Alexandria Developers Say City Incentives Critical To Moving Projects Forward

Huge real estate projects are moving forward throughout Alexandria, from Landmark Mall to Old Town to Potomac Yard, that will dramatically transform the city in the years to come. 

While anchor institutions like Virginia Tech and Inova Health System have helped kick-start these projects, their developers said Tuesday at Bisnow's Future of Alexandria event that they couldn't have moved forward without financial incentives from the city government. 

These incentives, including infrastructure investments and increased density, have been controversial in Alexandria and other jurisdictions, but developers say they will help them advance projects that will provide new housing, retail, education and healthcare access to the community. 

The long-awaited redevelopment of the Landmark Mall property took a big step forward in December, when The Howard Hughes Corp. brought on Foulger-Pratt as a development partner and the team reached deals with Inova and the city government. 

Alexandria committed to use $54M in public bond financing to acquire a portion of the site and lease it to Inova for its new $1B hospital, and it plans to use $76M in public bond financing for site preparation and infrastructure. It also plans to bring a new fire and emergency medical services station to the property. 

Foulger-Pratt CEO Cameron Pratt said the city committing to provide this financing was necessary to bring the Inova hospital to the site and to push the deal across the finish line. 

"The city was there every step of the way, they put a significant financial package on the table, which was critical to pull the deal together for the real estate development side of it and to bring Inova to it," Pratt said. 

In addition to the hospital, the Landmark Mall redevelopment is planned to include around 2,000 residential units and 300K SF of retail, plus office and medical uses. Pratt said the activity the hospital will generate is critical to supporting the other uses on the site. 

"This couldn't be a retail-anchored center anymore," Pratt said. "That's one reason why Inova's involvement was so important. When you look at the types of real estate that can anchor a project these days, retail has gone through major disruptions, office has gone through major disruptions, multifamily has always been in demand, but just building apartments doesn’t create the vibrancy people want."

Inova Health System CEO J. Stephen Jones said it was important for the hospital to move to a mixed-use environment with nearby amenities. The hospital plans to move from 4320 Seminary Road, a site it plans to rezone for residential and sell to a developer. He said that plan, combined with the city's financing, will help support its investment in the new hospital. 

"If there weren’t city funds, if there weren’t the redevelopment of the property, we wouldn’t be able to financially make that happen," Jones said. 

City incentives also helped advance a major affordable housing project in the Old Town area this year. 

Asland Capital Partners received approval in February for the zoning changes and permits necessary for its Heritage at Old Town redevelopment. The project is planned to preserve the existing 140 federally subsidized affordable units on the property and add new apartments to bring the site to 750 total units. 

The property's affordability protections were set to expire, and to help Asland preserve them, the city provided incentives in the form of increased density.

This plan received strong opposition from some neighbors who argued the proposed 80-foot-tall project was too big for the neighborhood, the Washington Business Journal reported. But Asland Capital Partners CEO James Simmons III said the added density was necessary to keep affordable housing in Old Town as the area continues to get more expensive. 

"What the city did in this particular instance was say, ‘We have to put some fingers in the dike and stop the bleeding, and how do we do that?’ and one of the tools in their toolbox to do so was the provision of incentives for owners and developers to increase density," Simmons said.

Simmons said that the arrival of Amazon HQ2 and its thousands of highly paid employees will create more demand for market-rate housing in the area, but it is necessary for Alexandria to provide housing for the lower-wage workers that make a city function. 

"One thing Amazon touts is the average wage for their employees, and that’s a good thing that they’re not all lower-paying jobs," Simmons said. "However, having said that, we have to have people who are going to put out fires, we have to have people who are going to teach our children."

Less than 2 miles south of the Amazon HQ2 campus, Virginia Tech is moving forward with its new $1B campus, and JBG Smith is planning mixed-use development in the surrounding Potomac Yard area. 

JBG Smith Senior Vice President of Development Bailey Edelson said the team has been working on the infrastructure portion on the site, which was visible from Tuesday's event, held on the sixth floor of the 3030 Potomac Ave. office building. 

Virginia Tech is preparing to begin construction in mid-September for the first buildings on its campus, and JBG Smith is moving forward with two multifamily buildings, Edelson said.

A portion of the Virginia Tech property will be exempt from city taxes, Alexandria Times reported, another way the local government is providing incentives to help advance projects. Alexandria also helped finance the new Potomac Yard Metro station, which is scheduled to open next to the development in fall 2022.  

Edelson said the city's involvement in the Potomac Yard project was critical in moving it forward. 

"We've seen a true partnership from the mayor, the council and the staff, which is unique," Edelson said. "There’s a willingness to engage and problem-solve and figure it out together ... that was absolutely necessary in the years we spent getting Virginia Tech and the first phase of Potomac Yard approved."

The process of moving forward with Amazon HQ2 didn't go as smoothly in New York City, where local opposition led to the tech giant backing out of its plans. Alexandria Economic Development Partnership CEO Stephanie Landrum said one reason Northern Virginia was successful in landing and advancing the HQ2 project was because the area had already laid out its vision for growth with neighborhood-level land use planning.

"When we pursued Amazon, we could say with a clear mind, 'This is what our community wants, and we feel pretty confident that when you choose us, our community will be excited,'" Landrum said. "The same was not true in a number of jurisdictions throughout the United States because their planning process doesn’t result in the level of detail we have with our small area plans."

Alexandria Mayor Justin Wilson said he also sees smart land use planning as a key way the city can help developments move forward. 

"As we go forward, flexibility is key, making sure we have a zoning code that can adapt and deal with the changes that are going to continue to happen, and making sure we can partner in the land use process to make projects happen," Wilson said. "Ultimately we want to make things happen in the city."

New things have continued to happen in the city as recently as last week, when Stonebridge closed the deal for its Oakville Triangle mixed-use project. The developer formed a joint venture with PCCP LLC and said it plans to begin work this fall on the first phase of the 1M SF, $300M project. 

The project's first phase is planned to include 571 multifamily units, 84 townhouses, a 94K SF ambulatory care center from Inova, a 103K SF self-storage building and 37K SF of retail. The residential will include 62 affordable units, and the project will include a 0.75-acre park, two pieces that Stonebridge founding principal Doug Firstenberg said were important for getting community support. 

"On the Oakville project, the two top community contributions were affordable housing and the park," Firstenberg said. "For developers, we’ve got to think about that because parks make neighbors happy, and also bringing green space around your project tends to have a payback in how the overall project works."