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Rosslyn Sector Plan Update
Highway Air Rights Development Feasibility Study
A. Introduction and Summary of Findings
Virginia’s Exploration of Potential Air Rights Development in Rosslyn
In July 2013, the Commonwealth of Virginia’s (“Commonwealth”) Office of Transportation Public
Private Partnerships (“OTP3”) and the Virginia Department of Transportation (“VDOT”) issued a
Request for Information (“RFI”) to solicit feedback from development teams regarding potential
Air Rights development projects in Arlington County.1 One of the two potential project sites
OTP3 identified for potential Air Rights development in the County included properties in
Rosslyn along Interstate 66 (“I-66”). OTP3 received responses from six developers, two
consultants, and three single-interest entities, on the range of topics presented in the RFI,
including:
Background information and respondents;
Key due diligence items to be considered;
Preferred transaction structures; and
Opinions on specific sites with regard to site viability, platform size, financial and
technical feasibility, and perceived risk.
All six developer responses stated an interest in Air Rights development on the Rosslyn site,
while including a variety of information addressing the topics above. However, private
development comprising the range of scale and program envisioned in the responses to the RFI
would not currently be permitted under Arlington County’s current General Land Use Plan and
existing zoning designations for the sites.
Meanwhile, at the time the RFI was issued, the County was leading a community planning
process to update the Rosslyn Sector Plan. Generally serving as a guide for future development
and public investment over the next twenty years, the Rosslyn Sector Plan Update could present
an opportunity, if warranted, to include planning guidance for the potential Air Rights
development locations. Such guidance on potential Air Rights development in Rosslyn could be
warranted if: 1) there was sound planning rationale for encouraging development in these
locations and 2) it was generally understood that such development would be economically
feasible in the foreseeable future.
1 The issuance of this RFI followed OTP3’s commissioning of a development feasibility analysis completed
by JLL.
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Purpose of this County Study of Air Rights Development
Given the developer responses to the Commonwealth’s RFI indicating interest in air rights
development in Rosslyn, the County initiated its own study of potential air rights development.
The County retained a multi-disciplinary consultant team led by Goody Clancy to support the
RealizeRosslyn planning process with an analysis of development feasibility of four potential air
rights parcels over Interstate 66 in Rosslyn2. This study builds upon recent explorations of
potential air rights development conducted by OTP3 and its partners, and aims to better
understand the economic prospects, planning opportunities and implications, and other factors
related to such development. Several key County objectives of this study include:
Determining whether Air Rights development is, or will soon be, economically
feasible, taking into consideration reasonable contributions to the Commonwealth
(for payment of land) and County (for anticipated community benefits);
Whether important planning goals could be achieved through Air Rights
development above I-66 in Rosslyn;
Whether such goals should be pursued through future processes to consider
amendments to adopted County plans and rezonings to certain properties that
would be required to permit such development; and
While not including a detailed market analysis, qualitatively assessing current and
anticipated market conditions in Rosslyn to better understand overall feasibility of
potential air rights projects.
In addressing these items, this report will help inform recommendations as to whether or not the
County should expend resources as part of Realize Rosslyn to conduct detailed planning for air
rights development in Rosslyn. If potential air rights development in Rosslyn is found to be
economically feasible in the immediate future, that may suggest addressing these sites in
significant detail as part of Realize Rosslyn. Alternatively, if air rights development in Rosslyn
appears to be economically infeasible for the foreseeable future, it may suggest that detailed
planning for it should be deferred until the next update to the Rosslyn Sector Plan.
In terms of project feasibility, the scope of this study includes an evaluation of the economic
feasibility of potential air rights development projects based purely on anticipated financial
return. In doing so, it examines anticipated costs and revenues of a potential project as they are
currently understood in an attempt to determine whether a potential development project would
be viewed as being feasible enough to continue to pursue. However, a market demand analysis is
2 The team includes W-ZHA, LLC which provides real estate advisory services and Kittelson & Associates,
Inc. which provides transportation planning services.
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not included as part of the study, and therefore, this report does not directly address questions of
market feasibility. Therefore, in the event that a project is found as economically feasible, it may
not necessarily mean the project is likely a development someone would build in a defined
timeframe, if the market doesn’t support it. This is an important caveat that applies to the study’s
findings for all four sites evaluated for potential air rights development in Rosslyn.
Study Sites
As expressed in the RFI, OTP3 and VDOT requested information from the development
community for four specific sites generally within the Rosslyn Metro Station. These four sites are
depicted in the map of the Rosslyn Coordinated Development District and Air Rights
Development Study Sites provided in Figure 1. Site 1 is located immediately east of the N. Lynn
Street bridge over Interstate 66, between the westbound and eastbound ramps connecting with
Lee Highway. Site 2 includes the portion of the highway generally located east of Arlington Ridge
Road. Site 3 includes the westernmost portion of the western half of Gateway Park, and might
envision potential development along this segment of N. Nash Street. Finally, site 4 is located
west of N. Nash Street, between the westbound and eastbound travel ways of Lee Highway.
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Figure 1: The four potential air rights development sites identified by OTP3. They are situated between central Rosslyn and the Potomac River landscape, and are typically within a 5-10 minute walk of the Rosslyn Metro station.
Central Rosslyn’s Existing Development Context
The four sites examined for potential air right’s development are generally located north or east of
the Rosslyn Coordinated Development District, and within the northeastern limits of the Rosslyn
Metro Station Area. Since the 1960s, the County has established and updated a planning and
zoning framework for Rosslyn making it one of the most highly concentrated areas of activity in
Arlington. As of July 2014, Rosslyn included nearly 8.5 million square feet of office space, more
than 7,000 residential units, more than 2,100 hotel rooms, and more than one-half million square
feet of retail. These uses were all included within its 288 acres of land area.
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Beyond existing development, there are several development projects that are currently under
construction, approved but not yet built, or undergoing the County’s formal development review
process. Taken together, this total pipeline development potential could add another net new 2.5
million square feet of office space, 1,600 residential units, 316 hotel rooms, and 131,000 square feet
of retail space. Although much of this development would occur within the Rosslyn Coordinated
Redevelopment District closest to Metro, these figures apply to existing and potential
development across the entire Rosslyn Metro Station Area,
Collectively, the net new development reflected in the pipeline totals more than 4,000,000 square
feet across all uses. However, given historic absorption rates and anticipated market demand, it
may take some time for all of this development to be realized. Current office vacancy rates in
Rosslyn are estimated in the range of 22-30%, compared with 6-7% rates just a few years ago.
These levels may have an impact on when developers make the decision to move forward with
already entitled projects, which sometimes already entail a number of years between entitlement
and construction. For example, the recent groundbreaking for construction of the residential and
office towers at Central Place will likely make the buildings ready for occupancy in 2017 and
2018, nearly a decade after they were approved by the County Board. While it may take time for
the Rosslyn market to absorb already approved projects in addition to future development
proposals that have yet, Rosslyn should remain very competitive in the regional marketplace and
should realize this development in the future.
Framing Questions and Summary of Findings
This analysis follows previous studies conducted by OTP3 and its team, and provides the County
with its own evaluation of potential air rights development in Rosslyn within the broader context
of the ongoing RealizeRosslyn planning process. A set of specific questions were developed to help
guide the study. The framing questions (and corresponding responses) for this analysis, which
encompass issues of physical development, feasibility parameters, and high-level transportation
issues, include:
Rosslyn MSA (Includes RCRD), Development Characteristics
Office (sq ft) Retail (sq ft) Other (sq ft) Hotel Rooms Residential Units
July 1, 2014 Base 8,477,674 557,289 164,504 2,141 7,063
Projects Under Construction (NET) 1,090,588 55,574 30,103 - 374
Approved Projects (NET) 360,171 5,772 - 316 772
Projects Under County Review (NET) 1,093,910 69,678 (9,440) - 454
Total Development in Pipeline (NET) 2,544,669 131,024 20,663 316 1,600
as percent increase over 2014 Base 30.0% 23.5% 12.6% 14.8% 22.7%
Source: CPHD, Planning Division
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1) In terms of development feasibility, will air rights development in Rosslyn be
economically viable over the next 20 years? In the next 40 years? Beyond?
o W-ZHA’s analysis tests economic feasibility only. The analysis assumes there is
market to support air-rights development. In reality, project feasibility requires that
both market and economic forces align to generate sufficient investment return to a
developer.
o W-ZHA’s analysis applies assumptions that are relevant in today’s market and
economic environment. Today we are in an environment with historically low interest
rates. If interest rates increase, investment hurdle rates will increase thus putting more
pressure on rents. With this in mind, the conclusions below are likely optimistic, not
conservative.
o Given the assumptions, W-ZHA concludes that air rights development that is
exclusively developed on a newly constructed platform is likely not feasible for at least
20 years (sites 1, 2 and 4 independently). To be economically feasible each of the
alternatives would require rents to be 13 to 20 percent higher (net of inflation) than
they are today.
o On Gateway Park (site 3) the platform development costs are assumed to be less
because there is an existing platform. W-ZHA concludes that office development on
Gateway Park alone and/or in combination with Site 4, will likely be economically
feasible within a 20-year timeframe. Note: development on a portion of Gateway Park
would further limit the availability of park land in Rosslyn to serve recreational needs.
2) What are the likely significant costs associated with air rights development above
Interstate 66 in Rosslyn?
o Purchase of air rights development footprint from the State;
o Community benefit contributions to Arlington County;
o Platform development cost;
o Extended construction schedule to account for developing the platform, then
developing the land use - this will translate into higher finance costs;
o Increased risk associated with extended and complex development;
o Possibly, high infrastructure costs to integrate platform development with existing
infrastructure.
3) If found to be economically viable, what is the minimum amount of density/development
GFA assumed necessary to be built?
o This depends upon the land use and the platform configuration. It is likely that air
rights projects will require all of the development envelope allowed by assumed
height restrictions envisioned by the Metropolitan Washington Airports Authority.
Each of the scenarios tested maximizes the development capacity on the platform
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given assumed height restrictions. FAR’s in these scenarios range from 5.8 FAR to 10
FAR.
4) If found to be economically viable, how much (if any) net value can the County expect to
be manifest as community benefits?
o Financially feasible private development projects will likely need to support both the
cost of the air rights access paid to the State as well as community benefits provided to
the County to mitigate the impact of the development, through existing or future
Arlington County zoning tools. Currently, the market value of density in Rosslyn is
$52.50 per FAR square foot of office, $75.00 per FAR square foot of residential, and
$65.00 per FAR square foot of retail. In zoning districts such as "C-O-Rosslyn" the
appraised market value of approved increases in density has been the typical tool to
determine the amount of the total, market-feasible community benefits contributions.
