Greenlin Park—the Board needs a backbone

By Charles Houston

On October 16 our Board of Supervisors will vote on yet another rezoning request by JK Land Holdings, the biggest land speculator in the county and a frequent recipient of the Board’s favorable votes. The owner of JK Land Holdings has probably made a billion dollars on its land deals. (That amount’s just a guess, but probably close enough.) I wish I was that slick.

Two Questions

There are two basic questions here. The first is whether millions of square feet of data centers should be built here. (Answer—“No.”) Chair Phyllis Randall says she gets emails every day, saying “NO!” That’s no surprise as many conservation and environmental groups have come together to oppose new data centers. The citizenry boils at the darn things.

JK is seeking a ZMAP—a change in the zoning map to allow a giant data center project of 2,121,000 square feet—on 84 acres of farmland along the Greenway—instead of its present residential zoning. Data center land in Loudoun is approaching $4 million an acre. That’s $336,000,000.  

The second basic question is whether a zoning ordinance is static or flexible. It seems quite odd to grant rezonings to a legal document—our Zoning Ordinance—that the Board enacted within the past year. Why change something you’ve just done?

As a matter of law, the Board has absolutely no obligation to grant this rezoning.

Section 1031

This section of the IRS code defines property exchanges that will avoid capital gains tax. As an example, assume that you sold land for $300,000 that originally cost you $100,000. You then face paying capital gains tax on a gain of $200,000. 

Section 1031 says that if you reinvest the proceeds into a similar property, then capital gains taxes can be indefinitely deferred. 

It’s fair to assume that JK uses Section 1031 to defer taxes and as such, has an unending and voracious appetite for new properties to buy to avoid a massive tax liability. 

Did JK Learn a Lesson?

A long time ago JK purchased White’s Ferry from its Maryland owners. Unfortunately for JK, that price did not include landing rights on the Virginia side of the Potomac. Perhaps JK blithely assumed it could negotiate a deal with the Virginia owners.

Negotiations failed and JK was left with a useless ferry. It tried all sorts of desperate moves with Virginia and Maryland and with Loudoun County. It even asked the County to use its right of eminent domain to take the landing property so he could put the ferry in use. That’s nervy. His efforts failed and some of his zillions remain tied up.

I do miss the ferry.

Frankly this was perhaps the worst real estate mistake that I’ve ever seen. It ignored a basic tenet: Any purchase contract should have contingency clauses that lets the buyer back out if something was wrong. Every purchase contract of our Atlanta company had contingency clauses: Bad soil? We’d bail. Weak market? Color us gone. Can’t get good financing? Bye-bye. 

A typical contingency period is 90 days, which can be extended by making an additional deposit.

A Lawyer Spills the Greenlin Park Beans

JK’s attorney Michael Romeo made an amazing admission: JK “doesn’t have a user for the property.” The gall is stunning and I’ll translate it: “Rezoning this land will make JK hundreds of millions.” It’s a rare public admission of rank speculation.

If JK learned a lesson from its White’s Ferry debacle, it would have put a zoning contingency in its purchase of the Greenlin park property: No zoning? Then no deal. A probable scenario is that it has only a purchase contract on the Greenlin property, exercisable only if it’s rezoned.

Based on all the favorable results JK’s gotten from the County, it would have had a plausible case for convincing the actual property owners that with its clout, JK was the perfect purchaser.

It’s up to the Board

Each Supervisor faces a clear question when considering this scheme on October 16: “Should I vote to help a favored land speculator make hundreds of millions, or should I vote to keep the property zoned as it is in the zoning ordinance?”

The board could easily deny the application on general grounds of incompatibility, but I’d much rather see it deny the rezoning by adhering to the existing provisions of the zoning ordinance. It’s the better decision for our county.

Charlie Houston helped develop six million square feet of Class A office buildings including headquarters for Fortune 50 firms. He consulted extensively for Coca-Cola and Norfolk Southern, served as an expert witness on real estate matters and occasionally lectured on real estate at Georgia Tech. He has serious real estate chops.