What's Happening at CityCenterDC?

Anyone who walks or drives near New York Avenue and Tenth and 11th streets can’t help but notice something big is happening. Cranes reach to the sky, as bulldozers and other heavy equipment rearrange the ten acres that once held the DC Convention Center. There are signs of construction, too. The new development is called CityCenterDC, a grandly ambitious project that takes the concept of “mixed use” development to a scale not before seen in downtown Washington. It’s also an optimistic demarcation line between the recession, which stalled so many development projects nationwide, and what comes after. The measure will be the tenants, who are still in short supply.

The promotional material boasts it will be a place to “Live. Work. Shop. Celebrate. Learn.” The developers say the closest regional comparison is Bethesda Row but note that CCDC will be practically triple the size.

CCDC joins a number of other large real estate projects happening in the city, notably the Marriott Marquis Hotel that is going up next to the Walter E. Washington Convention Center. Donald Trump won the bid to redevelop the Old Post Office Building, including the addition of a Trump International Hotel. CCDC promises all that and more.

The developers are a union of two real estate powers, Hines and Archstone. The principal investor is the country of Qatar, through the Qatari Diar Real Estate Investment Company, which also has projects underway in Palestine, Yemen, Egypt, Sudan, London, and Cuba. Howard Riker is the vice president for development at Hines. We met with him at his company’s 13th Street office building to talk particulars about CCDC.

When did Hines set up a Washington office?

In 1982. Bill Alsup founded the Washington office. Hines is a privately owned company, founded by a man named Gerald Hines. His son Jeff runs the company day to day from Houston. It is one of the largest privately owned real estate companies in the United States, but it has an international platform. We’re involved in multiple product types–development, investment management, and leasing management services.

What was your first property in DC?

Columbia Square, which was completed in 1986. Hogan Lovells, the largest law firm in DC, was the lead tenant.

What properties have you developed since Columbia Square?

Our second was Franklin Square, at 1300 I Street. The law firm Finnegan, Henderson, Farabow, Garrett & Dunner was the lead tenant there. Then we developed Postal Square, the headquarters for the Bureau of Labor Statistics and the National Postal Museum. We developed 600 13th Street, with McDermott Will & Emery as the lead tenant. We also were the development manager for the Gannett/USA Today headquarters in McLean.

Did you bid on the old Post Office Building?

We did.

How do you feel about losing to Donald Trump?

It was a very competitive situation and a challenging project, and we wish Trump the best of luck.

When did Hines first get involved in the CityCenter DC project?

We submitted a proposal in the fall of 2002. The District of Columbia owned the site, which was the location of the old convention center. An RFP [request for proposal] was issued in summer of 2002, and so we responded to that.

When did you break ground?

March of 2011.

It’s interesting but that’s about the last time your website was updated with any “news,” and the news was the investment from Qatar.

In terms of a press release, that may be correct. We finalized our relationship with Qatar, formed our partnerships, finalized all our documentation with the District of Columbia, and finalized all our contracts with the contractor, and that was all announced in the same press released.

Will Qatar be a tenant?

No–an investment partner only.

So the country won’t put its embassy here in CityCenter?

No.

What tenants have you secured at this point?

We’re actively working on tenants for the office buildings and retail.

Does it concern you that nothing is currently secured?

We’re very encouraged by the amount of activity we’ve had. It’s our hope we’ll have a number of transactions to announce in the coming months.

The real estate market nationwide has gone up and down and up and down. Do you feel it is leveling off?

First of all, we feel very fortunate that we’re in the Washington, DC, market. The strength and vitality of the local economy here has had an influence on our being able to move forward. DC has had continued job growth. I think that from a residential perspective we see heightened demand for apartments and condos. As we entered into the depth of the recession, the pipeline for multi-family products was constrained. As a result there’s a supply-side constraint within the Beltway. We feel we will be well received.

A supply constraint? Do you mean building stopped so there’s low supply?

Right.

And that works in your favor?

Yes. We really feel that market conditions are favorable. Generally office tenants have been reluctant to make decisions because of the economy and global conditions and the election year, but we have seen an increased amount of activity.

How do you plan to attract interesting retailers and avoid the ubiquitous chains that dominate Washington? What’s your philosophy on that?

I think we view downtown Washington as a unique cultural and entertainment destination for the metro area, with the Verizon Center, the live theater venues, the critical mass of chef-driven restaurants, and the Smithsonian museums. This cannot be replicated throughout the broader metro area. It’s a draw. It puts us in a position to attract retail tenants that perhaps don’t have as much presence in DC.

Are you envisioning luxury brands?

Our general approach has been to try to attract aspirational, bridge, and luxury tenants to the site. The fashion retail downtown right now tends to be value-oriented. Many of the people who work and live downtown desire more unique, higher-quality goods and services. 

How do you avoid what happened with the Georgetown Park mall, which has been practically empty for some time and feels like a dinosaur?

I think there are a lot of positive things that have happened in Georgetown over the past 15 years. The property owners and community leaders have done well with street-level retail. There is a lot of vision, and they’ve taken on significant risk. The mall is presented with a number of challenges. Again, I think the owners of that property right now are taking great strides to address those challenges and turn those challenges into advantages. But it’s difficult to get there and to park there, and that market is characterized as youth- and tourist-driven. We have a broader demographic.

When will the construction be done?

There are three phases, two of which are under the sponsorship of Hines Archstone development. The first phase is under construction now and will reach substantial completion by a year and a half from now, in 2013. We’re also responsible for a 350-room upscale hotel, with another 109,000 square feet of retail, which will start construction in the first quarter of 2014 and reach substantial completion by 2016. And there’s another developer, Gould Property Company, that controls a 60,000 square foot parcel at the northeast corner of the site. It is planning 500,000 square feet of office with 30,000 square feet of retail. The company is just beginning the process of permitting the site.

How big will CityCenterDC be altogether?

Overall, 325,000 square feet.

Have you found your hotel tenant yet?

We hope to finalize those discussions shortly. We’re talking to someone who would be unique to DC. 

Since you emphasize residential tenants, do you plan on having markets?

Yes, in two different ways. We are considering the possibility of integrating a market-like concept into our retail strategy, along the lines of Grand Central Market at Grand Central Station in New York. We’ve also been evaluating some of the market-restaurant concepts.

Such as Eataly?

Yeah. We may have a farmers market, too.

It’s great to be able to get fine foods, but will tenants also be able to get laundry detergent and toilet paper?

We are considering trying to address that need directly on site. We also believe there are stores in close proximity that sell products like that. There is a Safeway at City Vista. 

When you finish the first phase, what would be the percentage of occupancy to give you the measure of success?

We have the expectation it will be fully stabilized, if not at the beginning then shortly after. Also, we hope to commence condo sales around Labor Day this year. 

What will the price range be?

There will be one- and two-bedroom places, and the average price will be in the range of $800 to $900 per square foot.

Given the imperative of finding office tenants, have there been tenants you pursued that slipped away that you might go back to?

There’s a possibility. We maintain a dialogue.

Carol Ross Joynt