By Dana Hedgpeth
Washington Post Staff Writer
Monday, October 2, 2006
District-based developer John E. "Chip" Akridge III has closed on a deal to buy 15 acres of air rights above the railroad tracks at Union Station with plans to build a $1 billion mixed-use project.
Akridge paid $10 million to the General Services Administration, which owned the air rights. It is the first time the agency, the federal government's property manager, has sold air rights. Executives at Akridge and the Government Acountability Office said they worked on the complicated deal with Amtrak for four years.
Akridge's tentative plans call for about 3 million square feet of offices, restaurants, shops, condos, apartments and a hotel. The buildings will be on a concrete platform, supported by columns, about 20 feet above the tracks.
An atrium will connect Union Station with H Street NE and the surrounding neighborhood, where new housing and stores have been built. The project will be similar to projects above railroad tracks in Chicago, New York and Philadelphia.
It will be called Burnham Place after the architect of Union Station, Daniel H. Burnham. Akridge executives said they plan to market housing in the project to politicians and aides who want to live near the Capitol and the office space to trade associations, law firms, accountants and consultants.
Completion is years away.
Akridge's project must go through planning and design, then get zoning and other approvals. Construction of the concrete platform is likely to begin in late 2008, executives said, and take about three years. The rest of the project would be built after that.
"It's a once-in-100-year opportunity to be able to develop a site within two blocks of the U.S. Capitol," said Joe Svatos, senior vice president at Akridge.No End to Office Market
Plenty of capital is scouting for properties to buy in the District. Eyebrows are being raised about the amount of office space under construction in parts of Northern Virginia. And some tenants are leaving the District to take high- quality space for less money across the Potomac.
Those were some of the observations offered last week by developers and leasing and sales brokers to about 100 real estate professionals in an annual conference at the J.W. Marriott hotel. The event was put on by Commercial Property News, a trade publication.
Raymond A. Ritchey, executive vice president of Boston Properties Inc., said he was concerned about the number of buildings under construction -- without tenants in place -- in the Dulles corridor.
"Rather than building a building, lease it and sell it, speculative developers are now attempting to sell the building vacant," Ritchey said. "Buildings are being built in response to the needs of the investor . . . not the needs of the space occupants. As a result there's potential for more vacant space if the tenants don't materialize."
Another area developers are watching closely is NoMa, north of Massachusetts Avenue near Union Station in the District. Developers have 330,000 square feet of office space under construction, and several million square feet more may be built in the coming years. Little of the space is pre-leased.
"I don't think if there's empty space in downtown that you're going to get private firms to move there," said Jeffrey I. Sussman, president of Louis Dreyfus Property Group.
Brokers noted how attractive Crystal City has become for some tenants willing to consider space outside the District. Crystal City's biggest landlord, Charles E. Smith Commercial Realty, had about 2 million square feet to fill when the U.S. Patent and Trademark Office left for a new headquarters in Alexandria. Eighty percent of the space the patent office left behind has been leased, and many of the new tenants are moving from the District.
"They did everything right in remarketing Crystal City," said Blane T. "Zeke" Dodson, a partner and managing director at Cassidy & Pinkard Colliers. "They got the word out, and they were able to attract high-quality tenants."
The area around the planned baseball stadium in Southeast, many agreed, will eventually develop into shops, restaurants, housing and more offices. But some differed on how long it would take. The area, which is now mostly boarded-up storefronts, empty lots and car repair garages, would look very different by 2008, some said. Others said it would take until 2010 or beyond.
"You'll go down there and forget what it looked like before," said Daniel P. Dooley, managing director at Tishman Speyer Properties.
Investors remain eager to put money into buying commercial real estate in the Washington area, often bidding against each other on properties.
"We're tired of chasing deals," said Mark E. Portner, a managing director at Shorenstein Properties LLC. Buyers from the Middle East have been active in the District, some investment sales experts said. "The price of oil probably helps a little bit there," Portner said.
In the suburbs, brokers said fewer large-scale tenants are looking for space in Northern Virginia, although government contractors are still active. Montgomery County is benefiting from tenants in the District moving to Silver Spring and Bethesda, and from a low 8 percent vacancy rate. But Prince George's County hasn't seen as much activity; its vacancy rate is 14 percent.
"There's not a whole lot of growth in Prince George's County," said John Adderly, vice president of leasing at Mack-Cali Realty Corp. "We'd hope there is no market erosion."The Year of Three Owners
Barely six months after it sold, the Hotel Washington, one of the District's oldest operating hotels, is selling again.
Istithmar Hotels of Dubai is buying the 344-room hotel at 15th Street and Pennsylvania Avenue NW. The deal is expected to close this month. The price was not disclosed and calls to the buyer and the seller were not returned.
In April, the hotel sold for an estimated $120 million to New York-based Westbrook Partners, a real estate investment company. The hotel, which was built in the early 1900s, had been owned by Gal-Tex of Galveston, Tex., since the 1940s.Closings
· Pembroke Real Estate, an arm of Fidelity Investments of Boston, said an affiliate bought 1201-1225 New York Ave. NW, a 13-story building. Terms were not disclosed.
· BlackRock Realty of New York purchased 1015 15th Street NW in the District's East End from TIAA-CREF. Cassidy & Pinkard Colliers arranged the sale. Terms were not disclosed.
Dana Hedgpeth covers commercial real estate and economic development. Her e-mail address firstname.lastname@example.org.