$100M Fairfax Apartment Project Lands Construction Financing

A rare ground-up apartment project in Northern Virginia is set to break ground after landing a $60M construction loan.

Middleburg Communities and Capital City Real Estate plan to build a 260-unit apartment building on the parking lot of a Fairfax office park. The mortgage for the project, which the developers named The Botanist, comes from Chicago-based CIBC Bank USA, a subsidiary of the Canadian bank.

The development site is a 3-acre surface parking lot at 10350 Eaton Place next to a quartet of 1980s-era office buildings called WillowWood Plaza. 

Ross Macdonald, Middleburg Communities principal of strategic investments, said the developers and a 90% limited partner, which he declined to name, are providing $40M of equity.

The team closed on the site for $10.4M last week, the Washington Business Journal reported. With financing in hand, the team plans to start construction immediately and deliver the first units in the third quarter of 2027.

The project is four years in the making. Capital City began the process of entitling the project nearly four years ago, and Middleburg came on as a general partner last year, Macdonald said in an interview Thursday.

Middleburg was attracted to the opportunity given the region's return-to-office push and the lack of apartment construction in Northern Virginia relative to D.C. and other parts of the region, Macdonald said.

“Part of the reason why we liked it is because the construction market has been slower up there,” he said. “Where we see in the rest of the mid-Atlantic and Southeast there has been a good amount of supply coming online, Northern Virginia has not had that supply.”

Northern Virginia has been a hot acquisition market over the past few years, but the development pipeline has been slow. 

As of last year, Fairfax County was just 36% of its way to the 2030 housing development target set by the Metropolitan Washington Council of Governments, according to a Washington Post analysis. D.C. and Alexandria had already surpassed their targets. 

One of the most recent impediments to new construction that developers are facing is the perception of the Trump administration's impact on the region with federal workforce cuts.

At a Bisnow event on the Northern Virginia multifamily market in June, developers said investors were wary of jumping into the market given national headlines surrounding the administration's staff cuts and the Department of Government Efficiency.

“We haven't spent a day this year without talking about DOGE in some capacity, or rather, a day since February,” Mill Creek Residential Senior Managing Director of Development Joe Muffler said onstage at the event. “It has dominated every conversation we've had with every capital partner trying to make deals work.”

Federal employment cuts in the first half of the year fell the hardest on D.C. suburbs, the WBJ reported this week, citing CBRE data. Northern Virginia experienced the biggest decline in federal employment between December and May, with the number of federal workers in the region declining 6.1%, compared to the 4.1% decline in suburban Maryland and the 2.4% decline in the District. 

Macdonald said the environment didn’t dissuade its partner or lender, CIBC, which was seeing “strong performance” in its portfolio in the region.

“There has been good rent growth where other markets are kind of flat to declining because of the supply story up there,” he said. “You haven't had that supply competition, and there's been good performance there.”

The DOGE disruption was on Middleburg’s mind in the first half of the year when the company was touring the area, but Macdonald said that it found that a small number of renters were being impacted and those that were had received attractive buyouts that allowed them to keep paying rent and find a new opportunity in the private sector.

“So we got comfortable there and we feel like if there is a short-term shrinkage in some of the federal, public employment out there, we do think that the private employment market up there is doing extremely well,” he said. “We think that those people with strong skill sets that may be looking for employment out there will shift from public to private employment.”