Chinatown: Monument Looks to Expand Foothold

A few lots on H Street near the intersection of 7th and H, NW are some of the last undeveloped lots in Chinatown / Penn Quarter.  If things go as planned, Monument Realty's 10-storey Gallery Tower will occupy the vacant parcel at 627 and 631 H Street NW, just a block from the corner.  The future 10-story building, with a design by architect Chris Morrison with Cunningham Quill, is due for delivery in 2014.  The site formerly housed China Doll Gourmet, which closed in 2006 and was razed shortly thereafter.

Monument Realty acquired the empty parcel in 2011 after foreclosing on the note it bought from Yeni Wong in 2010.  Wong had plans to develop the whole corner, but failed to secure financing when financial markets soured around 2008.  Douglas Development scooped up the neighboring corner lot to the west - 675 H Street NW - last year during the same week Monument clinched 627-631, from the auctioneer.  Douglas also owns the Vapiano building to the east of the Gallery Tower spot.

Gallery Tower rendering
courtesy of Monument Realty

According to one company representative, Monument hopes to expand its foothold in the neighborhood of Chinatown / Penn Quarter.  According to director of marketing Natasha Stancill, Monument's acquisition team is looking for opportunities to develop a residential parcel close to the future Gallery Tower site. She said the firm was excited about its plans for Chinatown.  "We are looking at other possibilities in the area because it is such a vibrant, exciting part of town," Stancill told DCMud.

The Gallery Tower building plan calls for two floors, or 11,000 square feet, of retail and another 60,000 s.f. office space on floors three through 10.  The project went through zoning, Office of Planning (OP), area neighborhood commission (ANC), and Chinatown Design review approvals processes when Yeni Wong controlled the property.  According to the project's development manager Pam Frentzel-Beyme, the first two floors will likely house a restaurant.

Frentzel-Beyme said the building's location would be its biggest selling point. "You can't beat being next to Gallery Place, and the design is really modern but also compliments Chinatown's history."  A lot of Chinatown's office space, she noted, is in historic buildings where tenants don't get the great views that she said Gallery Tower, with its large, modern windows, would one day offer.

The  former China Doll Gourmet was on the site

Developers describe the future Gallery Tower, with floor plates that are less than 8,000 square feet, a "Class A boutique space." "We'll be targeting the type of tenant that is not going to want much more (than 8,000 square feet)," Frentzel-Beyme said.  She said Monument would be targeting businesses with a "fun and creative employee base", such as design or architectural firms.  "They are young, they might want to grab dinner, go over to the Verizon center, but don't necessarily need 50,000 square feet of space."

Gallery Tower is now in the building permit process and Monument says it will break ground in the first part of next year.

Floor plan courtesy of Monument Realty

Floor plan courtesy of Monument Realty

Floor plan courtesy of Monument Realty

Washington D.C. real estate development news

Watergate Plans Move Ahead

After years of dormancy and uncertainty, the Watergate may be about to launch its rebirth as an upscale hotel, completing the circle after its closure to convert to private residences. Developers of the hotel, which shuttered in 2007, are now close to announcing a plan to renovate and rebrand the luxury hotel. Developer Euro Capital Properties, a European investment firm with dual headquarters in Paris and New York, has hired worldwide architectural firm Gensler to redesign the interior and refit the structure, a process that will begin once Euro Cap has had a chance to run its plans through a triad of regulatory agencies. Redevelopment of the "luxury hotel," considered to command a price point around $300 per night, will require an investment of around $50 million by Euro Cap subsidiary Euro Watergate Hotel and Residences LLC. The U.S. Commission of Fine Arts (CFA) will be the first to review the proposed design changes for the iconic curvilinear structure, a historic landmark, which it will do tomorrow, followed by the Historic Preservation Review Board (HPRB), and finally the National Park Service. Monument Realty purchased the famed hotel in 2004, with financing by the doomed Lehman Brothers, and after physical and legal work attempted its reincarnation as a co-operative residence. Sales began in 2006 for 96 units from $860,000 and up, but only a handful went under contract, and with legal problems besetting the conversion Monument stalled on construction and closed the hotel in 2007. After several attempts to work out the debt, the hotel was put up for auction in July of 2009 by New York-based lender PB Capital Corporation, still owed $40m for the property, an auction that induced no bidders. 

