Skyland Town Center's Phase One

It's been a long slog, but the work is finally building momentum at Skyland Town Center, where construction on the 18-acre site is expected to complete this year and retailers have finally been committing.  Chase Bank and CVS have already signed leases for Phase 1 of the project, which will include 84,000 s.f. of retail and 263 rental apartments when it completes later this summer.  Rappaport has been in discussion with numerous restaurants as well, despite the obvious impediments to restaurant leasing at the moment.  Lidl and Starbucks, also both committed retailers, will get underway later this year, the latter will take the place of the CVS trailer now on site.  A second phase of the project will nearly double the retail (to 136,000) and residential unit numbers (to 513) when that phase begins, though a start date is not yet determined.  A 4-story medical office building will eventually round out the final development, though a start date is not yet set.

The contentious project is one for the history books.  Initiated by the National Capitol Revitalization Corporation (since dissolved) in 2002 to bring development to a decaying and retail-starved area in southeast DC, developers had visions of urban renewal and improved retail opportunities. Developers, primarily WC Smith and Rappaport, began to assemble and acquire the land, but the existing retailers and landowners weren't convinced the project had legs, and many chose not to sell or abandon their businesses to an uncertain future.  Enter the District government, which chose to acquire the remaining properties via eminent domain, i.e. a constitutional prerogative that permits the government to seize private property for "public" use.  Developers dangled Target as a future tenant, which fell through, but with the District government on its team the recalcitrant owners were defeated, and by 2011 Mayor Vincent Gray predicted construction was "imminent."

That was not to be.  Planners needed an anchor, and eventually signed Walmart, but in 2016, with no construction yet underway, Walmart withdrew from its commitment to anchor the site, as well as another site in Ward 8, and the search was on to find a replacement. The project broke ground in February of 2018, and in May of 2019, Rappaport announced that German grocer Lidl had signed on for almost 30,000 s.f.  The other leases soon followed, including one of the only drive-through Starbucks in the region.  Until the completion of phase 2 a large portion of the site will remain a construction lot, but for now, the neighborhood is one step closer to having the grocery options, sit-down restaurants and conveniences of neighborhoods west of the river that have so long bedeviled the residents in the project's vicinity.

Project:  Skyland Town Center

Address:  Intersection of Good Hope Road and Alabama Avenue, SE 

Developer:  Rappaport, WC Smith, District of Columbia

Architect:  Torti Gallas

Interior Design:  Carlyn & Co.

Construction:  WCS Construction

Use:  480 apartments, 134,000 s.f. of first floor retail

Expected Completion: Phase 1:  Fall 2020.   Phase 2:  TBD

Washington D.C. retail and real estate development news

Today in Pictures - Skyland

While the District government struggles to rid Skyland of its owners and tenants in order to make way for a more contemporary shopping destination by turning it over to developer Rappaport, the outdated shopping center looks ever more dilapidated and forlorn.














Washington D.C. real estate development news

Skyland Struggles Towards Uncertain Timeline

With the specter of a Wal-Mart vs. Safeway showdown over a decade-old exclusivity covenant having receded, the District can get back to resolving the many other issues standing in the way of the Skyland redevelopment in Southeast DC, a top priority of Mayor Vincent Gray’s embattled administration. But can Skyland overcome the many hurdles it faces?

Safeway, one of the District’s top private employers (15 stores), and high-profile retail anchor Wal-Mart squared off in November over an agreement Safeway had entered into with the owners of the shopping center, Skyland LLC, to bar certain types of competitors from the property after Safeway relocated to a nearby shopping center. Each side issued bland statements but retained powerful advisors; Safeway hired Maryland lobbyist Bruce Bereano, famously an ex-fraternity brother of Mayor Gray, and Wal-Mart hired David Wilmot, a local dealmaker who co-hosted a fundraiser with Mayor Gray just last month. Fast-forward a couple of days, and the matter was suddenly settled.

