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At Nationals Park, District of Dreams Hits a Slump

By Dana Hedgpeth and David Nakamura
Washington Post Staff Writers
Sunday, April 12, 2009; A01

Baseball stadium backers promised a lively entertainment district when the D.C. government poured nearly $700 million into building Nationals Park: a hub of bustling shops, restaurants, hotels, condos and office towers to draw patrons year-round.

But as the Nationals take the field for their second season at the ballpark, there won't be much entertainment outside. In a few weeks, a developer expects to set up a lonely beer tent on an empty lot across the street.

Fans approaching the ballpark along Half Street will pass an empty office building and a 35-foot-deep hole in the ground owned by Monument Realty, which has put plans on hold for shops, residences and a hotel. One block north, another office building, built by Nationals owner Theodore N. Lerner, sits vacant in search of a tenant.

Across the country, development has slowed dramatically and left a ballpark that was once a symbol of the city's hopes a reminder instead of the struggling economy.

"It just so happens that implementation is occurring during the worst economic downturn in recent history. So things are going to struggle a little bit," said Neil O. Albert, the District's deputy mayor for economic development.

City officials and developers say nobody should have expected the area to change overnight. The stadium district is part of a massive redevelopment effort in Southeast on both sides of the Anacostia River, which is projected to take more than a decade. The area around the Verizon Center downtown, officials pointed out, took years to develop into a neighborhood that draws residents and visitors day and night.

Nearly five years ago, the announcement that baseball was returning to Washington set off a land-buying frenzy near South Capitol Street and the Navy Yard.

Investment in the stadium area has been led by the city government. In addition to the ballpark, the city paid for new roads, sidewalks and parks, committing a total of about $1 billion. Metro tripled the capacity of the Navy Yard Station on the Green Line.

That was intended to attract private developers, who rushed in and spent more than $2 billion to build 16 apartment complexes and office towers, including a previously planned headquarters for the Department of Transportation. Speculators and developers, flush with cash, paid up to $125 per square foot for lots with boarded-up storefronts and takeout restaurants that sold Chinese food and fried chicken.

In retrospect, it was too much, too soon, some developers said.

"People's expectations got out ahead of the reality," said Steve Cohen, vice president of real estate for developer Opus East, which has built two office buildings in the area. "We're in a down cycle. People are going to stay on the sidelines for a while."

Inside the ballpark, the Nationals announced recently that they have expanded seating at the Red Porch Restaurant and added new food offerings and entertainment in the Fun Zone. But fans looking out from the ballpark in any direction can see projects that have slowed or stopped.

EYA, a residential developer, said sales on its 78 townhouses, which start in the mid-$600,000 range, have slowed to two a month from five.

At Lerner's 10-story office building at 20 M St., the lobby doors are sometimes locked much of the afternoon. The only tenant is a bank.

A few blocks away, at 2nd and M streets SE, sits a parking lot where developer Chris Smith had planned to build a 10-story office building without a tenant signed in advance. Now he says he needs to have the building about 70 percent leased to even try for financing.

Closer to the Anacostia River, Florida Rock owns land where a cement plant still operates. It hopes to begin construction on office, retail, hotel and residential buildings in the fall of 2010 -- if it can get financing and find a major office tenant.

Nearby, Cleveland-based Forest City stopped construction on a loft building at its project, the Yards, because it couldn't get a loan. It is trying to get financing through a city housing program to restart construction. In the meantime, brown paper and plywood cover the windows.

At developer JPI's apartment project, called Capitol Yards, about half of the nearly 700 apartments are leased. For the past four months, the developer offered two to three months of free rent on the units, which start at roughly $1,600 for a one-bedroom.

Then there's the ballpark district's signature development: Monument Realty's $350 million Half Street project, which was supposed to feature offices, a hotel, residential towers and shops directly above the Metro station closest to the ballpark. There's a 35-foot hole where the two residential towers and the hotel are supposed to go. Although the office building is finished, the parent company of one of Monument's financial backers, Lehman Brothers, is bankrupt.

Monument executives said that the project isn't dead, and that they are trying to get construction financing for the deal.

Neighbors, who were sold on new opportunities by city officials, are frustrated.

"Everybody is building these big buildings, and they're empty. It is sad. I live in a ghost town," said Robert Siegel, an advisory neighborhood commissioner who has lived in the ballpark area since 1979.

"It was promised that baseball was going to help make it a vibrant place, but it hasn't happened," said Siegel, who received $8 million from the city after it seized his land by eminent domain to make way for the ballpark. "There are no sit-down restaurants. There's not even a gas station."

Some small-business owners who sold out are counting their blessings. Marty Chernoff of Denver got $45 million from developers for land he owned, including the spot where the Nexus Gold strip club once operated.

"I'm glad I got out when I did," said Chernoff, who started buying land in the area in the mid-1980s for roughly $20 a square foot.

These days, brokers said the value of land and office buildings has fallen significantly -- not much has changed hands recently, but brokers estimate land would go for about half what it cost at the peak.

Albert, the deputy mayor, said the slowdown prompted the city to focus more attention on "nontraditional tenants," such as nonprofit organizations that cannot afford to rent downtown. The city also is moving forward with its development of several public parks. Water taxi piers will be built by midseason to accommodate shuttles from Alexandria and National Harbor, Albert said.

"Luckily, the government investments are moving forward," said D.C. Council member Tommy Wells (D-Ward 6), who represents the area. "If we're patient, it will be one of the best places in the country to live."

For those business and land owners who stayed put, the going is tough.

Sok Reed, the owner of Ann's Beauty Supply & Wigs near the Navy Yard Metro station, wants to stay in the neighborhood, counting on new residents and businesses to buy wigs, lipsticks, nail polish, hair coloring kits and stockings from her packed storefront in the shadow of a new office building.

But most of her sales are to neighborhood teenagers, and she has gone into debt to pay her rising property taxes.

"I can barely make it, but I'm trying," Reed said.

Across the street, Davood Mirzaiee held out when developers tried to buy his land. Now he and his brother want to build a small office building on top of their auto repair shop to offset the 50 percent loss in revenue the past two years.

"We're trying to hold on and get some business from the few people that are around here, but most of these buildings are empty," he said, pointing at a new apartment tower next door.

Nearby, Rev. Maxwell Washington hopes his 300-member congregation at St. Matthews Baptist Church can get an offer, at least someday, for their acre of land. They had two offers -- one for $7.3 million -- but both fell through.

"We thought we had something, but they backed out," Washington said. "The economy changed like it did, so we're just here. . . . If somebody comes knocking on the door with the right price, we're ready."

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