In May of 2010 PB Capital sold the project for $45m to Euro Capital. Senior designer Cory Kessler of the architect's New York office and lead architect on the project, said the project is still "in the conceptual phase," with various exterior design elements up for review, but that outward appearances will change little. "The exterior renovations will be minimal and respectful," said Kessler, who would not delve into specifics. Thomas Luebke, Secretary to the CFA, confirmed that the elements under review this week are minimal. "By and large these [changes] are relatively minor," said Luebke, "not particularly significant in the scheme of the whole complex." The Watergate's developers have declined to comment on the project during the review process, noting only that it will be a "lifestyle brand hotel." Sources at Euro Cap had also considered a blended use with at least a few floors of residential living. "It's a hodge podge of upgrades," continued Luebke. "There are mechanical upgrades that involve some changes to the rooftop, [specifically the] elevator overrun ... and some proposed changes to the grand ballroom, pushing it out toward the water, and elevating the roof up to six feet." However, he added, these changes are "not too noticeable from the street." 

Monument's plans would have carved out the interior, converting some 250 hotel rooms into 96 residences, but those changes were never begun, leaving the hotel in its original configuration. While there are limitations to the exterior redevelopment of the Watergate Hotel due to its historic landmark status, the long-neglected interior provides an opportunity for definitive, upper-crust design transformation. Euro Cap has experience in luxury hotel redevelopments both internationally - notably the Hilton Arc de Triomphe in Paris, its flagship property - and locally; the company first invested in D.C. in the late '90s through the restoration of the Hamilton Crowne Plaza Hotel at 14th and K Streets, NW. Sources say the hotel operator has not been chosen, and that developers are waiting for progress on the design before choosing the best flag for the building. Sources at Euro Cap familiar with the process say the legal and physical challenges of the building, which inhibited bidders at the 2007 auction sale ("too many uncertainties"), have made development of the site complex, calling it "a consultant's dream." Under local preservation law and regulations, projects reviewed by CFA under its Shipstead-Luce or Georgetown jurisdictions do not require review by HPRB. Nonetheless, HPRB staff is reviewing it because the owner is seeking federal historic preservation tax credits for rehabilitation. The Secretary of the Interior’s Standards for Rehabilitation apply to tax credit projects, and are more stringent than the standards under the historic preservation law, extending to the interior, unlike CFA review. Time will tell if the property that brought down the Nixon administration, helped sink Lehman Brothers, and proved a millstone for Monument will prove more fruitful for its newest investor. 

Washington D.C. commercial real estate news

Neighborhood Report: Capitol Riverfront Southeast

"Our neighborhood is no longer emerging," said Michael Stephens, Executive Director of the the Capitol Riverfront Business Improvement District. "It has blossomed." Stephens cites 35,000 people who commute to work in the area every day and the rising number of residents to buttress the growing retail imprint just north of the Anacostia River.
Retail, restaurants and office space leases are filling in at a more rapid rate than counterpoint emerging neighborhood NoMa, where the snap-up of square footage has been dominated by office leases. Sexier retail - even indie tenants such as as Pound Coffee have defected to Capitol Hill, while Capitol Waterfront is a hot commodity for retailers.
It helps that temporary projects draw the young and artsy to the water - Trapeze School Washington, Sensorium Dining and Art at the Yards generate buzz. Then there's the developing Canal Park that's scheduled to open in May 2012, Yards Park which opened last year, and Diamond Teague Park that was completed in 2009. In the meantime, enter the bridge to connect the two parks. And of course there's the ball park.

Many completed office buildings have lassoed tenants. Monument Realty's 55 M Street S.E. is 86% leased, with tenants such as the FAA and DDOT. Several D.C. government offices plan to move to the neighborhood in the second quarter, and this month Booz Allen Hamilton moved into 20 M Street, bumping the building to 97% leased. And 1015 Half Street, the former Opus East LLC and Prudential Real Estate Investors partnership that was resuscitated by Skanska this past May, is slated to open in July.

Both Lumber Shed at The Yards Park Pavilion and The Yards Boilermaker Shops are among the most anticipated retail projects. Both buildings - the Lumber Shed at 100 Water Street and Boilermaker Shops at 200 Tingey Street - are part of the National Register of Historic Places, with Forest City Washington as developer and Gensler shepherding construction and design. Among other tenants, Neighborhood Restaurant Group has signed a lease for a restaurant that's expected to become a brewpub. According to Ramsey Meiser, Senior Vice President of Development at Forest City, 50% of the Lumber Shed and 70% of the Boilermaker Shops leases are tied down. Estimated opening date is early 2013.

Over at 400 Tingey Street S.E., Michael Stevens confirms that "a major health club" is signing a lease for 30,000 s.f. of this Forest City cite; sources tell DCMud that said major health club is VIDA Fitness, and that the lease is a done deal.

Also destined for the block at 401 M Street is a 50,000 s.f. Harris Teeter, above which will rise two residential towers with 220 units, with 20% affordable housing, also by Forest City. Environmental remediation will continue through the year with construction is expected to begin in the spring of 2012.

