, Akridge has projects that total more than 17.5 million square feet with a value of $3.5 billion.

Regional Leader Akridge is recognized as a leading regional commercial real estate services firm that has produced Class A office, mixed-use and industrial/flex space throughout the region. Defined by its stability and innovative experience, Akridge is a full service firm with more than 130 employees providing leadership and management in acquisition, development, construction management, asset and property management, leasing, marketing and consulting services, and third-party project management.

Depth of ExperienceAkridge has consistently generated value for our Clients — both investors and owner-occupants. Akridge’s experience encompasses project management for new development and re-development of suburban and urban office, mixed-use, industrial/flex, and retail space. Akridge has a successful history of collaboration with a multitude of local real estate professionals, including developers, brokers, architects, contractors, and property owners. Akridge’s proven track record is the successful result of unparalleled credibility,

comprehensive knowledge of the Washington metropolitan market, and in-depth development and transaction expertise.

Creative SolutionsAkridge takes pride in its entrepreneurial and innovative spirit and is well known for pioneering innovative solutions to development challenges that thwarted others. From the successful completion of a highly-secured suburban office complex with a tight time frame and the sensitivities that followed September 11, 2001, to innovative financing requiring a change in Federal legislation, Akridge embraces complex transactions and deploys this capability to execute deals and create value for Clients. Akridge was first to: use the “Woodies Act” allowing air rights development; conduct annual indoor air quality testing in office buildings; initiate a large-scale mixed-use development over above-ground rail transportation; and install a neutral host in-building wireless system in a multi-Client building.

Akridge is: Service, Innovation, and Results.

2. Firm Backgrounds Akridge and Jefferson Apartment Group

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#1Best Place to Work in

Greater Washington, selected by the Washington Business Journal and a Great Place

to Work according to Washingtonian magazine

#2Healthiest Workplace

in Greater Washington, selected by the Washington

Business Journal

11Best Customer Service awards

from CEL & Associates, Inc., a national recognition

for Client satisfaction in property management among comparably-sized companies

Akridge at a Glance

39Years in the business

17.5Million square feet developed

7Office Building of the Year awards, A Building Owners and Managers

Association (BOMA) award based on management

26Class A office buildings in the Washington, DC, area

9Headquarters buildings

developed

130Professional staff members

98%Average occupancy

rate over past decade

30+Federal/state agencies and

associations with whom Akridge has worked

3.5Million square foot

management portfolio

13LEED accredited professionals

and associates

16LEED certified buildings

16ENERGY STAR-qualified

buildings

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JEFFERSon APARTMEnT GRouP

Jefferson Apartment Group (“JAG”) is Akridge’s strategic partner, specializing in multifamily real estate investments. Together, the Akridge and JAG team has extensive experience executing complex commercial real estate developments in the Washington, DC, metropolitan area.

Services & CapabilitiesJAG is a full-service real estate firm focused on multifamily and mixed-use real estate opportunities through acquisition, development, construction and property management services. The company specializes in urban, transit-oriented assets located in high barrier-to-entry markets on the East Coast. JAG’s management team has over 80 years of combined experience leading nationally recognized multi-family organizations. The team leverages in-depth market research, proven business practices and local entrepreneurial knowledge to create value and maximize returns for investors, partners and clients.

JAG’s partners have been responsible for the acquisition or development of over 18,000 units with a value of more than $3 billion in 10 states along the East Coast. Based in McLean, Virginia, the company has experienced, professional team members focused on the following:

Local Market Knowledge. Macro-economic and regional trends are not enough. A thorough understanding of the submarket for a particular property is necessary to craft sound strategies.

Understanding and Management of the Physical Asset. It is extremely important to understand the physical asset under control. The creation of operating and capital budgets is important in preserving and increasing the value of the asset while maintaining control of investment dollars.

Understanding Residents’ Needs. It has never been more important to understand the needs of residents and to make sure satisfaction, retention and occupancy remain high.

Integration. The ability to control and align as many real estate functions as possible is crucial in order to fully understand the risks and opportunities at hand.

Integrated advisory services include:

+ Asset management

+ Property management

+ Development and construction management

+ Disposition

These disciplines serve to provide:

+ Evaluation and analysis of the property or portfolio

+ Creation of a strategic plan that maximizes the value of the real estate and achieves key goals

+ Implementation and execution of the strategic plan

+ Facilitation of all processes in order to reach your stated goals

3Case Studies

3 Case Studies

3.ACase Study: Burnham Place

3.A Case Study: B

urnham Place – A

ir Rights Project

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Air rightS Development informAtion | 3.A CASe StuDy: burnhAm plACe – Air rightS projeCt

3.A Case Study: Burnham Place – Air Rights Project

Burnham place is an example of Akridge’s hands-on experience with complex Air Rights projects.