Local community benefits serve a specific purpose (mitigation of the impact of
density), are calculated through an appraisal and not competitive process, and are
most often paid only when a building is delivered, all of which is very likely different
than the disposition of air rights by the State that is akin to sale or land lease of a
development site. The method the State chooses to pursue when determining the
timing and value of the disposition of their air rights will have a significant impact of
the financial viability of negotiated community benefits contributions to the County. 5) What are the potential impacts of making available air rights development in Rosslyn on
the millions of square feet of development already entitled or under review in the core of
Rosslyn? And how might this potential air rights development have an effect on market
absorption in the larger Rosslyn submarket?
o A market analysis was not conducted as part of this work effort. However, from an
economic perspective, allowing air rights development may stall the redevelopment of
existing under-developed sites in the core of Rosslyn. Developers will go to locations
where the economic reward is highest. If air rights development is deemed a more
attractive investment location, allowing air rights development may have an impact on
the harder-to-develop core by reducing developer interest there. It is important to note
that the level of risk and complexity associated with air rights development greatly
compromises its attractiveness as a development option.
o It is unclear whether air rights projects will bring a different type of tenant into the
Rosslyn market or whether air rights development will simply be another location
option for the same market. In the former case, absorption may increase. In the latter
case, overall absorption will stay the same, but its location may shift to the air rights
locations instead of Rosslyn’s core.
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6) What opportunities might potential air rights development present to advance established
County goals for Rosslyn, or those emerging from Realize Rosslyn?
o Increase economic development for Arlington County by capturing value from
currently underutilized land
o Reinforce Rosslyn’s market position and identity as a location for prime waterfront
views
o Add workers, residents, and/or visitors who can intensify use of adjacent park spaces
like Gateway Park and the planned Esplanade, making them more attractive
destinations for additional people.
o Improve existing walking connections to the Key Bridge, regional trail system, park
network, future boathouse, Esplanade
o Create new paths and/or public spaces over Interstate 66
o Reduce Interstate 66’s impact as a visual barrier that generates noise and pollution
7) What is the potential impact of an additional 4 to 5 million square feet of new air rights
development on the transportation infrastructure serving Rosslyn?
o Assuming on-site parking is provided as prescribed by current “C-O Rosslyn” zoning
requirements and fully utilized, traffic volumes would likely increase on key Rosslyn
streets such as North Lynn Street, Lee Highway, 19th Street, Ft Myer, and to a lesser
extent, Arlington Ridge Road and Wilson Boulevard. Peak hour volumes are already
high on N. Lynn, Lee, 19th, and Wilson so the location, magnitude, and timing of trips
from new development would require careful study and planning to be feasible.
o The proximity of these sites to the transit network will mitigate some of these impacts,
especially if a new station entrance is created along North Lynn Street near 19th Street.
Reducing the amount of parking provided and vehicle trips generated, in conjunction
with measures to encourage access on foot, transit, bike and/or shared vehicles, could
significantly enhance development feasibility from transportation and development
economics perspectives. However, reduced parking would also need to be acceptable
to potential business and residential tenants. Further market analysis and/or
discussion with developers should be pursued to confirm actual market-based parking
demand for these sites.
o Vehicular access to these sites is limited by their location over the highway, especially
for Site 1. Traffic entering and exiting Site 2 from 19th Street would have to cross the
planned multi-use Esplanade creating potential conflicts with pedestrians, bicyclists,
and other users. Sites 3 and 4 would benefit from access points using the one-way pair
of Lee Highway to the north and south side, by eliminating need for curb cuts along
Nash Street and thereby enhancing north-south walkability between Rosslyn, the site
and points north like the Marriott Hotel and Key Bridge.
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Study Conclusions
In consideration of the results of this economic feasibility analysis and responses to the preceding
framing questions, this study concludes that the Rosslyn Sector Plan Update should include only a
brief section on potential air rights development above I-66 in Rosslyn. The sector plan should
reference air rights development as an item for potential future consideration, and may identify
broad planning goals the County would like to see advanced if air rights development in this area is
in fact pursued. This conclusion is supported by a number of factors, including:
In 1996, the County Board established the Rosslyn Coordinated Redevelopment District
(RCRD) to encourage the physical and economic development needed to maximize Rosslyn’s
potential to become a competitive first class urban center.
Since that time, public and private investments have made meaningful improvements in
central Rosslyn, through the addition of Class A office space, infusion of new residences and
hotel units, and key enhancements in public spaces and infrastructure.
In the face of challenges presented by current office vacancy rates above 25% in Rosslyn, the
County maintains its strong interest in advancing planning and development solutions that
will enhance, revitalize and energize Rosslyn’s core over the next 20 to 30 years.
More than 4,000,000 square feet of net new development is already in the pipeline (either
proposed, approved but not yet built, or under construction) for central Rosslyn, which if
completed, would present significant supply of new building space for some time while
contributing to significant progress towards the County’s goals for the area.
Over time, as fewer sites in the RCRD become available for redevelopment, air rights
development may emerge as more of a longer-term proposition to help continue Rosslyn’s
transformation into a great urban place.
In the near-term, any serious exploration of air rights development in Rosslyn may best be
reserved for a unique deal that could help implement immediate improvements to key public
realm elements, such as major improvements to Gateway Park, the existing highway deck,
and the Rosslyn Circle/northern gateway to Rosslyn environs, for example.
If air rights development is pursued in this manner by the Commonwealth and its partners,
the County would determine a special process to guide the community review and
evaluation before the County Board takes action on such a proposal.
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B. Previous Feasibility Explorations
In the Fall of 2012, the Commonwealth of Virginia Office of Public Private Partnerships (OTP3)
and the Virginia Department of Transportation (VDOT) initiated an investigation of air rights
development feasibility over Interstate 66 in Rosslyn. As part of this initiative, VDOT contracted
Jones Lang LaSalle (JLL) to conduct a preliminary analysis on the financial feasibility of air rights
development over a portion of Interstate 66 (JLL Analysis). The question was whether private
development could pay the State an upfront payment in return for the State’s air rights. While
preliminary in nature, the JLL Analysis concluded that: “an Air Rights development at the Rosslyn
site would likely be feasible from a market standpoint, including the construction of the platform. However,
the project is not able to support the payment of an upfront “value” to VDOT [Virginia Department of
Transportation] for the Air Rights.”3
In additional to the JLL Analysis, OTP3 issued a Request for Information (RFI) from developers
regarding air rights development at the Rosslyn and East Falls Church Metro station areas.
Developers were asked to address questions like the optimum size of a platform to support
vertical development, estimated platform cost, and development viability. A number of well
qualified and experienced development companies responded to the RFI. Information from RFI
submissions was considered in W-ZHA’s Air Rights Development Economics Memorandum.
Review of findings
Arlington County retained W-ZHA to review the JLL Analysis and its assumptions in light of W-
ZHA’s prior research on development economics in Rosslyn. W-ZHA also reviewed the
responses to the State’s RFI regarding air rights development at the Rosslyn and East Falls
Church Metro station areas. Informed by their previous work, the JLL Analysis and the
information contained in the RFI responses, W-ZHA developed a new set of assumptions related
to air rights development economics. This analysis and its conclusions are contained in W-ZHA’s
Air Rights Development Economics Memorandum which is attached in Appendix A.
W-ZHA compared their initial analysis of Rosslyn development economics to JLL’s development
cost assumptions and operating assumptions. W-ZHA applied the assumptions contained in the
RFI responses to understand the JLL Analysis without the benefit of their financial model. For
platform cost, W-ZHA relied on information contained in the Monday Properties’ and the
Akridge Companies’ RFI submissions. For the most part, JLL’s assumptions are in line with W-
ZHA’s understanding of development economics. The assumptions regarding the cost to develop
3 Jones Lang LaSalle, Air Rights Development in Northern Virginia, February 4, 2013 Internal Draft.
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the air rights platform differed, however. W-ZHA cost was higher at $550 per platform square
foot versus what W-ZHA interpreted the JLL assumption to be, $320 per square foot.
The JLL Analysis was preliminary in nature and was intended to determine whether there was
market and economic justification for VDOT to pursue air rights development over Interstate 66.
An important omission in the JLL analysis was Arlington’s practice of working with developers
of projects seeking densities above standard site plan base densities to negotiate a package of
community benefits to be provided to help ameliorate the adverse impacts of the additional
density. It is likely that air rights development will require that developers invest in community
improvements. Including community investments as part of a project’s development cost will
further challenge air rights development feasibility.
Based on W-ZHA’s understanding of Rosslyn market economics and the assumptions contained
within the JLL Analysis, W-ZHA concluded that the following development cost assumptions
(net of community investments) are reasonable for air rights development in Rosslyn: $418 per
gross square foot office, $491 per gross square foot retail, and $423 per gross square foot
residential. In addition to these costs, air rights development projects will likely be required to
invest in community improvements. These investments would be additional costs to
development. For additional detail, see the tables of assumptions in Section D.
The JLL Analysis assumed slightly higher operating costs per square foot as compared to W-
ZHA’s understanding of Rosslyn market economics. W-ZHA concluded that JLL’s assumptions
were reasonable but did not change its own operating cost assumptions. For additional detail, see
the tables of assumptions in Section D.
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C. Development Scenarios for Analysis
Goody Clancy developed potential development scenarios to test the capacity of each air rights
site within the maximum building heights currently presumed by the Metropolitan Washington
Airports Authority to preserve safe departure procedures for flights departing from Ronald
Reagan Washington National Airport (DCA). (It should be noted that at the time of this report,
the Federal Aviation Administration has a proposed policy change pending to incorporate one
engine inoperative procedures into standard reviews of proposed structures. Any future outcome
of that process may yield adjustments to presumed building height limits for these, and other
sites).
Figure 2: The four potential sites (labeled with red numbers) with presumed maximum building height limits above mean sea level, or AMSL, (labeled in white) as provided by the Metropolitan Washington Airports Authority. View looks to south from above Key Bridge. Site information provided by VDOT.
The scenarios incorporate the following assumptions:
20’ minimum clearance of any structure above Interstate 66 travel lanes
4’ platform structure thickness supporting parking and the development above
Horizontal structural spans allow support columns to align with the edges and center median
of the highway
293’
284’
302’ 309’ 312’
325’
327’
333’
279’
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13’ office floor-to-floor height and 11’ residential floor-to-floor height
20’ rooftop mechanical penthouse height
100’-120’ wide office buildings and 60’ wide residential buildings
1,100 sq. ft. per residential unit
Minimum on-site parking requirements (per “C-O Rosslyn” zoning district provisions): 1
space per 1,000 sq. ft. office; 1 space per residential unit; 2 spaces per 1,000 sq. ft. retail
The development program for Site 1 matches the JLL analysis in order to be directly comparable.