"A covenant exists on one lot of the many that comprise the Skyland redevelopment site," says Nimita Shah, Project Manager in the Office of the Deputy Mayor for Planning and Economic Development (DMPED) by way of clarification. “The District is in discussions with Safeway about the removal of the covenant and anticipates a resolution in the upcoming year. However, it is important to note that the Safeway covenant noted above will have no impact on the proposed Wal-Mart that is to be included in the redevelopment, given that its placement on the site is outside of the affected lot.”

Either no one at Safeway or Wal-Mart actually read the covenant before throwing down their respective gauntlets, or the issue was quietly resolved through backroom horsetrading (the very sort of thing that Gray denounced when he pledged to bring transparency to the mayor's office). At any rate, with this issue put to bed, does this mean that Skyland faces a clear runway to approval and groundbreaking? Far from it.

Since first seizing Skyland in 2005 by invoking eminent domain, the District has spent over $12 million on settlements. Three more tenants settled in 2011 – Hong Kong Inn, Hilltop Cleaners, and New York Fried Chicken – leaving perhaps as few as one holdout, though according to the District there are over a dozen tenants are still operating at Skyland. “Fifteen tenants remain in operation at Skyland," says Shah. “The District is in the process of working will all of the remaining tenants to coordinate their relocations over the upcoming year.”

Everyone out by the end of 2012? Count Elaine Mittleman, an attorney who represents several Skyland tenants, among the skeptics. Mittleman contends the eminent domain proceedings have been slipshod and disorganized. “Wild ineptitude,” Mittleman snaps when asked to characterize the District’s handling of Skyland. Mittleman also provided DCMud with extensive correspondence between herself and the District that seems to raise questions about who holds the titles to seized Skyland properties, as well as concerns about the eventual turnover of Skyland to private developers, one of whom is a close associate of Mayor Gray’s, and has done repairs at his home.

Serious questions also remain regarding the project itself. There’s no firm consensus on whether Skyland is in fact a viable site for redevelopment; critics have pointed to the lack of public transportation options (the nearest Metro station, Anacostia, is a mile and a half away) and an already dicey traffic situation. There are also multiple competing projects in Southeast – St. Elizabeths East, Poplar Point, and Kenilworth-Parkside, just to name a few - as well as another Walmart planned nearby, on East Capitol Street. In the face of these doubts, the conventional wisdom is that with millions and years spent and so many promises made – none more than by the present administration - the District can hardly back out now.

Or can it?

People who point to the 2005 Supreme Court ruling that empowered the city of New London to oust intransigent homeowners so they could build a Pfizer plant as proof that Skyland is all but inevitable, overlook the fact that the Pfizer plant was never actually built. The drawn-out process of settling with and vacating tenants, as well as appeals and the administrative labyrinth of state seizure of property, can often outlast the patience of prospective tenants. Before Wal-Mart agreed to anchor Skyland, a similar Target deal fell through. Who's to say Wal-Mart won't walk, if litigation drags on for another year or three? Is Mayor Gray prepared to

follow through on his threat to block Wal-Mart's four other stores in the District if they don't put one in Skyland?

Some cite the possibility that the District's resolve on Skyland is, at least in part, opportunistic. If it comes together, it will be a victory for some mayor's scorecard. But if it doesn't, that mayor (like the last three) can still curry favor with the voters of Southeast by telling them he tried. In fact, the prospect of a mayor fighting the good fight on behalf of the city's least-served quadrant, only to be stymied by other forces, is arguably a more valuable asset in a general election than a mere shopping center, however big and shiny. But the Mayor has been personally advancing the cause of Skyland to private businesses that might have a stake in the proposed development.

Elaine Mittleman disagreed with this cynical view of things – with conditions. Mittleman believes that the District sincerely wants Skyland, and wants it badly, but just got in over their heads. “The District courts rubber-stamped everything, basically, and there was never any comprehensive plan, just a back of the envelope thing,” Mittleman says. “It seems like they have just not put in the proper effort. It seems like they just magically thought it would happen.”

