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WASHINGTON, DC-The National Capital Revitalization Corp. and Morgan Stanley Real Estate's MSREF US have entered into a three-year, $150-million public-private equity partnership. The JV will develop properties and assets NCRC owns throughout the district. NCRC expects that the investment will yield between $700 million to $800 million in total investments including debt.
There are three projects initially targeted by the partnership. The first will be Skyland, an 18-acre site in Southeast Washington that is currently a hodge-podge of 1950s-era vintage strip malls that has had about 16 different owners and 40 different tenants over the years. The redevelopment of this area, estimated to be roughly $200 million, will likely have a strong retail focus. NCRC development executive Kevin Warner tells GlobeSt.com that there is a potential for major anchors to be included in the project. "Across the street is a Safeway-anchored retail center that is one of the best producing in the area."
The other two projects are mixed-use, retail-entertainment developments that Warner and NCRC president and CEO Anthony Freeman say would unlikely have been considered by a private developer. "That is what is so unique about this partnership," he tells GlobeSt.com. "You have a significant Wall Street player investing at the portfolio level in a community with a quasi government organization. On the project level this happens quite frequently, for large projects, for example, such as a stadium. But we have partnered for the longer term, and will invest smart money in smart projects. It is the first of its kind."
The Fifth and Eye Street development, a $180-million project, is a 20,000-sf parcel very close to the Convention Center that will include retail, entertainment, hotel and condo developments. Freeman says NCRC is currently in conversations with a number of developers and retailers. "Only a public-private partnership could have put this mix of uses together," he says. "These are tough deals to negotiate."
The third project, a 20,000-sf parcel located at Fourth Street Southwest that is projected to come in at an estimated $140 million, will also be a mixed-use development. "We are looking to create a new magnet for development in the Mt. Vernon Triangle area," Freeman says.
"All three of these projects will be good financial investments for our equity partners," Warner adds. The partnership will also focus on affordable housing initiatives as well. Morgan Stanley has said the $150 million is a starting point for the partnership and will commit additional funds as more projects are identified, according to Warner. NCRC will also participate with Morgan Stanley in seeking out debt partners.
A buyer of New Market and Low Income Housing and Historical Preservation tax credits, Morgan Stanley is planning to leverage the credits available from these projects, Freeman also notes. Meridian Hill Advisors LLC, a District-based financial consulting firm assisted NCRC in structuring the deal.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
