Washington Business Journal: New Apartment Building Set for National Harbor
December 13, 2010
The Peterson Cos. and The Bozzuto Group have formed a joint venture to build 350 apartments atop retail space at the National Harbor development along the Potomac River in Prince George’s County.The $90 million residential project, slated to break ground in the fall of 2011, marks the first rental development at the sprawling 300-acre site and, as Peterson CEO Steven Peterson puts it, secures the “fourth residential food group on the site” after already breaking ground on condominiums, town houses and single-family homes there.
Milt Peterson, the man behind National Harbor for more than a decade, had plans for a high-rise apartment project on a 4.7-acre site three years ago and even signed a deal with a partner. But when the economy soured, those plans fell through and were tabled until this fall. That’s when the elder Peterson, now chairman of the Fairfax company, approached Tom Bozzuto, CEO of Greenbelt-based Bozzuto, another family-owned real estate company, about a partnership to develop and hold the property long term.The team says it hopes to use a 40-year mortgage backed by the Department of Housing and Urban Development, though it has yet to formally apply for a loan. Steven Peterson said talks with HUD for the unnamed apartment project along American Way are preliminary, but positive.
“As Milt would say, this is Chapter 2 of a 12-story book,” he said.The partnership envisions a four-story market-rate project above 25,000 square feet of street-level retail, replacing a ropes course run by Poolesville-based Cavella Inc. Because the vast development still has more room to grow, that ropes course will likely be pushed farther away from the water onto the next open parcel near the planned Children’s Museum.
The majority of the apartments will be one-bedroom and one-bedroom-with-den units, though it will also include two- and three-bedroom units.“We’ve been watching National Harbor for a long time and how successful it has become,” said Toby Bozzuto, president of Bozzuto Development Co., which recently used a HUD mortgage at its 496-unit Arbors at Arundel Preserve development in Hanover, Md. “The spirit of the deal is that the Peterson and Bozzuto families own it forever.”
Although National Harbor and the on-site Gaylord National Hotel and Convention Center have been in the works for more than a decade, the first residential units weren’t completed until 2008. So far, the project’s 423 condominiums are 75 percent sold, while the planned 87 town houses and four single-family homes, built by Chantilly-based Integrity Homes, are 40 percent sold.Peterson said building a solid supply of condominiums initially was key to gaining momentum for the larger National Harbor project, as well as an on-site apartment rental building. Strong condominium sales at One National Harbor and Fleet Street Condominiums, he said, created a pool of residential stakeholders at National Harbor that would give renters confidence.
To date, Peterson Cos. has developed about 4 million square feet and $2 billion worth of projects at National Harbor.As with any new apartment development, there may be challenges in signing residents. At 3.9 percent, suburban Maryland’s apartment vacancy rates were higher than neighboring D.C.’s 3.6 percent rate and Northern Virginia’s 3 percent rate in the third quarter.
Suburban Maryland’s 36-month pipeline of 5,148 new units, however, is far lower than that of Northern Virginia’s 8,568 units. In D.C., the 36-month pipeline for new apartments is at 5,079 units, according to Alexandria research firm Delta Associates Inc.