The program for the other sites is based on the capacity of each site given its unique physical
constraints. Two alternatives were considered for sites 3 and 4: development independent of one
another and joint development by a common owner. Joint development opens the possibility of
locating all of the parking for both sites on Site 4. This would allow for more development on Site
3 and eliminate the need for parking in the levels above the street.
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Development scenarios for the four identified air rights sites were physically modeled using a 3D
computer model originally developed as part of the Realize Rosslyn process to update the
Rosslyn Sector Plan. Correspondingly, exhibits depicting potential air rights development
scenarios in this report also include building massing studies of potential development on other
sites throughout central Rosslyn. Plan and aerial views from this model are shown on subsequent
pages. All model studies depicted in this report should be considered preliminary and illustrative
only, and do not reflect specific recommendations for development on individual sites. Buildings
are colored in model views as follows:
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Site 1
Site 1 is located along North Lynn Street at the I-66 ramps and east of Gateway Park. The
maximum height assumptions range from 309’ AMSL at Lynn Street to 302’ AMSL to the
southeast. The JLL analysis assumed a program of 460,000 sq. ft. office; 200 residential units; and
10,000 sq. ft. retail to reach FAR 10.0. The model assumes an office building along the North Lynn
Street bridge and a residential tower on the eastern end of the platform with a landscaped plaza
between them that serves as an amenity for office workers and residents. The plaza may be
connected to the public plaza at Waterview/Potomac Tower to the south and/or provide access to
the Mount Vernon Trail to the north.
Among the four study sites, this one has the most challenging vehicular access issues. Access
directly from the ramps is not feasible. Traffic signals at both ends of the bridge control flow
to/from the highway and cars frequently queue on N. Lynn Street particularly during morning
peak hours, making it an undesirable access point. One option would be to explore shifting the
western ends of the ramps eastward to create space for parking access from an extended Lee
Highway. The site benefits from being near a potential future Metro station entrance on Lynn
Street near 19th Street, adjacent to the planned Esplanade, and adjacent to existing regional trails
and bicycle paths, all of which would encourage reduced vehicular access in favor of walking,
bicycling, and transit.
Site 1: plan
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Site 2
Site 2 is located at the eastern end of 19th Street and east of Arlington Ridge Road. The maximum
height limit assumptions are most restrictive for this site and range from 284’ AMSL at the south
to 293’ AMSL at the north. The program includes two office buildings totaling 566,000 sq. ft. and
220 residential units in two towers. Parking is concentrated in one large structure beneath the
northern office tower with a smaller structure within the southern office building. The proposed
18th Street corridor would extend across this site and link to the trail system to the east, and the
Esplanade would run parallel to this site along its western edge.
This site would be accessed from 19th Street, Arlington Ridge Road, and/or the lower Arlington
Ridge Road service drive envisioned as part of the Rosslyn Plaza redevelopment. Vehicular traffic
would come largely from Lynn Street and Wilson Boulevard. The site benefits from being near a
potential future Metro station entrance on Lynn Street near 19th Street and adjacent to the planned
Esplanade, both of which would encourage reduced vehicular use
Site 1: view from northeast
Waterview -
Office
Gateway Park
Potomac
Tower
Waterview -
Residential /
Hotel
(Height: 242’ ASE /
302’ AMSL)
(Height: 237’ ASE /
297’ AMSL)
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Site 2: view from east
Site 2: plan
Potomac
Tower
Waterview -
Residential /
Hotel
(Height: 203’ ASE /
279’ AMSL)
(Height: 185’ ASE / 257’ AMSL)
(Height: 213’ ASE /
283’ AMSL)
(one alternative explored
via Realize Rosslyn)
Rosslyn Plaza (one alternative explored via Realize Rosslyn)
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Site 3
Site 3 is located at the western end of Gateway Park at Nash Street and would be built on top of
the existing platform structure (which may require reinforcing). Note that development on a
portion of Gateway Park would further limit the availability of park land in Rosslyn to serve
recreational needs. The assumption for maximum height on this site is approximately 325’ AMSL.
As part of this study, an independent development scenario was explored, comprising a 200,000
sq. ft. office building with 16,000 sq. ft. of ground-level retail and parking contained within the
floors immediately above street level. An alternative joint development scenario combining Sites
3 and 4 was also explored and modeled, and is ultimately illustrated in this report. In this
combined scenario, all parking would occur on Site 4, providing the potential for either a 280,000
sq. ft. office building (as modeled) or an 183,500 sq. ft. residential building, both with ground
level retail.
This site would greatly benefit from a pair of access points using the Lee Highway one-way pair,
one on the eastbound leg and the other on the westbound leg, to facilitate vehicular flow around
the site. Nash Street should not be an access point to preserve the improved pedestrian
environment that will be created with new development and active street-level uses to facilitate
north-south pedestrian access to and beyond the site. This site is adjacent to the planned
Esplanade which would run along the southern edge of the site and provide pedestrian and
bicycle access.
Site 4
Site 4 is located west of Gateway Park across Nash Street. The assumption for maximum heights
ranges from 327’ AMSL at Nash Street to 333’ AMSL at the western edge. The program includes a
309,000 sq. ft. office building with 4,000 sq. ft. retail along Nash Street. Parking is contained in a
structure within the lower levels of the building that extends west, and in the combined Site 3 and
4 scenario as modeled, would also include parking for Site 3. The parking levels within the
building should be designed to mitigate their visual impact using architectural panels, green
walls, public art, or some other strategy.
This site would greatly benefit from a pair of access points using the Lee Highway one-way pair,
one on the eastbound leg and the other on the westbound leg. This would facilitate vehicular flow
around the site. Nash Street should not be an access point to preserve the pedestrian environment
that will be created with new development and active street-level uses there. This site is further
from the Metro station than the others but is near the end of the planned Esplanade which would
stop at Nash Street.
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 19 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Site 4 Site 3
Site 3
Site 4
Sites 3 & 4: view from northeast
Sites 3 & 4: plan
Key Bridge
Marriott
Highgate Townhomes
(Height: 222’ ASE /
312’ AMSL)
(Height: 232’ ASE /
322’ AMSL)
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 20 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
D. Economic feasibility
Assumptions
W-ZHA tested the financial feasibility of the air rights development scenarios presented in
Section C using assumptions that are based on the review of the JLL analysis. An underlying
assumption to the analysis is that there is sufficient market to support each development
program. In reality, project feasibility requires that market and economic forces align to generate
an attractive investment opportunity. The analysis assumes the following development costs for
office, retail and residential air rights development:
A lower platform cost ($300 per square foot) is used for Site 3 since its location on Gateway Park
would not require a new platform but would likely require the existing platform to be reinforced.
The analysis reflects the following operating costs for office, retail and residential air rights
development:
Office Retail Residential
Air Rights Platform (New) /Platform SF $550 $550 $550
Building
Hard Cost /GSF $175 $175 $220
Soft Cost 25% /GSF $44 $44 $55
Sub-Total /GSF $219 $219 $275
Tenant Allowance/Fit-Out /RSF $80 $75 $30
Hard Cost na
Soft Cost na
Parking Cost /Space /Space $40,000 $40,000 $40,000
Total Development Cost $388 $429 $392
Finance Fees and Interest /GSF $29 $63 $31
GRAND TOTAL /GSF $418 $491 $423
Source: W-ZHA
E:\ros air\[assumptions.xlsx]Sheet1
W-ZHA Final Development Cost for Air Rights Development
Rosslyn, VA
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 21 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Both the State and the County will require economic consideration from air rights projects.
These projects will likely have to pay the State to obtain the air rights, and in addition will be
required by Arlington County to invest in community improvements above and beyond project
development costs in accordance with established County policy.
Specific payment amounts to the state and county have yet to be determined. For purposes of this
analysis, W-ZHA applied the fair market land values below to each FAR foot of air rights
development to estimate the cost of both air rights access and community investments. This cost
is treated as a development cost in the feasibility analysis.
To be financially feasible, a real estate project must generate sufficient income to justify the
investment. W-ZHA employed a yield analysis to determine air rights development feasibility.
The “yield” is simply the project’s net operating income divided by development cost. When the
yield is higher than the investor’s hurdle rate, the project may be worth pursuing.
Hurdle rates are a function of the cost of money, capitalization rates, perceived market risk and
investment risk. Each investor is different in terms of their access to capital and risk tolerance.
Therefore, hurdle rates vary depending on the investor. Hurdle rates also vary by land use.
Generally, hurdle rates today range from 6.25 percent to 9 percent depending on the land use.
These hurdle rates reflect historically low interest rates, strong market forces and conventional
development.
Office Retail Residential
Rent /RSF $60.00 $35.00 $40.80
Vacancy Rate % of Rent 5% 7% 5%
Operating Expenses /RSF or /Unit $18.00 $0.00 $9,000
Parking NOI /Space /Mo $150 $150 $130
Source: W-ZHA
E:\ros air\[air rights 2.xlsx]Sheet5
Operating Assumptions for Air Rights Development
Rosslyn, VA
Office Retail Residential
Fair Market Land Value /FAR Ft $52.50 $65.00 $75.00
Source: Arlington County; W-ZHA
E:\ros air\[assumptions.xlsx]Sheet2
Fair Market Land Values by FAR Ft by Land Use
Rosslyn, VA
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 22 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
W-ZHA has assumed that air rights projects must achieve a hurdle rate in excess of 9 percent to
attract private investor interest. This assumption takes into consideration that air rights
development will likely be perceived as more risky than conventional development because of its
complexity and extended construction period. This assumption also takes into consideration that
the cost of money (or interest rates) will likely increase in the future.
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 23 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Findings
For each site below, the feasibility determination is presented followed by one table summarizing
the total project cost and another presenting the yield calculation (to determine whether the yield
exceeds the 9% hurdle rate). The evaluation of the two alternative joint development scenarios for
Sites 3 and 4 follow the evaluation of each site as an independent project. More detailed
information and additional tables are contained in W-ZHA’s Air Rights Feasibility Memorandum
which is attached in Appendix B.
Site 1
Given the development cost and operating assumptions, Site 1 air rights development is not
feasible in the near term. Rent would need to increase by 15 percent to achieve a 9 percent
investment hurdle rate (excluding financing). This translates into real rent growth (exclusive of
inflation) of 1.4% over 10 years or 0.7% over 20 years. Air rights development may be feasible in
the long term (20 years-plus).
