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In St. Elizabeths project, opportunities for many

By Dana Hedgpeth, Lisa Rein and Jonathan O'Connell
Washington Post Staff Writers
Monday, April 26, 2010; 20

Fifteen minutes from downtown Washington, Bob Peck stood on a bluff across the Anacostia River where the massive government construction project he's running buzzed with activity -- a 4.5 million square-foot federal mini-city for the Department of Homeland Security rising on the west side of the former St. Elizabeths Hospital.

In a dark suit and a baseball cap, the man in charge of designing, building and leasing office space for the federal government marvels at the scale. Backhoes scoop thousands of cubic yards of dark brown dirt to make way for the new headquarters for the U.S. Coast Guard, the first of 22 agencies scheduled to move into the Southeast development by 2016. Nearby, huge forklifts tear down a warehouse from the District's famous psychiatric hospital.

It's the largest federal construction job since the Pentagon in the 1940s. The $3.4 billion consolidation of Homeland Security's far-flung agencies in one campus is slated to create 16,000 direct construction jobs involving at least 100 contractors over the next six years. Presently there are roughly 400 construction workers on the site.

The potential for development is breathtaking. Panoramic views of official Washington and Northern Virginia. Interstate 295 and the Congress Heights Metro station minutes away. A District government vowing to mold 170 acres it controls on the east campus across Martin Luther King Jr. Avenue into a destination place of shops, offices and homes. Another $3 billion in still-to-be-let construction contracts. Eventually, 14,000 DHS workers who will come and go every weekday, plus 2,000 daily visitors to the Homeland Security campus. The area, some say, could become another Crystal City of federal contractors hopping on the $17 billion Homeland Security train.

But as it rises in a community that has the city's highest rate of unemployment, community leaders and planners question whether investors will be lured there and rejuvenate the struggling neighborhoods that surround it.

"There's great opportunity with a great challenge," said Peck, commissioner of public buildings for the General Services Administration. "How do you take a secure campus and still make it a catalyst for development in Anacostia?"

The redevelopment of St. Elizabeths has been in the works for years. The sprawling campus, which is divided by Martin Luther King Jr. Avenue, was built in the 1850s after social reformer Dorothea Dix persuaded Congress to provide money for a premiere psychiatric hospital. Preservationists fought hard to keep the DHS buildings in scale with the historic buildings on the site.

"You're talking about DHS being a mini-city within the city," said Merrick T. Malone, head of the District of Columbia Building Industry Association. "It can't help but spark the area and have a catalyst effect."

OBSTACLES TO WIDER CHANGE

But despite the hopes of community and city leaders and local residents, the obstacles to bringing back the neighborhoods around St. Elizabeths loom large. Lenders, planning experts and some developers say a 9-to-5 workforce alone, especially one behind a secure perimeter, will do little to spur development around the campus unless a large retailer comes along with it. The land rush that engulfed the area across the river five years ago as the new Washington Nationals ballpark was on the way isn't in sight around St. Elizabeths, at least not yet. There are few available large commercial spots nearby and land-use experts say there will be a lag time before the surrounding area starts to change.

"Even Crystal City didn't grow up around the Pentagon overnight," said developer Chris Smith, who has built shopping centers and housing projects in Ward 8.

Anacostia is a risky bet when downtown landlords can barely fill their office space, the condo market is dead and the renaissance around the ballpark is stuck.

"It just feels like a piece of fruit that needs to be a bit more ripe," said Capstone Development President Norman Jenkins, part of a team building a Marriott hotel across from the Walter E. Washington Convention Center downtown. Neighborhoods east of the Anacostia River, he said, are "still the other end of the world for many of us."

