"Ultra-luxury" Georgetown Hotel Secures Financing

The long-simmering Georgetown luxury hotel project has secured financing and is finally moving forward, with an eye towards a December 2012 completion, just in time for the 2013 presidential inauguration.

The Capella Georgetown will be an “ultra luxury” hotel at 1050 31^st Street NW, the former American Trial Lawyers Association building. The five-story building, which overlooks the C&O Canal, will feature just 49 rooms and interiors designed by German firm Peter Silling & Associates. The design also calls for a public restaurant and bar overlooking the canal, but details aren't in place just yet. The project, spearheaded by Capella Hotels and Resorts, ICG Properties, and D.C.-based Castleton Holdings Inc., recently brought in Point Ford Management Ltd., an investment firm based in Indonesia, to complete financing for the project, which is estimated in the $45 million range.

"The [financing] process was challenging because of the market," says Nick Demas, Partner at Castleton Holdings LLC. "But in challenging markets there is also great opportunity. We worked through the market fluctuations and successfully secured all the funds needed to complete the project this past July. Our lender, PNC Bank, has been really supportive of the project and our partnership. And we are very excited about our relationship with our new equity partners, Point Ford Management Limited. They are terrific partners and are committed to our program of assembling an ultra-luxury hotel portfolio. As a developer, you really can’t ask for anything more."

The Capella Georgetown will cater to foreign dignitaries, captains of industry, and other international clientele (discussion at an October meeting of the Georgetown advisory neighborhood commission touched on possible entourage-related traffic jams), and the hotel will be accordingly discreet. While the interior has been gutted, the drab office building will receive only minor cosmetic changes to the exterior – new window frames and a slightly larger canopy - in deference not only to future guests' desire to keep a low profile, but also to neighborhood preferences for aesthetic continuity. By restricting the heavy redesign to the interior of the site, the developers have sidestepped the community backlash that often follows these sorts of projects. Demas says of the locals: "We are thrilled that our plan was so well received by our neighbors, the ANC and the Old Georgetown Board." And ANC2E Commissioner Tom Birch was quoted recently as praising the developers for "turning a sow's ear into a silk purse." The contrast between this hugfest and, say, the ongoing drama of the Friedman/Schrager Adams Morgan hotel could scarcely be greater.

Still, despite Demas' demurrals, this project was never realistically going to have problem attracting financing. Hotels, especially luxury ones, have proven to be safe money through the recession, and the District hotel market has historically been one of the strongest in the nation. Local occupancy rates have held steady in the low seventies, and while average luxury rates softened in the past few years, they’ve recovered to nearly the level of their 2008 peak.

This will be Atlanta-based Capella’s second hotel in the United States (its other property is in New York), and the company plans to expand into several other U.S. cities in the near future.

Washington D.C. real estate development news

Back to Drawing Boards for Italian Embassy Owners

Earlier this year Valor Development LLC purchased the former Italian Embassy at 2700 16th St. NW for $7.5 million in what will be a second attempt at condo development on the site. Partnering with Potomac Construction Group, Valor intends to renovate the embassy into condominiums, add a three-story wing on the north side of the building (also to house condo units), and construct a nine-story apartment building at the rear of the site. Earlier this month developers' plans and the architectural diagrams provided by Trout Design Studio went before the Historic Preservation Review Board (HPRB). While the HPRB found the conceptual site plan and rehabilitation of the landmark satisfactory, members of the Board directed the applicants to "restudy the architectural treatment of the north wing, and restudy the height, massing and architectural treatment of the new apartment tower, and return for further review when appropriate."

The first phase of the "Flats at IL Palazzo" will be the restoration of the landmark's facade and the conversion of the interior into condominium units "blending the character and charm of the historic building with the sophistication, class, and modern finishes that one expects in this premium location," according Valor's online description. The interior restructuring and transformation will preclude several significant interior spaces: the ballroom, library, dining room, and other smaller spaces will be preserved with some opportunity for public use and visitation. The second phase will include the north wing addition and the construction of the apartment tower, but those elements remain unapproved by HPRB.

Plan rejected in 2006.