Burnham Place is a transformative 3 million square foot mixed-use development that will create a new urban neighborhood in downtown Washington, DC. Similar to the I-66 Air Rights over a federal highway, Burnham Place will be built atop a busy operating transportation facility, the rail yards north of Union Station, The project joins together the city’s Central Business District, Capitol Hill, and the emerging NoMa and H Street, NE, Neighborhoods with each other and the region.

Burnham Place’s design and construction are integrated with a multi-billion-dollar expansion of Union Station. Beneath Burnham’s office, residential, hotel, retail, and five-plus acres of park and plaza areas, new station facilities will comprise more than 750,000 square feet of new space and 20 acres of new tracks and platforms. Passenger services will include four new concourses, a below-grade taxi, rental car, and intercity-bus facility, and 3,000 parking spaces. The new station will include a grand, naturally-lit Train Hall above the tracks, adjacent to a main concourse, the length of Reagan National Airport.

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Partnership DevelopmentOne of the most complex transportation related projects in the country, the master plans developed for Burnham Place and Union Station are truly a collaborative effort. Since 2006, after acquiring the ‘air rights’ above the tracks (fee simple), Akridge has worked with Amtrak, MARC, VRE, Metro, the Union Station Redevelopment Corporation (USRC), the District’s Departments of Transportation, Planning, Economic Development, and Historic Preservation, city council members, Congressional representatives, the National Capital Planning Commission, local neighborhood and historic preservation groups, and others to build a coalition of support for the plans. We anticipate that a similar cooperative effort with OTP3, VDOT, FHWA, WMATA, FAA and Arlington County will provide a successful development for all stakeholders.

Among the organizations involved in the overall Union Station planning, Amtrak’s positive view of Burnham Place and the station upgrades represent the most salient manifestation of Akridge’s coalition-building efforts. In 2006, Amtrak leaders saw virtually no benefit in Akridge’s air rights development, viewing the initiative as strictly an inconvenience and disruption of operations. Over many patient and persistent years, Akridge gained a greater understanding of Amtrak’s culture, operational limitations, organizational history, and long-term goals.

Today, Amtrak and Akridge enjoy an intimate and genuine partnership. In July 2012 the two organizations together released a visionary master plan which Amtrak’s CEO views as a demonstration project for the Northeast Corridor, and Akridge


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and city leaders believe will provide extraordinary economic development value for the National Capital Region. In 2006, only Akridge and its consultants worked on Union Station Master Plan matters. Now, Amtrak and USRC devote five full- time planners towards advancing the initiative.

Approval and EntitlementsIn 2010 and 2011, Akridge worked with the city’s Office of Planning to rezone the air rights property. In an unprecedented action, the city served as the lead applicant (rather than the developer), and created a unique new zoning classification tailored to the circumstances of this complex initiative. The rezoning required a Comprehensive Plan amendment to be approved by City Council as well as the Zoning Commission. This demonstrates the result of Akridge’s community relationships, trustworthy and long-standing reputation in the city, and extensive work with city officials. In the near future, Akridge will manage multiple approvals before the Zoning Commission, Historic Preservation Review Board, the National Capital Planning Commission, the Commission of Fine Arts, and the Advisory Neighborhood Commission. The initiative will likely include dozens of private- and public-funding sources (equity, debt, grants, etc.), and will include federal environmental reviews. It is this attention to the stakeholders that we expect to bring to the development of the I-66 Air Rights development.

Planning, Design, Construction and EngineeringManaging the Union Station master planning process in conjunction with Amtrak and other stakeholders has made Akridge well prepared for the I-66 Air Rights planning process. A myriad of design, engineering, and constructability challenges must be overcome. Overseeing a top-tier group of local and national architectural and engineering firms, Akridge has designed a marketable, attractive, and technically feasible project that is synergistic with Union Station’s expansion plans. For example, with no previous

experience in heavy-rail design or station operations, Akridge has built its own internal knowledge base in these areas over several years by studying the best practices at stations across the world and learning from Amtrak’s expert planners.

Experience gained in the planning of Burnham Place and the larger Union Station masterplan shows Akridge’s understanding of the processes required for a complex project such as the I-66 Air Rights development. In addition to the entitlement efforts completed to date, Akridge is helping plan and resolve precedent tasks including the relocation of rail yard support operations, the re-construction of the H Street Bridge to allow re-alignment of tracks, and development of innovative constructability solutions all while maintaining rail traffic requirements.

Technically, Akridge has studied and understands the relationship between the column spacing of a mixed-use development (standards vary per use) and how the structural loads need to be transferred to an efficient parking garage and then ultimately transferred to spans that clear an active rail yard. Akridge has identified means and methods of construction over an active rail yard which includes the complexity of restricted layout space. Akridge also understands how construction methodology of a platform affects the project cost and schedule. Further, fire/life safety, ventilation/smoke evacuation, and noise/vibration have been studied as it relates specifically to Air Rights developments. This knowledge is easily transferred and applicable to the proposed I-66 Air Rights development.