The big news as far as grocery stores in the area has been the potential for a Whole Foods at 800 New Jersey Avenue, S.E., however, the developer William C. Smith + Co. and the grocer are looking for tax abatement to the tune of $8 million over ten years. The groups have apparently been discussing a store for the site since 2002. With a city handing out tax breaks to far less game-changing endeavors - but now strapped for funds - the plan is still given better than even odds.

Among residential options, of Capitol Quarter's EYA development of 113 homes, phase I has sold out, and the 130 homes of Phase II are on the market now, with a move-in date of June 1. Construction had started in 2008, with Phase I construction completed in May of last year.

Other apartments include the off-then-on Foundry Lofts project at 201 Tingey Street S.E. which will offer 10,000 s.f. of retail and 170 market rate units. Forest City was able to resume building in September of 2010 as a result of President Obama's New Issue Bond Program (NIBP) that allowed for the D.C. Housing and Finance Agency (DCHFA) to fund the project and kick it forward. Leasing will begin this summer, with move-in likely in October.

In a holding pattern are several other projects awaiting financing. They include Factory 202, the SK&I-designed building that had been home to Federal Protective Services which was to have become a condo building. Forest City is still entertaining other plans for the site, but as of now it is considered a building for a later phase of development.

Though Monument Realty's 55 M Street is filling up, there is no start date for the hotel or residential buildings at Half Street since funding has not been secured since Lehman Brothers' exit. The grand plans for this property tanked with the fall of the economy, leaving a crater sized hole in 2008.

Akridge's Half Street mixed use office, residential and retail tower is also on hold, as developers are in the process of securing an office tenant. "We've just picked things up again in regard to design," said Kathy McDaniel, Project Administrator for Akridge. "Three months from now, we will have more progress to report."

Still on the boards is the CSX plan to widen its rail lines that run under Virginia Avenue, which is not marketed as loudly, partly because it will be some time before the location will be affected. A $98 million TIGER grant will raise the clearance in 38 locations in three states; 23 more need to be funded and amended before the bigger clearance allows for taller trains. The Virginia Avenue tunnel is among the largest and the most expensive pieces of the project.

Washington, D.C. real estate development news

Monument Pays $7.3m for its Downtown Development

Sources say that Monument Realty shelled out $7.3m for its purchase of 627-631 H Street at an Alex Cooper auction, one of the last opportunities for buildable development in downtown Washington D.C.

In its place, Monument will build Gallery Tower, an 80,000 s.f. office tower that will feature either one or two floors of retail space.

Monument tapped Cunningham+Quill for design but has yet to choose a contractor. Though the company is actively looking for a pre-lease tenant, the company acknowledges it may build on spec. "We believe in the vibrancy of this location in downtown Washington," a source told DCMud. "We don't believe we'll have a problem securing a tenant."

The parcel Monument purchased is near 675 H Street, N.W., which McCaffery Interests Inc. and Douglas Development bought from the same auctioneer within the same week. The property had been owned by Yeni Wong of Riverdale International, who had defaulted on the note several times which had led to foreclosure.

The property had been the site of China Doll Gourmet which had closed in 2006 and has since been razed. Monument anticipates breaking ground by the year's end.

Washington, D.C. real estate news

Corcoran Sells Randall School

Yesterday, the Corcoran College of Art and Design announced the sale of the former Randall School for $6.5 million to Telesis Corporation and CACB Holdins LLC. Don and Mera Rubell, owners of CACB, will convert the school at 65 I Street, SW, into a contemporary art museum, hotel and private residence (s?). Corcoran originally purchased the Randall School in November 2006 for $6.2 million to build another College campus, but the bankruptcy of Lehman Brothers forced Monument Realty, Corcoran's then development partner, to "default" in September 2008, according to a Corcoran spokesman. The sale means Corcoran will begin the search again for another location in the District for extending the College's campus.

According to a press release from Corcoran, the new owners, the Rubell Family, are hoteliers and collectors of contemporary art. The southwest museum will serve as a satellite of the Rubell's Miami museum. Corcoran estimates the purchase and sales agreement for the school will take 12 to 18 months for government review and approval.

Corcoran's previous designs by Shalom Baranes Architects included two nine-story residential towers with 420 units of housing and 100,000 s.f. of college facilities. Last month Kristin Guiter, Manager of Media Relations for Corcoran, told DCMud "the Corcoran has entered into negotiations with a potential development partner" and was seeking a PUD extension, which the ANC approved. Today Guiter said that after almost a year and a half of looking for a development partner, it became clear it just would not be "financially feasible." Guiter indicated the College put the property on the market a few months ago and are now working on a partnership with the Rubells where Corcoran will likely still be involved in programming for the planned museum.

