A slowing economy and the collapse of credit markets have halted the much-anticipated development of retail, restaurants and other projects in the area around the Washington Nationals’ new stadium in Southeast.
The publicly financed ballpark is considered the centerpiece of a broad effort to redevelop a long-neglected industrial area along the Anacostia River. Officials remain optimistic, but the change in the economic climate over the past six months likely will delay the completion of many key components of the redevelopment plans.
After a full season of baseball at Nationals Park, financing for many projects in the so-called “Ballpark District” has become difficult to obtain, and those buildings already under construction are likely to open without tenants.
Along M Street Southeast and to the east and north of the ballpark, shovels have not hit the ground on several vacant plots. Plans for new office buildings, including 250 M St., 401 M St. and 1111 New Jersey Ave., are on hold while developers who once were able to build without a single signed tenant now must show a large stack of executed leases in order to obtain financing.
“Until you’re getting your office building 70 percent leased up, you’re not moving forward,” said Michael Stevens, executive director of the Capitol Riverfront Business Improvement District.
Getting those leases has become more difficult as the economy slows. Existing buildings, including Lerner Enterprises’ 20 M St., largely have sat empty since their construction. Other projects, such as Monument Realty’s 55 M St., will be erected without many tenants in place.
“With such a freeze-up of the credit markets, a lot of office tenants are staying put,” Mr. Stevens said. “Very few law firms, professional services [companies] and lobbyists are relocating because it’s just too expensive to do.”
The struggles of office developers may not directly impact baseball fans, but the lack of new workers in the area has slowed the development of the retail and restaurants that fans are eager to visit on game days.
The stalled project most noticeable to fans is at Half Street Southeast between M Street Southeast and Nationals Park.
Monument plans 340 condominiums, a boutique hotel and 50,000 square feet of retail just one block from the stadium, but work on the project is on hold because of the difficulty of borrowing money.
Like most developers, Monument found financing hard to secure beginning this summer, and the problems were exacerbated by the bankruptcy of Lehman Brothers, a major financing partner.
Monument Vice President Russell Hines said the financing difficulty is not because of pre-leasing requirements but rather demands for larger amounts of collateral on loans.
Lenders once were willing to finance 75 percent of a project with only the project itself as collateral. Now, however, companies ask developers to put up additional assets to back the loan, even for just 50 percent financing. Monument has not even pursued financing in recent weeks, Mr. Hines said, because the effort likely would prove fruitless.
“There’s not a lot of active discussion right now,” he said. “The last month has been kind of a dead zone.”
Mr. Hines declined to say how long the Half Street project has been delayed. But he said he expects credit markets to remain unfavorable for perhaps a year and construction to take at least two more years.
Monument, however, is further along on its Half Street project than fellow developer Akridge, which recently acquired the rights to build on the west side of the corridor. Akridge had been embroiled in a dispute with Monument over the development rights on Half Street, and the company still is in the planning stages of a 700,000-square-foot mixed-use project there with no stated date for construction to begin.
To the east of the ballpark, the economy and credit crunch also have affected the pace of Forest City‘s “The Yards” project, which calls for the reuse of several buildings at the site of the old Southeast Federal Center.
The company pushed back the opening of the Foundry Lofts condominium complex to spring 2010 from the end of 2009, and officials are still seeking restaurant tenants to fill the old Boilermaker Shop portion of the development.
Meanwhile, development of office space at 401 M St. SE can’t start until tenants are in place.
“[Lenders] want to see leases in hand,” Forest City spokesman Gary McManus said. “They want to see executed deals.”
Still, signs of life are evident, particularly in residential development.
The Velocity Capitol Riverfront Condos at 1001 First St. SE are expected to generate 200 new units by next summer. JPI’s 909 at Capitol Yards building, with 237 units, is scheduled to open on New Jersey Avenue in the spring.
EYA’s Capitol Quarter, at the site of the former Capper/Carrollsburg public housing complex, will be completed early next year. Although sales are not nearly as brisk as they were a year ago, development officials said, they are excited by the nearly 3,000 residential units that will be added to the area in the next 12 months.
“We’re very pleased with the residential market,” Mr. Stevens said.
Elsewhere, city officials recently approved zoning for a mixed-use project at the site of the Florida Rock cement-mixing plant. The timeline for construction of the project is unclear, but the adjacent Diamond Teague Park is expected to open in time for the Nationals’ Opening Day and include a pier to accommodate water taxi service. Meanwhile, Forest City and the District were expected to announce Wednesday plans for a 5.5-acre park along the Anacostia River between Nationals Park and the Navy Yard.
Officials also said they are hoping for an influx of residents after the Nov. 4 elections brought on by changes in the White House and on Capitol Hill that could draw new staffers looking for housing.
“Nobody’s abandoning this area,” Mr. Hines said.