Cost /GSF
Community Benefit Package $41,300,000 $59.86
Platform $37,950,000 $55.00
Building Cost $230,964,500 $334.73
Total Project Cost w/out Financing $310,214,500 $449.59
Financing Cost $29,229,520 $42.36
Project Cost with Financing $339,444,020 $491.95
Source: W-ZHA
E:\ros air\[Site 1 .xlsx]total cost
Total Project Cost
Site 1
Rosslyn Air Rights Feasibily Analysis
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 24 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sq Ft 220,000
Rentable Sq Ft 182,600
Rent $3.40
Vacancy 5%
Op Exp /Unit $9,000
Gross Revenue $7,450,080
Vacancy ($372,504)
Net Revenue $7,077,576
Operating Expenses ($2,052,000)
Net Operating Income $5,025,576
Sq Ft 460,000
Rentable Sq Ft 427,800
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $25,668,000
Vacancy ($1,283,400)
Net Revenue $24,384,600
Operating Expenses ($7,700,400)
Net Operating Income $16,684,200
Sq Ft 10,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $350,000
Vacancy ($17,500)
Net Revenue $332,500
Operating Expenses $0
Net Operating Income $332,500
Spaces 680 Residential 200
Mo Permit Rate $144 Office/Retail 480
Vacancy 0%
Gross Revenue $1,176,000
Vacancy $0
Net Revenue/NOI $1,176,000
Sq Ft 690,000
Gross Revenue $34,644,080
Vacancy ($1,673,404)
Net Revenue $32,970,676
Operating Expenses ($9,752,400)
Net Operating Income $23,218,276
Yield Without Financing 7.5%
Yield With Financing 6.8%
Source: W-ZHA
E:\ros air\[Site 1 .xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Feasibily Analysis
Office
Site 1
Residential
Target hurdle rate 9%
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 25 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Site 2
Given the development cost and operating assumptions, Site 2 air rights development is not
feasible in the near term. Rent would need to increase by over 20 percent to achieve a 9 percent
investment hurdle rate (exclusive of financing costs). Site 2 is a long term (20 years-plus)
development proposition.
Cost /GSF
Community Benefit Package $48,191,250 $59.31
Platform $70,400,000 $86.65
Building Cost $273,004,875 $336.01
Total Project Cost w/out Financing $391,596,125 $481.96
Financing Cost $36,635,247 $45.09
Project Cost with Financing $428,231,372 $527.05
Source: W-ZHA
E:\ros air\[Site 2 .xlsx]total cost
Total Project Cost
Site 2
Rosslyn Air Rights Feasibility Analysis
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 26 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sq Ft 246,000
Rentable Sq Ft 204,180
Rent $3.40
Vacancy 5%
Op Exp /Unit $9,000
Gross Revenue $8,330,544
Vacancy ($416,527)
Net Revenue $7,914,017
Operating Expenses ($2,295,000)
Net Operating Income $5,619,017
Sq Ft 566,500
Rentable Sq Ft 526,845
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $31,610,700
Vacancy ($1,580,535)
Net Revenue $30,030,165
Operating Expenses ($9,483,210)
Net Operating Income $20,546,955
Spaces 829 Residential 255
Mo Permit Rate $145 Office/Retail 574
Vacancy 0%
Gross Revenue $1,446,300
Vacancy $0
Net Revenue/NOI $1,446,300
Sq Ft 812,500
Gross Revenue $41,387,544
Vacancy ($1,997,062)
Net Revenue $39,390,482
Operating Expenses ($11,778,210)
Net Operating Income $27,612,272
Yield Without Financing 7.1%
Yield With Financing 6.4%
Source: W-ZHA
E:\ros air\[Site 2 .xlsx]yield
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Feasibility Analysis
Office
Site 2
Residential
Target hurdle rate 9%
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 27 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Site 3
Given the development cost and operating assumptions, Site 3 air rights development may be
feasible within a 20-year timeframe. Real rent (net of inflation) would need to increase by 2
percent to achieve a 9 percent hurdle rate on development costs net of financing.
Cost /GSF
Community Benefit Package $11,540,000 $53.43
Platform $9,060,000 $41.94
Building Cost $72,610,000 $336.16
Total Project Cost w/out Financing $93,210,000 $431.53
Financing Cost $9,682,110 $44.82
Project Cost with Financing $102,892,110 $476.35
Source: W-ZHA
E:\ros air\[Site 3 Office.xlsx]total cost
Total Project Cost
Site 3 Office
Rosslyn Air Rights Feasibility Analysis
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 28 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sq Ft 200,000
Rentable Sq Ft 186,000
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $11,160,000
Vacancy ($558,000)
Net Revenue $10,602,000
Operating Expenses ($3,348,000)
Net Operating Income $7,254,000
Sq Ft 16,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $560,000
Vacancy ($28,000)
Net Revenue $532,000
Operating Expenses $0
Net Operating Income $532,000
Spaces 232 Residential -
Mo Permit Rate $150 Office/Retail 232
Vacancy 0%
Gross Revenue $417,600
Vacancy $0
Net Revenue/NOI $417,600
Sq Ft 216,000
Gross Revenue $12,137,600
Vacancy ($586,000)
Net Revenue $11,551,600
Operating Expenses ($3,348,000)
Net Operating Income $8,203,600
Yield Without Financing Cost 8.8%
Yield With Financing Cost 8.0%
Source: W-ZHA
E:\ros air\[Site 3 Office.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Feasibility Analysis
Office
Site 3 Office
Target hurdle rate 9%
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 29 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Site 4
Given the development cost and operating assumptions, Site 4 office development is not feasible
in the near term. Rent would need to increase by 13 percent to achieve a 9 percent investment
hurdle rate on cost excluding financing cost. Site 4 is a long term (20 years-plus) development
proposition.
Cost /GSF
Community Benefit Package $16,482,500 $52.66
Platform $25,300,000 $80.83
Building Cost $114,882,185 $367.04
Total Project Cost w/out Financing $156,664,685 $500.53
Financing Cost $15,256,486 $48.74
Project Cost with Financing $171,921,171 $549.27
Source: W-ZHA
E:\ros air\[Site 4 Office.xlsx]total cost
Total Project Cost
Site 4 Office
Rosslyn Air Rights Analysis
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 30 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sq Ft 309,000
Rentable Sq Ft 287,370
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $17,242,200
Vacancy ($862,110)
Net Revenue $16,380,090
Operating Expenses ($5,172,660)
Net Operating Income $11,207,430
Sq Ft 4,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $140,000
Vacancy ($7,000)
Net Revenue $133,000
Operating Expenses $0
Net Operating Income $133,000
Spaces 317 Residential -
Mo Permit Rate $150 Office/Retail 317
Vacancy 0%
Gross Revenue $570,600
Vacancy $0
Net Revenue/NOI $570,600
Sq Ft 313,000
Gross Revenue $17,952,800
Vacancy ($869,110)
Net Revenue $17,083,690
Operating Expenses ($5,172,660)
Net Operating Income $11,911,030
Yield Without Financing 7.6%
Yield With Financing 6.9%
Source: W-ZHA
E:\ros air\[Site 4 Office.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Analysis
Office
Site 4 Office
Target hurdle rate 9%
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 31 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sites 3 & 4: Alternative 1
Two alternatives were considered for sites 3 and 4 assuming joint development. The preceding
analysis assumed the sites would develop independently of one another. It is conceivable,
however, that due to their close proximity they would be controlled by one developer which
opens the possibility of locating all of the parking for both sites on Site 4. This would allow for
more development on Site 3 and eliminate the need for parking in the levels above the street.
Under the first alternative office space with ground floor retail is developed on both Sites 3 and 4
with parking for both buildings on Site 4. This allows an increase in the total amount of
development that fits within the physical constraints.
From an economic perspective, the alternative is not feasible today. Rents would need to increase
by 5 percent to achieve a 9 percent hurdle rate. This alternative may be feasible within a 20-year
timeframe.
Total Sq Ft 564,000
Gross Sq Ft Office 540,000
Rentable Sq Ft Office 502,200
Gross Sq Ft Residential 0
Rentable Sq Ft Residential 0
Gross Sq Ft Retail 24,000
Rentable Sq Ft Retail 24,000
Parking Spaces 588
Source: W-ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Analysis
Site 3 Office with Site 4
Cost /GSF
Community Benefit Package $29,910,000 $53.03
Platform $36,560,000 $64.82
Building Cost $188,871,000 $334.88
Total Project Cost w/out Financing $255,341,000 $452.73
Financing Cost $24,236,031 $42.97
Total Project Cost $279,577,031 $495.70
Source: W-ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]total cost
Total Project Cost
Site 3 Office with Site 4
Rosslyn Air Rights Analysis
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 32 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sq Ft 540,000
Rentable Sq Ft 502,200
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $30,132,000
Vacancy ($1,506,600)
Net Revenue $28,625,400
Operating Expenses ($9,039,600)
Net Operating Income $19,585,800
Sq Ft 24,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $840,000
Vacancy ($42,000)
Net Revenue $798,000
Operating Expenses $0
Net Operating Income $798,000
Spaces 588 Residential -
Mo Permit Rate $150 Office/Retail 588
Vacancy 0%
Gross Revenue $1,058,400
Vacancy $0
Net Revenue/NOI $1,058,400
Sq Ft 564,000
Gross Revenue $32,030,400
Vacancy ($1,548,600)
Net Revenue $30,481,800
Operating Expenses ($9,039,600)
Net Operating Income $21,442,200
Yield Without Financing 8.4%
Yield With Financing 7.7%
Source: W-ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Analysis
Office
Site 3 Office with Site 4
Target hurdle rate 9%
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 33 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sites 3 & 4: Alternative 2
Under the second alternative residential is developed on Site 3 and office space is developed on
Site 4 with parking for both buildings on Site 4. While the total development square footage is less
than sites 3 and 4 developed independently, this alternative creates a better mixed-use
environment and would allow the developer greater flexibility in phasing to respond to market
demand.
From an economic perspective, under this alternative rents would need to increase by 20 percent
to achieve a 9 percent hurdle rate. This alternative may be feasible after 20 years.