In January, ANC 6D Commissioner David Sobelsohn told DCMud "we in the community are anxious to get this project underway. We're very concerned that this building has been sitting vacant and empty all this time." It looks like the community will get something at Randall, just not what it was expecting.

The Connecticut condominiums

The Connecticut, 3883 Connecticut Ave., NW, Washington DC
This 158-unit, 9-story condominium was slipped into the backyard of an apartment building just off Connecticut Avenue, sitting on the edge of Rock Creek Park, offering bucolic views from the rear. The Connecticut is only 3 blocks to Van Ness and Cleveland Park Metro stations, within short range of diverse retail. Layouts and finishes were very standard for its era of development, but the lobby was sufficiently redesigned to make it modern and attractive, and the building does offer a small rooftop deck with pool, fitness center, business center, and 3-level underground garage. Built in 2003 by Clark Realty Capital as a rental building, the brick and zinc-paneled building was designed by Weihe Design Group (now WDG Architecture), using New York based ShoP Architects for the "minimalist" interior design, and built by Clark Construction. The Connecticut was partially rented, but the condo conversion numbers were too good to pass up, and the project was purchased and rebranded by Monument Realty, interior renovation by Coakley & Williams Construction. Individual condos were sold as tenants vacated beginning in early 2005. The Connecticut condos sold out in Spring, 2006.

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New Development Potential for Corcoran's Randall School

The Corcoran College of Art and Design may have found a suitor for its project at the Randall Junior High School at 65 I Street, SW, after more than three years of setbacks. An announcement could come as soon as March, when Corcoran will have to renew their approved development plan with the Zoning Commission. Until that time the community will have to continue their long wait for new development at a neighborhood eyesore.

Kristin Guiter, Manager of Media Relations for the Corcoran, would only confirm that "the Corcoran has entered into negotiations with a potential development partner."

That's great news for a development project that has faced uncertainty since the Corcoran purchased the 50-year-old, 80,000 s.f. middle school from the District government in November, 2006, for a reported $6.2 million dollars.

No news yet on who the new mystery developer might be or what changes might happen to the previous designs by Shalom Baranes Architects. Guiter says that "at this point, we are not prepared to release details since an agreement has not been signed."

Originally, the Corcoran had hoped to convert the school into a combination of apartments, studios, classroom, and display space. But when its partnership with Monument Realty dissolved last spring, plans for two nine-story residential towers with 420 units of housing and 100,000 s.f. of college facilities were scrapped.

But with its first zoning approval expiration coming up this March, news of a possible development partner couldn't come soon enough.

ANC 6D Commissioner David Sobelsohn said "we in the community are anxious to get this project underway. We're very concerned that this building has been sitting vacant and empty all this time." Sobelsohn added that the ANC voted unanimously on Monday to support the Corcoran's efforts to be granted a two year PUD extension with the Zoning Commission on "the condition that various community benefits agreed upon in 2007" remain intact in any new agreements. The ANC Commissioner noted that the new developer will likely be announced once the PUD is extended. "The development partner probably wants to be sure that the PUD is in place," said Sobelsohn. Corcoran is not yet on the Zoning Commission calendar for PUD extension.

Washington DC real estate development news

Parker Flats at Gage School

Parker Flats at Gage School is 3-building development - the renovation Washington DC's historic Gage School, built in 1904 and renovated under historic preservation guidelines, and construction of 2 new condo buildings. The new condos are four-story, wood-framed buildings with red brick facades, in keeping with the character of neighborhood. Located just east of Howard University, and set against architecturally appealing, if largely unrenovated, single family homes of the area. The Gage school offers 92 units - 33 in the original structure - priced originally from the upper $200k's for studios and from $339k for two beds (marked down from $445k). Delivery began in the summer of 2007 when the building was completed, with features including maple cabinets, high ceilings (up to 14 ft in some units), balconies, and both underground and above-grade parking available. Developed by Urban Realty Advisors, which was chosen by Howard University to convert the decaying building into housing. URA was later bought out by Monument Realty. Designed by Bonstra Haresign Architects, which oversaw the renovation of the historic school and designed the new buildings. Construction by James G Davis Construction began in March 2006. Real estate sales by McWilliams Ballard began in February 2006, but in 2008 switched to Urban Land, sales are ongoing.

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Monument Back at the Helm at Watergate?

