Victory Center Office-To-Residential Redevelopment Approved By Alexandria City Council

ALEXANDRIA, VA — The redevelopment proposal for the long-vacant Victory Center in Alexandria secured final approval from City Council Saturday. The approval includes a partial tax abatement for 25 years to help convert the building.

In November, City Council received a proposal from developer Stonebridge for a conversion of the vacant office building at 5001 Eisenhower Avenue to 377 rent-controlled housing units. A presentation to City Council indicated that the 600,000-square-foot office building has been vacant for 21 years, as it has lost several bids for federal agency locations. The Victory Center was originally constructed in 1973 for the U.S. Army Material Command, but it has been vacant since the agency moved to Fort Belvoir in 2003.

According to City Council meeting documents, the city government had provided a partial real estate tax abatement in 2019 to incentivize office redevelopment and leasing. However, office tenants didn't end up leasing the space. It was temporarily used as a large-scale vaccination site during the COVID-19 pandemic.

The presentation to City Council indicates the Victory Center accounts for about 3 percent of the city's mid-year vacancy rate of 15.5 percent.

The proposal calls for residential units and a city-operated community space. Of the 377 units, 41 units would be affordable to households with 50 percent of the area median income, and 41 would be for 60 percent of the area median income households. Another 189 units would be available to households with 80 percent of the area median income, and the remaining 106 units would be for households with 100 percent of the area median income. The current median income in the DC metropolitan region is $154,700.

The affordable units would be rent controlled for 40 years. Future phase of development could add another 450 residential units on the surface parking lot area — potentially 50 market-rate townhouses and 400 market-rate multifamily units plus open space, day care and retail. The city is considering the project as transit-oriented development due to walking distance from the Van Dorn Street Metro.

Under Virginia state code, localities can allow a partial tax exemption for real estate improvements in a rehabilitation district for up to 30 years. The real estate tax abatement would be in effect for 25 years, with the rate gradually getting lower. The proposed tax exemption would be 90 percent in the first five years, then 10 percent less every five years. The exemption would be 50 percent by the 21st to 25th year.

City Manager James Parajon estimated the real estate tax abatement would cost the city between about $13 and $16 million in net present value over the 25-year period of the proposed tax abatement. The exemption is capped at $1.5 million per year.

"The tax abatement is only on the new increment of value," said Parajon at last Tuesday's City Council meeting. "The existing taxes the city receives will continue to receive under this proposal. It's the increment that would be part of the partial tax abatement."

Parajon said if the developer doesn't deliver the project, there will be no tax abatement provided. The city manager's presentation to City Council estimates a fully developed site would increase annual real estate taxes from $135,000 to over $3 million after the abatement period.

The agreement with the city calls for construction on the building conversion to start within two years and for construction to start within four and a half years. For the future townhouse development, construction would need to be completed in six years. For the phase with multifamily development, open space, day care and retail, the development would need to be completed in 15 or 16 years.