Rising Renovation Costs, Rental Contract End Leave Lake House With Deficit

by Karen Goff May 23, 2016 at 4:30 pm 46 Comments

Tetra buildingReston Association says the Lake House property is facing a nearly $500,000 cost overrun and is seeking the Board of Directors’ approval to move $430,000 from the 2016 Operating Fund to cover some of the costs.

There are several reasons for the big gap. Among them: Former tenant Tetra commercial real estate was expected to rent back the property through 2016.

Instead, the company, which had its offices in the building since 2003, left at the end of 2015. That means RA did not receive about $107,000 in payments and was also responsible for paying $20,000 in property taxes. Tetra did not break a contract — the contract ended at the end of 2015. It did, however, unexpectedly opt not to sign two six-month renewals, said RA CEO Cate Fulkerson.

“When [Tetra president] Bill Lauer died [in 2015], it was his intention to rent back through 2016,” said Fulkerson. “His wife, Rosemary, said the company just could not stay — it held too many memories. So we said OK, but it accelerated our plan by a whole year.”

Adding to the deficit — renovation costs that ended up being more expensive than estimated. RA estimated that capital costs would be $259,000 this year. Instead, they are $687,000 due to LEED certification modifications ($60,000), preferences of the Lake House Working Group ($217,000), and Fairfax County requirements ($26,000).

The Working Group’s adjustments included a new layout, relocation of electrical systems for a new restroom and new plumbing for the kitchen, according to RA documents.

Fulkerson said there were even more suggestions for changes (from the working group, LEED and the county) that would have totaled nearly $1 million. Among them:an additional bathroom, more bathroom fixtures and more moveable partitions. However, she said she scaled them down in an effort to save money.

County requirements included restroom changes; a new water fountain to meet new plumbing codes; and a requirement to keep a load bearing partition that led to floor plan revisions.

LEED adjustments include a new HVAC system and light fixtures, among others.

When promoting the $2.6 million purchase of the Lake House in the spring of 2015, RA said it expected $55,000 net income in the first year. However, the latest budget proposal projects a $4,000 operating loss due to the unexpected expenses.

After a member referendum was approved by a narrow margin, RA purchased the building — which formerly housed Reston’s Visitor Center — in July of 2015. The association financed the entire $2.6 million purchase price.

Comstock gave the association a contribution of $650,000 to offset renovation costs. RA has projected income of more than $100,000 annually from after-school care and event rentals, which will begin in the next several months.

RA says it is optimistic it can quickly begin bringing in income. There has already been great interest in people renting the Lake House for events this summer, said RA spokesman Mike Leone.

Purchasing the Lake House, which sits on a little more than three acres on the shores of Lake Newport, gave RA 98 contiguous acres of open space as the property is next to Brown’s Chapel Park and Lake Newport Tennis. It also was a way to fend off interest from commercial developers.

Fulkerson said during the referendum process RA members would not see an impact to their annual assessments until at least 2018. She said on Monday that is still the case.

Fulkerson also said Monday that the money is available in the Operating Fund for Capital Projects. Moving it to the Lake House will not affect funding for other projects.

The RA Board will discuss the budget situation and moving money from the operating fund at its regular meeting on Thursday. It will also hear from the working group about potential long- and short-term uses for the property. The RA Board will also be looking at amended budget options for the remainder of 2016.

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