Total Sq Ft 467,600
Gross Sq Ft Office 260,000
Rentable Sq Ft Office 241,800
Gross Sq Ft Residential 183,600
Rentable Sq Ft Residential 152,388
Gross Sq Ft Retail 24,000
Rentable Sq Ft Retail 24,000
Parking Spaces 475
Source: W-ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Analysis
Site 3 Residential with Site 4
Cost /GSF
Community Benefit Package $28,980,000 $61.98
Platform $36,560,000 $78.19
Building Cost $157,330,640 $336.46
Total Project Cost w/out Financing $222,870,640 $476.63
Financing Cost $21,281,228 $45.51
Project Cost with Financing $244,151,868 $522.14
Source: W-ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]total cost
Total Project Cost
Site 3 Residential with Site 4
Rosslyn Air Rights Analysis
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 34 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Sq Ft 183,600
Rentable Sq Ft 152,388
Rent $3.40
Vacancy 5%
Op Exp /Unit $9,000
Gross Revenue $6,217,430
Vacancy ($310,872)
Net Revenue $5,906,559
Operating Expenses ($1,710,000)
Net Operating Income $4,196,559
Sq Ft 260,000
Rentable Sq Ft 241,800
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $14,508,000
Vacancy ($725,400)
Net Revenue $13,782,600
Operating Expenses ($4,352,400)
Net Operating Income $9,430,200
Sq Ft 24,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $840,000
Vacancy ($42,000)
Net Revenue $798,000
Operating Expenses $0
Net Operating Income $798,000
Spaces 475 Residential 207
Mo Permit Rate $143 Office/Retail 268
Vacancy 0%
Gross Revenue $817,740
Vacancy $0
Net Revenue/NOI $817,740
Sq Ft 467,600
Gross Revenue $22,383,170
Vacancy ($1,078,272)
Net Revenue $21,304,899
Operating Expenses ($6,062,400)
Net Operating Income $15,242,499
Yield Without Financing 6.8%
Yield With Financing 6.2%
Source: W-ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Analysis
Office
Site 3 Residential with Site 4
Residential
Target hurdle rate 9%
D R A F T | J a n u a r y 1 3 , 2 0 1 5 P a g e 35 | 35
A r l i n g t o n C o u n t y a n d G o o d y C l a n c y
Economic Feasibility Conclusions
Given the assumptions, this analysis concludes that air rights development is not economically
feasible today.
The analysis concludes that air rights development on Site 3 may be feasible within a 20-year
timeframe. Because there is already a platform supporting Gateway Park, platform development
cost is assumed to be lower on Site 3.
Air rights development on Sites 1, 2 and 4 (without associated Site 3 development) is likely not
feasible for at least 20 years because each would be exclusively developed on newly constructed
platforms.
MEMORANDUM
TO: Ben Carlson, Goody Clancy FROM: Sarah Woodworth
DATE: September 8, 2014
RE: Air Rights Economic Feasibility
________________________________________________________________
EXECUTIVE SUMMARY
In this Technical Memorandum, W‐ZHA evaluates the feasibility of potential air rights development
projects based purely on anticipated financial return. In doing so, it examines anticipated costs and
revenues of a potential project as they are currently understood in an attempt to determine whether a
potential development project would be viewed as being feasible enough to interest an investor. A
market demand analysis has not been performed. Therefore, this analysis does not directly address
questions of market feasibility.
Therefore, in the event that a project is found as economically feasible, it may not necessarily mean the
project is likely a development someone would build in a defined timeframe, if the market doesn’t
support it. This is an important caveat that applies to the study’s findings for all four sites evaluated for
potential air rights development in Rosslyn.
Given the assumptions, W‐ZHA concludes that air rights development that is exclusively developed on a
newly constructed platform is likely not economically feasible for at least 20 years in Rosslyn. To be
economically feasible rents would need to increase by 13 to 20 percent (net of inflation) from where
they are today.
W‐ZHA’s analysis concludes that air rights development as office space may be feasible within the next
twenty years on Rosslyn’s Gateway Park site. While not economically feasible today, to be economically
feasible real rent would need to increase by 2 to 5 percent. The Gateway Park is more feasible than the
other sites because it is assumed that reinforcing the Gateway Park platform is less expensive than
constructing a new platform. It is important to note that the adopted RealizeRosslyn Plan Framework
revitalizes Gateway Park as a park, not a development site.
‐ 2 ‐
INTRODUCTION
STUDY PURPOSE
W‐ZHA, LLC is part of a multi‐disciplinary consultant team lead by Goody Clancy Associates to support
the County in the RealRosslyn planning process. W‐ZHA, LLC provides real estate advisory services. In
this Technical Memorandum, W‐ZHA tests the financial feasibility of various air rights development
scenarios over Interstate 66.
In this Technical Memorandum, W‐ZHA evaluates the feasibility of potential air rights development
projects based purely on anticipated financial return. In doing so, it examines anticipated costs and
revenues of a potential project as they are currently understood in an attempt to determine whether a
potential development project would be viewed as being feasible enough to interest an investor. A
market demand analysis has not been performed. Therefore, this analysis does not directly address
questions of market feasibility.
Therefore, in the event that a project is found as economically feasible, it may not necessarily mean the
project is likely a development someone would build in a defined timeframe, if the market doesn’t
support it. This is an important caveat that applies to the study’s findings for all four sites evaluated for
potential air rights development in Rosslyn.
BACKGROUND
In the Fall of 2012, the Virginia Department of Transportation (VDOT) initiated an investigation of air
rights development feasibility over Interstate 66 in Rosslyn. As part of this initiative, VDOT contracted
Jones Lang LaSalle (JLL) to conduct a preliminary analysis on the financial feasibility of air rights
development over a portion of Interstate 66 (JLL Analysis). The question was whether private
development could pay the State an upfront payment in return for the State’s air rights. While
preliminary in nature, the JLL Analysis concluded that: “an Air Rights development at the Rosslyn site
would likely be feasible from a market standpoint, including the construction of the platform. However,
the project is not able to support the payment of an upfront “value” to VDOT [Virginia Department of
Transportation] for the Air Rights.”1
In additional to the JLL Analysis, the State issued a Request for Information (RFI) from developers
regarding air rights development at the Rosslyn and East Falls Church Metro station areas. Developers
were asked to address questions like the optimum size of a platform to support vertical development,
estimated platform cost, and development viability. A number of well qualified and experienced
development companies responded to the RFI. Information from RFI submissions was considered in W‐
ZHA’s Air Rights Development Economics Memorandum (see Appendix A).
1 Jones Lang LaSalle, Air Rights Development in Northern Virginia, February 4, 2013 Internal Draft.
‐ 3 ‐
Arlington County retained W‐ZHA to review the JLL analysis in light of W‐ZHA’s prior research on
development economics in Rosslyn and RFI responses. This analysis and its conclusions are contained in
W‐ZHA’s Air Rights Development Economics Memorandum which is attached in Appendix A.
For the most part, JLL’s assumptions jibe with W‐ZHA’s understanding of development economics. The
assumptions regarding the cost to develop the air rights platform differed, however. W‐ZHA cost was
higher at $550 per platform square foot versus what W‐ZHA interpreted the JLL assumption to be, $320
per square foot.
A significant omission in the JLL analysis was Arlington’s practice of requiring development projects that
exceed base zoning to invest in community improvements. This cost was not included in the JLL
analysis. W‐ZHA includes community benefits as a project cost in this financial feasibility analysis.
STRUCTURE OF THIS TECHNICAL MEMORANDUM
Following this introduction, the key assumptions underlying the feasibility analysis are presented. Then
each air rights scenario is tested for financial feasibility. Finally, feasibility conclusions are summarized.
ASSUMPTIONS
SITE DEVELOPMENT PROGRAMS
‐ 4 ‐
The Site 1 development program is from the JLL Analysis. Development programs for the remainder of
the Sites were developed by Goody Clancy Associates. Goody Clancy’s programs reflect the maximum
density of development as constrained by height.
DEVELOPMENT COST (NET OF AIR RIGHTS AND COMMUNITY BENEFIT COSTS) AND OPERATING ASSUMPTIONS
As per W‐ZHA’s Air Rights Economics Memorandum (see Appendix A), this analysis assumes the
following development costs for office, retail and residential air rights development.
Site 1 Site 2 Site 3 Office
Site 3 Office/Site 4
Office & Parking
Site 3 Rental
Residential /Site 4
Office & Parking Site 4 Office
Platform New New Reinforced Reinforced/New Reinforced/New New
Total Sq Ft 690,000 812,500 216,000 564,000 467,600 313,000
Gross Sq Ft Office 460,000 566,500 200,000 540,000 260,000 309,000
Gross Sq Ft Residential 220,000 246,000 0 0 183,600 0
Gross Sq Ft Retail 10,000 0 16,000 24,000 24,000 4,000
Parking Spaces 680 829 232 588 475 317
Source: W‐ZHA
E:\ros air\[Site 4 Office.xlsx]Sheet4
Building Program Assumptions
All Air Rights Development Scenarios
Rosslyn Air Rights Analysis
Office Retail Residential
Air Rights Platform (New) /Platform SF $550 $550 $550
Building
Hard Cost /GSF $175 $175 $220
Soft Cost 25% /GSF $44 $44 $55
Sub‐Total /GSF $219 $219 $275
Tenant Allowance/Fit‐Out /RSF $80 $75 $30
Hard Cost na
Soft Cost na
Parking Cost /Space /Space $40,000 $40,000 $40,000
Total Development Cost $388 $429 $392
Finance Fees and Interest /GSF $29 $63 $31
GRAND TOTAL /GSF $418 $491 $423
Source: W‐ZHA
E:\ros air\[assumptions.xlsx]Sheet1
W‐ZHA Final Development Cost for Air Rights Development
Rosslyn, VA
‐ 5 ‐
Site 3 is Gateway Park. Air rights development on Site 3 would not require that a new platform be
developed. The existing platform over Interstate 66 would likely need to be reinforced.
A development company, JBG Companies, estimated the platform cost for Site 3 in their Request for
Information submission to VDOT. The estimated cost was between $300 and $350 per platform square
foot. W‐ZHA has assumed a Site 3 platform cost of $300 per platform square foot.
As per W‐ZHA’s Air Rights Development Economics Memorandum (see Appendix A), this analysis reflects
the following operating for office, retail and residential air rights development.
ADDITIONAL COST ‐‐ AIR RIGHTS AND COMMUNITY BENEFIT CONTRIBUTIONS
Air rights projects will likely have to pay the State to obtain air rights. In addition, air rights projects will
be required to invest in community improvements above and beyond project development costs. Both
the State and the County will require economic consideration from air rights projects.
How the air rights and community benefit formula works out between the State and the County is
unknown. For purposes of this analysis, W‐ZHA has applied fair market land values to each FAR foot of
air rights development to estimate the cost of both air rights access and community investments. This
cost is treated as a development cost in the feasibility analysis.
Office Retail Residential
Rent /RSF $60.00 $35.00 $40.80
Vacancy Rate % of Rent 5% 7% 5%
Operating Expenses /RSF or /Unit $18.00 $0.00 $9,000
Parking NOI /Space /Mo $150 $150 $130
Source: W‐ZHA
E:\ros air\[air rights 2.xlsx]Sheet5
Operating Assumptions for Air Rights Development
Rosslyn, VA
‐ 6 ‐
Fair market land values are summarized in the following table.
INVESTMENT HURDLE RATES
To be financially feasible, a real estate project must generate sufficient income to justify the investment.
W‐ZHA employed a yield analysis to determine air rights development feasibility. The “yield” is simply
the project’s net operating income divided by development cost. When the yield is higher than the
investor’s hurdle rate it is a project that may be worth pursuing.
