Katz Properties plans major upgrades to the East River Park Shopping Center in Northeast D.C. after buying it for $33.6 million from District-based City Interests.
Anchored by a Safeway grocery store and CVS Pharmacy, East River Park is at the intersection of Minnesota Avenue and Benning Road, one of the most heavily trafficked corridors in the city, but one that has not experienced the revitalization many District neighborhoods have enjoyed in recent years.
New York-based Katz focuses on grocery-anchored shopping centers on the East Coast. It announced the East River Park deal alongside a separate $15.8 million purchase of Festival Shopping Center in Manassas Aug. 17.
Principal Daniel Katz said the company watched as developer Chris Donatelli finalized plans to build a 376-unit apartment building across the street, where construction began last month, and decided now was the time to take a chance on the neighborhood east of the Anacostia River.
“The Donatelli development across the street will certainly add more housing there, and it certainly made us more interested in buying there,” Katz said.
Katz said East River Park remained popular with shoppers — it is 97 percent leased and the average tenant has been there for 18 years. He said the company planned to upgrade the property and add new restaurants and neighborhood-serving stores around the anchors.
“We want to make this a vibrant, walking, shopping and eating-type shopping center,” he said.
Katz’s buy is a sign that developers are ready to return to less-established areas as construction of new apartments and restaurants booms in the U Street, Mount Vernon and NoMa neighborhoods.
But the sale also signals the end of major mixed-use plans for the center that District-based City Interests had been plotting since it acquired the property in 2007, paying $48.5 million for seven shopping centers in the area from UrbanAmerica.
Led by the father-son team of Alan and Jonathan Novak, City Interests had planned to turn the shopping center into a 700,000-square-foot mixed-use project featuring new housing and offices. As a precursor, they landed a restaurant by popular steak and burger chef Michael Landrum.
Peter Farrell, a partner at City Interests, said that part of the reason for selling was the strong prices shopping centers are receiving. “The market is definitely very ripe for retail properties so we knew that from a valuation standpoint it would be strong and in fact that proved to be the case,” he said.
City Interests still has major holdings in the neighborhood, the centerpiece being its 16-acre Parkside development, which will include 350 apartments, 100 townhouses, a senior living facility and an Educare early childhood education center.
Farrell also said that by finding an experienced, well-capitalized buyer, City Interests was moving the neighborhood forward, even if it wouldn’t be the company redeveloping East River Park. “Part of the reason we went east of the river was to demonstrate to the market that east of the river was a place where institutional-quality investors could go and be successful and bring a new product to the market and make it work,” he said.
“I don’t really have regrets,” he added. “We are incredibly busy at Parkside.”