Interest Rates Block "Gateway"

Interest Rates Block "Gateway"

Condominium market free fall puts hold on "Gateway" project.

Whatever happened to the "Mount Vernon Gateway?" It was to be the premier development along the Route 1 corridor.

Bounded by Route 1, Buckman Road and Jana Lee Avenue, the 17-acre plot was to contain 432 dwelling units, 30 affordable housing units, 70 units for those 55 years of age and older, 55,000 square feet of office space, and 10,000 to 15,000 square feet of retail space." Then came the Federal Reserve Board with 17 consecutive interest rate hikes.

"We've had three deals fall through with national builders. We've met with others but they are all holding back to see where this condo market levels out," said John H. Thillman, vice president, Landmark Communities of Arlington, developers of the site.

"The guy who was going to do the land development backed out because the condominium market is in free fall. We're going to wait 12 to 14 months to see where this trend is going," he said.

"Rising interest rates have slowed the entire market. But, we are going to scramble to keep this project alive," Thillman said.

"We have five to six million invested in this so far so we are serious about making it happen. It's basically a logistical issue. A developer is looking at a $20 million investment here and most of it was condominiums," he said.

Condominiums are up for grabs throughout the area. The rental market is soaring with demand up. Some condominium sales areas have even been reported to offering potential buyers incentives such as a new car.

However, the Northern Virginia Association of Realtors recently released a report that shows the anomaly of an increased inventory of homes on the market coupled with increased average sale prices. This indicates a slowed market but not a down market.

"If this project had gotten underway 12 months ago everything would have worked out fine," Thillman said. "It's all a matter of timing."

THE PROJECT when originally proposed had the full support of both Mount Vernon and Lee District Supervisors Gerald Hyland and Dana Kauffman respectively, as well as the Southeast Fairfax Development Corporation. "Mr. Thillman has brought forth a proposal that is a major plus for that plot of land and that intersection," said Hyland.

"It will make traffic flow much better. It is a very creative addition to the revitalization of the Route 1 corridor," he said.

Kauffman, in whose district the development is planned, said, "This is one of those rare projects that adds a lot of value to the entire community. And it includes a commitment to bring a real solution to one of the real choke points on the highway."

"In addition to bringing more senior housing to the area, it's a mixed use project that has the backing of the civic community, the business community and the revitalization organizations. That's a rare combination," Kauffman said at the time of the Gateway's announcement.

The problem, although not apparent at that time, February 2005, was that the vast majority of the residential units were condominiums. There were 182 units in mid-rise buildings with two levels of underground parking. Another 128 units were planned in three low-rise condo buildings of four stories each.

These are to be complemented by 86 "two floor over two floor" townhomes plus 36 back-to-back townhomes. "All the townhomes will have garages with surface parking for guests," Thillman explained.

"We are designing this development to appeal to all age groups. We don't want all one type of owners. We want all ages and family variations," he said.

As planned, the average condominium will be 1,000 square feet with some ranging up to double that size. It is expected there will be 430-plus units throughout the projected $250 million development. Prices are estimated to range from $400,000 upward.

That was at a time when home loan interest rates were at a low of five to six percent. They are now pushing nine percent with prime listed at 8.25 percent on Tuesday.

"Everybody was betting on the infill market and we still are. We are very serious about bringing this project to fruition. If we weren't we would not have five to six million of our money into it. And, that's all out-of-pocket," Thillman said.

"We just have to see where this market is going. We are continuing to meet with the various property owners. And, we continue to be very hopeful," he said.