Akridge has already begun consultation with consultants and contractors familiar with the challenges and successes in design and construction over Virginia’s highways and around Metro facilities. Building atop Interstate 66 will take significant coordination to enable the maintenance of east and west bound commuter roadway traffic. A creative use of innovative and proven construction methods will prove imperative for the Air Rights project.

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Local, Regional and national SupportSecuring project financing and approvals will require enthusiastic support from elected leaders and government officials in the Arlington, Richmond and at the federal level. Akridge representatives understand how to successfully deal with key leaders and staff members and identifying the specific public benefits for each constituent contained in the master plan. Akridge has also overseen and facilitated the public-relations strategy and events for various project announcements and milestones, including open houses and listening sessions with hundreds of neighborhood residents as well as daily commuters.

Looking AheadAs of 2013, Akridge continues to advance design, engineering, and approval activities with Amtrak and USRC for Burnham Place. Initial train-station area construction is slated for 2015, followed by rail-yard improvements and the replacement of the H Street Bridge over the yards. Then, the major station expansion will proceed simultaneously with Burnham Place’s first buildings. Akridge is committed to implementing similar processes to ensure a successful Air Rights development for I-66.

3.BCase Study: Gallery Place

3.B Case Study: G

allery Place

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Air rightS Development informAtion | 3.b CASe StuDy: gAllery plACe

3.B Case Study: Gallery Place

Gallery Place is an example of Akridge’s creativity with the public sector to create and implement a vision of complex, mixed-use development.

Gallery Place is a transformational mixed use project located at 7th and H Streets NW. Developed in partnership with Western Development (Western), Akridge delivered 270,000 sf of retail space, 220,000 sf of office space and 192 residential units in phases between 2004 and 2005. While the Verizon Center delivered at 7th and F Streets in 1997, it was the completion of Gallery Place in 2004 to 2005 that established the Chinatown/Penn Quarter area as the region’s premier downtown retail, restaurant, sports and entertainment destination.

The $300 million project was the manifestation of a shared vision among Akridge, Western and the District Government to re-establish the core of downtown

Washington as a place to live and shop, not just to work. Within our development partnership, Akridge’s primary responsibilities included land acquisition strategy and assembly, financing, entitlement, design, construction, and property management. Western led the retail vision, strategy and leasing efforts and also provided expertise in entitlements and community and government relations. This partnership provided a complementary set of skills. Gallery Place would not have been successful without the collaboration of both parties.

Land AssemblageAcquiring the 2.3 acres of land to build this project involved assembling nine different ownership interests. We acquired several parcels through commercial brokers and under different ownership entities to avoid a spike in land prices. In addition to the acquisition

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of four privately owned and one DC Government-owned property, Akridge and Western acquired the largest tract from WMATA through an RFP. Ownership control represented a fraction of the property rights negotiations, as we worked with dozens of additional property owners to acquire easements and alleyway service agreements to allow loading dock deliveries. All manner of strategies and forms of communication were required to reach agreements with these varied owners.

VisionBetween 1970 and 1990, 150,000 residents, nearly 20 percent of the District’s population, moved out of the City. In 1996, the City was under the direction of the Control Board, had more than 3,000 acres of abandoned, vacant or underutilized land, and there was not a single housing start recorded. While the success of Gallery Place may seem like a foregone conclusion today, it took creativity, foresight and faith to propose such an unprecedented initiative at the time.

In the late 1990s, in collaboration with the Downtown Task Force (a group led by Herb Miller of Western

and with strong participation from Akridge leadership) the District implemented several tax incentives and other strategic economic development initiatives to encourage residential and retail development. These included geographic zones which provided waivers of capital gains taxes, employment tax credits, and the granting of Transferable Development Rights (TDRs) in return for the development of residential and retail uses. Akridge and Western created a partnership to leverage all of these incentive programs and execute a vision for an 18-hour sports, retail and entertainment destination with both offices and residences.

Financing and Public AgreementsAt the time of project inception, the proceeds derived from residential rental rates or sales prices could not justify the costs of new construction (whereas office space construction was economically viable). To achieve the mixed use vision, Akridge supported federal legislation to allow Tax Increment Financing (TIF) in the District. We then worked with the City’s administrative and legislative branches to devise an $80 million TIF vehicle funded from future sales and real estate taxes to make the development of

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residential and retail uses viable. We successfully negotiated as well for the waiver of many forms of one-time taxes and fees associated with building construction, and the City contributed roughly $2 million towards streetscape improvements. The City Council also approved an alley closing, which was critical to the project’s feasibility.

Throughout the concept development phase of Gallery Place, Akridge and Western worked in close cooperation with the Chinatown Steering Committee, the active community advisory group in this area at the time. As part of a package of community benefits, Gallery Place included a new police substation, community facilities (the Chinatown Community Cultural Center), and the restoration of the historic arch over H Street.

