Opportunity Zone Investment


opportunity-zones-for-investorsThe Tax Cuts and Jobs Act has provided a host of new regulations aimed at spurring economic development. One of those provisions that has flown under the radar throughout 2018 is the newly established qualified opportunity zones (O-Zones). The Department of Treasury recently released the long-awaited proposed regulations that help provide a level of clarity to ease investor uncertainties. The O-Zones are census tracts in low-income communities designated by the governor of each state. Qualified Opportunity Funds (O-Funds) are investment vehicles established to invest in O-Zone assets that offer several tax incentives aimed at providing additional returns to investors and attractive financing opportunities for real estate projects and operating businesses. While somewhat similar in concept to a 1031 exchange there are several variances that open up opportunities where a 1031 like-kind exchange would not be possible.

The O-Zones provide three separate tax benefits to taxpayers:

  1. deferral of gain on the sale of a capital asset
  2. reduction of the future taxable gain if certain holding periods are met
  3. tax-free appreciation in the O-Fund investment if a holding period is met.

The new regulations allow investors to defer the recognition of capital gains occurring before December 31, 2026 if the funds are reinvested in an O-Fund within 180 days of the capital transaction. There are no required exchange intermediaries to hold onto the funds during the 180 days and the funds do not need to be reinvested in similar type property as with a 1031 exchange. The timing deferral of paying the tax is a significant benefit that decreases as we get closer to 2026. The regulations allow taxpayers to defer all forms of capital gain except gains arising from transactions with related persons. An owner of a pass-through entity may elect to defer allocated gains if the entity does not take part in its own O-Zone deferral election. For purposes of the 180 day period for pass-through gains, the beginning date is generally the last day of the entity’s taxable year though a taxpayer may elect to treat the 180 day period as beginning on the date the entity incurred the capital gain.

Investors receive another set of benefits based on the holding period of the subsequent investment in the O-Fund. Those who stay invested in the O-Fund for 5 years will receive a 10 percent step-up in the original deferred gain and if invested for 7 years another 5 percent step-up is earned. Investors who meet these holding periods will see up to 15 percent of the original deferred capital gain forgiven.

An income recognition event occurs at the earlier of the date on which the O-Fund investment is sold or December 31, 2026. At that point, taxpayers will have to pay the tax on the remaining deferred capital gain taking into consideration basis step-ups such that an investor could potentially only have to pay tax on 85 percent of the originally deferred gain in 2026. As we move closer to 2026 the ability for an investor to meet the 5 or 7 year holding periods diminishes such that by 2022 investors will not be able to meet the holding period to receive partial forgiveness. Up front planning is necessary if investors plan on holding onto the O-Fund investment past 2026 to make sure they have funds available to cover the taxable income reported in 2026.

Investors who meet a 10-year holding period receive a final benefit upon disposition of the O-Fund. Investors may elect to step-up the basis in the O-Fund to fair market value on the date the investment is sold as long as the disposition occurs before January 1, 2048, thereby eliminating any taxable income attributable to the post-purchase appreciation in the O-Fund. This allows investors at least 20 years to stay invested in the O-Fund and encourages patient capital investment. The step-up to fair market value provides investors with a significant opportunity to take advantage of depreciation deductions and other basis related reductions.

O-Funds are investment vehicles organized as either a corporation or a partnership, including LLCs, for the purpose of investing in O-Zone property. The IRS has announced that the O-Fund will self-certify by attaching the newly established Form 8996 to the entity’s tax return. The O-Fund must hold at least 90 percent of its assets in O-Zone property or be subject to a monthly noncompliance penalty. The 90 percent threshold is measured as the average of the O-Zone property held on the last day of the first 6-month period and the last day of the taxable year. The regulations provide a safe harbor for businesses that acquire, construct or rehabilitate property such that they can treat cash held with the intent of investing in qualified opportunity zone business property as working capital for up to 31 months if there is a written plan for its use. This safe harbor will prevent businesses from failing to meet the 90% asset test when holding cash for the intended purpose of building or improving property.

O-Zone property is qualified opportunity zone stock, qualified opportunity zone partnership interest or qualified opportunity zone business property. Both qualified opportunity zone stock and partnership interest must be issued after December 31, 2017 in exchange for cash and the entity must meet the definitions of an O-Zone business. An O-Zone business must hold at least 70 percent of its assets in O-Zone business property and cannot hold more than 5 percent of its assets in non-qualified financial property with the aforementioned exception for working capital. It is not necessarily a separate entity be established to serve as a holding company for the O-Zone property though many investment managers are packaging together various qualifying investments to offer as a separate O-Zone Fund. Given the discrepancy of an O-Fund needing to maintain 90 percent of its assets in O-Zone property whereas an O-Zone business must only meet a 70 percent threshold the regulations provide a significant advantage to having the O-Fund serve as a holding company of O-Zone businesses rather than investing directly in O-Zone business property.

O-Zone business property is tangible property used in a trade or business that is acquired by purchase from an unrelated party after December 31, 2017, and the original use of such property in the O-Zone commences with the O-Fund or the O-Fund substantially improves the property. Property is substantially improved if during any 30-month period beginning after the date of acquisition additions to basis exceed the original basis of such property. It is not necessary to factor in the land basis when determining if a substantial improvement has occurred. The land is treated as O-Zone business property if additions to the building basis exceed the building’s original basis.

In the case of an investment in an O-Fund where only a portion of the investment consists of a deferred capital gain, the investment shall be treated as two separate investments. Only the portion related to the deferred capital gain is eligible for the O-Zone tax benefits. Thus, investors who do not have a capital gain to defer are not eligible for any of the O-Zone tax benefits.

The mechanics of establishing and maintaining an O-Fund are complex and the Department of Treasury plans to release additional guidance to help investors. Contact #RezaieCo with any questions you have about forming or investing in an O-Fund.

Virginia did a good job of picking strategic areas to designate as opportunity zones. Localities recommended census tracts to the state, which then nominated the tracts for official designation at the federal level. To be eligible, census tracts had to have a poverty rate of 20% or a median family income that is 80% of statewide median income based on U.S. Census data. That meant that 901 of Virginia’s census tracts were eligible to become opportunity zones. States were only allowed to nominate up to 25% of their eligible zones.  In nominating its zones, Virginia balanced evaluating census tracts with the most need and those with the most likelihood of future investment.  Virginia’s opportunity zones are in places that are either already developing or are on the cusp of development.

The Northern Virginia multifamily housing area is a particularly interesting area because of the mismatch between demand and supply in workforce housing.  The multifamily housing has been the darling of the institutional investment community for 20 years and should have compelling returns for opportunity-zone investors looking to protect their realized capital gains.

To find out if an area of your interest is located in of one of Virginia’s hundreds of Qualified Opportunity Zones, click on the map image below and you will be taken to an interactive map.



Any questions on this article, contact us at support@rezaiereport.com or call (202) 802-8200/ (703) 629-0994.

Rezaie Report smaller version - Copy

3060 Williams Drive, Suite 101 Fairfax, Virginia 22031

#RezaieCo #RezaieRE #RezaieReport #RezaieCoAdvisors #LongandFoster #TheLeaderinRealEstate #MorethanJustRealEstate


Opportunity Zones – The biggest economic development program in the country.


Opportunity Zones mark the latest way of helping investors save on taxes, while also aiding to advance the economic fabric of an underdeveloped community. These incentives were developed by the recently-passed Republican Tax Cuts and Jobs Act of 2017, which allows private investors to save on taxes by injecting cash into certain opportunity funds.

The bill is slated to help out communities all around the Washington, D.C. area, which include underprivileged regions in Virginia and Maryland. Here’s what you should know about Opportunity Zones.

How Opportunity Zones Are Chosen
Every area of the country that is part of the low-to-moderate-income (LMI) census tracts was eligible to be designated as an Opportunity Zone. A geographic region has the LMI designation if the median family income is under 80% of the median income of the surrounding area. Plus, if the area has a poverty rate of over 20%, there’s a good chance that it will become an Opportunity Zone.