Hurdle rates are a function of the cost of money, capitalization rates, perceived market risk and
investment risk. Each investor is different in terms of their access to capital and risk tolerance.
Therefore, hurdle rates vary depending on the investor. Hurdle rates also vary by land use.
Generally, hurdle rates today range from 6.25 percent to 9 percent depending on the land use. These
hurdle rates reflect historically low interest rates, strong market forces and conventional development.
W‐ZHA has assumed that air rights projects must achieve a hurdle rate in excess of 9 percent to attract
private investor interest. This assumption takes into consideration that air rights development will likely
be perceived as more risky than conventional development because of its complexity and extended
construction period. This assumption also takes into consideration that the cost of money (or interest
rates) will likely increase in the future.
Office Retail Residential
Fair Market Land Value /FAR Ft $52.50 $65.00 $75.00
Source: Arlington County; W‐ZHA
E:\ros air\[assumptions.xlsx]Sheet2
Fair Market Land Values by FAR Ft by Land Use
Rosslyn, VA
‐ 7 ‐
SITE 1 OFFICE, RETAIL AND RESIDENTIAL DEVELOPMENT
Development Program
Total Sq Ft 690,000
Gross Sq Ft Office 460,000
Rentable Sq Ft Office 427,800
Gross Sq Ft Residential 220,000
Rentable Sq Ft Residential 182,600
Gross Sq Ft Retail 10,000
Rentable Sq Ft Retail 10,000
Parking Spaces 680
Source: JLL Analysis; W‐ZHA
E:\ros air\[Site 1 .xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Feasibily Analysis
Site 1
‐ 8 ‐
Air Rights and Community Benefit Costs
Sq Ft Attained Office 460,000
Less: Standard Base Zoning 0
Difference 460,000
Assumed Fair Market Value $52.50
Community Benefit Package Value $24,150,000
Sq Ft Attained Residential 220,000
Less: Standard Base Zoning 0
Difference 220,000
Assumed Fair Market Value $75.00
Community Benefit Package Value $16,500,000
Sq Ft Attained Retail 10,000
Less: Standard Base Zoning 0
Difference 10,000
Assumed Fair Market Value $65.00
Community Benefit Package Value $650,000
Total Sq Ft Attained 690,000
Less: Standard Base Zoning 0
Difference 690,000
Assumed Fair Market Value $59.86
Community Benefit Package Value $41,300,000
Source: Arlington County; W‐ZHA
E:\ros air\[Site 1 .xlsx]contrib
Air Rights and Community Benefit Costs
Rosslyn Air Rights Feasibily Analysis
Site 1
‐ 9 ‐
Building Cost
Building $163,312,500
Office and Retail Hard Cost $82,250,000
Sq Ft 470,000
Cost /SF $175.00
Residential Hard Cost $48,400,000
Sq Ft 220,000
Cost /SF $220.00
Sub‐Total Hard Cost $130,650,000
Soft Cost @ 25% $32,662,500
Tenant Improvement Allowance $40,452,000
Office 427,800 @ $80.00 $34,224,000
Residential 182,600 @ $30.00 $5,478,000
Retail 10,000 @ $75.00 $750,000
Parking $27,200,000
Spaces 680 @ $40,000
Total Cost $230,964,500
Cost /SF $334.73
Source: RS Means; W‐ZHA
E:\ros air\[Site 1 .xlsx]bldg cost
Building Development Cost (Excluding Platform)
Site 1
Rosslyn Air Rights Feasibily Analysis
‐ 10 ‐
Platform Cost
Total Cost
Platform Reinforcement Sq Ft 0
Platform Cost /Sq Ft $300
Sub‐Total Cost $0
New Platform Sq Ft 69,000
Platform Cost /Sq Ft $550
Sub‐Total Cost $37,950,000
Total Platform Cost $37,950,000
Cost /FAR Ft $55.00
Source: JBG Expression of Interest; W‐ZHA
Platform Cost
Site 1
Rosslyn Air Rights Feasibily Analysis
E:\ros air\[Site 1 .xlsx]plaatform cost
Cost /GSF
Community Benefit Package $41,300,000 $59.86
Platform $37,950,000 $55.00
Building Cost $230,964,500 $334.73
Total Project Cost w/out Financing $310,214,500 $449.59
Financing Cost $29,229,520 $42.36
Project Cost with Financing $339,444,020 $491.95
Source: W‐ZHA
E:\ros air\[Site 1 .xlsx]total cost
Total Project Cost
Site 1
Rosslyn Air Rights Feasibily Analysis
‐ 11 ‐
Yield
Conclusion
Sq Ft 220,000
Rentable Sq Ft 182,600
Rent $3.40
Vacancy 5%
Op Exp /Unit $9,000
Gross Revenue $7,450,080
Vacancy ($372,504)
Net Revenue $7,077,576
Operating Expenses ($2,052,000)
Net Operating Income $5,025,576
Sq Ft 460,000
Rentable Sq Ft 427,800
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $25,668,000
Vacancy ($1,283,400)
Net Revenue $24,384,600
Operating Expenses ($7,700,400)
Net Operating Income $16,684,200
Sq Ft 10,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $350,000
Vacancy ($17,500)
Net Revenue $332,500
Operating Expenses $0
Net Operating Income $332,500
Spaces 680 Residential 200
Mo Permit Rate $144 Office/Retail 480
Vacancy 0%
Gross Revenue $1,176,000
Vacancy $0
Net Revenue/NOI $1,176,000
Sq Ft 690,000
Gross Revenue $34,644,080
Vacancy ($1,673,404)
Net Revenue $32,970,676
Operating Expenses ($9,752,400)
Net Operating Income $23,218,276
Yield Without Financing 7.5%
Yield With Financing 6.8%
Source: W‐ZHA
E:\ros air\[Site 1 .xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Feasibily Analysis
Office
Site 1
Residential
‐ 12 ‐
Given the development cost and operating assumptions, Site 1 air rights development is not feasible.
Rent would need to increase by 15 percent to achieve a 9 percent investment hurdle rate (excluding
financing). This translates into real rent growth (exclusive of inflation) of 1.4% over 10 years or 0.7%
over 20 years. Air rights development may be feasible in the long term (20 years‐plus).
SITE 2 OFFICE AND RESIDENTIAL DEVELOPMENT
Development Program
Total Sq Ft 812,500
Gross Sq Ft Office 566,500
Rentable Sq Ft Office 526,845
Gross Sq Ft Residential 246,000
Rentable Sq Ft Residential 204,180
Gross Sq Ft Retail 0
Rentable Sq Ft Retail 0
Parking Spaces 829
Source: W‐ZHA
E:\ros air\[Site 2 .xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Feasibility Analysis
Site 2
‐ 13 ‐
Air Rights and Community Benefit Costs
Sq Ft Attained Office 566,500
Less: Standard Base Zoning 0
Difference 566,500
Assumed Fair Market Value $52.50
Community Benefit Package Value $29,741,250
Sq Ft Attained Residential 246,000
Less: Standard Base Zoning 0
Difference 246,000
Assumed Fair Market Value $75.00
Community Benefit Package Value $18,450,000
Sq Ft Attained Retail 0
Less: Standard Base Zoning 0
Difference 0
Assumed Fair Market Value $65.00
Community Benefit Package Value $0
Total Sq Ft Attained 812,500
Less: Standard Base Zoning 0
Difference 812,500
Assumed Fair Market Value $59.31
Community Benefit Package Value $48,191,250
Source: Arlington County; W‐ZHA
E:\ros air\[Site 2 .xlsx]contrib
Air Rights and Community Benefit Costs
Rosslyn Air Rights Feasibility Analysis
Site 2
‐ 14 ‐
Building Cost
Building $191,571,875
Office and Retail Hard Cost $99,137,500
Sq Ft 566,500
Cost /SF $175.00
Residential Hard Cost $54,120,000
Sq Ft 246,000
Cost /SF $220.00
Sub‐Total Hard Cost $153,257,500
Soft Cost @ 25% $38,314,375
Tenant Improvement Allowance $48,273,000
Office 526,845 @ $80.00 $42,147,600
Residential 204,180 @ $30.00 $6,125,400
Retail 0 @ $75.00 $0
Parking $33,160,000
Spaces 829 @ $40,000
Total Cost $273,004,875
Cost /SF $336.01
Source: RS Means; W‐ZHA
E:\ros air\[Site 2 .xlsx]bldg cost
Building Development Cost (Excluding Platform)
Site 2
Rosslyn Air Rights Feasibility Analysis
‐ 15 ‐
Platform Cost
Total Cost
Platform Reinforcement Sq Ft 0
Platform Cost /Sq Ft $300
Sub‐Total Cost $0
New Platform Sq Ft 128,000
Platform Cost /Sq Ft $550
Sub‐Total Cost $70,400,000
Total Platform Cost $70,400,000
Cost /FAR Ft $86.65
Source: JBG Expression of Interest; W‐ZHA
Platform Cost
Site 2
Rosslyn Air Rights Analysis
F:\8000s, misc\80099 Roslyn\air rights\[Site 2 .xlsx]plaatform cost
Cost /GSF
Community Benefit Package $48,191,250 $59.31
Platform $70,400,000 $86.65
Building Cost $273,004,875 $336.01
Total Project Cost w/out Financing $391,596,125 $481.96
Financing Cost $36,635,247 $45.09
Project Cost with Financing $428,231,372 $527.05
Source: W‐ZHA
E:\ros air\[Site 2 .xlsx]total cost
Total Project Cost
Site 2
Rosslyn Air Rights Feasibility Analysis
‐ 16 ‐
Yield
Sq Ft 246,000
Rentable Sq Ft 204,180
Rent $3.40
Vacancy 5%
Op Exp /Unit $9,000
Gross Revenue $8,330,544
Vacancy ($416,527)
Net Revenue $7,914,017
Operating Expenses ($2,295,000)
Net Operating Income $5,619,017
Sq Ft 566,500
Rentable Sq Ft 526,845
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $31,610,700
Vacancy ($1,580,535)
Net Revenue $30,030,165
Operating Expenses ($9,483,210)
Net Operating Income $20,546,955
Spaces 829 Residential 255
Mo Permit Rate $145 Office/Retail 574
Vacancy 0%
Gross Revenue $1,446,300
Vacancy $0
Net Revenue/NOI $1,446,300
Sq Ft 812,500
Gross Revenue $41,387,544
Vacancy ($1,997,062)
Net Revenue $39,390,482
Operating Expenses ($11,778,210)
Net Operating Income $27,612,272
Yield Without Financing 7.1%
Yield With Financing 6.4%
Source: W‐ZHA
E:\ros air\[Site 2 .xlsx]yield
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Feasibility Analysis
Office
Site 2
Residential
‐ 17 ‐
Conclusion
Given the development cost and operating assumptions, Site 2 air rights development is not feasible in
the near term. Rent would need to increase by over 20 percent to achieve a 9 percent investment
hurdle rate (exclusive of financing costs). Site 2 is a long term (20 years‐plus) development proposition.