Project executionThe design and construction of Gallery Place represents one of the most complicated publicprivate initiatives in the City ever undertaken.

+ Movie theater and bowling alley uses required advanced sound attenuation technology

+ Stacking of different uses created complex structural transfer systems and code/egress requirements

+ The fluidity of the retail leasing market required several areas to be redesigned during construction

+ High-security government tenants required unique design and construction parameters

+ Service could not be disrupted to the Metro station below and three Metro lines adjacent to the site

+ Vehicular and pedestrian traffic during Verizon Center events had to be maintained

+ The terrorist attacks of September 11, 2001 occurred during construction and negatively impacted several tenant and financing negotiations underway

+ The initial General Contractor filed for bankruptcy during construction, requiring its replacement and complex settlement negotiations

Akridge’s experience addressing and successfully managing these challenges has informed our approach to subsequent large-scale mixed use initiatives.

The Legacy of Gallery PlaceThe economic and community impacts of Gallery Place have far exceeded the City’s projections and aspirations. The anchor retailers continue to thrive: Clydes, Regal Cinemas, Lucky Strike, Bed Bath and Beyond, Zengo, Urban Outfitters and others have become signature stores and part of 7th Street’s identity. The residential condominiums were all presold during construction.

Of much higher impact was the stimulatory impact Gallery Place has had on its surrounding neighborhood. Just as the 6th Street Corridor adjacent to Gallaudet could catalyze billions of dollars of private investment in the nearby vicinity in future years, Gallery Place initiated the wave of residential, retail and restaurant development which has reinforced the Penn Quarter as one of DC’s premier neighborhoods.

3.CCase Study: Half Street

3.C C

ase Study: Half Street

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Air rightS Development informAtion | 3.C CASe StuDy: hAlf Street

3.C Case Study: Half Street

Half Street is an example of Akridge’s ability to navigate complex zoning processes and design large-scale, mixed-use projects.

Akridge’s HALFSTREET project is an environmentally-progressive, 710,000 square foot mixed-use development comprised of two LEED Platinum office buildings, a 277-unit residential tower, and 55,000 square feet of ground-floor retail space. Fully designed and commencing construction soon, this project is located at the front door to Nationals Ballpark, making it one of the most visible projects

in the Washington, DC region. Inspired by the great plazas and retail streets in Europe, HALFSTREET and its adjacent streetscape have been designed with meticulous focus on the pedestrian experience.

Land Assemblage and District ConcessionsAkridge acquired the HALFSTREET property in 2008 from the Washington Metropolitan Area Transit Authority (WMATA) and a private land owner. The property had been subject to relatively intense media attention due to its prominent location along

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Half Street SE at the entrance to Nationals Ballpark and its involvement in a lawsuit between another development company and WMATA. Working with the District government, Akridge structured and negotiated a four-party settlement that gave Akridge control of the HALFSTREET property.

Entitlement and neighborhood EngagementShortly after acquiring the property, Akridge embarked on an accelerated entitlement process with the local ANC, the Office of Planning, DDOT, DDOE and DCRA. Because we were seeking some unusual variances on a very high-profile project, Akridge chose to meet early and often with neighborhood groups and the governing agencies to discuss our designs and to solicit feedback. These early meetings helped build Akridge’s credibility in the neighborhood and gave outside stakeholders an opportunity to contribute to the designs. We leveraged this support to receive Zoning Commission approval and full entitlement only eight months after property acquisition.

Design and PlacemakingOne of the reasons that the entitlement process went so smoothly for HALFSTREET was the high-quality architectural designs and the intense attention to public realm planning, the pedestrian experience, and an overriding effort to create a new “place.” Each of the HALFSTREET buildings offers between 16- and 20-foot ceiling heights for the ground-floor retailers — far more than standard Washington buildings — and perfect for the local and independent restaurants and retailers that are targeted for HALFSTREET. Spaces for sidewalk cafes, coffee shops, bars, and restaurants have been designed into the plan to create a vibrant and dynamic HALFSTREET retail scene. The streetscape will read much more like a plaza, reminiscent of those found throughout Europe, than a typical urban Washington, DC street. This experience will be best appreciated on ballgame days when the street is closed to vehicular traffic. Curbless streets and sidewalks crafted out of granite paving stones will create a rich urban fabric delivering a street unlike any other in Washington.

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HALFSTREET was also designed to include dynamic exterior signage that is only permitted in a few select places in Washington, DC. Like those in other major cities, large interactive signs can report the news, link to social media, engage the public, advertise commercial products, and broadcast community announcements to visitors and residents alike.

Phasing and a Creative Interim useHALFSTREET was designed to be built in one or two separate phases to appropriately respond to market demand and the influence of the capital markets. The current strategic plan is to deliver the residential component of the project up to two years in advance of the office buildings on the north side of the property. One of the many challenges with this approach is the expected softer leasing pace for both the Phase I residential and retail space if the neighboring property (Phase II) is a surface parking lot.

