1A — February 14 - 27, 2014 — Mid Atlantic Real Estate Journal
www.marejournal.com
F inAnciAl d igest
By Mike Scott, Norton Scott LLC, co-developer of Kincora with Tritec Real Estate Finding a creative solution to a transportation crisis through anunusual public/private partnership
L
oudoun County, Virginia is a suburb of Washing- ton, DC and one of the
pleted portion of that network flows through the 400-acre Kincora (mixed-use) project at the southwest corner of Routes 28 and 7. The connector roads (Gloucester Pkwy. and Pacific Blvd.) are of strategic impor- tance because they provide for completed and much-needed transport around Washington Dulles International Airport and east and west through the county and into Fairfax County. Route 28 is a critical north/ south corridor between Loud- oun and Fairfax counties that provides access to Washington
Dulles International Airport. In 1988, when the initial wid- ening of Route 28 from 2 to 6 lanes was completed, Virginia Department of Transportation (VDOT) projected that by 2010, the traffic volumes on Route 28 would be 51,840 average daily trips (ADT). However, by 2009, the actual traffic volumes on Route 28 were 112,685 ADT, 217% of projected volumes. Seven of the ten most danger- ous intersections in the region for 2010 were directly attribut- able to “funnel effect” conges- tion associated with the lack of east-west traffic corridors,
all of which require expensive bridging. The Kincora connections were critical to solving the problem, but the projected $76 million price tag for the remaining road segments created a stumbling block to completion of the network. Such a financial burden would be untenable to advancing con- struction of the roads from the developer’s perspective and neither the County nor State had funding for the project. Various finance mechanisms were discussed in an attempt to get the road connections
fastest growing counties in the country. With growing population and construction growth, along with an inter- national airport (Washington Dulles), Loudoun County’s transportation network has had difficulty keeping up. Loudoun County’s County- wide Transportation Plan has provided for the completion of a parallel road network in the Route 7 and Route 28 cor- ridors since the mid 1990’s. A significant and final uncom-
VTIB Road Diagram
built sooner than the 15 to 20 year proffer. Typical real estate finance tools were not an option. Virginia state of- ficials were brought into the discussions as part of a search for a solution. Virginia’s new administration was consider- ing forming a Virginia Trans- portation Infrastructure Bank (VTIB) to jump-start critical projects. The infrastructure bank is structured as a revolving fund to accelerate important trans- portation initiatives that could be repaid from an identified future cash flow associated with the project, such as tolls. Funding could be provided from the VTIB at below mar- ket interest rates. As the proj- ect obligation was repaid, the funds would be recycled into future projects. Kincora’s proffer obligations were offered as a future cash stream that might support an infrastructure bank loan. Kin- cora enlisted the Loudoun County Economic Develop- ment Authority (“EDA”) as the needed local government sponsor for its VTIB applica- tion and was among the first three applications considered by VTIB’s Advisory Panel. The County stepped in to co-invest in the project to cre- ate attractive leverage for the State’s investment by building one of the road extensions. Together the State and County would share in the collateral pool from the Kincora proffers to retire their respective in- vestments in the road project as Kincora built-out. In December of 2013, VDOT broke ground on one of the road connections and will break ground on the second early this year with delivery of both in 2016. n
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