SITE 3 OFFICE AND RETAIL DEVELOPMENT
Development Program
Site 3 is Gateway Park. Gateway Park is already located on a platform over Interstate 66. Under this
scenario an office building is developed with retail on the ground floor, a parking garage above the
ground floor, and office above the parking. The building is self‐parked on Site 3.
It is important to note that the adopted RealizeRosslyn Plan Framework revitalizes Gateway Park as a
park, not a development site.
Total Sq Ft 216,000
Gross Sq Ft Office 200,000
Rentable Sq Ft Office 186,000
Gross Sq Ft Residential 0
Rentable Sq Ft Residential 0
Gross Sq Ft Retail 16,000
Rentable Sq Ft Retail 16,000
Parking Spaces 232
Source: W‐ZHA
E:\ros air\[Site 3 Office.xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Feasibility Analysis
Site 3 Office
‐ 18 ‐
Community Contribution Package Value
Sq Ft Attained Office 200,000
Less: Standard Base Zoning 0
Difference 200,000
Assumed Fair Market Value $52.50
Community Benefit Package Value $10,500,000
Sq Ft Attained Residential 0
Less: Standard Base Zoning 0
Difference 0
Assumed Fair Market Value $75.00
Community Benefit Package Value $0
Sq Ft Attained Retail 16,000
Less: Standard Base Zoning 0
Difference 16,000
Assumed Fair Market Value $65.00
Community Benefit Package Value $1,040,000
Total Sq Ft Attained 216,000
Less: Standard Base Zoning 0
Difference 216,000
Assumed Fair Market Value $53.43
Community Benefit Package Value $11,540,000
Source: Arlington County, W‐ZHA
E:\ros air\[Site 3 Office.xlsx]contrib
Air Rights and Community Benefit Costs
Rosslyn Air Rights Feasibility Analysis
Site 3 Office
‐ 19 ‐
Building Cost
Building $47,250,000
Office and Retail Hard Cost $37,800,000
Sq Ft 216,000
Cost /SF $175.00
Residential Hard Cost $0
Sq Ft 0
Cost /SF $220.00
Sub‐Total Hard Cost $37,800,000
Soft Cost @ 25% $9,450,000
Tenant Improvement Allowance $16,080,000
Office 186,000 @ $80.00 $14,880,000
Residential 0 @ $30.00 $0
Retail 16,000 @ $75.00 $1,200,000
Parking $9,280,000
Spaces 232 @ $40,000
Total Cost $72,610,000
Cost /SF $336.16
Source: RS Means; W‐ZHA
E:\ros air\[Site 3 Office.xlsx]bldg cost
Building Development Cost (Excluding Platform)
Site 3 Office
Rosslyn Air Rights Feasibility Analysis
‐ 20 ‐
Platform Cost
Total Cost
Site 3 Platform Reinforcement Sq Ft 30,200
Platform Cost /Sq Ft $300
Sub‐Total Cost $9,060,000
Site 4 Platform Sq Ft 0
Platform Cost /Sq Ft $550
Sub‐Total Cost $0
Total Platform Cost $9,060,000
Cost /FAR Ft $41.94
Source: JBG Expression of Interest; W‐ZHA
Platform Cost
Site 3 Office
Rosslyn Air Rights Feasibility Analysis
E:\ros air\[Site 3 Office.xlsx]plaatform cost
Cost /GSF
Community Benefit Package $11,540,000 $53.43
Platform $9,060,000 $41.94
Building Cost $72,610,000 $336.16
Total Project Cost w/out Financing $93,210,000 $431.53
Financing Cost $9,682,110 $44.82
Project Cost with Financing $102,892,110 $476.35
Source: W‐ZHA
E:\ros air\[Site 3 Office.xlsx]total cost
Total Project Cost
Site 3 Office
Rosslyn Air Rights Feasibility Analysis
‐ 21 ‐
Yield
Sq Ft 200,000
Rentable Sq Ft 186,000
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $11,160,000
Vacancy ($558,000)
Net Revenue $10,602,000
Operating Expenses ($3,348,000)
Net Operating Income $7,254,000
Sq Ft 16,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $560,000
Vacancy ($28,000)
Net Revenue $532,000
Operating Expenses $0
Net Operating Income $532,000
Spaces 232 Residential ‐
Mo Permit Rate $150 Office/Retail 232
Vacancy 0%
Gross Revenue $417,600
Vacancy $0
Net Revenue/NOI $417,600
Sq Ft 216,000
Gross Revenue $12,137,600
Vacancy ($586,000)
Net Revenue $11,551,600
Operating Expenses ($3,348,000)
Net Operating Income $8,203,600
Yield Without Financing Cost 8.8%
Yield With Financing Cost 8.0%
Source: W‐ZHA
E:\ros air\[Site 3 Office.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Feasibility Analysis
Office
Site 3 Office
‐ 22 ‐
Conclusion
Given the development cost and operating assumptions, Site 3 air rights development may be feasible
within a 20‐year timeframe. Real rent (net of inflation) would need to increase by 2 percent to achieve a
9 percent hurdle rate on development costs net of financing. The RealizeRosslyn planning framework
assumes Site 3 remains a park and is revitalized as such.
SITE 3 OFFICE WITH SITE 4 OFFICE AND PARKING DEVELOPMENT
Development Program
Under this scenario office is developed on both Sites 3 and 4. The parking for both office buildings is
located on Site 4. There is no parking on Site 3.
It is important to note that the adopted RealizeRosslyn Plan Framework revitalizes Gateway Park as a
park, not a development site.
Total Sq Ft 564,000
Gross Sq Ft Office 540,000
Rentable Sq Ft Office 502,200
Gross Sq Ft Residential 0
Rentable Sq Ft Residential 0
Gross Sq Ft Retail 24,000
Rentable Sq Ft Retail 24,000
Parking Spaces 588
Source: W‐ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Analysis
Site 3 Office with Site 4
‐ 23 ‐
Community Contribution Package Value
Sq Ft Attained Office 540,000
Less: Standard Base Zoning 0
Difference 540,000
Assumed Fair Market Value $52.50
Community Benefit Package Value $28,350,000
Sq Ft Attained Residential 0
Less: Standard Base Zoning 0
Difference 0
Assumed Fair Market Value $75.00
Community Benefit Package Value $0
Sq Ft Attained Retail 24,000
Less: Standard Base Zoning 0
Difference 24,000
Assumed Fair Market Value $65.00
Community Benefit Package Value $1,560,000
Total Sq Ft Attained 564,000
Less: Standard Base Zoning 0
Difference 564,000
Assumed Fair Market Value $53.03
Community Benefit Package Value $29,910,000
Source: Arlington County; W‐ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]contrib
Air Rights and Community Benefit Costs
Rosslyn Air Rights Analysis
Site 3 Office with Site 4
‐ 24 ‐
Building Cost
Building $123,375,000
Office and Retail Hard Cost $98,700,000
Sq Ft 564,000
Cost /SF $175.00
Residential Hard Cost $0
Sq Ft 0
Cost /SF $220.00
Sub‐Total Hard Cost $98,700,000
Soft Cost @ 25% $24,675,000
Tenant Improvement Allowance $41,976,000
Office 502,200 @ $80.00 $40,176,000
Residential 0 @ $30.00 $0
Retail 24,000 @ $75.00 $1,800,000
Parking $23,520,000
Spaces 588 @ $40,000
Total Cost $188,871,000
Cost /SF $334.88
Source: RS Means; W‐ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]bldg cost
Building Development Cost (Excluding Platform)
Site 3 Office with Site 4
Rosslyn Air Rights Analysis
‐ 25 ‐
Platform Cost
Total Cost
Site 3 Platform Reinforcement Sq Ft 30,200
Platform Cost /Sq Ft $300
Sub‐Total Cost $9,060,000
Site 4 Platform Sq Ft 50,000
Platform Cost /Sq Ft $550
Sub‐Total Cost $27,500,000
Total Platform Cost $36,560,000
Cost /FAR Ft $64.82
Source: JBG Expression of Interest; W‐ZHA
Platform Cost
Site 3 Office with Site 4
Rosslyn Air Rights Analysis
E:\ros air\[Site 3 Office with site 4.xlsx]plaatform cost
Cost /GSF
Community Benefit Package $29,910,000 $53.03
Platform $36,560,000 $64.82
Building Cost $188,871,000 $334.88
Total Project Cost w/out Financing $255,341,000 $452.73
Financing Cost $24,236,031 $42.97
Total Project Cost $279,577,031 $495.70
Source: W‐ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]total cost
Total Project Cost
Site 3 Office with Site 4
Rosslyn Air Rights Analysis
‐ 26 ‐
Yield
Sq Ft 540,000
Rentable Sq Ft 502,200
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $30,132,000
Vacancy ($1,506,600)
Net Revenue $28,625,400
Operating Expenses ($9,039,600)
Net Operating Income $19,585,800
Sq Ft 24,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $840,000
Vacancy ($42,000)
Net Revenue $798,000
Operating Expenses $0
Net Operating Income $798,000
Spaces 588 Residential ‐
Mo Permit Rate $150 Office/Retail 588
Vacancy 0%
Gross Revenue $1,058,400
Vacancy $0
Net Revenue/NOI $1,058,400
Sq Ft 564,000
Gross Revenue $32,030,400
Vacancy ($1,548,600)
Net Revenue $30,481,800
Operating Expenses ($9,039,600)
Net Operating Income $21,442,200
Yield Without Financing 8.4%
Yield With Financing 7.7%
Source: W‐ZHA
E:\ros air\[Site 3 Office with site 4.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Analysis
Office
Site 3 Office with Site 4
‐ 27 ‐
Conclusion
Given the development cost and operating assumptions, Site 3 office development with Site 4 office and
parking development is not feasible in the near term. Rent would need to increase by 5 percent to
achieve a 9 percent investment hurdle rate without financing. This Scenario may be implementable
within a 20‐year timeframe.
SITE 3 RENTAL RESIDENTIAL WITH SITE 4 OFFICE AND PARKING DEVELOPMENT
Development Program
Under this scenario residential is developed on Site 3 and office is developed on Site 4. The parking for
the residential use and the office use is located on Site 4. There is no parking contemplated on Site 3.
It is important to note that the adopted RealizeRosslyn Plan Framework revitalizes Gateway Park as a
park, not a development site.