A number of census tracts located adjacent to LMI tracts were also considered for designation, regardless of income status. Ultimately, deciding whether or not an area is an Opportunity Zone is a burden that would fall on the governor of each state, albeit with some limitations. Governors had the freedom to choose up to 25% of eligible LMI or high-poverty areas as Opportunity Zones.

Up to 5% of designated tracts could fall in the middle- or upper-income if they were adjacent to LMI tracts. The tracts were reviewed by the National Community Reinvestment Coalition (NCRC), which helped to finalize the list of opportunity zones around the nation.

What an Opportunity Zone Designation Means for the Area
Garnering an Opportunity Zone designation can be big for a certain census tract as unrealized capital gains, which are used to fund these investments, is valued at roughly $6.1 trillion. Such an investment can help to completely reshape communities as long as local groups, investors and city officials join forces to determine the best initiatives to invest in.

Some positives that could arise from these investments include the expansion of start-ups that may create jobs and stimulate local economies. Job training facilities in the area could also help citizens with limited education develop an actionable skill that they can use to make a living and improve their economic situation.

Opportunity Zone could reportedly bring in up to $2.2 trillion in investments, although this means nothing unless the money is invested wisely. As things stand, the program still has many flaws that could lead to a slew of issues such as displacement, so ensuring the money is going to the right channels is as important as the money itself.

How Taxpayers Will Benefit if They Invest in Opportunity Zones
Taxpayers have plenty of reason to invest in Opportunity Zones, which is an opportunity that is offered to those who reinvest gain from a sale of property into a “Qualified Opportunity Fund.” One such benefit is that reinvesting this gain in a Fund results in the gain being deferred until the earlier of the date when the taxpayer sells their interest in the Fund or December 31, 2026.

The investment also states that if a taxpayer invests in the Fund for at least five years, 10% of the original gain is excluded. If they do so for at least seven years, an additional 5% (amounting to a total of 15%) of the original gain is excluded. Plus, if a taxpayer invests in a Fund for 10 years or more, all appreciation in that investment will be tax-free once they exit the Fund.

How the DC Area Is Set to Benefit from Opportunity Zones
A total of 149 areas in Maryland have been identified as Opportunity Zones, consisting largely of east and west Baltimore, as well as Park Heights and large parts of south Baltimore such as Port Covington. Fort Meade, Aberdeen Proving Ground and the Indian Head naval facility in southern Maryland are also set to benefit from the designation.

Some of the initiatives that could help these areas include a slew of new mixed-use offices that Under Armour CEO Kevin Plank wants to bring to Port Covington. Plus, the state has identified an area in Montgomery County as the potential spot for Amazon’s second headquarters as state officials are seeking to expand the construction of distribution centers in the area. The Shaw neighborhood in DC is another candidate for the Amazon headquarters.

Michael White, chief of staff at the Maryland Department of Housing and Community Development, is hoping to reel in investors by choosing areas that already have other programs. Local officials, developers, and politicians discussed how bringing more offices and jobs in enterprise zones could offer businesses tax benefits, which is a win-win for everyone.

In Virginia, the benefit could also be huge in areas such as Charlottesville and Albemarle County where new housing and jobs could help low-income workers spend less time and money traveling. Areas in Albemarle have expressed their enthusiasm over how the northern tract could improve in the coming years as there are plenty of transportation improvements and amenities that have been released in the last few years, with many more to come.

All in all, the DC area has a lot to win from these investments, but not everyone is in favor of Opportunity Zones, which could cause a negative impact in some regions.

The Downside of an Opportunity Zone Designation
There is some concern regarding how investing in housing and commercial real estate locations in an LMI area could adversely affect its current residents. Some zones do not actually invest in their current residents as they instead focus on improving the neighborhood, leading to potential gentrification and the displacement of existing residents.

The DC area needs to be more careful about how it invests this money as the tax subsidy could result in increased property values, higher rents, and improved business profitability. Higher-income professionals could replace the local residents as a result of higher returns to investors causing larger tax subsidies, which leads to a rapid gentrification process.

The Urban Institute Analysis discovered in a study that a full third of the tracts nominated as part of DC’s Opportunity Zones are at high risk of increased socioeconomic change, including housing unaffordability and displacement due to these incentives. Potential neighborhoods affected include Brightwood, Pleasant Plains, Deanwood and Carver Langston.

Some cities are requesting to be excluded from the program due to displacement fears. Areas that are designated as Opportunity Zones and experience increased investment should be committed to developing housing below 60 and 30 percent of the area median income to keep rent low.

Existing businesses should be aided in order to help existing residents obtain gainful employment. The fact that Opportunity Zones are profit-driven, there is no incentive to actually help existing communities with programs such as Community Land Trusts, designed to help keep current housing affordable in the long-term by lowering speculative housing costs.

Ultimately, there should be enforceable regulations in place for Opportunity Zones that help to determine how the money benefits these communities, as well as proactive programmatic work that aids current residents.

The District of Columbia has nominated 25 Opportunity Zones as vehicles to leverage and encourage targeted investment in the city.


Opportunity Zones (OZ) are low-income census tracts that allow individuals and businesses to pool money for development while deferring taxes on gains from sales of assets within those tracts. Out of 97 qualifying low-income census tracts, the Office of the Deputy Mayor for Planning and Economic Development was able to nominate 25 to the Treasury Department and has selected the following:

