By Dana Hedgpeth
Washington Post Staff Writer
Monday, January 1, 2007
The largest owner of land around the Southwest and Southeast waterfronts -- neighborhoods crucial to the District's vision of its future self -- is an $8.5 billion company that traces its roots to a Cleveland lumberyard opened in 1921.
Forest City Enterprises owns, manages and develops almost 24 million square feet of hotels, offices and shopping malls in 25 states. In the District, the company owns about 90 acres at three major Southwest and Southeast projects where it plans to invest roughly $3 billion into a mix of parks, housing, shops, restaurants and offices. And it is one of the developers working on transforming the land around the new baseball stadium -- now mostly boarded-up storefronts, car-repair garages and nightclubs -- into a vibrant neighborhood.
"We got into Washington because we believe in cities," said Deborah Ratner Salzberg, granddaughter of one of the firm's founders and head of the company's Washington operations. "We believe in redeveloping cores of existing cities. We look for underutilized areas where we can make a difference. We felt these are areas that fit that."
A former trial lawyer for the Department of Justice, Salzberg has lived in the Washington area since the 1980s. The company has been building projects in Washington over the last two decades, including Ballston Common Mall in Arlington and rental apartments in Rockville, and in the past five years has focused on making Washington one of its major development markets.
Salzberg's right-hand man and chief operating officer, Thomas W. Henneberry, was involved in the development of Jacobs Field, home of the Cleveland Indians, which helped revitalize Cleveland's downtown. He came to Forest City four years ago from Cleveland's Jacobs Group development firm.
Henneberry took an active role organizing plans for development around the Nationals' baseball stadium, working with other major developers such as Western Development and Monument Realty, both of the District, and Baltimore-based Cordish. The developers first cooperated to come up with an overall vision, and each is now moving on its own projects.
"Looking at the river here, it is a totally underutilized area," Salzberg said. "We thought this would be a wonderful area for new population and growth."
The 42-acre Southeast Federal Center site today is an area of old warehouses, parking lots and weeds along the Anacostia River. It sits next to the Navy Yard and the new Department of Transportation headquarters.
The site was once part of the Navy Yard. Anchors, chains and boilers for ships were made there in the 18th and 19th centuries and guns and ammunition during World Wars I and II, according to the developer.
Over the next decade, Forest City plans to build an almost $2 billion development of 6 million square feet -- a space almost as large as the Pentagon. Its plans call for preserving the historic buildings and turning a boilermaker shop into a retail area, creating apartments from a former carpentry building and converting an old gun mount factory into condominiums. It will also put in streets, offices, lofts and waterfront parks. In tribute to its Navy history, the project will be called the Yards.
"You can create a very active, lively area," Salzberg said, as she walked the property. "It really will be a mixed environment that looks like it's been here forever. It won't look like Disneyland. It will be a little edgy and have the feel of the waterfront."
Just across the street, Forest City, with another partner, Mid-City Urban of Silver Spring, has torn down the former public housing complex of Arthur Capper/Carrollsburg and is replacing the brick barrack-style buildings with 1,600 townhouses and mid-rise apartments, condominiums and senior housing.
A five-minute car ride away in Southwest, the company and two partners -- Charles E. Smith of Crystal City, which is a unit of Vornado Realty Trust, and Bresler and Reiner of Rockville -- plan to turn the tired-looking Waterside Mall into 1.5 million square feet of offices, high-rise housing and retail in a project that will cost $800 million. Two city agencies recently said they are going to lease 500,000 square feet of office space there.
Forest City's projects are helping to transform areas of the city that have been cut off from other neighborhoods since the Southeast Freeway was built in the 1960s. Other developers describe it as an enormous task.
"They'll establish an anchor" for future development, said Ray Ritchey, executive vice president at Boston Properties, a competing development company.
"I'm glad they have [the projects] and not me," said John E. Akridge III, another major developer in the District. "But I think they can chew it up and swallow it."
With annual revenue of $1.2 billion, Cleveland-based Forest City is one of the largest publicly traded real estate companies in the country. The company's stock has traded over the last year between $36.47 and $59.67 per share.
Forest City was started in 1921 by the Ratowczer family, whose members changed their name to Ratner after emigrating from Poland. The family started in the lumber yard business. It got into real estate in the 1930s and 1940s, buying its first apartment building and building strip malls. Today Ratner family members own most of Forest City, and five of the top executives are cousins.
Its major projects under development in New York include a 52-story office building in Manhattan that will be the headquarters of the New York Times. A controversial $4 billion mixed-use development in Brooklyn will include an arena for the New Jersey Nets -- a team owned by a group of investors led by Forest City executive Bruce C. Ratner. The rest of the Forest City empire includes projects in Pittsburgh, Cleveland, Boston, Baltimore, Richmond, Los Angeles and San Francisco.
"They have the biggest development pipeline for their size in the real estate world," said Richard Moore, a managing director at RBC Capital Markets in Cleveland. "They're the only ones who do this level of mixed-use development and the only one who does projects of this size."
The company has succeeded in getting hundreds of millions of dollars in tax credits and public money to subsidize its projects across the country. In the District, it has received about $135 million in city and federal monies to pay for such things as roads, sidewalks and utilities at its projects.
The company was selected from a group of 11 developers for the right to redevelop the Southeast Federal Center site. Congress had to pass special legislation for it to buy the land, which is owned by the federal government. It is still settling on the deal to buy the land.
Walking through a dusty warehouse, Salzberg gazed up at the rafters. "You've got a lumber shed here with unbelievable bones," she said. "It's got corrugated steel but you could make it more transparent with glass and give it openness. It would be a terrific spot for entertainment, theater groups, concerts or a restaurant with entertainment."
Henneberry added: "Think restaurant with kitchen in the back, seating overlooking the water."
They envision workers at the nearby Navy Yard buying houses on their land.
"This can be for people who want to roll out of bed, run along a waterfront trail, walk to work or hop on the Metro and go out to restaurants in the evening," Salzberg said.
"All for the price of $1.6 billion," Henneberry added.