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September 28, 2016

Alvarez & Marsal (A&M) - Real Estate Case Study: Fairfax County, VA
As a result of A&M’s efforts, Fairfax County, Virginia was able to transform the former Lorton prison into Laurel Hill, a vibrant mixed-use community that retains and celebrates its historic structures.

 

 

Client Mandate
In 2009, A&M was engaged by Fairfax County to review and validate the financial information provided by the proposed master developer for the Laurel Hill Adaptive Reuse Area.  The site is a Fairfax County Public-Private Education Facilities and Infrastructure (PPEA) project located at the former Lorton Prison Reformatory and Penitentiary.  This 80-acre adaptive reuse site includes the former reformatory which is composed of 41 buildings including dorms, an auditorium/hospital and gymnasium, and the former penitentiary’s 15 structures including cellblocks, towers, and a dining area. 

A&M Approach
A&M reviewed development assumptions, development costs, project operational cost projections, historic tax credits, housing credits, Community Development Areas (CDAs), and Tax Increment Financing (TIF) to identify any financial shortfalls and protect the County’s interests. In late 2012, A&M was asked to complete a reassessment of those same topics as the County and master developer approached the final stage of negotiations to execute a ground lease for the Reuse Area.

For the Laurel Hill engagement, A&M played a critical role in providing project assessment and real estate advisory services, particularly with regard to developer selection and developer financial viability analysis.  A&M provided Fairfax County with a financial and fiscal impact analysis which outlined the strengths and potential weaknesses of the developer’s financial plan. We also performed market research and assessment to provide a best use analysis of the County’s real estate assets by analyzing the proposed density of residential, commercial, and retail development on individual parcels, and projected commercial and retail lease rates for the project, as well as short-term and mid-term viability of the proposed asset uses.    

Results
Adhering to the counsel of A&M, Fairfax County expedited the signing of a land development agreement and ground lease.  The estimated $188 million Laurel Hill reuse project is currently under construction, and has been noted as a prime example of adapting a site while preserving its historical integrity. Fairfax County’s contribution is capped at $12.8 million for public infrastructure design and construction, but the project is expected to yield $2.5 million in County revenue annually.