  • Census tract 2101, the area of Brightwood Park between Georgia and Missouri Avenues to the west and north, with 5th and Gallatin Streets NW to the east and south.
  • Census tract 3400, which is roughly between Georgia Avenue and First Street, from Irving Street to Florida Avenue NW. The zone includes both Howard University and the address of the McMillan Sand Filtration Site, although it does not encompass the land McMillan sits on.
  • Census tract 6400, which essentially encompasses the Buzzard Point neighborhood from South Capitol Street to Delaware and 5th Avenues SW beneath M Street. This area is home to the soon-to-open Audi Field soccer stadium.
  • Census tract 6804, which runs under Benning Road to the west of Oklahoma Avenue, 22nd Streets NE, and 19th Street SE. The tract is bound by the Anacostia River (but includes RFK Stadium and parts of Kingman and Heritage Islands).
  • Census tract 7304, which encompasses the portion of Congress Heights southeast of Alabama Avenue and Wheeler Road SE and just west of Stanton Road SE. This area borders southern Prince George’s County and contains the vast majority of Oxon Run Park and Parkway, as well as United Medical Center.
  • Census tract 7401, which includes the Poplar Point and Barry Farm neighborhoods from the Anacostia River to South Capitol Street SE, east of the St. Elizabeth’s campus and bound by Suitland Parkway. While Barry Farm is being razed and redeveloped, the tract is also skirting the future landing of the 11th Street Bridge Park.
  • Census tract 7407, containing the Fort Stanton neighborhood north of Suitland Parkway, west of Stanton Road, south of the intersection of Martin Luther King, Jr. Avenue and Morris Road SE.
  • Census tract 7503, which is the historic Anacostia district bound by the Anacostia Freeway, Good Hope Road, and Morris, 16th and Bangor Streets SE. The neighborhood includes the Frederick Douglass Home and a raft of redevelopment that will include the first Busboys and Poets east of the River.
  • Census tract 7601, which includes the portion of Fairlawn between the 11th Street Bridge Park/Good Hope Road and Minnesota and Pennsylvania Avenues SE, north of S Street.
  • Census tract 7603, southeast of the Alabama Avenue and Naylor Road intersection and south of Pennsylvania Avenue SE. The tract includes Naylor Gardens, Hillcrest and Fairfax Village.
  • Census tract 7604, northeast of the Alabama Avenue and Naylor Road intersection, south of Pennsylvania Avenue, including the neighborhoods of Good Hope and Randle Highlands.
  • Census tract 7709, the Ward 7 area north of Pennsylvania Avenue and just east of the River, cutting off just above the DC Therapeutic Recreation Center and including parts of the Twining and Dupont Park neighborhoods.
  • Census tract 7803, the Central Northeast area that runs north of Benning Road, east of Kenilworth Avenue, west of 47th Street and south of Nannie Helen Burroughs Avenue NE.
  • Census tract 7804, the Lincoln Heights/Deanwood area straddling Nannie Helen Burroughs Avenue between 44th and Division Avenues from Hayes Street to East Capitol Street NE, and including the future Deanwood Town Center and redeveloped Strand Theater.
  • Census tract 7806, the Deanwood area south of Kenilworth and Eastern Avenues and north of Sheriff Road NE.
  • Census tract 7808, which stretches from the Northeast Boundary north of East Capitol Street, south of Eads Street and east of Division Avenue NE, including part of Marvin Gaye Park and much of the Watts Branch tributary of the Anacostia.
  • Census tract 8904, which includes the triangular neighborhood of Carver-Langston east of the Starburst intersection (and potential redevelopment site) and bound by Benning Road, Maryland Avenue and 26th Street NE.
  • Census tract 9102, including the Brentwood neighborhood between New York and Rhode Island Avenues, 18th Street NE and the train tracks that separate it from neighboring Eckington.
  • Census tract 9204, the area of Edgewood bound between New York Avenue and Franklin Street with 4th Street and the aforementioned train tracks.
  • Census tract 9601, the Kenilworth and Eastland Gardens neighborhoods just east of the River and north of the Watts Branch, between Kenilworth and Eastern Avenues NE.
  • Census tract 9602, the Mayfair neighborhood just east of the River and south of the Watts Branch, between Kenilworth Avenue and Benning Road NE.
  • Census tract 9603, the Benning area east of 295, north of East Capitol Street and south of Benning Road in Northeast.
  • Census tract 10300, which primarily is sited between Piney Branch Road and Alaska Avenue NW, between Butternut Street and Fern Place NW, including the old Walter Reed Campus (and site of a massive ongoing redevelopment). The tract also includes the area of Takoma between Georgia and Eastern Avenues and Fern Place NW.
  • Census tract 10400, which includes the St. Elizabeth’s campus (and site of the under-construction Monumental Sports and Entertainment Complex and larger mixed-use development). The tract also includes the portion of Congress Heights from the intersection of South Capitol Street and Martin Luther King, Jr. Avenue SE northward, bound by Alabama Avenue and the Hebrew Congregational Cemetery.
  • Census tract 10900 of Bellevue, at the southernmost tip of the city bordered by both Prince George’s County and Alexandria, west of South Capitol Street and south of Galveston Street SW.

The selected zones were intended to focus on areas east of the Anacostia River, retail-heavy corridors and creative, industrial and manufacturing zones, but most also share the distinction of having a strong development pipeline.

To Recap, the “Three Major Benefits Available To Opportunity Zone Investors”

Investing in an Opportunity Zone yields three types of attractive benefits: 1) capital gains tax deferment, 2) capital gains tax reduction, or “trimming,” and 3) capital gains tax elimination. The level of benefit investors can take advantage of depends upon several distinct factors.

Profits from the sale of an existing investment will accrue tax. But using those profits, or capital gains, to reinvest in a qualified  Opportunity Zone gives investors a deferment on paying those capital gains taxes, either until that new interest is sold or until the year 2026, whichever comes first.

What’s even better is that investors could see those capital gains tax payments reduced, or trimmed, by 10% or even 15%.

1. How to Reduce Capital Gains Tax Payments By 15%

To get a 15% reduction in paying capital gains tax from the sale of old property, an investor must use profits from that sale to reinvest in an OZ within 180 days of that sale. Further, they must finalize that new, OZ transaction before the end of 2019 and hold onto that investment through 2026. This fulfills the new tax code’s seven-year requirement.

2. How to Reduce Capital Gains Tax Payments By 10%

To get a 10% reduction in paying capital gains tax on the sale of old property, an investor must use profits from that sale to reinvest in an OZ by 2021, and they must hold onto that investment for a full five years, or until 2026.

3. How to Get Capital Gains Tax Eliminated (for the new investment only)

In order to see a complete elimination of capital gains tax payments, investors can purchase a new investment in a qualified Opportunity Zone (using their previous capital gains) but they must hold that interest for ten years or longer. The capital gains tax is eliminated on the future sale of the investment made with an investor’s initial capital gains investments. In other words, one would still have to pay deferred and potentially trimmed capital gains tax on their old investment in 2026, but when that Opportunity Zone investment is sold, if it were held for ten years or longer, no capital gains tax would be due. #RezaieReport #RezaieRE #RezaieCo


3060 Williams Drive, Suite 101 Fairfax, Virginia 22031

Direct (202) 802-8200

Email: support@rezaiereport.com

How the Government Shutdown Is Affecting Mortgage Lending


With the partial federal government shutdown now approaching its third week, several federal agencies have suspended all but essential operations. Federal banking regulators—the Consumer Financial Protection Bureau, FDIC, Federal Reserve, and OCC—remain open, as their funding does not come from congressional appropriations. But many federal lending programs and other functions that relate to mortgage origination and servicing have been curtailed or otherwise affected.

This article provides a summary of key mortgage-related programs affected by the shutdown.


The Department of Housing and Urban Development is closed. In accord with the HUD Contingency Plan, the Federal Housing Authority’s Office of Single Family Housing will endorse new single-family loans, but not HECM (reverse mortgages) or Title I (property improvement) loans. FHA is operating with reduced staffing, which may result in closing delays.

Ginnie Mae has reduced staffing to essential personnel levels during the shutdown. Ginnie Mae will continue to make pass-through principal and interest payments to investors and perform other essential functions, such as granting commitment authority and supporting the issuance of guaranteed mortgage backed securities. Ginnie Mae will notify issuers and other stakeholders to provide specific instructions and contact information.

The Department of Agriculture will not issue new loans or guarantees through its Rural Housing Financing program. Scheduled closings of single housing direct loans are being cancelled. Lenders that proceed with scheduled closings of single-family guaranteed loans where the guarantee was not issued before the shutdown do so at their own risk.

The Department of Veterans Affairs is fully funded for fiscal year 2019 and all VA operations will continue unimpeded during the shutdown. The processing of VA loans is considered an essential function, and VA loans are being funded and closed.

On Dec. 28, 2018, the Federal Emergency Management Agency announced that the agency would resume operations of the National Flood Insurance Program during the shutdown, retroactive to Dec. 21. Earlier in the week, FEMA had announced that it would suspend the sale and renewal of NFIP policies, despite Congress’ passage and the President’s signature of a bill to reauthorize the NFIP before the shutdown began. ABA, along with members of Congress and other trade groups, strongly objected to FEMA’s earlier decision, citing concerns that the move could complicate and potentially delay mortgage loan closings where NFIP coverage is required. ABA applauded FEMA’s subsequent decision to reinstate the program.

Social Security payments are non-discretionary spending and will continue to be made during the shutdown. More broadly, the SSA contingency plan excepts a majority of SSA employees from furlough and provides for continuation of most functions, and SSA offices remain open. The shutdown may affect mortgage lenders who need to validate Social Security numbers with the SSA using SSA-89, however. The contingency plan does not specify whether processing SSA-89 requests would be continued or discontinued during a shutdown, and it is currently unclear whether these requests are being processed.

The Internal Revenue Service is now processing requests for tax transcripts made through its Income Verification Express Service (IVES) program. IVES is used by mortgage lenders to verify income as part of loan originations. The IRS had suspended the service when the partial shutdown began. After strong advocacy with the Treasury by ABA and other trade groups, the IRS resumed the service on January 7, 2019, noting in its announcement that transcript requests may take longer to process until the backlog clears. On the same day, the IRS also announced that it will recall a significant portion of its furloughed workforce in order to process tax returns beginning January 28, 2019 and provide refunds to taxpayers as scheduled.

