Editor: Arlington County Board members did, indeed, leave many questions unanswered in their recent discussion with Civic Federation delegates on the financing plan for the Barcroft Apartments [“Questions Linger on Arlington’s Role in Affordable-Housing Deal,” Jan. 13].
Case in point: Why did Arlington, Amazon and the mystery “senior lender” pony up more than three times the assessed value of the 39-acre Barcroft Apartments.
To help fund this acquisition, Arlington County has offered up the proceeds of an apparently unsecured $150 million, variable-rate line of credit at a time when interest rates (and thus borrowing costs) are almost certain to rise.
At least part of the now highly leveraged Barcroft property is at high risk for flooding, though it also enjoys federal “opportunity zone” tax breaks (Amazon frequently locates new warehouses in opportunity zones). Add to these tax breaks the Low-Income Tax Credits available for affordable housing and, under certain conditions, other tax breaks for real-estate developers and investors whose projects lose money.
Reminiscent of leveraged buyouts, projects hamstrung by excessive acquisition debt can be doomed to failure from the start. Typically, however, this engineered failure results in the “investors” being handsomely repaid. Here, however, some of the investors remain unidentified, shielded by one or more limited-liability companies. So it’s difficult to determine the motives of everyone participating in this complex arrangement.
Repaying the loans will likely require the new owner to demolish most or all of the existing 75-year-old, poorly maintained garden apartments and replace them with market-rate residences (in addition to the requisite committed-affordable units).
But what happens in five years, when Arlington’s line of credit comes due, if the project isn’t viable? With Arlington’s loan subordinated behind the senior lender’s and Amazon’s loans, Arlington is last in line to be repaid.
If the debt remains unpaid, how will the county government float bonds or roll over a loan for a property to which it has no claim?
Suzanne Smith Sundburg, Arlington