RA Members, Directors Have Questions on Tetra Purchase

by Karen Goff February 27, 2015 at 9:30 am 38 Comments

Tetra Building in Reston/Courtesy of Tetra Reston Association staff envisions a remodeled building on the shores of Lake Newport that can host anything from yoga classes to camp aftercare to a lovely wedding reception.

More importantly, it will be the missing link in nearly 100 acres of RA open and common space in North Reston.

That’s the picture that emerged Thursday as RA’s Board of Directors held the first of two public hearings on its intended purchase of the former visitors center.

RA is seeking to buy the 3.48-acre property that features a 3,128-square-foot building currently used as offices for Tetra commercial real estate. The purchase price will be $2.65 million, based on a recent appraisal, said RA CEO Cate Fulkerson.

See more details on the Letter of Intent to purchase, which was approved by the board on Thursday.

Fulkerson said there are no plans to repurpose the land as an indoor tennis center, which had been under consideration (and ultimately tabled due to cost and mixed community reaction) at adjacent land twice since 2009.

Adding the parcel, which is surrounded by other RA properties such as Lake Newport Tennis and Brown’s Chapel Park, would give the association 98 contiguous acres of open and community space, said Fulkerson.

RA President Ken Knueven said acquiring the Tetra property is a unique opportunity, both to ward off outside development and offer options for members.

“Our master plan effort for Phase 2 is to re-designate the area [which is currently zoned convenience center],” he said. “However, as it is zoned and according to the development plan in place today, an owner can come in and build 50 feet into lake and double its size. … even if we get a zoning change.”

“This is an opportunity to get total control in ownership over a piece of property that will give us one contiguous piece of land for use by the members,” said Knueven. “That is the intangible we have to continue to tell ourselves.

RA plans to put the issue to community referendum in April. There will be an additional public hearing on the subject March 26. Only 10 percent of households voting (or 1,751 in a pool of 17,506 eligible households) are needed for the referendum to pass, according to RA’s fact sheet on the topic.

The referendum question will look like this:

Should the Reston Association, acting through the Board of Directors, be authorized to:

1) Purchase the 3.47 acre Tetra property, inclusive of land and improvements, located at 11450 Baron Cameron Avenue, Reston, VA 20190 in the North Point District as an addition to Common Area pursuant to Article IV, Section IV.10 of the Reston Deed;
2) Borrow up to $2,650,000 on behalf of the Association to make the purchase; and,
3) Renovate and repurpose the existing building and land for future community and recreation uses?

Still, many of the directors, as well as the five members who spoke during the public hearing portion, had questions that remain to be answered.

Most of the concerns are financial. RA’s appraisal came in more than $1 million more than the county assessment. RA land use attorney John McBride explained that an appraiser is looking at one property while an assessor is looking at a county full of properties — in this case, small offices, which will not be the “highest and best use” for the property.

McBride said an appraisal done in 2010 valued the property at $2.7 million — and the current owners originally wanted that price.

The fact sheet draft further explains the difference between the appraisal and the assessment in this case, as well as outlines a five-year financial forecast.

Some financial details from RA CFO David Harris: RA intends to borrow the full $2.65 million at 3.45 percent. The loan is amortized over a 20-year period. The loan will mature in 10 years, at which time RA can pay the principal in full, pay part and refinance the rest or refinance it all. There is a $650,000 pledge from an unknown developer.

Settlement charges will likely cost $16,000. Projected revenue from camps and rentals is $123,000. It will cost RA about $250,000 to repurpose the building, and those costs are not expected to have a significant impact on repair and replacement reserves. The current owner will replace the roof and HVAC systems.

RA will lease the building back to Tetra at least through the end of 2015, but could extend for as long as 18 months. When the building becomes common property, RA will no longer have to pay taxes.

The financial estimate says there will be no impact on member assessments until 2019 and 2020, when $3.64 and $3.68 are estimated. However, those estimates come with the current number of households in the association(21,618 households, including the new Harrison Apartments) and not the 600 new units that are expected to join the association in the next five years.

“On the surface, this sounds like a pretty good opportunity,” said South Lakes Director Richard Chew. “The question, when all is said and done,  is does this deal make financial sense?”

Chew said he would like to know the cost of not doing the deal, if the association has any other projects that are higher priority and what else the developer proffer could be used for if this deal does not happen.

“We just don’t have a bucket of cash sitting around, wondering what to do with the money,” he said.

John Mendonça, a resident of nearby Greenwich Point, said he had concerns with the appraisal as well as the proffer.

“Did RA consider getting a different appraisal?” he asked the board. “The profit Tetra would be making is handsome, and it is not indicative of what is happening in market, where there is a 15-percent vacancy rate. Where is the $650,000 coming from? Is this a certainty or is it wishful thinking? I am also concerned that the programming slated for property could duplicate county and RCC offerings.”

Other members wanted to know how RA would ensure neighbors that noise from parties would not bother them at night and whether RA, essentially a homeowners association, should be competing with hotels for event rental space.

Tammi Petrine, a resident who has been outspoken on many development issues in recent years, said she was also concerned with noise, as well as whether RA had conducted a structural inspection.

She also said she hoped this would not be the return of the indoor tennis issue.

“Will you be able to swear, to ‘cross my heart and hope to die, stick a needle in my eye’ swear that this is not the way to get indoor tennis in through the back door?” she said.

 

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