Fannie Mae and Freddie Mac are not government-funded and are operating as usual. In most cases, the shutdown will not impede the GSEs’ processing of conventional purchase loans and refinances, and both Fannie and Freddie had adopted workarounds to address certain indirect impacts of the shutdown, such as the temporary unavailability of IRS tax transcripts or SSN validation. Fannie Mae and Freddie Mac have each issued temporary guidance to sellers and servicers to assist impacted borrowers, addressing such loan origination issues as employment and earnings verification, IRS transcript requests, social security number validation and flood insurance.


The shutdown affects nearly 800,000 government employees, with approximately 420,000 working without pay and 380,000 furloughed. Federal contractors also face loss of income on contracts.

In their temporary guidance, both Fannie Mae and Freddie Mac advised mortgage servicers that they can offer forbearance options to mortgage borrowers impacted by the shutdown, in accordance with the respective company’s existing forbearance policies.

On Jan. 8, the FHA issued a mortgagee letter encouraging servicers and lenders to extend special forbearance plans, waive late fees and suspend credit reporting on furloughed federal workers and contractors suffering a loss of income due to the shutdown.  FHA Commissioner Brian Montgomery reminded servicers are reminded “of their ongoing obligation” to offer forbearance, citing the FHA handbook.

Also on Jan. 8, Treasury Secretary Steven Mnuchin issued a statement commending the efforts of mortgage lenders, mortgage servicers, and other financial institutions working to assist those who may face financial hardships resulting from the federal government shutdown. “We applaud the actions of mortgage lenders, mortgage servicers, and other financial institutions, including Fannie Mae and Freddie Mac, that are taking steps to assist individuals experiencing temporary financial difficulties due to the government shutdown,” – Mnuchin

During the 2013 shutdown, the CFPB, Federal Reserve, FDIC, OCC and NCUA issued a joint statement encouraging financial institutions to work with affected customers. Noting that “prudent workout arrangements that are consistent with safe-and-sound lending practices are generally in the long-term best interest of the financial institution, the borrower, and the economy,” the agencies said that arrangements that “increased the potential for creditworthy borrowers to meet their obligations” while dealing with the transitory effects of a shutdown “should not be subject to examiner criticism.” The 2013 shutdown lasted 16 days. There were no subsequent government shutdowns until 2018, with a three-day shutdown in January, a one-day shutdown in February, and the most recent shutdown commencing on Dec. 21. The banking agencies have not issued any new statements in response to these latest shutdowns, but the 2013 statement remains available on each agency’s website. #RezaieReport #RezaieRE #RezaieCo


3060 Williams Drive, Suite 101 Fairfax, Virginia 22031

Contact Us at (202) 802-8200 or support@rezaiereport.com




How will the New Tax Law affect retirees?

The changes in the Tax Cuts and Jobs Act signed into law late in 2017 will be reflected in 2018 tax returns, which are filed this spring. The law is one of the most sweeping tax code reforms of the last three decades, and it is likely to affect all Americans who file tax returns. Many of its provisions are certain to affect retirees. Here’s a look at four of the most significant.

1. The standard deduction is nearly doubling.

Deductions are amounts subtracted from income, lowering the taxable income and thus reducing the total amount owed in tax.

Taxpayers must choose between two categories: the standard deduction and itemized deductions. If filers choose the standard deduction, they exclude a set amount from their income. If they choose to itemize, they subtract the dollar value of each deductible category.

The new tax law almost doubles the standard deduction, from $6,350 to $12,000 for single fliers, and from $12,700 to $24,000 for married people filing jointly.

On the face of it, the considerable hike in the standard deduction sounds significant. It may not be as far-reaching as it initially seems, though. In years past, filers using the standard deduction could include a personal exemption as well, as long as no one claimed them as a dependent. For 2017, for instance, single filers using the then standard deduction of $6,500 could also subtract $4,150 from their income for a personal exemption, making the total adjustment $10,650.

But the personal exemption was eliminated under the Tax Cuts and Jobs Act, so folks taking the standard deduction for 2018 won’t have access to also taking a personal exemption any longer.

The jump in the 2018 standard deduction thus represents more of a muted increase from the former standard deduction plus personal exemption level, rather than effectively doubling the past standard deduction. The gain is more than 12% for a single filer, for instance. That’s still a nice increase, and it more than makes up for the elimination of the personal exemption. But it’s just not as much as an initial comparison of amounts might lead you to believe.

The increase in the standard deduction has the resulting effect of making itemization necessary for fewer people, including retirees. In the past, itemizing as many deductions as possible was the smartest move, as long as the total exceeded the amount of the standard deduction plus the personal exemption. Common deductions included mortgage interest up to $1 million, a level that the Tax Cuts and Jobs Act has now reduced to $750,000.

The rise in the standard deduction might mean that retirees can achieve roughly the same overall deductible by taking the standard amount as they could by itemizing. Once you get an idea of what your itemized deductibles add up to, you can decide whether itemizing still makes sense. If not, taking the standard deduction can save time, effort, and tax-preparation expenses.

2. The deduction for state and local taxes has been capped.

There’s also a brand new cap on another widely used deduction: state and local taxes, including property tax (SALT). In the past, the total could be deducted, period. Your SALT total made no difference to its deductible status. But for 2018 and beyond, SALT deductions are restricted to a total of $10,000.

For retired filers whose SALT is less than $10,000, there is essentially no change stemming from the SALT cap, although they should consider the advisability of choosing itemization or the standard deduction.

But for many retirees, especially in high-tax states like California, New York, and New Jersey, the SALT cap could have significant repercussions, for three reasons.

First, if your SALT total is considerably more than $10,000, you are losing one of the financial incentives to own a house. You will no longer be able to deduct all your SALT, which may make owning a property less appealing.

Second, the SALT cap may make downsizing more desirable for homeowners in high-tax jurisdictions. Property taxes, for example, usually depend upon real estate size: A 700-square-foot condo is likely to be assessed considerably less in taxes than a 15,000-square-foot house. Retirees with high property taxes may end up taking a hard look at their property footprint.

Third, it may become less appealing to live in a state with high taxes. Many states have no state income taxes, after all, including Alaska, Florida, Nevada, South Dakota, Texas, and Washington. States also vary widely in the amount of property tax and sales tax assessed. Localities vary in the respective taxes levied. In the wake of the cap, all these levels may receive increased scrutiny as a factor in real estate desirability.

Many retirees think about moving to eliminate the maintenance costs for a large property or to live near grown children (or both), but then they don’t actually make the move. The SALT cap could be an impetus to make that thought a reality, especially if the state of your dreams has more-favorable taxes.

3. Taxpayers may be able to deduct more for healthcare expenses.

For the last several years, filers could itemize and deduct healthcare expenses totaling more than 10% of adjusted gross income (AGI). Under the new tax law, healthcare costs are now deductible if they exceed 7.5% of your AGI. This increased deduction potential was made retroactive to 2017 taxes as well.

AGI is calculated by totaling all income for the year (wages, bonuses, dividends, and so forth) and subtracting allowed adjustments, such as qualified retirement account contributions and alimony. AGI, which can be found on the Internal Revenue Service’s 1040 form, is the amount from which deductions, whether they’re standard or itemized, are subtracted. Because many deductions depend on percentages or totals of the AGI, the amount is a significant one for tax purposes.

If your AGI was $65,000 in 2016, for example, you would have needed healthcare expenses of more than 10%, or $6,500, to utilize the healthcare deduction. If your AGI was $65,000 in 2018, though, you can itemize the deduction if they exceed 7.5%, or $4,875.

The increased potential to deduct is likely to affect retirees, who have high healthcare expenses. A couple needs an estimated $399,000 saved by age 65 to meet healthcare costs in retirement, according to the nonprofit Employee Benefit Research Institute, roughly $19,950 out of pocket per year over 20 years.

