Washington Business Journal is reporting that a joint venture has been created for construction on the former Whitman-Walker Clinic site. Article posted after the jump.
JBG, Grosvenor deal to kick off residential development in D.C.
WASHINGTON BUSINESS JOURNAL - BY Sarah Krouse
Grosvenor and The JBG Cos. have closed on a joint venture totaling more than $50 million, triggering construction of a residential project at the former Whitman-Walker Clinic site on 14th Street NW.
The 50-50 venture — the first between London-based Grosvenor and Bethesda-based JBG — is significant because it will mark the return of major, privately funded multifamily development to the city in the aftermath of the financial crisis. The pair plan to break ground on the 125-unit project and 18,000 square feet of retail in September with delivery slated for the first quarter of 2012.
JBG paid $11 million for the entire stretch between S and Swann streets over the last two years, closing in February on a deal to buy the last remaining parcel on the south end of the 1800 block of 14th Street.
The Shalom Baranes-designed project will include smaller units, roughly 675 square feet, most of which will be studios or one-bedrooms. JBG plans to amp up amenities at the project, tapping Canadian interior design team Cecconi Simone Inc. to appeal to a younger group of buyers. The developers have not decided whether the units will be condominiums or apartments.
The project is the first residential undertaking for Grosvenor in the Washington area. The company owns 1701 Pennsylvania Ave. NW near the White House but has been better known locally as an owner than as a developer.
A year ago, Andrew Galbraith, chief information officer for Grosvenor in the Americas, reached out to local broker Warren Dahlstrom, a principal of Dahlstrom Real Estate Advisors. Grosvenor had sold a project in Vancouver, British Columbia, and wanted to use the proceeds to invest in the D.C. market.
Dahlstrom put Galbraith in touch with JBG, which has grown since the 1960s into one of the area’s most well-known owners, investors and developers.
“For Grosvenor there’s a desire to get small and focused and detailed on the nitty-gritty of development in Washington, and with JBG there’s a desire to get big,” Dahlstrom said of the partnership, which he said is different from typical financing situations.
“This is harder than a typical joint venture, where one group brings the money and calls the tune. This is a venture of equals, so it was a little more important to carve out the rules,” he said.
JBG has a strong fundraising record and holds properties in some of the region’s most stable markets, such as the Rosslyn-Ballston corridor; Grosvenor’s real estate history has roots in 17th century London.
“The glue that held them together through several months of discussions is the desire for the two organizations to grow together,” Dahlstrom said of the talks between JBG’s James Iker and Grosvenor’s Mark Darley.
Grosvenor snagged an award from the Urban Land Institute for a mixed-use project in Vancouver with 92 live-work apartments above 212,000 square feet of ground-floor retail, and it hopes to model the 14th street project after that property, Dahlstrom said.
Those plans fall in line with what the city has approved for JBG on the historic Whitman-Walker site.
JBG worked with the city to hash out a number of architectural and historical issues before securing final approval for the project in 2009. The historic building on the corner of S and 14th most recently used by Whitman-Walker will be retained, but the rest of the block, including Swann Drycleaners, will be demolished.
JBG bought the project from Scott Pannick, head of Metropolis Development Co., who planned the project during the real estate boom but walked away in 2008 amid financial troubles.
Moving the project forward fast puts JBG and Grosvenor in a strong position. They will be among the first to deliver a new residential product as the city — and the Shaw/Columbia Heights submarket, which includes the 14th Street corridor — grapples with a shrinking supply of new condominiums.
Delta Associates’ second-quarter condo report showed a 1.8-year inventory in the metro area and just less than a year of inventory in the submarket that includes 14th Street.
If JBG and Grosvenor go rental, the project will deliver into a market with a shrinking supply of units, a 3.1 percent stabilized vacancy rate — the lowest rate of any metro area in the country — and a 3.6 percent increase in rent over the past 12 months, according to second-quarter data from Delta.