For their part, lead developer The Rappaport Companies, who won rights to Skyland way back in 2002, doesn’t seem the least bit perturbed by these latest developments, either stoically patient or just resigned to sticking it out for the long haul.

“The Skyland project is definitely gaining momentum, and the Mayor has made this a priority,” said Sheryl Simeck, Vice President of Marketing and Communications at Rappaport. “But it is still too early in the process for us to be able to supply construction dates," (despite Mayor Gray's prediction it would break ground last year.) "The District continues to work on resolving the outstanding legal issues involving eminent domain. Development cannot start until these last few issues are resolved.” At this time, no one is prepared to say when that will be.

Washington D.C. real estate development news

Skyland's Supreme Challenge

Real estate development is sometimes an agreeable collaboration, sometimes a struggle, and all too often a wordy brawl, but seldomly is it constitutionally challenging. But that may well be the case in southeast DC's Skyland Town Center project, now in its 8th year of development. What began as a plan to redevelop a needy southeast neighborhood, a benefit most agreed was overdue, has morphed into a property rights battle that tests the U.S. Supreme Court's decisions on property rights.
Eight years ago, the National Capital Revitalization Corporation (NCRC) began planning a makeover of the strip mall, proposing 450-500 residential units and 280,000 s.f. of retail at the intersection Alabama Avenue and Good Hope Road, an area that saw none of the rejuvenation that occurred downtown over the last decade. The District-funded NCRC recognized the spot as a bullseye to spur development, one where private industry alone might not be tempted. The choice seems apt; shuttered beauty salons accompany a check-cashing outlet, a Discount Mart offers faded displays in the window, and the mismatched storefronts are united as much by their nearly-matching green awnings as by their peeling paint and disrepair. On a warm day, car traffic is heavy but the few pedestrians seem more inclined to linger on one of the park benches in front than patronize the stores.

Promoters have a vision: "A 20-year old dream, conceived by Ward 7 residents when this 16-acre site in southeast Washington, D.C. was declared a redevelopment zone in the late 1980's...will transform a disjointed retail area with limited offerings into a cohesive, well-designed, prominent living, shopping, and gathering place." Planners presented at a meeting to the ANC in February, promising a new retail experience for southeast: concentrated retail, multi-family residences, three above-ground parking garages, a 5-story streetfront presence, and reducing vehicular access points for less interrupted pedestrian traffic. As a bribe to locals, builders will throw several million dollars at homeowner counseling services, retail build-out subsidies, park improvements, sidewalk and road enhancements, and job preparedness.

The project was initiated during Mayor Williams' term, but the Fenty administration has gotten squarely behind the project, helping bring together the parties and promoting the project. The Council has even offered a $40 million Tax Increment Financing (TIF) package to provide gap financing to the team, a consortium including Rappaport Companies, William C. Smith & Co., Harrison Malone Development LLC, the Marshall Heights Community Development Organization (MHCDO) and the Washington East Foundation. The Feds, for their part, threw in $28m of funding to show their support. Even the ANC, which usually love development as long as its not in their district, voted to support the project.

With all the economic incentives and mutual bonhomie, what could stop such a beloved juggernaut? The people who own the land. A not-so-small detail in the rehash is that neither the development team nor the city owns most of the property; private owners (originally 15, predominantly retailers) still claim title to the land. And with concerns about displacement and the possibility that once the site is emptied developers will not have financing to build up again, owners fret that selling out means closing down, for good.

The District government is sympathetic, but not very. In view of the greater good for the area, the economic development that will ensue and tax revenue that will one day flow, District planners have opted to proceed with or without the owners' approval. In May of 2004, the District passed "emergency" legislation authorizing NCRC to use eminent domain proceedings - where the government determines and pays a fair market value and takes over the land - to acquire the 40 parcels it needed "in order to show the commitment of the D.C. government to the project." As the argument went at the time, if the District could not pull together a united front, financiers and an anchor store would be hard to come by.