Note that health savings account (HSAs) can make any healthcare cost bite more palatable, by providing participants with a tax deduction in the year of contribution and tax-free withdrawals. HSA maximum contributions for 2018 are $3,450 for an individual (up $50 over the prior year) and $6,850 for a family (up $100). (For 2019, the maximum climbed again, to $3,500 for individuals and $7,000 for a family.) Contributors who are 55 or older are still allowed a $1,000 additional catch-up contribution.

4. Tax rates lowered in most brackets.

Tax rates were lowered almost across the board under the new tax law. As a result, many retirees will pay less in taxes.

While there are seven tax brackets for 2018, just as there were in 2017, the rates and income associated with most brackets have changed. Although the lowest tax bracket remains the same —-10% for those who make up to $19,050 — taxes for most others are falling.

Single filers who made between $19,050 and $77,400 during 2017 were in the 15% tax bracket for example. For 2018, people with incomes in the same range are in the 12% tax bracket. Single filers who made between $77,400 and $156,150 in 2017 were in the 25% tax bracket. For 2018, they will pay 22% in tax on income in the same range. It’s likely that some aspect of the new tax law affects you — maybe even to a great extent if you’re a retiree. Reviewing these four categories will help you plan your tax return for maximum benefit.

The $16,146 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,146 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.

Any questions, contact us at (202) 802-8200 or email to support@rezaiereport.com

#RezaieCo #RezaieRE #RezaieReport #ChristiesInternationalRealEstate #LongandFoster

Long and Foster Real Estate, Inc.

3060 Williams Drive, Suite 101

Fairfax, Virginia 22031

Metro Area (202) 802-8200

Office (703) 573-2600

International buyers showing less interest in U.S. real estate

A combination of inventory shortages and rising prices means that international buyers are showing less interest in U.S. property than they have in the last few years.

The National Association of Realtors says international sales in the U.S. hit $121 billion during the period from April 2017 to March 2018. The data comes from the NAR’s 2018 Profile of International Transactions in U.S. Residential Real Estate.  This amounted to a 10 percent decrease compared to the same period one year before.

After a surge in 2017, the United States saw a decrease in foreign activity in the housing market in the latest year, bringing us closer to the levels seen in 2016.  Inventory shortages continue to drive up prices, and sustained job creation and historically low interest rates mean that foreign buyers are now competing with domestic residents for the same, limited supply of homes.

The NAR says foreign buyers usually purchase more expensive homes than the average U.S. buyer. The median price for foreigner-bought homes was $292,400 during the period, compared to the $249,300 median for all U.S. homes. Chinese buyers are the biggest spenders on U.S. property, with their average purchase price clocking in at $439,100.


Just five countries account for almost half of all foreign real estate buyers in the U.S. – China, Canada, India, Mexico and the U.K., which comprised 49 percent of the dollar volume of such purchases. China is the largest single investor amount foreigner countries, spending $30.4 billion on U.S. real estate during the period, but that was four percent less than one year before.

The highest amount of foreign buying activity in the U.S. continues to be centered on three states: Florida (19 percent); California (14 percent); and Texas (9 percent).

International buyers say they buy U.S. property for numerous reasons, but the most frequent reason, at 52 percent, is for a primary residence, according to the report. However, Chinese buyers were most likely to purchase a home in the U.S. for student housing, while Canadian buyers were the most likely to purchase a property as a vacation home. Indian buyers were the most likely to purchase a U.S. property to serve as their primary residence.

Any questions, contact us at support@rezaiereport.com or call (202) 802-8200.  Follow Us on Social Media –

RezaieCo Advisors

Luxury Defined

Long and Foster Real Estate | Christie’s International

3060 Williams Drive, Suite 101

Fairfax, Virginia 22031

Office (703) 573-2600


5 Factors That Determine if You’ll Be Approved for a Mortgage


If you want to buy a home, chances are good you’ll need a mortgage. Mortgages can come from banks, credit unions, or other financial institutions — but any lender is going to want to make sure you meet some basic qualifying criteria before they give you a bunch of money to buy a house.

There’s variation in specific requirements from one lender to another, and also variation based on the type of mortgage you get. For example, the Veterans’ Administration and the Federal Housing Administration (FHA) guarantee loans for eligible borrowers, which means the government insures the loan so a lender won’t face financial loss and is more willing to lend to risky borrowers.

In general, however, you’ll typically have to meet certain criteria for any lender before you can get approved for a loan. Here are some of the key factors that determine whether a lender will give you a mortgage.

1. Your credit score

Your credit score is determined based on your past payment history and borrowing behavior. When you apply for a mortgage, checking your credit score is one of the first things most lenders do. The higher your score , the more likely it is you’ll be approved for a mortgage and the better your interest rate will be.

With government-backed loans, such as an FHA or VA loan, credit score requirements are much more relaxed. For example, it’s possible to get an FHA loan with a score as low as 500 and with a VA loan, there’s no minimum credit score requirement at all.

For a conventional mortgage, however, you’ll usually need a credit score of at least 620 — although you’d pay a higher interest rate if your score is below the mid 700s.

Buying a home with a low credit score means you’ll pay more for your mortgage the entire time you have the loan. Try to raise your score as much as you can by paying down debt, making payments on time, and avoiding applying for new credit in the time leading up to getting your loan.

2. Your debt-to-income ratio

Your debt-to-income (DTI) ratio is the amount of debt you have relative to income — including your mortgage payments. If your housing costs, car loan, and student loan payments added up to $1,500 a month total and you had a $5,000 monthly income, your debt-to-income ratio would be $1,500/$5,000 or 30%.

To qualify for a conventional mortgage, your debt-to-income ratio is usually capped at around 43% maximum, although there are some exceptions. Smaller lenders may be more lax in allowing you to borrow a little bit more, while other lenders have stricter rules and cap your DTI ratio at 36%.

Unlike with credit scores, FHA and VA guidelines for DTI are pretty similar to the requirements for a conventional loan. For a VA loan the preferred maximum debt-to-income ratio is 41% while the FHA typically allows you to go up to 43%. However, it’s sometimes possible to qualify even with a higher DTI. The VA, for example, will still lend to you but when your ratio exceeds 41%, you have to provide more proof of your ability to pay.

If you owe too much, you’ll have to either buy a cheaper home with a smaller mortgage or work on getting your debt paid off before you try to borrow for a house.

3. Your down payment

Lenders typically want you to put money down on a home so you have some equity in the house. This protects the lender because the lender wants to recoup all the funds they’ve loaned you if you don’t pay. If you borrow 100% of what the home is worth and you default on the loan, the lender may not get their money back in full due to fees for selling the home and the potential for falling home prices.

Ideally, you’ll put down 20% of the cost of your home when you buy a house and will borrow 80%. However, many people put down far less. Most conventional lenders require a minimum 5% down payment but some permit you to put as little as 3% down if you’re a highly-qualified borrower.

FHA loans are available with a down payment as low as 3.5% if your credit score is at least 580, and VA loans don’t require any down payment at all unless the property is worth less than the price you’re paying for it.

If you put less than 20% down on a home with a conventional mortgage, you’ll have to pay private mortgage insurance (PMI). This typically costs around .5% to 1% of the loaned amount each year. You’d have to pay PMI until you owe less than 80% of what the home is worth.

With an FHA loan, you have to pay an upfront cost and monthly payments for mortgage insurance either for 11 years or the life of the loan, depending how much you initially borrowed. And a VA loan doesn’t require mortgage insurance even with no down payment, but you typically must pay an upfront funding fee.

4. Your work history

All lenders, whether for a conventional mortgage, VA loan, or FHA loan, require you to provide proof of employment.

Typically, lenders want to see that you’ve worked for at least two years and have steady income from an employer. If you don’t have an employer, you’ll need to provide proof of income from another source, such as disability benefits.