Federal officials are putting in few amenities on the west side of the campus in hopes of getting DHS workers to patronize businesses in the surrounding neighborhood and to go to the east side of St. Elizabeths. The city owns 170 acres on the east side of the campus and is creating a blueprint for a mix of offices, shops and restaurants, and housing to attract, not just DHS workers -- 90 percent of whom live in Maryland and Virginia -- but also the community, which is now underserved by retail. The city also hopes to house a research center that would focus on domestic security issues. The east campus is home to a police emergency response office and there are plans to build the Federal Emergency Management Agency's new 750,000-square-foot headquarters.

"This campus has been the heart of this community for generations, and we want to make it become that again," said Harriet Tregoning, director of the city's Office of Planning. "We don't want it to be a place where people come to work and then leave for the day, and we get their fumes. We want to capture them to live and work here."

Some contractors that are working at the site, or see opportunities to sell DHS computers, software or other products, are looking to rent office space nearby, according to a few real estate brokers. Already, 33 firms have received contracts for work on the Coast Guard headquarters, the GSA said, seven of them based in Ward 8, where St. Elizabeths is located and where unemployment hovers above 27 percent.

Alberto Gomez, owner of Prince Construction in Anacostia, said his 23-year-old firm got a boost from the St. Elizabeths project by landing a contract with Clark Construction -- the major builder of the DHS campus -- to haul dirt. While he said the deal is worth "several hundred thousand dollars" in revenue for him and will help keep his truck drivers employed, he cautioned that it won't help him hire back the 15 concrete workers he laid off last year when his revenue dropped 20 percent.

"The margins are tight, and you've still got to pay the phone bill, the light bill and other bills," he said, noting that he's hopeful that he can get more business at St. Elizabeths by partnering with a bigger construction firm.

"I'd like to stay here in this area and get a piece of the work that's going on here in my back yard," he said.

'THE AREA HAS A FUTURE'

Landowners hope there is more interest to come. Ali Javad, a real estate broker for Marcus & Millichap, said he's seen a recent uptick in the number of calls he gets a week on properties he has for sale along Martin Luther King Jr. Avenue.

"People are starting to see the area has a future," he said. "Before, it was considered dead. Five years from now this area will be totally different."

Up the hill along Martin Luther King Jr. Avenue, Jose Muse, a small developer in the area, is searching for a financial partner to back his plans for a $100 million office and retail building to serve DHS employees and contractors. He said one potential backer dropped out last year when the economy tanked. Muse keeps large posters of architectural drawings showing a drugstore, sub shop and other stores in the first floor of the brick and glass building he wants to build. He said a local coffee shop owner and two national drugstore chains have expressed interest.

For now, his strip is a hodgepodge of tenants that cater to the neighborhood. Women in black, full-face veils and head scarves shop in a store that sells bean pies and CDs on the "Virtues of Islam." Next door, men gather inside an Islamic center. And a few doors down, an older man who neighbors call Myron sells soda, candy and potato chips to customers through a small window. He boarded up his storefront and keeps his door locked after he was stabbed 19 times and left for dead.

"I'm looking ahead at what's coming here, and there's going to be more people with disposable incomes and they're not going to want to have to reach through what looks like a jail to buy something," Muse said.

A few blocks away, Stephen Thompson, who since 1972 has owned a neighborhood bar Georgena's, which used to be called the Players Lounge, said he's recently received some offers from developers to buy out his spot near one of the east campus entrances. But he's not ready to sell. His bar stools are filled at lunchtime with D.C. government employees, police officers, firefighters and workers from St. Elizabeths ordering fried chicken, fish and oxtails.

"We're pretty well filled right now. I'm sure it's going to pick up," he said of the DHS campus.

Developer Jeff Epperson, who owns land adjacent to Poplar Point near the Anacostia River, said he is looking to capture some of the spinoff from DHS. Epperson has plans to build up to 4 million square feet of offices or retail, possibly to include a big-box tenant. But he said signing retailers before the foot traffic arrives is a hard sell.

"Once the Coast Guard lands, you'll start seeing a change," he said. "You'll start to see the waves of people coming in."

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