To address this concern, Akridge created the Fairgrounds at Half Street, a 90,000 square foot outdoor event space and marketplace constructed out of 92 recycled shipping containers from the Port of Baltimore. The concept was to create an asset out of a liability – an amenity and attraction out of what otherwise would be vacant land. The Fairgrounds is a wildly successful event arena, hosting more than 120 events per year, including the surprisingly popular food-truck festivals dubbed, “Truckeroos.” These monthly events commonly attract more than 20,000 attendees who come from across the District on non-baseball game days to enjoy food from mobile vendors and enjoy the outdoor atmosphere. On game days, more than 5,000 people pack the Fairgrounds before and after the game. Already a regional destination and unique place prior to construction commencement, HALFSTREET will ultimately complement Gallery Place as one of Akridge’s most exciting, signature, mixed-use, placemaking initiatives.

4Request for Information Response

4 Request for Inform

ation Response

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Air rightS Development informAtion | 4. requeSt for informAtion reSponSe

4. Request for Information ResponseGEnERAL

1. Please comment on the optimum size of an Air Rights platform and underlying land area to support vertical development, if such size exists. Please indicate how the size of the platform may relate to the building footprint.

A successful Air Rights development platform size is dependent on a number of factors. First, market demand, rental rates, and land value all need to justify the cost of platform construction and the vertical development. The value created by the vertical development should exceed the platform construction costs plus allocated land value in a manner that delivers an acceptable market level project return to the project sponsor.

Second, an Air Rights platform size will be dependent upon the density allocable for vertical development. Building height, use, and parking requirements also need to be considered. Typical building footprints range as follows:

Commercial Office 25,000 SF – 35,000 SF

Residential Floor 15,000 SF – 20,000 SF

Boutique Hotel 15,000 SF – 30,000 SF

The relationship of the vertical development value and platform construction cost will determine the appropriate platform size.

Third, defining the Air Rights development platform size requires understanding the vehicular and pedestrian flow and accessibility to the site. The current infrastructure and the potential future modifications will aid in defining the density that can be supported at a proposed site. In addition, infrastructure/utility availability and connectivity will also limit the available density at a chosen site.

An added complexity of Air Rights development is project phasing. In order to minimize disturbance to activity occurring under the platform and to control construction costs, the platform supporting the Air Rights is generally constructed at one time. Depending on the project program and mix of uses, there can be considerable market risk if the configuration of the Air Rights site requires that all development occur in one phase.

2. What due diligence items and studies are required to develop an understanding of the preliminary feasibility of Air Rights platform development? Are detailed engineering studies required to reach this level of understanding?

The below list of due diligence items and studies are recommended to convey to a purchaser the potential value at the site. With a clear understanding of this information, a certain amount of risk is removed from the project which equates to a higher potential purchase price. A number of these items are standard to any land transaction; however, there are specific items relating to these two potential sites. Standard

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due diligence items:

1. Title

2. Survey

3. As-builts

4. Geotechnical Report

5. Environmental Phase I

6. Utility Availability

Rosslyn Site/Falls Church due-diligence items:

1. Traffic Assessment

2. VDOT/FHWA Requirements

a. Cooperation agreement for site access

b. Constructability in ROW

c. Clearance requirements for platform

d. Future expectations of widening I-66/ramp modifications

e. Known future transportation capital improvements

f. Nature of the settlement between Arlington and VDOT regarding the construction of I-66.

3. Arlington County Requirements

a. Comprehensive Plan

b. Realize Rosslyn modifications to the sector plan

i. Potential height restrictions

ii. Possible reconfiguration of Lynn and Fort Myer to two way streets

c. Zoning

d. Proffers

4. FAA height restrictions

5. WMATA guidelines

6. Availability of public funds/tax abatements/incentives/etc.

7. Understanding of neighborhood/stakeholder involvement

8. Necessity, if any, to obtain easements from adjacent property owners

3. Please describe the preferred transaction structure for Air Rights development at either of the contemplated sites.

The preferred transaction structure is a Fee Simple purchase of an Air Rights Development. This structure is generally preferred by institutional debt and equity partners investing and provides for a wider range of capital sources for the project.

A Ground Lease structure is an alternative that could be considered.


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SITE

1. Please comment on the viability of the prospective Rosslyn site as identified in this document for Air Rights development.

Site IThere is a high viability of a full or partial Air Rights development at the site located east of Lynn Street between the on and off ramps of Interstate 66. Historically, Rosslyn is one of the most-desirable and top performing submarkets in the Washington, DC area. This site is located along the perimeter of Rosslyn and offers exceptional views over the Potomac towards Georgetown and Washington, DC. The topography of the site lends itself to an Air Rights development. North Lynn Street abuts the future

development at platform level and actively engages the pedestrian flow.