Monument Realty appears to be seeking contractors for renovation and construction on the Watergate hotel, suggesting the DC developer may be closer to a work-out on the property it lost to the bank earlier this year. Lender PB Capital Corp foreclosed on the famed hotel this past July, and held an unsuccessful auction, with none of the 10 bidders jumping at the $25m starting bid. Since then, there has been no confirmed word on the fate of the historic structure overlooking the Potomac River. In an interview with DCMud following the auction attempt, Monument's Principal and Co-Founder Michael Darby indicated he had raised the necessary funds to buy back the property, but later accounts suggest the bank turned down the developer, possibly hoping to get a sweeter deal with Holland Development, which was rumored to have been interested in the property. An industry source says Monument is seeking contractors for a "top to bottom renovation of the existing 13-story, 250-room hotel. Renovations will include reducing the number of rooms, while expanding the rooms that do remain to 650 s.f." The project costs are estimated at $20 million. When DCMud inquired about Monument's plans, Natasha Stancill, spokesperson for Monument, responded "we are going to pass on commenting." Which of course increased our suspicion. 

Further supporting a rekindling of the romance between bank and borrower is the fact that Holland now appears to be out of contention. In a statement to this journal, Memphis Holland of Holland Development confirmed that Holland is now just watching the action. "The Watergate Hotel is a complex and exciting project. We were just one of a myriad interested in contributing to the growth and development of the Virginia Avenue/Kennedy Center area. We look forward to watching as this development takes shape and becomes a vibrant center of activity," said Holland. Nor will the former architect be part of the redevelopment effort. "Hickok Cole Architects is not going to be working on the Watergate Project if and/or when the project restarts. I would suggest that you speak with Michael Darby at Monument." said Jeff Lockwood of Hickok Cole Architects. Thanks, tried that. Original plans for the building were to convert the 250 rooms into an 96-unit coop, but Monument reportedly sold only 11 of the high-end units, which started at $850,000 for a one-bedroom home - and that wasn't for the good view. 

Washington D.C. commercial real estate development news

Monument's Southwest Condo Reboots After Lehman Brothers

In a market lean on financing and glutted with faltering projects, Monument Realty announced Monday that their Potomac Place Tower in DC's southwest will move forward with renovation and sales, having secured the support of a new lender. Potomac Place Tower, a 396-unit condominium at 800 4^th Street in Southwest Washington, DC, has been stalled since Lehman Brothers, the primary lender, filed for bankruptcy last September. Designed by Cloethiel Woodard Smith and built in 1959, Potomac Place Tower and Monument Realty were saved from sharing the same fate as another southwest renovation and (failed) condo conversion, The View, which recently sold at foreclosure.

Monument obtained the project as the Capitol Park Apartments in 2001, the aesthetically challenged building was registered as historic landmark in 2003, and in 2005 residents elected to convert it to condominiums; sales began back in March, 2006. Monument employed architect Jane Nelson to renovate and redesign the interiors. According to Natasha Stancill, Director of Marketing at Monument Realty, the owner stopped settling units early last fall, but did continue to sign contracts through the spring with purchasers who were willing to wait out the unresolved financing problems. With the recent announcement, Monument expects to have units available for settlement in the next 30 to 45 days.

In a press release, Monument advertised that Potomac Place Tower has units in the $200,000 range available for occupancy in the next 30 days, including studio, one bedroom, one bedroom with den, and two bedroom units. Records show that Monument sold 132 of the units in the North Tower, with an average price of $241,000. According to Stancill, the North tower renovation is complete and 17 units will be available for settlement in the next 30 days, while the remaining 35 units of the North tower should be ready for settlement come the 1st quarter of 2010. The South tower project is not complete; half of the 200 units there should be ready for settlement in the next 30 days, with the remaining 100 ready before the end of the year.

DC's land records reveal that on January 26, 2009 Lehman assigned Potomac Place to SwedBank AB's New York branch. In a statement, Michael J. Darby, founding Principal of Monument Realty, said that Monument worked with the lender (SwedBank) to resolve a "very complicated situation" and was "pleased to be in a position to pay contractors and vendors and to bring the project back to market." You can bet the vendors and contractors are very pleased too.

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LEED Gold for Monument's 55M, Southeast

Monument Realty has been awarded an environmental gold medal; Gold LEED status, that is, on its Half Street, SE office building. Coming on the heels of recent set backs including the Watergate foreclosure and auction and the bankruptcy of financing partner Lehman brothers, the news had to be a welcome respite from the negative media glare accompanying the Watergate auction.

The Gold status, the second highest rating in the system, was awarded by the U.S. Green Building Council (USGBC) and came as a surprise to the developer, which had expected only the Silver certification. "[t]o be awarded Gold is a true testament to the hard work that all the team members put into this project,” said Michael Darby, Principal of Monument Realty.

55 M Street, a Class A commercial office building in the heart of the Capitol Riverfront neighborhood - and the official pedestrian entrance to the ballpark - features 275,000 s.f. of office space and 13,000 s.f. of ground floor retail directly above the newly expanded Navy Yard Metro station. Architect Davis, Carter, Scott included environmentally conscious design features such as a green roof and an LID (Low Impact Development) streetscape concept that captures rainwater to irrigate street trees and plantings and reduces storm water run-off. Monument has yet to begin work on the residential portion of the block, for which Lehman was a partner, and has no immediate plans to add to the residential stock of the neighborhood.

