CityCenterDC - A New Focal Point for Downtown Washington, D.C.
By: Howard Riker, managing director, Hines
Currently under construction, Phase I of CityCenterDC is scheduled for completion in Fall 2013. Construction of Phase 2 is expected to commence in the third quarter of 2014.
The 2.5-million-square-foot mixed-use project known as CityCenterDC, now rising from a once desolate area just east of the White House, aims to create a new focal point and fuel sustainable growth on the 10-acre footprint of Washington, D.C.’s former convention center. District of Columbia officials consider the project — which the New York Times has described as “a modern-day Rockefeller Center” (“Blocks from the President, Developers Plan Big,” by Terry Pristin, June 21, 2011) — to be critical to the economic future of the city.
Currently under development by Hines, the $1 billion pedestrian-friendly, mixed-use complex is set amid downtown Washington’s commercial, cultural, arts, and entertainment epicenter. Located within a block of two of the region’s most heavily used Metrorail stations (Metro Center and Gallery Place) and the new Walter E. Washington Convention Center, the site is city-owned, except for the land beneath the two condominium buildings. When fully built out, the neighborhood will encompass three city blocks. Phase I, which is scheduled to be completed in fall 2013, will consist of approximately 1.3 million square feet in two office buildings, two apartment buildings, and two condo buildings, and includes the reopening of Tenth and I streets between H Street and New York Avenue, retail-oriented alleyways and streetscapes, and a 1,555-car below-grade parking facility.
Well-proportioned, tree-lined streets with appealing storefronts and signage around the site perimeter will help attract retail patrons.
City officials chose Hines as lead developer for CityCenterDC in 2003, largely because of the firm’s presence in the District, its international experience with large mixed-use projects, its financial strength, and its willingness to engage in a partnership with the city and community stakeholders. The objective of all of these partners was to create a top-quality asset of lasting relevance that would build upon the progress made in the city core and surrounding neighborhoods over the preceding 30 years. (Since 2000 alone, more than $12 billion has been invested in real estate development in downtown Washington, D.C.)
Developing a Clear Strategy through Collaboration
CityCenterDC is located in the heart of downtown Washington on a 10-acre, 4.5-block parcel bounded by New York Avenue, 9th, H and 11th Streets, NW.
While much of the project scope was specified by the city’s request for proposals (RFP), early planning led to Hines’ decision to create a pedestrian-friendly environment that will enhance communication around and through the site. Hines’ collaborative relationship with the city produced a design that does not maximize density, but results in spatial relationships between and among the buildings that create exceptional value, particularly for residential and retail uses. Hines also made a commitment to the city to construct all 1.3 million square feet of Phase I simultaneously, resulting in a subgrade structure that spans the entire first phase. With those parameters established, the master planning process commenced in July 2005 and was completed in September 2006. All legal agreements and zoning issues were resolved by the end of 2007. Building design began in October 2006 and was mostly completed by the end of 2008.
Funding a Large Project in a Tough Economy
While Hines initially assumed that the project would be financed through a 50 percent equity, 50 percent debt structure — with an anchor office tenant signed before construction began — the state of the capital markets during the Great Recession made it impractical to proceed on that basis. In October 2010, Qatari Diar Real Estate Investment Company (Qatari Diar), the real estate arm of the Qatari Investment Authority, agreed to finance the venture on a 100 percent equity basis, with the understanding that debt might be secured if deal terms became more attractive. Financing was put in place by The First Investor (TFI), a subsidiary of Barwa Bank. Hines and TFI jointly decided to proceed on a 100 percent speculative basis in part because of their confidence in the quality of the office product, belief in the downtown office market, and recognition that a significant supply-side constraint existed within the multifamily housing inventory in the District of Columbia and close-in suburbs.
Designing for Sustainability and Functional Efficiency
A 29,000-square-foot public park on the northwest corner of the site will host live entertainment, art exhibits, and other events to attract a mix of visitors, workers, and residents.
Building design was heavily influenced by a desire to address environmental factors at the site. From the beginning, the goal was to make the project as environmentally responsible as possible. To that end, all buildings were designed to maximize energy efficiency and quality of life for occupants. The entire project was accepted into the U.S. Green Building Council’s pilot program for Neighborhood Development (LEED-ND) in May 2012 and pre-certified LEED Gold. The office buildings were pre-certified LEED Gold Core & Shell in October 2009, and the residential buildings have been designed to achieve LEED Silver New Construction certification.