5. The value and condition of the home

Finally, lenders want to make sure the home you’re buying is in good condition and is worth what you’re paying for it. Typically, a home inspection and home appraisal are both required to ensure the lender isn’t giving you money to enter into a bad real estate deal.

If the home inspection reveals major problems, the issues may need to be fixed before the loan can close. And, the appraised value of the home determines how much the lender will allow you to borrow.

If you want to pay $150,000 for a house that appraises only for $100,000, the lender won’t lend to you based on the full amount. They’ll lend you a percentage of the $100,000 appraised value — and you’d need to come up with not only the down payment but also the extra $50,000 you agreed to pay.

If a home appraises for less than you’ve offered for it, you’ll usually want to negotiate the price down or walk away from the transaction as there’s no reason to overpay for real estate. Your purchase agreement should have a clause in it specifying that you can walk away from the transaction without penalty if you can’t secure financing.

Shop around among different lenders

While these factors are considered by all mortgage lenders, different lenders do have different rules for who exactly can qualify for financing.

Be sure to explore all of your options for different kinds of loans and to shop around mortgage lenders so you can find a loan you can qualify for at the best rate possible given your financial situation.

Any questions, contact us at (202) 802-8200 or support@rezaiereport.com

Logo (9)

3060 Williams Drive, Suite 101

Fairfax, Virginia 22031


Constitutional -Challenges to county inaction fail

Logo (9)

The district court correctly granted the motion for judgment on the pleadings filed by Montgomery County, Maryland, and the planning commission because the commercial developer had no constitutional property interest to develop its land.


Pulte is a residential real estate developer. Between November 2004 and January 2006, Pulte purchased or contracted to purchase 540 acres of real property in Clarksburg, Maryland, which is located in Montgomery County.

Pulte submitted its water and sewer category change request application for review by the county and the Maryland-National Capital Park and Planning Commission in May 2009, along with a required filing fee. The county, however, has never acted on Pulte’s applicatio

In December 2012, Pulte submitted a Pre-Application Concept Plan to the commission as required by the County Subdivision Ordinance. The county and commission refused to meet with Pulte to discuss the plan and stopped responding to Pulte’s detailed letters and other communications.

In October 2013, the commission’s Montgomery County Planning Board submitted to the county a draft amendment that implemented a variety of regulatory changes which severely reduced the number of dwellings Pulte could build on its land and placed additional costly burdens on Pulte.

Following additional actions it perceived as an arbitrary and capricious targeting of its land, Pulte commenced a suit against the county and commission in state court in November 2014. The county removed the action to federal district court. After the parties had engaged in some discovery, but before any depositions had been taken or experts identified, the county and commission moved for entry of judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), and the district court granted their motion. Pulte now asks us to reverse.


The district court held that Pulte could not prevail on its substantive or procedural due process claims because it had no constitutional property interest to develop its land under the 1994 master plan or to have its water and sewer category change request processed in light of the discretion reserved to the local authorities under the 1994 master plan. We agree.

We turn next to Pulte’s equal protection claim. Pulte has not alleged it was deprived of a fundamental right or subjected to discrimination based on a suspect classification. Therefore, we will uphold the distinctions drawn by the county and commission if they were “rationally related to a legitimate state interest.” Here, the county and commission provided rational reasons for treating Pulte’s land differently, and that is the end of our inquiry.

The district court also concluded that Pulte could not demonstrate that the actions of the County and Commission amounted to a compensable regulatory taking of Pulte’s property under the Fifth Amendment to the United States Constitution. The district court properly applied the applicable factors and concluded, in accord with past decisions of this court, that Pulte was unable to establish that the regulatory actions of the County and Commission amounted to a taking of Pulte’s property under the Fifth Amendment. We agree with the district court’s analysis and will affirm its ruling.

Finally, Pulte complains that the lower court erred in dismissing its claim under Article 19 of the Declaration of Rights of the Maryland Constitution. Pulte has alleged that the County and Commission violated Article 19 by actively preventing Pulte’s rights from vesting, thereby thwarting its due process claims. By delaying to act on Pulte’s water and sewer change application, Pulte argues that the appellees essentially immunized themselves from suit. Pulte contends that Article 19 is broader than the Due Process Clause, and that the lack of a constitutional property interest is irrelevant to an Article 19 claim. We can find no support for Pulte’s claim in Maryland jurisprudence. The district court correctly dismissed Pulte’s Article 19 claim.


Pulte Home Corporation v. Montgomery County, Maryland (Lawyers Weekly No. 001-172-18, 21 pp.) (James Jones, J.) Case No. 17-2112. Nov. 29, 2018. From D.Md. (Hazel, J.) Deborah Jean Israel for Appellants, Howard Ross Feldman for Appellees.

The Long & Foster | Christie’s Experience

Long & Foster is the exclusive affiliate of Christie’s International Real Estate in virtually all our luxury estate markets, from Hampton Roads, Virginia, to Washington, DC, to the New Jersey shore. Not only does the relationship set our listings apart, but also it brings authorities on fine art, jewelry, design and more into our expert network.  Together, Long & Foster and Christie’s offer exclusive real estate services to luxury home buyers and sellers worldwide.  Whether you’re acquiring art to complement a new home, curating your personal collection or moving into a high-value estate, Long & Foster | Christie’s will guide you there.  Want to know more about selling your property with Long & Foster?

Contact with your Luxury Agent- Alan A. Rezaie at (202) 802-8200 or email to support@rezaieco.com


Retrofitting Tysons: From Edge City to Walkable Urban Place

The Largest and Best-Known “Edge City” in the U.S. is Being Transformed Into a More Walkable Urban Center-

In 1991,  “Edge City” was discussed as the explosion of “drivable sub-urban” development and described “the most radical change in a century in how we build our world.” Edge cities are typically freeway-hugging agglomerations of regional malls, business parks, hotels and the occasional rental apartment complex. They are dependent on cars and trucks as their primary or only transportation option. And they are where the vast majority of economic growth and substantial real estate development occurred in the late 20th century U.S.

At the time, the “Model Edge City” was Tysons Corner in Northern Virginia, an area set near the intersection of two major limited access highways, the Capital Beltway (Interstate 495) and the Dulles Access Road (Route 267). Later renamed simply “Tysons”, it was characterized by mid- and high-rise office buildings and two regional malls, surrounded by acres of surface parking lots.

Metro Rail Construction at Tyson's Corner Route 123


The Dulles Access Highway (Route 267) is in the upper right corner and the Capital Beltway (I-495) is in the foreground. The Tysons Corner Center shopping mall is on the left; the then-new Tysons Galleria is at the center.

Tysons has been the largest edge city in the U.S. since the 1980s. In that decade it added on average 1.3 million square feet of new office space per year, as well as retail space, luxury hotels and apartments.  Coming out of the Great Recession in 2010, Tysons had a total of 27 million square feet of office space as well as 20 million square feet of retail, hotel and residential space spread over 2,400 acres.  That year, Tysons was the 13th largest “downtown” in the country, in terms of office space.  With as much office space as the downtowns of Denver and Pittsburgh, Tysons housed nearly 100,000 jobs and a population of 17,000. It was larger than Perimeter Center in metro Atlanta, Chicago’s Schaumburg, Houston’s Galleria/Post Oak, Los Angeles’ Costa Mesa and Seattle’s Bellevue.

Yet Tysons also had some of the nation’s worst traffic jams, was hostile to pedestrians and had limited cultural offerings.  It was approaching full buildout under existing zoning. By the early 21st century, it also had competition from a place that offered something it fundamentally did not have: walkable urban vitality.

The Rosslyn-Ballston (R-B) Corridor in nearby Arlington, Virginia, immediately across the Potomac River from Washington, D.C., had been a competitor to Tysons.  During the go-go days of the 1980s, Tysons was absorbing over twice as much office space annually as the R-B Corridor. However, the R-B Corridor was then at the start of a transformation into the national model of the urbanizing suburb.  Starting in the 1970s, Arlington County had based its urban plan for the R-B Corridor around five then new Metrorail stations and encouraged high-density, mixed-use zoning in urban clusters within walking distance of each station.

