Toward the end of last year, the Chevy Chase development firm JBG—a real-estate titan, at least by D.C. standards—quietly bought up nearly all of the remaining empty land in the U Street corridor. It was a smart move.
One of JBG’s new chunks of real estate, the derelict and fenced-off Atlantic Plumbing lots around the 9:30 Club on V Street NW, had languished for years under a different firm. At $24.3 million for 2.1 acres—on which the previous owner had hoped to build 750 new residential units—the purchase could make JBG and its backers a pile of money.
The developer’s other moves in the neighborhood have been almost as ambitious. In January, JBG bid $11.5 million for a set of Metro-owned parcels on the southern side of Florida Avenue between 7th and 9th streets NW, more than double the next highest offer. Last October, the company dropped $9.5 million on buildings at the corner of 14th and U streets, just north of a huge residential project scheduled to break ground later this year. And that’s all in addition to JBG’s control of the southwest corner of 13th and U streets, where plans for an upscale hotel have been in the works for years.
Why buy up so much land, so quickly? JBG declined comment about their strategic thinking. But rapid acquisitions in close proximity are not out of the ordinary among big-time D.C. developers. It’s a pattern that explains why the city looks like it does today.
Jim Abdo’s Abdo Development did several residential projects around 14th Street NW and Rhode Island Avenue, before Logan Circle was ever hot enough to land Whole Foods. Anthony Lanier of EastBanc bought and renovated scores of Georgetown properties since the 1990s. Despite Douglas Development’s far-flung portfolio, Doug Jemal is best known for sensitively restoring large chunks of downtown. Stanton Development specializes in Capitol Hill historic properties. William C. Smith is the biggest player east of the Anacostia River, putting up thousands of units. Chris Donatelli created a town center in Columbia Heights where there had been little but empty lots. In development circles, the visionaries who saw such opportunities early enough to capitalize on them are venerated—and closely identified with the neighborhoods they’ve redeveloped. (The federal government and universities wield similar power on their own turf.)
The tendency is especially pronounced in the District for a number of reasons. There’s the rapid growth and local meddling of the federal government, as well as the advent of super-strong neighborhood commissions. But from a resident’s perspective, it means that deep-pocketed types who often reside elsewhere can create better micro-neighborhoods for the people who have to live with what they build. JBG, with several lots in that little area of U Street, will pay attention to the area between its buildings, not just each building in isolation.
Perhaps no one knows that better than Gerard DiRuggiero, whose UrbanLand Company has been marketing a large condo building in the empty-feeling neighborhood, figuring that someone would swoop in and knit it all together. Now, a bigger player has done just that. “It’s a fantastic opportunity to create a small town center,” DiRuggiero says. “We sell the potential. Totally. Been doing it there since the building opened.”
Developer clustering is a natural pattern in cities and suburbs alike. Projects that work out well create their own inertia. “Developers in general are risk averse,” explains Ed McMahon, a scholar with the Urban Land Institute. “So if a developer does a successful project in one neighborhood, there’s a logic to doing additional projects in that same neighborhood.”
Washington, though, has always been especially friendly to developers. The decades following the Civil War saw a building boom in the seat of the newly solidified government; individual builders staked out swaths of town to build the different styles of rowhouses that now distinguish one neighborhood from another. Recognizing cohesion as a selling point, the builders promoted their fabricated neighborhoods as places, not just properties. As the city was built out, the District was also shaped by the reformist impulses of the federal government. In the 1950s, the Southwest quadrant was largely leveled and sectioned off to builders—what we now view as sterile superblocks were, back then, the beau ideal of urban living.
In the 2000s, the city again entered a period of rapid redevelopment, with developers racing to buy up tracts of land in the next U Street, the next Columbia Heights, the next Logan Circle. After years of underinvestment, the city’s development arm was able to pick and choose between developers, apportioning large chunks of land to folks who could propose compelling concepts—thereby spurring master plans for places like McMillan Reservoir and Southwest Waterfront.
Developers who go big in a certain neighborhood follow a certain calculus. One major factor: D.C.’s ultra-empowered Advisory Neighborhood Commission system. While these hyperlocal bodies can’t directly kill a project, they can certainly slow it down. In a business where investors get spooked when things drag on too long, that’s often the same thing—which is why a long record of working with the locals is especially helpful. “The more time it takes to do anything, potentially the worse off the developer is,” says Calvin Gladney, of the development consulting group Mosaic Urban Partners. “You have to get the ANC to weigh in, so the more you can leverage previous relationships, the better.”
The ability to work with an ANC can also help small-fry developers punch above their weight. For example, the Petworth-based Neighborhood Development Company has done most of its medium-sized residential projects in Columbia Heights and along Georgia Avenue NW. Now, brokers come to owner Adrian Washington when they think parcels might be for sale, giving him first dibs on good opportunities. Having invested in one place, he’s believable when he comes to an ANC or civic association saying he cares about its future.
“What we’re trying to do in our projects is create a sense of community,” says Washington, speaking of the retail he’s working to attract to the neighborhood.
Owning large swathes of a neighborhood also helps developers avoid the sort of adjacencies that can imperil projects. The best way to ensure your new condo development abuts retail property aimed at the same target demographic? Own the retail land, too.
And clustering lets developers build a local brand name, something that helps when it comes time to actually sell their units to the public. “People in the neighborhood specifically know his brand as being a clear type of product that they can rely upon,” community relations consultant Tania Jackson says of William C. Smith’s Congress Heights units. “If you’re a for-profit developer, that’s pretty great.”
But if you look at it another way, developer clustering also empowers residents, or at least their elected representatives. ANCs can leverage concessions from large landowners, knowing that the company will have to come back looking for support for their next project. In Shaw, for instance, Douglas Development scatters tens of thousands of dollars every year in donations to local organizations, like a manor lord might spread charitable donations around the adjacent village.
That can be a discomfiting image, but the bottom line is that there’s a lot to like about the fiefdom model of development. When developers double-down on an area, their interests become the residents’ interests. It’s to their advantage to advocate for transportation and streetscape improvements, or amenities like parks and recreation centers, because they have a larger financial stake in a neighborhood’s success.
For a counterexample, think of a place where clustering hasn’t happened: The ballpark and Navy Yard area. Most of the new construction there has been backed by institutional developers, whose faraway owners want to pack as much square footage onto their footprint as possible. (Forest City’s still-unbuilt Yards project is a notable exception.) Though the blocky buildings have slowly filled up, the streets are empty on the weekends. Retail spaces are either occupied by chain fast food places, or vacant.
It’s a classic problem: There’s no there there. If there was a powerhouse developer with an interest in changing that unhappy status quo, things would look a lot better. CP
Visit the Housing Complex blog every day at washingtoncitypaper.com/blogs/housingcomplex. Got a real-estate tip? Send suggestions to email@example.com.