Developable density and building height will be key factors in determining the true viability of an Air Rights Development. Further, vehicular accessibility to the site is challenging; however, not impossible and will need to be worked through with the appropriate stakeholders.

There are a number of projects in Rosslyn that are either approved or are in the development process including Central Place, Rosslyn Gateway, Rosslyn Plaza, 1400 Wilson and Wilson School. Market conditions at the timing of an Air Rights development will need to be considered.

RoSSLyn SITE

Site ii

Site iSite iii Site iV

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George Washington Parkway

Key

Brid

ge

N Lynn S

treet

N N

ash Street

N F

ort M

yer Drive

Route 29

Route 29

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2. Would an alternative site over I-66 in the Rosslyn area be more viable for Air Rights development?

Site IIThe area east of North Arlington Ridge Road is an alternative site that could be considered for an Air Rights development. The site offers outstanding views east towards Washington, DC and is located within close proximity to the Rosslyn core. Due to topography, access to this site is challenging. Rosslyn Plaza is currently being rezoned and includes plans to relocate North Arlington Ridge Road. This is the appropriate time to consider this potential location for an Air Rights development, especially as it relates to accessibility.

Site IIIGateway Park is another site that should be discussed with Arlington County and considered. With similar attributes to the Site I (views, access, proximity to higher density developments), this location has a potential for a successful Air Rights development. A study would need to be completed to understand if the existing structure could support a vertical development or if a new platform would need to be built.

It is understood that the park was park was part of the original VDOT I-66 and Arlington settlement and thus may make vertical development challenging. Arlington County is likely to require components of the park be incorporated into a new site plan; however, a vertical development could help reinvigorate the park and tie it back into the heart of Rosslyn. A development could make the park a more desirable destination to the residents and workers of Rosslyn.

Site IVThe site west of Fort Myer Drive between the east bound and west bound lanes of Lee Highway does not appear to be an optimal location for an Air Rights Development. It is unlikely that this location will be able to achieve the required density to make an Air Rights development project viable. The surrounding sites are zoned C-O-2.5 and C-O-1.5. In addition, the elevation difference between Lee Highway east and west bound make accessibility to and through the site challenging.

FEASIBILITy

1. Please comment on the current technical or financial feasibility of Air Rights development in Rosslyn given the current and projected development pipeline and real estate market conditions. Which product type or types (office, commercial, residential, etc.) are most feasible? Please indicate the scope of development (by use and square footage) that is believed to be feasible.

The Rosslyn-Ballston Corridor of Arlington continues to be one of the highest demand submarkets for office, retail and multifamily product in the DC Metropolitan Area. The Rosslyn Submarket within this Corridor is currently undergoing a transformation from being an office park environment to a vibrant place to live, work and play. The area benefits from its established employment base, multiple transportation options, outdoor amenities and immediate access (and views) to the District of Columbia.

Limited multifamily product has been developed in the submarket both before and after the recession. Local and national developers like Vornado, JBG and Monday Properties are currently planning mixed-use projects in the Rosslyn Submarket with multifamily housing components, but demand for housing in this area well exceeds current and proposed supply. Younger generations working in Arlington and the


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District of Columbia and those valuing walkability, transit access and more urban mixed-use settings are flocking to this neighborhood. As a result, occupancy levels and rents have spiked in the limited multifamily product to deliver in Rosslyn. Our Team is confident that this trend will continue in this submarket and that new multifamily development is well situated to capitalize on the trends referenced above.

Rosslyn is one of the most convenient office locations in the Washington, DC area and has historically attracted a solid base of tenants. In the last three years, Rosslyn has suffered from BRAC related relocations and restrictions in government spending. Vacancy rates have risen and there has been a negative net absorption of office space. Arlington is currently revising the sector plan and has grand visions for the future of Rosslyn. With a focus on a live, work, and play environment, Rosslyn is well positioned to retain the strong existing tenant base and to begin to attract new tenants. Rosslyn will be on the forefront of the recovery.

Ideally, the development on the platform will be a mix of uses in an effort to construct all buildings concurrently. Due to topography, existing road infrastructure, and assumed clearance requirements, the estimated platform size is 100,000 SF. Assuming

this site is able to achieve C-O-Rosslyn and achieve a 10 FAR (based on zoning of surrounding parcels), it is believed that this site could deliver approximately, 1,000,000 SF. Further discussion with the county is necessary to determine probable approvable uses; however, it is estimated that 1/3 office and 2/3 residential would be viewed favorably by county staff.

2. Would development occur in a single phase or in a multi-phased approach?

It is preferred to have the development occur in one phase due to the probability that the entire platform would be constructed upon project commencement. However, a concern with delivering a mixed-use project in a single phase is the market risk. The mix of uses and market demand will determine the phasing of the project.

VALuE

1. Please explain the relationship between the value created by vertical development and the potential cost of an Air Rights platform at the Rosslyn site.