In sharp contrast to Tysons’ drivable sub-urbanism, the R-B Corridor offered walkable urbanism. This development model is five to 30 times denser than traditional suburban development. It offers multiple transportation options, including transit, bikes and walking, in addition to cars and trucks. And it features a mix of product types – typically office, retail and residential – as well as parks and other public spaces, plus 24/7 place management, all within about a 3,000-foot (half-mile) radius.

During the 1990s and the 2000-2006 real estate cycles, Tysons and the R-B Corridor grew at exactly the same rate of office absorption annually and had comparable office rents, about $25 per square foot. There was a standoff between drivable sub-urban Tysons and walkable urban R-B Corridor during those cycles.

Tysons Loses Market Share
During the current real estate cycle (from 2010 to the present), however, Tysons grew at only half the rate of the R-B Corridor in terms of new office space delivered. Its net office absorption was even worse; Tysons was losing 100,000 square feet annually. The R-B Corridor achieved an average office rent of $41 per square foot, compared to $31 in Tysons, a 32 percent premium.



Conceptual Lane Use Map
Fairfax County’s Tysons conceptual land use map focuses on accommodating mixed-use development near the area’s four Metrorail stations. Fairfax County Department of Planning and Zoning

The valuation premium was even higher, since drivable sub-urban cap rates are in the range of 5 to 7 percent versus 4 to 5 percent for walkable urban office product, adding an additional 30 to 40 percent valuation per square foot premium. The relative loss of market share and value was naturally troubling for Tysons’ property owners and developers.

In addition, Tysons was not well positioned for the major new development product of the post-Great Recession market: rental housing. Most 21st century renters did not want to live in a sterile, drivable sub-urban location like Tysons; they wanted a hip, walkable urban place like the R-B Corridor. The R-B Corridor added 1,200 apartment units per year from 2010 to 2014, versus about 370 units per year in Tysons.

These lagging office and residential rental absorption trends for Tysons came as most developers and investors in metropolitan Washington real estate were beginning to realize that the late 20th century approach to development was losing favor. Walkable urban places were rapidly becoming more popular and more financially successful in response to pent-up demand.

Back to the Future
The market was shifting “back to the future.” Developers were once again building walkable urban places, something they had not done in a century. And the focus of that development was confined to much smaller areas. Since walking distance has been fixed for thousands of years at about a half mile, this limits the size of a walkable urban place to between 100 and 400 acres. The R-B Corridor has five walkable urban places totaling 1,100 acres, or an average of 220 acres each.

“Core Values: Why American Companies Are Moving Downtown,” a 2016 report published by Smart Growth America in partnership with Cushman & Wakefield and The George Washington University, demonstrated office tenants’ growing demand for walkable urban places. Researchers surveyed over 500 corporations that had moved to these places and learned that the No. 1 reason they had done so was to attract talented young millennial workers. To be a 21st century knowledge-based, creative class company requires being located in a walkable urban place.

The growing demand for walkable urbanism, among other factors, lead the Fairfax County Board of Supervisors to establish the Tysons Land Use Task Force in 2005. Another major catalyst for the establishment of the task force was the planned construction of Metrorail’s new Silver Line, which was to add four new stations in Tysons. Comprised of citizens, planners, landowners and businesses in and around Tysons, the task force’s mission was to:

1) Promote more mixed-use

2) Better facilitate transit-oriented development (TOD).

3) Enhance pedestrian connections throughout Tysons.

4) Increase the residential component of the density mix.

5) Improve Tysons’ functionality.

6) Provide for amenities and aesthetics, such as public spaces, public art and parks.

The head of the task force was Clark Tyler, a neighborhood leader who had lived near Tysons for 50 years. A longtime observer of Tysons, he saw it as “the blob that ate Northern Virginia.” Yet he felt there was a model Tysons could follow nearby: the R-B Corridor.

Tyler and the task force studied how the R-B Corridor had evolved, following smart growth principles of high-density, walkable urban development clustered around its five Metrorail stations. Two things stood out:

1) In the late 1980s, 11 percent of Arlington County’s land mass consisted of land zoned for walkable urban development, and that land generated 20 percent of its tax revenues. By 2010, more than 50 percent of the county’s tax revenues came from this up-zoned and redeveloped land.

2) The main arterials serving the corridor’s five walkable urban places, which experienced a tripling of square footage since the 1980s, actually saw their traffic counts decline in absolute terms. All of the growth was accommodated by increased transit, biking and walking.

Tyler and the task force also discovered from the R-B Corridor that high-density mixed-use development within walking distance of single-family housing improved the quality of life in the surrounding neighborhoods. Allowing Tysons to evolve into a much denser, more walkable urban place, as the county’s comprehensive plan envisioned, could offer residents of surrounding neighborhoods the best of both worlds: a suburban lifestyle within walking distance of restaurants, transit, jobs and urban vitality.

Plan Approved
After an extensive community engagement process, including 300 meetings, economic and fiscal impact analyses, land use planning, and review and approval by both the task force and the Fairfax County Planning Commission, the Fairfax County Board of Supervisors approved the Tysons rezoning and urban plan amendment to the county’s comprehensive plan on June 22, 2010. The plan update calls for 75 percent of all new development in Tysons to be located within a half-mile walk of a Metrorail station.

Tysons 3

Plan Highlights Text Box
By 2050, Tysons is projected to have twice as many jobs (200,000) and five times as many residents (100,000) as it did in 2010, resulting in a jobs/housing balance of two jobs for every resident, as opposed to a 6:1 ratio in 2010. Tysons will also be more environmentally sustainable, with restored streams; a green network of public parks, open spaces and trails; and green buildings.

A redesigned transportation system will include circulator routes, community shuttles, feeder bus service and vastly improved pedestrian and bicycle routes and connections. The new comprehensive plan also called for the establishment of the Tysons Partnership, a nonprofit organization of property owners originally empowered to engage in transportation management, which has broadened its responsibilities tremendously, as discussed below.

All of this required substantial up-zoning. The new comprehensive plan allows for a tripling of the square footage existing in 2010, with up to 150 million square feet estimated to be on the ground around 2050. It assumed that much of this new development would be spurred by the four Metrorail stations, which opened in 2014. The plan and the Metrorail opening did indeed spark an explosion of rental housing deliveries. In the two years after the Silver Line opened, 840 new rental apartments came on the market annually, more than double the 371 units that came on line in the previous four years.

The $2.9 billion Metrorail extension was paid for by increased tolls on the Dulles Access Road as well as state and federal funds.  However, an additional estimated $2.8 billion in other transportation infrastructure was needed to support the increased density and transform Tysons into a walkable urban place.  Where would this funding come from?
Tysons property owners now contribute to both a Tysons-wide Road Fund and a Tysons Grid of Streets Fund to increase walkability and put in new streets to break up the super-blocks that have long dominated the area.  As the county’s 2017 Tysons Progress Report says, “All new or reconstructed road improvements will include pedestrian facilities and many will include bicycle facilities.” The county’s board of supervisors recently increased the 2018 contribution rate for these two funds to a combined total of $13.21 per floor-area ratio (FAR) square foot for commercial property.

A third transportation fund, The Tysons Road Fund, which has been in existence since before the 2010 comprehensive plan was approved, requires an assessment of $4.46 per FAR square foot.  A developer’s minimum assessment, payable upon obtaining a building permit, is now $17.35 per FAR square foot.

This contribution, however, reflects the base transportation fees, and generally does not represent the full upfront cost of transportation improvements associated with a specific new or redeveloped project.  Additional fees fund unique on-site road improvements, nearby road and intersection improvements, traffic demand management studies and programs, traffic signals, etc.  Total transportation fees therefore typically range from $25 to $29 per FAR square foot.  These fees alone mean that Tysons has some of the highest-priced suburban land values in the country.