Interview: Michael Darby on the Watergate Auction and Monument Realty

A day after the Watergate auction, Michael Darby, principal and co-founder of Monument Realty, spoke with DCMud about the nation's most publicized foreclosure auction. The Watergate went to auction after lender PB Capital foreclosed on Monument and its former financing partner, Lehman Brothers.

DCMud: Tell us what is happening with the Watergate and where does Monument Realty fit in?

MD: The foreclosure auction happened and there were no bidders except for the bank, who purchased the property. Going forward we... have already put in an offer to the bank. We believe they should accept [the offer]. Whether they do or not - I can’t control what other people do, but they should accept it because we have the ability to pay more than what the bidders bid at the auction yesterday.

DCMUD: How did you feel when the gavel fell yesterday? There must have been a sense of relief.

MD: When I realized there were no legitimate bidders, bidding on the property? Yes it was a relief. I’ve spent 6 years working on this project, going through some turmoil and some unfortunate and unusual situations. So to lose it with all the knowledge and all the work we’ve done on it would have been frustrating It certainly would have left a bad feeling with me, because I know I can finish it. I’ve grown very fond of the building and the potential building.

DCMUD: You said you put in an offer - did you have an opportunity for extensive conversations with the bank previously about your future with the project?

MD: We didn’t have many conversations because previously we were partnered with Lehman Brothers. Because of Lehman Brothers's financial situation, the bank wasn't able to work with the lender to do anything. I have, through another investor that I am working with, informed the bank that we have the ability to move forward with something. But they didn’t want to talk to anybody until after the foreclosure sale. So we had to wait for that to happen before we could come back to talk to them.

DCMUD: How does monument see the development of its other large projects? Projects like Half-Street, do you feel that everything that happened with the Watergate affects them?

MD: Each one is really independent of the next. Different projects suffer in different ways depending on the financial structure, depending on what type of product they are, depending on where they are in the development cycle or process.

The Watergate, since it had a third party lender, and the lender was not Lehman Brothers, there was the potential that Lehman and we could lose [the property] to the lender, should the term of the loan run out. We were not able to pay off the loan and that is what happened. So in that situation, [the] goal was to be ready to come in after that event and try to negotiate a purchase price for the lender with whomever would be the logical partner....

The ballpark deals: Lehman and our other partner McFarlane are very heavily invested and we don’t have any firm timing yet, except of course on the office building; that’s going though the normal construction process, we don’t look at that the same way. We aren’t so involved in that aspect as the management of that development project... So that’s just an ongoing project that we have to look at in terms of what’s happening in the market today to work out the best way of creating value going forward. We’re looking at every day, trying to work out what we can do to create value going forward. As far as any of our other assets, again it depends on what the status of them are, who the lenders are, what they’re willing to do, who our equity partners are, what they’re willing to do and then whether we have other source of capital to do the best deal we can do.

DCMUD: So I hear you mention the office building on Half Street, that that was part of a giant project where there was a 2-acre hole in the ground, and had previously been told that construction would start in 20 months or so, what is the status of the project? You had said it depends on the financing on projects - was this one where you had third party debt...was it just you and Lehman or was it one of your other financiers?

MD: It’s Lehman, McFarlane and us. We dug the hole because it was cheaper to dig the hole while we were building the office building portion of the development with the thought that we would continue on at that point in time with the space available. At that point in time there was financing available-we were fine with financing. So when the world kind of stopped, the financing went away and obviously we had a hole in the ground. We managed to stabilize the hole, make sure it is at conditions satisfactory to the District of Columbia and obviously to us. At the right time we’ll begin construction again, with already having value from with what we’ve dug that ditch with. It’s stopped the project somewhat in midstream, [and] its a very visible space, which is a shame. But I’d rather stop it there rather than halfway up, or complete without any prospects of tenants. I’d rather be at this point in time than in the future. We own that property, free of debt, so we’ll sit on the property and wait for the right time to build the residential portion of the development. At that point in time, we will have created one part of the Half Street vision. And we can put in the retail that we expect to put in there and have whole bunch of great retail in line for the ball park.

In 1991 in the east end of DC we have the same situation where the Verizon Center is today, between there and 13^th Street, and north of Pennsylvania Avenue was pretty much a no-man’s land and you look at it today, it’s hard to believe that there were people who wouldn’t walk in those areas at that time. It’s a vibrant area that is great and everybody loves being down there. That would be the same thing with the ball park area, it will just take time to do that based on where the market is and where the economy is.

DCMUD: How do you think your story and the story of the Watergate compares to others in the industry and other projects in this climate?

MD: I don’t know how other people have structured their financial situation with their investment partners. We always structure it in a way where we try to minimize our liability on any project in case this kind of thing happens. And we do that so that we can hold cash and be available to fight another day when things happen. To tell you honestly, this downturn is certainly has been a good thing, from the standpoint that there’s a lot of people who have lost a lot of value, however as a developer you know we can’t make money unless there are opportunities out there to create value. Where the market was prior to this downturn, was at a point where there wasn’t much value to be created. It got so heated up that I wasn’t interested in doing a lot of deals because you were betting on something that was basically false inflation. And I don’t think that’s a good way of doing business.

So that fact that the market has been affected, gives us opportunity to go out and buy if it’s at the right price, and develop properties based on the right value, the right construction costs and be able to make money again. And that’s where we started from in 1997 when we started the company and that’s where we’re back to that situation. And some ways, again its taking a little while to sort things out, [for] those opportunities to become available- and they will become available and that’s great for us. We’ve got a great team here and we’re ready to go moving forward and buy stuff and develop. It’s a good thing from that standpoint. It’s not a good thing from standpoint on the value we’ve lost of the deals we do have up and going but it is good for the future as well.

DCMUD: So you think there is definitely a future for Monument Realty in development?

MD: Yes, absolutely. For the good developers in town that understand that there will always be recessions and slow downs, that understand what relationships are all about, and that building relationships early in your career is important so that there’s always capital sources available, there’s always people to do business with you going forward. Absolutely there’s always a bright future for those people.

For the people that are mired and stuck dealing with severe problems, they may not be able to buy new stuff in the near future while they get themselves out of these problems. For us, the problems started in the fall with [the] Lehman situation and we basically sorted through most of the problems even though it doesn’t look like it with the foreclosure of the Watergate. [It] was foreclosed financially [and] that was the culmination, so we could potentially move forward. [With regard] to our other assets, we are managing them and are able to look at other assets, that are becoming available on the market.

Watergate Auction Sees No Bids, PB Capital Holds Property

The Watergate Hotel went to the auction block this morning. According to Reuters, with an opening bid at $25 million, no bids were placed and PB Capital Corp. made a credit bid to wipe out all debts on the property for $25 million. This despite the $40 million the bank was owed by Monument Realty, whose financing partner on the project, Lehman brothers, went bankrupt this past fall.

Ten bidders, including hotel chains and developers both US-based and international, registered, having demonstrated their $1.1 million deposit. However, the $25 million opening bid apparently was more than they were willing to bite off. Several developers remain interested in the property, including Monument, which may ultimately work with PB Capital to buy the property back and continue their plan to develop a hotel with some areas zoned for residential use.

Watergate Auction Tomorrow: Who Wouldn't Want a Building Adjacent to a Piece of History?

When did it all go wrong for the Watergate? The hotel with arguably some of the best views in the city has a lively history - controversial design, Nixon era break-in, failed condo conversion, and now add bankruptcy. Back in 2007, DCMud reported that Monument Realty was ensnared in a legal battle after selling about a dozen units in its attempted condo conversion. Two years later and facing foreclosure on the remaining $40 million (out of $70 million) owed to lender PB Capital, Monument Realty's Watergate goes to auction at Alex Cooper Auctioneers tomorrow. The sale terms listed on Alex Cooper's website detail a process that will require $1 million up front (the starting bid was not disclosed), so be prepared to show the money to get in the door. Paul Cooper, principal at the auction house, said the response so far has been "tremendous," but that he had “given up speculating” how many bidders might show.Monument was given the standard 30 days notice to pack the linens and move out, or secure funds to prevent foreclosure. But with financial times like these and the bankruptcy of Lehman Brothers, the financing partner on the project, no financing has emerged and the gavel will fall tomorrow at 5301 Wisconsin Ave N.W. at 10:15 AM. So if you want to get a chance at owning a piece of history, bring $1m. Which, you might feel good to know, is less than it would have cost to buy a single unit back in the day. 

Washington DC real estate development news

Artomatic Does Southeast in Style

High culture and high-rise office space don't often collide, but they did today as DC arts organization, Artomatic, opened the doors on its landmark 10^th anniversary exhibition at Monument Realty's new 275,000 square foot, LEED silver-certified building at 55 M Street, SE in the Capitol Riverfront. With galleries on each of its nine-stories, this year's Artomatic celebration overlooks Nationals Park and the city's monumental core, while featuring the work of more than a thousand artists of just about every discernible sort – painters, sculptors, videographers, musicians, tattooists, poets, dancers and more. And, to wash down that load of multimedia, bars, retailers and vendors -- including the Hard Times Café, Red Bull, Cake Love, Busboys and Poets and the Flying Dog Brewery – are scattered throughout. The city legislators present, including Ward 6 Councilmember Tommy Wells and Congresswoman Eleanor Holmes Norton, touted this year’s festivities as the beginning of the “new 20003.”

“We’re no longer an emerging neighborhood. We’re here,” said Capitol Riverfront BID board member and Cohen Companies Executive Vice President Eric Siegel – who, in his acting his role with the latter organization, helped develop the Velocity Condominiums project a stone’s throw away at 1025 1^st Street, SE.

BID officials are projecting that Artomatic will draw some 70,000 visitors to the neighborhood (now dubbed “The ‘Front” for short) during its five-week run. The exhibition is open to the public starting today, Friday, May 29^th at noon. The opening gala will begin around 8 PM tonight and feature a fire dancers, 24 bands and performances and a discussion with PostSecret creator Frank Warren.

Artomatic 10 will close up shop on July 5^th, but until then, the exhibition will available for perusal on Wednesdays and Thursdays from 5 pm – 10 pm; Fridays and Saturdays from 12 noon -1 am; and Sundays from 12 noon – 10 pm.

And, having just returned from the sneak peek, let me state it plainly: it's pretty kick-ass.

Washington DC commercial property news

Corcoran Seeking New Developer for Vacant Southwest School

One of the District’s many vacant school sites will be remaining empty for the foreseeable future, now that the Corcoran College of Art and Design and Monument Realty have parted ways over the mixed-use redevelopment of the Randall Junior High School in Southwest DC. The split, which occurred last August after financial backing evaporated, has led the Corcoran back to square one in their attempt to convert the 800,000 square foot property at 65 I Street, SW, into two nine-story residential towers with 420 units of housing and 100,000 square feet of new college facilities. Now Corcoran will need find another development team up to the task. The school had intended to occupy the rebuilt space by 2011.

"The Corcoran is currently entertaining proposals for the building, but we’re as of now trying to move forward," said Kristin Guiter, Manager of Media Relations for the Corcoran. "We’re just trying to find an appropriate partner."

The college purchased the 50-year-old middle school from the District government in 2006 for a reported $6.2 million dollars. After teaming up Monument and Shalom Baranes Architects for the redevelopment initiative, Corcoran officials had planned to sell the site to the development team for an estimated $8.2 million, while retaining a condo interest in the property. Suffice it to say, the sale never occurred and full control of the Randall School still rests with the college.

In the meantime, Corcoran higher-ups continue to vet candidates from the DC development community for the project. Guiter tells DCmud that college currently hopes to retain the Shalom Baranes designs left over from the Monument era, but even that – along with many other details concerning the project’s future - is far from a certainty.

“It’s hard to say at this moment how we’ll move forward because of the economy and the current financial situation. It’s all TBD,” she said. “The Board is looking at proposals and we haven’t found the right partner yet, so it hard to say [when construction might begin].”

Half Street Digs Itself Out of a Hole

After weeks of speculation, construction is underway at Monument Realty's Half Street residential project. The prime real estate sits directly across from the Nationals' ballpark, was dug in the first months of 2007, with Monument's 275,000-s.f. office project rising on the northern portion of the crater. But when the remaining 2-acre hole sat vacant as the market was free-falling and funding of residential projects evaporated, speculation ensued about its demise. The hole became metaphorical as well as literal once it was revealed that Lehman Brothers, in a hole of its own, had an equity stake in the project.

But after 18 months without activity, construction is now underway on the site. Workers now seem to be assembling a subterranean parking garage at Half and N Streets SE - presumably a component of the hotel and 340-unit residential buildings planned for the site. And while the developer will not be able to hit their original target of a 2009 completion date, it does seem that rumors of the project's death have been greatly exaggerated.

"Monument is pursuing financing for the residential projects at the corner of N and Half Streets, SE. Clearly the changes in the market have made that task more difficult, but we have not made any plans to refill the excavated hole," says Monument Executive Vice President Russel Hines. "In addition to the office building [55 M Street SE], which will finish up in January, we are also building a portion of the garage that extends under the residential buildings – so, yes, there is some construction underway at this time."

In a related item, some portions of the Half Street project could be getting a new address, if a measure before the DC City Council goes through. According to the Washington Examiner, a vote next week will determine if a three-block portion of South Capitol Street (that also happens to border locale célèbre, Nationals Ballpark) will be renamed “Taxation without Representation Street.” Among those most directly affected by the switch would be Camden USA – which just happens to have a $105 million mixed-use project in the planning stages that fronts the avenue in question. We can see the signs now: Taxation without Representation Street Lofts now available! Have fun with that one, marketeers.

Washington DC commercial real estate news