Another development team in 2006 was close to moving forward with similar development plans for the ex-embassy, when HPRB designated the property an historic landmark just before construction was to begin, in part because the new tower would have eaten into part of the historic structure. HPRB asked the city to revoke the building permits for the 79-unit Il Palazzo condominium, a decision the developer litigated and lost. This go-round developers have moved the proposed apartment tower from near the front to the northwest corner of the site, far-removed from the 16th Street frontage and centered around a second courtyard. While the overall efforts seem to respect the historic nature of the property, and rearrange the site plan in accordance with HPRB's public wishes, the Board still found the three-story addition "capricious and discordant with the rest of the proposal" and the apartment tower's design to be "busy and composed of too many elements." Developers and designers have been advised to rethink their designs and try again soon. Although this is sure to delay Phase II, developers are still planning to deliver Phase I to the marketplace in summer of 2011.

The last project was spun by Spaulding & Slye, Colliers & Castleton Holdings, lender O’Connor North American Property Partners LP was forced to foreclose on the property, and enabling Valor to swoop in and purchase the site.

Washington DC real estate development news

ICG's Luxury Georgetown Hotel Still Alive

Expectedly there was a bit of a buzz in 2009 when ICG Properties announced its intentions of converting a 47-year old office building at 1050 31st Street NW into a "luxury" boutique hotel. But since Castleton Holdings Inc. first bought the property from the American Trial Lawyers Association in 2008 for $18.3 million, and shortly after revealed their 50/50 partnership with ICG, little progress has been reported. Prolonged inaction had some speculating that the deal to bring the U.S. only its second Cappella hotel had fallen through. But ICG Principal David Stern assures skeptics that, though behind schedule, developers are still pushing forward, and hope to wrap up and finalize financing within one or two months. "With the equity and debt aspects of deal squared away, " reports Stern, it appears a groundbreaking is not far off (relatively speaking).

Certainly good news, but stay seated, there remains much work to be done, before the physical labor can actually begin. "Once we close on financing," says Stern, "we still have to get a final project architect on record, and then go through six to nine months of planning." Current designs, provided by BBG-BBGM, are very much preliminary in nature. But the finer details will be hashed in early next year as the community relations, HPRB, and Zoning processes commence.

As currently proposed, the five-story hotel will feature 48 guestrooms and suites and an upscale restaurant and lounge overlooking the C&O Canal. Other highlights include an executive boardroom, a rooftop pool and bar, and exclusive spa. Remodeling of the exterior will be mostly cosmetic. “It won’t be a demolition," Stern reiterates, "The hotel renovation would be primarily interior renovation work.” With an expected construction time of approximately 12 months, developers hope to deliver the new hotel by the end of 2012.

Washington D.C. Real Estate Development News

Luxury Hotel Sought for Georgetown Canal

Commercial real estate developer ICG Properties announced this week that it is seeking to redevelop the former headquarters of the American Trial Lawyers Association at 1050 31^st Street, NW through a joint partnership with Castleton Holdings. The Washington DC-based developer's goal for the prominent Georgetown location? An "ultra-luxury hotel" with top-tier retail.

"[We are looking for a] high-end, luxury hotel operator," said David C. Stern, a principal with ICG. "There’s an opportunity for a fantastic restaurant presence on the Canal side of the building…In keeping with its location in the heart of Georgetown, it’s going to be a high-end project."

In its current incarnation, the five-story building hosts 50,000 square feet of space with two-levels of underground parking and views of the C&O Canal, the Potomac and the surrounding Georgetown area. According to Stern, the development will doing little to alter that – at least, externally.

“It won’t be a demolition. The hotel renovation would be primarily interior renovation work,” he said. “We haven’t selected a project architect yet…It’s very preliminary right now. Decisions like the operator, financing and the hotel architect haven’t yet fallen completely into place.”

That, however, hasn’t scared them from locking down a timeline on the project. Stern says his group is negotiating with an unnamed hotelier and is planning to begin construction by the end of the year. "They are not currently in the District, but, like many other groups, they are very interested in starting operations [here]," he said.

"Given the fact that it’s primarily an interior renovation project, it would be a 12 to 18 month period for construction,” said Stern. “Our goal would be to open in the first quarter of 2011." Presumably by then a hotel operator will have been selected.

Washington DC commercial real estate news