Another key design decision was to place all loading and delivery functions below grade, which allowed what would have been the “back” side of the buildings to become a pedestrian-oriented retail street front. Street widths and building heights were designed to provide a pleasant pedestrian experience. Formal streets were reintroduced through the site, along with a series of pedestrian-oriented alleyways, to integrate CityCenterDC into the broader fabric of downtown and to connect downtown with surrounding neighborhoods.
Choosing a Construction Team with the Right Experience
The condominiums offer dynamic views, and their rooftop amenities are complemented by unit balconies and private terraces for larger units. The apartments feature rooftop amenities, terraces and balconies, along with other amenities, including concierge service, fitness center, cafe, dog park, and more.
Discrete project and construction management teams were put in place to oversee each component of the project, while senior managers were responsible for ensuring coordination across uses. Hines engaged a general contractor that had substantive knowledge and experience working in the immediate neighborhood, as well as a clear understanding of the site’s geotechnical conditions. In addition, Hines used its established relationships with city officials to communicate with them early and often. The general contractor expedited the excavation and construction processes so that it would have more time to focus on the installation of window wall systems and interiors. While the construction timeline was challenged by a hurricane, heavy wind storms, and an earthquake, it benefited from mild winters and relatively dry summers, which kept construction on schedule.
Stimulating Sales and Leasing in a Competitive, Resurging Market
The half-acre Plaza at CityCenter serves as the Project’s “living room.” The well-proportioned and designed public space will be framed by inviting cafes with outdoor seating and feature a dynamic and inviting central public space suitable for programmed events.
Hines and its consultants developed brand standards — including a logo, font, and color palette — for the project as a whole. In addition, each product type had the flexibility to create tailored marketing plans that fit its needs and the dynamics of the market. Hines used its extensive knowledge of the local office market to reach out to leasing brokers representing prospective major tenants, providing occupancy requirements in line with delivery of the office buildings. In October 2012, the international law firm Covington & Burling LLP signed a 20-year lease as the anchor tenant for 420,000 square feet, approximately 80 percent of the Phase I office space. They will occupy all of One City Center and a portion of Two City Center. In March 2013, national nonprofit American Hospital Association (AHA) signed a lease for approximately 42,000 square feet in Two City Center.
Residential condominium sales efforts began with the launching of a website, signage, and a sales gallery in summer and fall 2012. Sales commenced in November 2012; by March 2013, more than 51 percent of the units in the H Street building were under contract.
The development team is positioning the project’s retail space with “City Life” uses that primarily serve the needs of residents and office workers while also recognizing that convention delegates, hotel guests, tourists and visitors from other parts of the region will seek out unique dining and shopping experiences at CityCenterDC. Restaurants will feature independent, chef-driven concepts that will complement the critical mass of dining establishments already in place in the area. Efforts will be made to create strong co-tenancy among the high-end fashion and specialty tenants to bridge price points.
Hines’ agreement with the city calls for CityCenterDC’s owners to restore and maintain a public park along New York Avenue, NW, and to sponsor public programming in a courtyard set among the four residential buildings. Construction of Phase II — which will include a luxury hotel and approximately 80,000 square feet of additional retail space — is expected to begin in the third quarter of 2014.
The development team has gained numerous insights from its experiences at CityCenterDC, including the following:
Creating shared objectives and win-win scenarios is important. Making efforts early on in the development process to engage local officials, community stakeholders, and team members can help eliminate conflicts and simplify decision making and planning.
Risk can be managed by structuring transactions so that expenditures are made only as successive milestones are achieved. For example, the development team made no material expenditures on design until the District had approved an agreement relating to the disposition of the site and the development; similarly, no material expenditures were made on building design until the District had approved the master plan.
Community relationships can be strengthened by engaging stakeholders early on to identify their priorities — and by continuing, ongoing communication throughout the planning and development process. This, in turn, results in greater community support as constituents take ownership of the project’s realization and success.
From a design perspective, the success of a project relies as much on the spatial relationships among its buildings — and on the vitality of its public spaces and streetscapes — as it does on the buildings themselves. A developer can create significant value by paying attention to this dynamic rather than just maximizing density.