That gave gastric reflux to at least some of the owners, who filed a counter suit to prevent the taking. The owners had two primary arguments: that the original PUD filed with the Zoning Commission was filed by a group that did not include the owners - an issue that is still outstanding - and that the eminent domain proceeding was unconstitutional, i.e., that the land was being taken for private use, not "public use" as required for eminent domain.

At this point forgive us for a brief Constitutional digression. The 5th Amendment to the Constitution reads, in part: "nor shall private property be taken for public use, without just compensation." Characteristically simple language for the foundation of U.S. law, but one that has caused recent debate. Until recently, it was obvious that sole authority for snatching land had to spring from a "public use" (building a new road or sidewalk, laying electric cables, forming a park, or even laying a railroad which served without exclusivity) - one where the government could take the land to further provision of a community service.

All that changed dramatically in 2005, when the U.S. Supreme Court issued its decision in Kelo, et al. v. New London, CT, et al. In the Kelo decision, the city of New London created a development plan for a waterfront neighborhood around an upcoming Pfizer research center. The plan was for parks, office space, retail and parking that would enhance the Pfizer site, one that was “projected to create in excess of 1,000 jobs, to increase tax and other revenues, and to revitalize an economically distressed city..." Some lifelong homeowners, however, resisted giving up their waterfront homes, so the city and a private entity called the New London Development Corporation (NLDC), used eminent domain proceedings to oust the residents.

The Court found for the city, arguing that although much of the space would not go to "public use", the Court decided it "had long ago abandoned any literal requirement" for reading the 5th Amendment, literalism being "impractical given the diverse and always evolving needs of society." So much for the 5th Amendment. The court abandoned the "public use" requirement in favor of a "public purpose" requirement; in other words, if the local government found a generalized benefit of some sort (such as "economic development") to the community, it was free to authorize the seizure of one party's land by another party. In addition to getting value-enhancing development next door, Pfizer received corporate subsidies to encourage it to build, while the shore-front owners were soon evicted and had their homes razed.

Kelo remains the Court's official position, and the Skyland project has nearly identical circumstances. But owners here see even less public use than in Kelo - no parks or public waterfront - distinctions that helped the court reach its decision. With the Court having lost Justice Souter, a key liberal vote in the 5-4 opinion, another look at the same issue might find a distinction in the circumstances that warrants a different outcome. (Conservatives, more furious with Souter than ever after this decision, later proposed an eminent domain proceeding against his private New Hampshire home for the "public benefit" of turning his family home into a museum dedicated to individual liberties and the study of the Constitution. Property rights activists used the decision to launch national speaking tours).

While the ruling is a bitter pill to retailers at Skyland, the worse aspect may be the knowledge of what took place after the decision. In New London, the city removed the homeowners and bulldozed historic homes, only to have the development plan fail for lack of financing. The former neighborhood remains flattened and unused. Pfizer later announced that it will pull out of its research center, just as its tax incentives reach their 10-year expiration.

Dana Berliner, Attorney with the Institute for Justice, was co-counsel on the Kelo case. In a conversation with DCMud, Berliner said the instance of eviction without subsequent development is a very common one. "What you are talking about here [at Skyand] is really speculative. Its a big development in a difficult part of town...that project could easily end up destroying the jobs that already do exist at Skyland. They could spend tens of millions of dollars and end up with nothing. Now, the project actually does employ people and raise tax dollars." Zina D. Williams, ANC Commissioner for ANC7B is more sanguine. "We have worked carefully with the developers to ensure there will be a space for the old tenants." Will the developers have the money to proceed with construction? "Yes, they definitely do. Rappaport and the development team have been working with assisting [owners]. ANC7B and the developers have been working very hard to accomplish what's best for the project; we are confident this project will go forward, we definitely support the development team."

In the wake of Kelo, many states revised their eminent domain laws to prevent such abuse, but the District did not. Elaine Mittleman, an attorney representing several of the parties in litigation with the District and aware of the Kelo fallout, refutes the notion that owners and tenants have been well cared for, and notes that this development is "highly speculative." Mittleman believes the developers have neither sufficient financing nor any substantial tenants, despite having previously teased the community with the promise of a Target. Representatives at Target have repeatedly denied they have any plans to open a store there, and the Skyland website says only that "the site is being marketed to prospective tenants."

Mittlement notes a change for the worse once NCRC was abolished and negotiations shifted to District attorneys, claiming that the District has never negotiated in good faith with the current owners, some of whom have come to agreements on a buy-out, only to have the offer reneged when the District took over from NCRC. But others may have it still worse. "While the owners have a right to 'just compensation,' tenants don't have such rights and have never received an offer to be made whole...and while homeowners must be relocated, businesses have no such right, and the District has done very little to help them."

The Mayor's office says only that "there are several outstanding legal issues associated with the project that have complicated the development process, but the District is working closely with the development team...to accelerate the pre-development work so the project moves on a parallel track with the legal process." Mittleman contends that fighting eviction during a recession has pushed several of her clients close to bankruptcy. "Some of the business that are now shuttered were operating when the this plan became known, this process has already forced some to close." Berliner supports that contention. "Many, if not most, condemned business do not reopen. They almost never get enough to start over" she said, citing the Nationals Ballpark as an example of eminent domain that cost alot more and produced less development than predicted.

Councilmember Kwame Brown, who may have the last word on the subject, told DCMud that property owners are at fault for not listening to the community and allowing their businesses and Skyland to become blighted. Brown said neighbors want to be able to shop in their community, but have had to watch as other neighborhoods throughout the city have been redeveloped, some of which came about through eminent domain. "The community is sympathetic toward the owners, but it's hard to attract an anchor tenant when you are mired in a lawsuit...We are going to move forward and get this done. We will develop Skyland shopping center."

Washington, DC real estate development news

Skyland Readying for Take-Off

Despite years of false starts and a finicky housing market (to put it delicately), the long in-development Skyland Town Center in southeast Washington D.C. is now pacing itself for a 2012 delivery. Well, maybe. Described by the 5-member development team - which includes the Rappaport Companies, William C. Smith & Co., Harrison Malone Development LLC, the Marshall Heights Community Development Organization (MHCDO) and the Washington East Foundation - as a "prominent living, shopping and gathering place," the $285 million Skyland project aims to deliver more than 700,000 square feet of mixed-use development, mostly in the form of new housing. Located at the intersection Alabama Avenue & Good Hope Road SE - across from the present location of the Good Hope Marketplace, the Skyland Town Center will boast 280,000 square feet of retail space and 460,000 square feet of residential housing. Of the roughly 475 residential units included in the project, 20% of the units will be available to families earning 80% of the Area Median Income (AMI) or less, 10% will be reserved for residents making 120% AMI. Torti Gallas & Partners also designed 21 single-family townhomes and three above-ground parking garages to serve the development.

Skyland replaces undeveloped land on the back of the site, and a small, dated mix of retail along the front of the property. Pre-development work on the project began in 2002 under the watch of former Mayor Anthony Williams and the National Capital Revitalization Corporation, which served as developer until the project was handed off to the present team in 2007. According to Steve Green of William C. Smith & Co., though the developers have made progress, the current economic climate makes a firm start date difficult to pin down.

And because nobody is planning to start a residential construction project in 2009 - and 2010 isn't looking much better - developers at Skyland are not inclined to rush. “Given the current market conditions, [a timeline] is particularly difficult to predict,” said Green, “but our best estimate…is that we would close on the property and begin demolition in the fall of 2010 and completion of the first phase would be 24 months later in the fall of 2012.”

William C. Smith & Co. expect to file a PUD for the Skyland Town Center on or around November 15^th. The DC City Council has already approved $40 million worth of Tax Increment Financing for the project. Washington DC based WCS Construction will build the project.

Washington DC retail and commercial real estate news