The value vreated by the vertical development is directly related to the density available at the site. The density allocated to the platform has an inverse relationship to the premium of hard and soft costs associated with the design and construction of the platform. For example, if the density achieved is less than the assumed, than the premium per FAR square foot will increase.

Based on a platform size of 100,000 SF and a density of 10 FAR (1,000,000 SF), the hard cost premium of constructing a platform and necessary infrastructure for access to the platform can range from $45 - $60/FAR square foot. There are many variables that should be determined in order to narrow down the range of actual costs.

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2. Please indicate the potential range of values created under a fee simple sale or long-term lease agreement that may be supportable by a feasible Air Rights development using the scope described above at the Rosslyn site.

As noted in the RFI response, there are a number of variables that should be clarified and resolved in order to achieve the maximum value for the proposed Air Rights development. Preliminary analysis estimates a potential value of $25 million to $35 million for a fee simple sale. Assuming a 99 year ground lease and other financable terms, expected annual ground rent would be 4.5 - 5 percent of land value.

3. Would public subsidy of any sort likely be required for feasibility of the project in the near term? Note: Assume no public subsidy has been allocated or made available for this project.

The goal of the project should be to not utilize a public subsidy. This will depend on the cost of the transaction, density achieved, and proffer requirements.

TECHnICAL

1. How would potential Air Rights development at Rosslyn be accomplished so as not to preclude future improvements to I-66?

If the potential future improvements to Interstate 66 are understood prior to starting design and construction of the platform, these considerations can be accommodated and included. Depending on the scope of future improvements, there may be a cost increase to the design. For example, if widening Interstate 66 to 3 lanes in both directions is determined to be a future improvement, longer structural spans will be required to be incorporated into the designed.

If the potential future improvements to Interstate 66 are determined after design has commenced, there is a potential that the entire platform design will need to be redesigned. Further, if the improvements are determined after construction has commenced or completed, it may be financial infeasible to make the necessary modifications.

RISKS

1. What are the key risks to an Air Rights development project at this site? How can such risks be mitigated, shared and/or transferred in an optimal manner?

Risks1. ZONING

Density, height, and use for this site have not been contemplated by the Realize Rosslyn Plan. It is critical to understand Arlington’s goals and objectives of land use for the site.

Mitigation Options:

A. Leave unresolved at RFP issuance: Developers will work with land use counsel and County staff to determine a range of probable outcomes.

B. OTP3 requests Arlington include site in the Realize Rosslyn Sector Plan: This will further clarify the desires of the County. Given the County Board and staff’s increasingly strict interpretation of the various sector and small area plans and recent examples of the County not moving forward on even relatively small scale developments, inclusion of the Air Rights site(s) in the Realize Rosslyn study would provide the Board and staff with the policy foundation that would be required for any Air Rights project to move forward.


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2. SITE ACCESSIBILITY/TRAFFIC Access to the site is challenging, but solvable. A clear understanding of VDOT/FHWA requirements should be understood.

Mitigation Options:

A. Leave unresolved at RFP issuance: Developers will work with traffic engineering and VDOT/FHWA to determine potential access points.

B. OTP3 works with VDOT/FHWA to propose acceptable access locations and road modifications.

3. FAA AND MWAA HEIGHT RESTRICTIONS Along with Arlington County, this site is

constrained by FAA and MWAA due to the flight path approaching Reagan National Airport.

Mitigation Options:

A. Leave unresolved at RFP issuance: Developers will work with aviation engineers to prepare a report of probable height restriction.

B. OTP3 has an aviation engineer complete an evaluation and include in the RFP.

4. WMATA ZONE OF INFLUENCE WMATA metro tunnel runs under Interstate 66

through the propose Air Rights development. Understanding the restrictions WMATA would place on the project during construction is important.

Mitigation Options:

A. Leave unresolved at RFP issuance: Developers will work with WMATA and consultants to understand the requirements.

B. OTP3 can work with WMATA to confirm if the Air Rights development is within their jurisdiction.

5. CONSTRUCTABILITY It is critical to understand the means and methods for construction of an Air Rights platform in the Interstate 66 right of way.

Mitigation Options:

A. Leave unresolved at RFP issuance: Developer will work with general contractors to propose means and methods for construction of the platform.

B. OTP3 works with VDOT/FHWA to provide general rules and guidelines for construction in the right of way.

6. FINANCING Developers will seek to finance the project. Typically, it is the developer’s responsibility to bear such risk. It is unlikely to obtain market rate debt on the purchase of un-zoned air rights.

Mitigation Options:

A. Delay closing until rezoning is achieved.

B. Delay closing until permit is issued and construction starts.

C. Consider ground lease payments starting at the commencement of construction or building delivery.

7. SECURITY Once constructed, there will be a security risk to the platform and vertical development in having an active roadway beneath the project. This is not unusual and is seen around the world. Appropriate design considerations need to be considered and the risk is born by the developer.