Total Sq Ft 467,600
Gross Sq Ft Office 260,000
Rentable Sq Ft Office 241,800
Gross Sq Ft Residential 183,600
Rentable Sq Ft Residential 152,388
Gross Sq Ft Retail 24,000
Rentable Sq Ft Retail 24,000
Parking Spaces 475
Source: W‐ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Analysis
Site 3 Residential with Site 4
‐ 28 ‐
Community Contribution Package Value
Sq Ft Attained Office 260,000
Less: Standard Base Zoning 0
Difference 260,000
Assumed Fair Market Value $52.50
Community Benefit Package Value $13,650,000
Sq Ft Attained Residential 183,600
Less: Standard Base Zoning 0
Difference 183,600
Assumed Fair Market Value $75.00
Community Benefit Package Value $13,770,000
Sq Ft Attained Retail 24,000
Less: Standard Base Zoning 0
Difference 24,000
Assumed Fair Market Value $65.00
Community Benefit Package Value $1,560,000
Total Sq Ft Attained 467,600
Less: Standard Base Zoning 0
Difference 467,600
Assumed Fair Market Value $61.98
Community Benefit Package Value $28,980,000
Source: Arlington County; W‐ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]contrib
Air Rights and Community Benefit Costs
Rosslyn Air Rights Analysis
Site 3 Residential with Site 4
‐ 29 ‐
Building Cost
Building $112,615,000
Office and Retail Hard Cost $49,700,000
Sq Ft 284,000
Cost /SF $175.00
Residential Hard Cost $40,392,000
Sq Ft 183,600
Cost /SF $220.00
Sub‐Total Hard Cost $90,092,000
Soft Cost @ 25% $22,523,000
Tenant Improvement Allowance $25,715,640
Office 241,800 @ $80.00 $19,344,000
Residential 152,388 @ $30.00 $4,571,640
Retail 24,000 @ $75.00 $1,800,000
Parking $19,000,000
Spaces 475 @ $40,000
Total Cost $157,330,640
Cost /SF $336.46
Source: RS Means; W‐ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]bldg cost
Building Development Cost (Excluding Platform)
Site 3 Residential with Site 4
Rosslyn Air Rights Analysis
‐ 30 ‐
Platform Cost
Total Cost
Site 3 Platform Reinforcement Sq Ft 30,200
Platform Cost /Sq Ft $300
Sub‐Total Cost $9,060,000
Site 4 Platform Sq Ft 50,000
Platform Cost /Sq Ft $550
Sub‐Total Cost $27,500,000
Total Platform Cost $36,560,000
Cost /FAR Ft $78.19
Source: JBG Expression of Interest; W‐ZHA
Platform Cost
Site 3 Residential with Site 4
Rosslyn Air Rights Analysis
E:\ros air\[Site 3 resi with site 4.xlsx]plaatform cost
Cost /GSF
Community Benefit Package $28,980,000 $61.98
Platform $36,560,000 $78.19
Building Cost $157,330,640 $336.46
Total Project Cost w/out Financing $222,870,640 $476.63
Financing Cost $21,281,228 $45.51
Project Cost with Financing $244,151,868 $522.14
Source: W‐ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]total cost
Total Project Cost
Site 3 Residential with Site 4
Rosslyn Air Rights Analysis
‐ 31 ‐
Yield
Sq Ft 183,600
Rentable Sq Ft 152,388
Rent $3.40
Vacancy 5%
Op Exp /Unit $9,000
Gross Revenue $6,217,430
Vacancy ($310,872)
Net Revenue $5,906,559
Operating Expenses ($1,710,000)
Net Operating Income $4,196,559
Sq Ft 260,000
Rentable Sq Ft 241,800
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $14,508,000
Vacancy ($725,400)
Net Revenue $13,782,600
Operating Expenses ($4,352,400)
Net Operating Income $9,430,200
Sq Ft 24,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $840,000
Vacancy ($42,000)
Net Revenue $798,000
Operating Expenses $0
Net Operating Income $798,000
Spaces 475 Residential 207
Mo Permit Rate $143 Office/Retail 268
Vacancy 0%
Gross Revenue $817,740
Vacancy $0
Net Revenue/NOI $817,740
Sq Ft 467,600
Gross Revenue $22,383,170
Vacancy ($1,078,272)
Net Revenue $21,304,899
Operating Expenses ($6,062,400)
Net Operating Income $15,242,499
Yield Without Financing 6.8%
Yield With Financing 6.2%
Source: W‐ZHA
E:\ros air\[Site 3 resi with site 4.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Analysis
Office
Site 3 Residential with Site 4
Residential
‐ 32 ‐
Conclusion
Given the development cost and operating assumptions, Site 3 rental residential development with Site
4 office and parking development is not feasible in the near term. Rent would need to increase by over
20 percent to achieve a 9 percent investment hurdle rate on cost without financing. This scenario is
likely not feasible within the next 20 years.
SITE 4 OFFICE DEVELOPMENT
Development Program
In this Scenario, an office building is developed on Site 4 with its own parking. Site 4 does not contain
any parking beyond what is required to support the Site 4 office program.
Total Sq Ft 313,000
Gross Sq Ft Office 309,000
Rentable Sq Ft Office 287,370
Gross Sq Ft Residential 0
Rentable Sq Ft Residential 0
Gross Sq Ft Retail 4,000
Rentable Sq Ft Retail 4,000
Parking Spaces 317
Source: W‐ZHA
E:\ros air\[Site 4 Office.xlsx]Sheet1
Building Program Assumptions
Rosslyn Air Rights Analysis
Site 4 Office
‐ 33 ‐
Community Benefit Package Value
Sq Ft Attained Office 309,000
Less: Standard Base Zoning 0
Difference 309,000
Assumed Fair Market Value $52.50
Community Benefit Package Value $16,222,500
Sq Ft Attained Residential 0
Less: Standard Base Zoning 0
Difference 0
Assumed Fair Market Value $75.00
Community Benefit Package Value $0
Sq Ft Attained Retail 4,000
Less: Standard Base Zoning 0
Difference 4,000
Assumed Fair Market Value $65.00
Community Benefit Package Value $260,000
Total Sq Ft Attained 313,000
Less: Standard Base Zoning 0
Difference 313,000
Assumed Fair Market Value $52.66
Community Benefit Package Value $16,482,500
Source: Arlington County; W‐ZHA
E:\ros air\[Site 4 Office.xlsx]contrib
Air Rights and Community Benefit Costs
Rosslyn Air Rights Analysis
Site 4 Office
‐ 34 ‐
Building Cost
Building $68,468,750
Office and Retail Hard Cost $54,775,000
Sq Ft 313,000
Cost /SF $175.00
Residential Hard Cost $0
Sq Ft 0
Cost /SF $220.00
Sub‐Total Hard Cost $54,775,000
Soft Cost @ 25% $13,693,750
Tenant Improvement Allowance $23,289,600
Office 287,370 @ $80.00 $22,989,600
Residential 0 @ $30.00 $0
Retail 4,000 @ $75.00 $300,000
Parking $12,680,000
Spaces 317 @ $40,000
Total Cost $104,438,350
Cost /SF $333.67
Source: RS Means; W‐ZHA
E:\ros air\[Site 4 Office.xlsx]bldg cost
Building Development Cost (Excluding Platform)
Site 4 Office
Rosslyn Air Rights Analysis
‐ 35 ‐
Platform Cost
Total Cost
Site 3 Platform Reinforcement Sq Ft 0
Platform Cost /Sq Ft $300
Sub‐Total Cost $0
Site 4 Platform Sq Ft 46,000
Platform Cost /Sq Ft $550
Sub‐Total Cost $25,300,000
Total Platform Cost $25,300,000
Cost /FAR Ft $80.83
Source: JBG Expression of Interest; W‐ZHA
Platform Cost
Site 4 Office
Rosslyn Air Rights Analysis
F:\8000s, misc\80099 Roslyn\air rights\[Site 4 Office.xlsx]plaatform cost
Cost /GSF
Community Benefit Package $16,482,500 $52.66
Platform $25,300,000 $80.83
Building Cost $114,882,185 $367.04
Total Project Cost w/out Financing $156,664,685 $500.53
Financing Cost $15,256,486 $48.74
Project Cost with Financing $171,921,171 $549.27
Source: W‐ZHA
E:\ros air\[Site 4 Office.xlsx]total cost
Total Project Cost
Site 4 Office
Rosslyn Air Rights Analysis
‐ 36 ‐
Yield
Sq Ft 309,000
Rentable Sq Ft 287,370
Rent $60.00
Vacancy 5%
Op Exp /Sq Ft $18.00
Gross Revenue $17,242,200
Vacancy ($862,110)
Net Revenue $16,380,090
Operating Expenses ($5,172,660)
Net Operating Income $11,207,430
Sq Ft 4,000
Rent $35.00 NNN
Vacancy 5%
Op Exp 0%
Gross Revenue $140,000
Vacancy ($7,000)
Net Revenue $133,000
Operating Expenses $0
Net Operating Income $133,000
Spaces 317 Residential ‐
Mo Permit Rate $150 Office/Retail 317
Vacancy 0%
Gross Revenue $570,600
Vacancy $0
Net Revenue/NOI $570,600
Sq Ft 313,000
Gross Revenue $17,952,800
Vacancy ($869,110)
Net Revenue $17,083,690
Operating Expenses ($5,172,660)
Net Operating Income $11,911,030
Yield Without Financing 7.6%
Yield With Financing 6.9%
Source: W‐ZHA
E:\ros air\[Site 4 Office.xlsx]yield
Retail
Parking
Total
Investment Return
Net Operating Income and Yield
Rosslyn Air Rights Analysis
Office
Site 4 Office
‐ 37 ‐
Conclusion
Given the development cost and operating assumptions, Site 4 office development is not feasible in the
near term. Rent would need to increase by 13 percent to achieve a 9 percent investment hurdle rate.
Site 4 is a long term (20 years‐plus) development proposition.
AIR RIGHTS FEASIBILITY CONCLUSIONS
Given the assumptions, W‐ZHA concludes that air rights development that is exclusively developed on a
newly constructed platform is likely not economically feasible for at least 20 years in Rosslyn. To be
economically feasible rents would need to increase by 13 to 20 percent (net of inflation) from where
they are today.
W‐ZHA’s analysis concludes that air rights development as office space may be feasible within the next
twenty years on Rosslyn’s Gateway Park site. While not economically feasible today, to be economically
feasible real rent would need to increase by 2 to 5 percent. The Gateway Park is more economically
feasible because it is assumed that reinforcing the Gateway Park platform is less expensive than
constructing a new platform. It is important to note that the adopted RealizeRosslyn Plan Framework
revitalizes Gateway Park as a park, not a development site.