The Deal Nobody Could Make

“Here’s our dilemma: I need a signed lease in order to get my approval. You need approval in order to sign a lease,” Todd Hitt, founder of Kiddar Capital, told Fred Morganthall, Harris Teeter President and COO, over coffee on a chilly November afternoon.

The topic of discussion was 2.57 acres of land in the heart of downtown Falls Church — actually three lots, one owned by a private investor, one by the City of Falls Church Economic Development Authority, and one by the City of Falls Church. Allan Berman, the private investor involved, had been trying for six years to place a Harris Teeter on this property. He had been in talks with large developers, while working with Harris Teeter broker Cary Judd of KLNB, but Berman’s lot alone was too small to fit a substantial grocery store. The economics did not work.

So Berman brought the problem to real estate veteran Todd Hitt.

Hitt’s conclusion: develop all 2.57 acres together as a mixed-use property, with apartments above the grocery store. Other developers had discarded the idea because of City of Falls Church zoning laws, but extensive research by Hitt’s team at Kiddar discovered that the city council could grant a special exception if the project proved to have a positive effect on the local economy.

“Research has been crucial to our success in real estate at Kiddar,” states Hitt. “If we don’t do our homework, we can’t execute.”

Hitt knew he had a good shot at the special exception. “Falls Church has a very small tax base. One grocery store like Harris Teeter, with their kind of sales, is 3% of their tax base — that’s huge. Now, most people wouldn’t research that.” The West Broad property is also slated to create 100 permanent jobs.

The proposition involved buying three different lots from three different owners. There were politics involved, and a great deal of risk. If the City of Falls Church failed to approve the build, the entire investment would be lost. Yet, the project had an all-star team behind it: Cary Judd was the man responsible for bringing Harris Teeter to 75 locations in the mid-Atlantic, and Rappaport had worked in D.C. area retail real estate for a quarter of a century.

Hitt took the project to the city council for approval. They liked the proposal, but had one condition: Harris Teeter had to sign the lease before they would give Hitt approval to build on the property. “Which doesn’t happen that way,” Hitt says. “No grocer signs a lease if they don’t even know if a project’s going to get approved.”

It would cost upwards of $450,000 for Harris Teeter to negotiate the lease — and without prior approval for the build, they had no guarantee they wouldn’t just lose that money. Todd Hitt called Fred Morganthall of Harris Teeter and scheduled a meeting.

Over coffee, they worked out a deal: an escrow agreement between Todd Hitt and Harris Teeter for $500,000. If approval fell through, the grocer would break even. “It was an innovative way to attack a very complicated problem,” says Hitt. He took the lease back to the the council, got approval, and brought in Hitt Contracting to manage and execute the build. They built the property in record time, finishing a two-and-a-half year build in just 18 months.

“There weren’t many brokers like him.” — Todd Hitt

Cary Judd did not live to see the project to completion, passing away in March of this year after battling cancer. Todd Hitt credits Cary Judd as an incredible businessman, and a driving force behind the West Broad Street development: “There weren’t many brokers like him.”

Today, 301 West Broad is a gorgeous mixed-use building in downtown Falls Church. The apartments have been available for lease since February 2016, and the flagship Harris Teeter has opened its doors on-schedule.

Todd Hitt says that the project is one of the best he’s seen in this metro area over the last five years. “I would never call myself a visionary,” he says, “but there is such a thing as vision.”