Mitigation Options:

A. OTP3 provides WMATA and VDOT security criteria.

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SITE

1. Please comment on the viability of the prospective East Falls Church site as identified in this document for Air Rights development. Which portion, if any, of the Air Rights development area is the most attractive or viable for development?

Site I A successful Air Rights project at East Falls Church metro station is unlikely at this time. Due to the existing topography, limited access to an Air Rights platform, location of the metro station above Interstate 66, and the probable low density that would be allowed by Arlington County the construction of a platform would be prohibitive.

2. Is the conventional land development site of the parking area more viable in the near term? Should the land parking area be developed completely separately from the Air Rights? Is some combination of Air Rights and conventional land development viable?

Site IIA conventional land development at the parking area is viable in the near term. Arlington County has given meaningful consideration for land use at this location (East Falls Church Area Plan) and the plan identifies what density, uses, and heights would be approved at this location.

Land transactions such as this are typical in this area and are straightforward. Adding in the complexity of an Air Rights development would delay the start of the conventional development.

Site i Site ii

66

Route 237/29

N S

ycamo

re Street

Washington Boulevard

EAST FALLS CHuRCH SITE

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FEASIBILITy

1. Please comment on the current feasibility of Air Rights development in East Falls Church given the current and projected development pipeline and real estate market conditions. Which product type or types are most feasible? Please indicate the scope of development (by use and square footage) that is believed to be feasible.

For the reasons stated above, an Air Rights project does not appear to be feasible at this time.

2. Please indicate the scope of land development on the parking lot site (by use and square footage) that is believed to be most feasible and financeable on the parking lot area in the current market environment.

The East Falls Church Submarket offers tremendous access to transportation, retail and employment and has historically provided more affordable housing options than it’s neighbors in McLean, Arlington and Vienna. The area’s small town feel attracts younger singles and families looking for an alternate living experience to the more dense developments in surrounding, urban submarkets. East Falls Church’s

central location between the region’s primary employment centers in Tyson’s Corner and Arlington’s Rosslyn-Ballston Corridor make it an ideal location for renters commuting to either of these locations. Demand and occupancy for Class “A” multifamily product has historically been high and trended more than 95 percent as a result of its central location, affordability and amenity offerings. The submarket has realized an increased share of renter households since 2008 but seen limited new construction activity. Due to these strong supply and demand factors, East Falls Church is well positioned for the proposed multifamily and mixed-use development.

The adopted County Plan for the area proposes between 450,000 and 600,000 square feet of density for this site. Our preliminary analysis indicates that the site can accommodate a project within this range. The most viable land use would be residential with a limited amount of retail as per the East Falls Church plan. From a market standpoint, many of the potential development sites in the vicinity that could accommodate significant multifamily development, already few in number, have either been previously developed, are currently going through entitlement or face regulatory hurdles or are few in number.

3. Would development occur in a single phase or in a multi-phased approach?

This project would most likely be phased.

VALuE

1. Please explain the relationship between the value created by vertical development and the potential cost of an Air Rights platform at the East Falls Church site.



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2. Please indicate the potential range of values created under a fee simple sale or long-term lease agreement that may be supportable by a feasible Air Rights development using the scope described above at the East Falls Church Air Rights site.


3. Please indicate the value under a fee simple sale or long-term lease agreement that may be supportable by a conventional land development using the scope described above at the East Falls Church Metro parking site.

Preliminary estimates:

Fee Simple Sale: $22,000,000 – $24,000,000

Long-term Lease Agreement*: $1,400,000 – $1,600,000

*Assumes a 99 year ground lease and other finacable terms.

4. Would public subsidy of any sort likely be required for feasibility of either the Air Rights or land development project in the near term? Note: Assume no public subsidy has been allocated or made available for this project.

A public subsidy could aid in advancing the feasibility an Air Rights development.

The goal of the land development project should be to not utilize a public subsidy. This will depend on the cost of the transaction, density achieved, and proffer requirements.

TECHnICAL

1. How would potential Air Rights development at East Falls Church be accomplished so as to not preclude future improvements to I-66?


2. Metro operations on site or at an alternative site in extremely close proximity must be maintained during construction and permanent replacement facilities must be provided. How would you approach the temporary and permanent replacement of the existing bus loop and Metro parking infrastructure, if displaced?

It is possible to design a project that does not incorporate the bus loop and leaves it in its current location and configuration. If this is desired, the bus facility could remain in operation during construction. The parking facilities would temporarily be displaced until the new parking garage facility is constructed.

If the bus loop is incorporated into the future design, the operations would either be temporarily shifted to Sycamore Street or to the kiss and ride lot. Upon completion of construction of the parking facility, the bus operation would move back to its original location. Incorporating the bus loop yields a greater number of units.

RISKS

1. What are the key risks to an Air Rights development project at this site? How can such risks be mitigated, shared and/or transferred in an optimal manner?


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