New partnership to develop D.C.'s Southwest waterfront
Monday, May 24, 2010
PN Hoffman, the D.C. real estate firm planning a $1.5 billion overhaul of the city's Southwest waterfront, is bringing retail specialist Madison Marquette in as co-developer after a previous partner faltered.
Monty Hoffman, chief executive of PN Hoffman, said Madison Marquette, a D.C.-based firm that has developed more 20 million square feet nationally, will also serve as an owner of the project after Baltimore's Struever Bros. Eccles & Rouse was no longer able to continue as a major partner.
The two D.C. companies are still going through due diligence before the deal, signed this month, can be finalized. The partnership would allow construction to begin in 2012, Hoffman said.
"We'll be staying on schedule, basically," he said. "This summer we'll be working on our master plan." He said he will seek zoning changes this fall "so we'll be staying on track with what we were planning a year or two ago."
PN Hoffman will retain majority interest and managing control of the project, which encompasses 26 acres along Maine Avenue SW facing Washington Channel. The plan calls for three hotels, 800 residential units, 250,000 to 300,000 square feet of retail, offices, a marina, underground parking, and parks and promenades along the waterfront nearly a mile long.
The project is easily the largest PN Hoffman has undertaken. Having built a number of popular condominium projects in neighborhoods including Adams Morgan and Logan Circle, PN Hoffman partnered in 2006 with Struever Bros. to win a city contract as master developer.
But the economic collapse hit Struever Bros. hard, forcing it to walk away from major developments outside of Baltimore. Struever's withdrawal forced Hoffman to shoulder more of the project, even as the economy continued to slide.
"Struever Brothers, like most developers, has faced challenges over the last couple years and consequently their role at Southwest waterfront has diminished, but nonetheless they are still an active partner," Hoffman said. Struever will retain a 5 percent stake and a role in the project, Hoffman said. The company did not return a request for comment.
In Madison Marquette, Hoffman has a partner that knows the area -- it developed the mixed-use Cityline at Tenley -- and has financial stability. Its portfolio includes major open-air shopping plazas that line the east and west coasts, and it raised a nearly $500 million development fund from institutional investors three years ago.
The deal also teams two companies that initially competed for the rights to redevelop the aging strip. When the former Anacostia Waterfront Corp. put the project out to bid during Mayor Anthony A. Williams's administration, a Madison-led team finished second out of 17 bidders to Hoffman-Struever.
"We've always believed it's one of the really exciting opportunities in Washington for creating a place that will be among the notable destinations in Washington and creating a waterfront environment that doesn't really exist in the city," said David Brainerd, managing director at Madison Marquette.
The project remains one of the city's largest and most anticipated development sites. In 2008, the city agreed to provide $200 million in public financing to help pay for infrastructure including parks, piers and a bulkhead. The Federal City Council, an influential group of business leaders, has undertaken an effort to improve 10th Street SW to encourage Mall visitors to walk to the site.
Valerie Santos, deputy mayor for planning and economic development, said the Southwest waterfront was one of many projects that were stalled by tumultuous financial markets. "People have had to retool," she said. "For some projects there's been delays of more than a year. Other projects have lost their institutional equity."
That made the new partnership all the more important.
"Most critical for us is that Madison Marquette will be injecting capital into the project, which will push the pre-development process," she said.