To put these fees in context, annual asking rents for Class A office space in Tysons now average about $40 per square foot; the one-time transportation fees for the three funds and unique assessments therefore represent 62.5 to 72.5 percent of annual rents. Compare this to New York’s Park Avenue Manhattan submarket, where Class A asking rents are about $90 per square foot, according to Cushman & Wakefield, among the highest in the country.  Transportation fees there are about $62 per FAR foot, according to the New York Times, 69 percent of annual rents.  In other words, Tysons transportation charges are about the same, relative to rents, as those in one of the most expensive office submarkets in the country.

These substantial transportation fees reflect both the high cost of infrastructure improvements for walkable urban development as well as the market’s ability to pay for the improvements, given pent-up demand and higher rents.

The Tysons Partnership

Tysons 4
Tysons overview
The comprehensive plan foresaw much increased cooperation among landowners regarding transportation management, human-scale infrastructure improvements and even consolidation and/or coordinated development plans.  To date, that cooperation has primarily been through the Tysons Partnership.

The Tysons Partnership was officially designated by Fairfax County as the transportation management association (TMA) for Tysons.  It has been responsible for carpooling and circulator management as well as the introduction of the metro area’s Capital Bikeshare network to Tysons.

The partnership, which describes itself as “a dynamic collaborative of Tysons stakeholders working together to accelerate the transformation of Tysons into a great American city,” has been taking the lead in ensuring “that the overarching goals and objectives of the Comprehensive Plan for Tysons are achieved.”  Its work has involved wayfinding, entrance signage and street banners; organizing pop-up parks, murals, festivals and other events like bike races and farmers markets; and installing public art. The partnership also represents property owners in their interactions with the county, the local jurisdiction implementing the comprehensive plan.

The partnership is not, however, taking an in-depth role in placemaking and place management. These functions will be filled by private developers and property owners.

The major responsibilities for implementation of the comprehensive plan are now in the hands of the private sector, which is taking advantage of the Metrorail and other infrastructure improvements and the substantial increase in zoning density to transform Tysons into a denser, more urban place. Many developers and property owners are in the process of creating walkable urban places through new development, placemaking and place management. (See “The Boro” for more on the new development now underway.)

The Coming “Breakup”

Tysons 5
Tysons street grid
The existing street grid for Tysons (top) limits connectivity for automobiles and pedestrians throughout the area. A more urban grid (bottom) will enhance connectivity for all modes of transportation.  Fairfax County Department of Planning and Zoning

At 2,400 acres, Tysons is far too large to be just one walkable urban place. Recognizing this, the comprehensive plan divided Tysons into eight different zones, anticipating that each would evolve independently.  However, it now appears that the bulk of new walkable urban development will cluster around Tysons’ four Metro stations, as specified by the new zoning.

Over the next generation, five walkable urban places of about 300 acres each are expected to emerge: one each around the McLean, Greensboro and Spring Hill stations, and two at the Tysons Corner station – one on either side, anchored by the area’s two regional malls, both of which are already surrounded by substantial office and residential development. Each of these five places will have its own character, economic role, tenant submarkets, etc.

This means that only about 1,500 of Tyson’s 2,400 acres will become walkable urban places. The rest of the area will stay pretty much as it is today for the foreseeable future.

Future Challenges And Lessons Learned
The entire country and much of the world is watching the transformation of drivable sub-urban Tysons into a collection of walkable urban places. This process already offers the following five lessons:

1) Massive investment in transportation and parks must be made upfront, by both the public sector and private property owners. Given unlikely future federal infrastructure spending, this funding will probably have to come from state and local sources, and must include private co-investment.

2) Walkable urban places, with their complex mix of residential, office and retail products, are much more difficult to develop than stand-alone drivable sub-urban projects. The initial phase of any walkable urban project must achieve enough critical mass to create a “there there.”

3) Not all of the drivable sub-urban space in an edge city will be converted to walkable urban development. Some of the existing office, retail and residential products will remain, and will still be able to attract tenants unable to afford the higher-priced walkable urban product.

4) Conventional underwriting probably does not apply to these projects, especially in their early phases. Upfront investment in infrastructure and parks, along with some unproven product offerings, especially at the required rent or sales price levels, will require a leap of faith at times. Property owners will eventually profit from the increase in land value in subsequent phases.

5) Place making is essential for success. Whether through a business improvement district, government-funded urban districts or private place management, extraordinary cleaning and safety services, festival management and promotion, park development and management, economic development and more are required, and do not come cheap.

Since the first projects following the opening of Metrorail have only recently been completed and the first phase of The Boro, Tysons’ first major walkable urban place, has not yet delivered, the jury is still out on Tysons’ transition to walkable urbanism.

What is known is that, if the largest edge city in the country can pull this off, other edge cities will take notice and follow Tysons’ lead. In fact, Fairfax County is already applying some of the new policies and practices developed for Tysons to the Reston Transit Corridor, where the Silver Line is being extended to Dulles Airport.

The Boro

The new walkable urban place that is furthest along in Tysons is The Boro, a multiphase mixed-use project being developed by The Meridian Group. Although the company was initially skeptical about investing in Tysons, following the adoption of the comprehensive plan and the commencement of Metrorail construction, Meridian felt Tysons was “ready to transition … away from the suburban office park model and create high energy pockets where people want to be,” according to Gary Block, partner and chief investment officer with Meridian.

Boro park
The Boro will feature vibrant streetscapes and greenspaces; its first phase will contain 1.7 million square feet of apartments, condos, office and retail space, including a 15-screen cinema. Courtesy of The Meridian Group

The Meridian Group wanted a Tysons location that would allow it to begin with a first phase large enough “to dramatically change the perception and feel of that area, which would drive land value of subsequent phases,” says Block. In August 2013, the company acquired the three-building headquarters of SAIC, a major government contractor, adjacent to the Greensboro Metrorail station. The property included 630,000 square feet of Class B office buildings, a parking deck and a call option for additional land with 3 million square feet of FAR. SAIC leased back 130,000 square feet in one of the three buildings.

The first improvement Meridian made was to add a new “front door” to the SAIC property to face the new Metrorail station, in addition to the original car-oriented entrance. Meridian then acquired a 765,000-square-foot portfolio of four buildings adjacent to The Boro on the east and a 210,000- square-foot building directly across Greensboro Drive to the south. This will allow subsequent phases of development to take advantage of the critical mass that will be created in the first phase.

The rezoning of Meridian’s holdings allows a total buildout of nearly 4 million square feet. The Boro’s first phase will contain 1.7 million square feet of apartments, condos, office and retail space, including a 15-screen ShowPlace Icon movie theater and the largest Whole Foods Market in the U.S.

Two parks and new streets will break up the super blocks. The Boro aims to create the walkable urbanity promised by the comprehensive plan when its first phase delivers
in 2019.

Office rents at The Boro have already increased from the mid-$20s annually in 2013 to the mid-$40s in 2018, following renovation of the existing buildings from Class B back up to Class A. Office rents at the new phase I office tower are in the mid-$50 per square foot per year. Condos will be priced at $800 per square foot, on average, and some early reservations have achieved $1,000 per square foot. The rental apartment market is still new in this location, but Meridian is projecting annual rents of $36 to $42 per square foot. There is plenty of room for apartment rents to rise, since Tysons apartments currently rent at a discount to those in the R-B Corridor and downtown Washington.

The key, according to Block, will be to “co-brand our properties and integrate one into the other, creating co-dependence and allowing one to benefit from investment in the other.” This “more is better” value creation phenomenon is common to most walkable urban places. As you build more retail space, housing, offices and entertainment, the area improves over time. More people on the sidewalks attract even more people. This is also referred to as the “upward spiral of value creation.” Meridian has planned substantial additional development to reap the benefits of the critical mass it expects to achieve in phase I.

Any questions, contact RezaieCo at (202) 802-8200 or support@rezaieco.com

Logo (9)



%d bloggers like this: