The Ultra-Posh Condo Comes to Washington
A Complex Rich in Amenities Rises on the West End
By Judith Evans
Washington Post Staff Writer
Monday, April 12, 1999
You only need a couple of bedrooms, but with a pleasant view - say of the Potomac at Georgetown, where on cloudy morns the water turns the gray-green color of new bills. And a reasonable amount of space - 1,900square feet, almost big enough for indoor Wiffle ball, once you move yourcollection of Ansel Adamses.
You'll want a gym nearby (100,000 square feet) and movie theater (a multiplex), perhaps a hotel next door for when the house guests outnumber the Roche-Bobois couches (it's a Ritz-Carlton). Reserved parking outside for the BMW, of course.
Look no further. Millennium Partners, a creation of New York developer
Christopher Jeffries, is building just such a high-end living quarters
for Washington's wealthy. At the site of the old city incinerator plant
in Georgetown, the company will spend $125 million to build 30 extravagant
residences with those unobstructed views and other opulent amenities.
Construction begins this summer.
A second project - in the District's West End neighborhood, where the company bought nearly an entire city block for a $260 million complex of 200 condominiums, a swank 300-room Ritz-Carlton hotel and a huge gym - will be completed next year.
Prices start at a cool half-million, but Jeffries is betting that Washington
holds enough city-loving high-livers to fill his playgrounds and then
some. Although, truth be told, Washington has never had Fat Cat Rows of
the sort found in New York (Fifth Avenue, Society Hill, Russian Hill),
Boston (Beacon Hill, Back Bay) or Chicago (Michigan Avenue Mile, Gold
Coast).
"There has been a much larger aggregation of wealth at all age levels in the population," Jeffries said in a recent interview, "and the premise is that that wealth enjoys the cities more than the generation before."
And, as people like to take their luxury with the right labels, brand names are associated with these condo complexes. Millennium has alliances with Reebok to manage the West End gym, Sony to run the theaters at the Georgetown site and Ritz-Carlton to manage the two hotels, and the projects will bear the Ritz name. "That branding is a very powerful item in the sale of luxury consumer goods," Jeffries said. "This is a demographic group that is mobile, that can afford what it wants. And it wants the best."
Millennium Partners has been able to develop its large mixed-used projects
- Jeffries has developments underway in five other cities, too - with
no bank financing. The company's three partners have been sufficient for
its needs - deep-pockets international financier George Soros; Goldman
Sachs & Co.'s real estate investment unit, the Whitehall Fund; and
a
consortium of German insurance companies.
Millennium says it is taking advantage of a robust U.S. economy and the greatest stock market boom in history. The way people, especially baby boomers, buy property has dramatically changed: With swelling stock portfolios, the baby boom generation feels richer and is spending like it, often in the very places a previous generation abandoned for the 'burbs.
But even Jeffries acknowledges that the lavish spending can't last forever. After all, the fortunes of real estate are tied to the strength of the economy. And economic experts agree that a stock market that acts as if it's on steroids will one day run out of energy.
"We're not building for the next generation or to leave this company for my son," Jeffries said. "This is an opportunity that will not exist if you do these projects sequentially, because if I do Washington and then go to San Francisco, by the time you get there the market will have turned or somebody else will have done it first."
The two projects will give Washington its most significant number of new opulent housing units since the Watergate opened in Foggy Bottom nearly three decades ago. Although the Washington Harbour luxury condos in Georgetown were built in between, they provided only 36 units with stunning views of the Potomac River.
Local real estate brokers are anxiously waiting for Ritz-Carlton, which will market the condos for Millennium, to open its sales office this month. They say there is pent-up demand for oversized condos in buildings where residents can pay to have the Ritz-Carlton chef help plan their dinner party menu, or can conveniently walk around the corner to their 100,000-square-foot gym.
Lawyers, lobbyists, foreign dignitaries, suburban nerds and empty nesters
all have made inquiries about both projects, brokers said. At the West
End site, the hotel company said the two huge billboards emblazoned with
the Ritz-Carlton lion's head logo have generated more than 1,000 phone
calls from people who have asked to be notified when the units are available
for
sale.
"There is a big demand for big space," said Tom Murphy, an agent in the Georgetown office of Pardoe Real Estate-ERA. "Why did people go to the Watergate? They were corporate people, diplomatic people who are looking for image as much as housing. The Ritz name is drawing some people on an image basis."
West End resident and commercial real estate broker Bill Miller, who
has been house-hunting with his wife, said he would consider one of the
Ritz properties because condos already on the market aren't large enough
for his family. At the same time, the senior vice president in the Washington
office of Jones Lang Wootton said his family isn't yet ready to give up
the
convenience of urban living.
"It's cool to live in downtown and walk to work," Miller said. "What we want to buy is a two-bedroom place where we can bring up our son and be in downtown. We're willing to be house poor."
Murphy and other real estate agents base their optimism on the sales activity in Foggy Bottom for one- and two-bedroom units in high-end buildings such as the Emerson House, the Westbridge and the Metropolitan.
So far this year, nine properties have been sold in the West End area,
with an average sales price of $224,244, according to figures compiled
from the Greater Capital Area Association of Realtors. Only one of those
units had three bedrooms. But over the past two years, more than 50 D.C.
condos have been sold for over $350,000 -- with seven of them selling
for
more than $750,000, records show.
"We can absorb 200 units. . . . There is wealth in Washington,
[though] maybe not as great as in New York or Los Angeles," said
Terry Robinson, an associate broker with AGS Realty in Georgetown. The
West End project, she said, "was just waiting to happen. It was absolutely
crazy to have a prime piece of real estate languishing like that in a
major city. It
always takes an outsider to look in and realize what you're sitting on."
But Jeffries wasn't convinced initially that Washington could support luxury housing.
The developer said he pondered whether Washington lacked new luxury apartments because people didn't want to spend millions of dollars to live in the city or because no one had built any units.
"That simple chicken-and-egg proposition was something that we struggled with in Washington for some period of time," Jeffries said. "To give you a profile of the people we're talking about, they almost all have two homes."
Ultimately, he decided that "Washington is a great market for that because so many people are doing something else or coming from someplace else that the back yards and the obligations that go with homeownership are no longer wanted."
It took three years to acquire the land for the West End project - the Georgetown site was bought in a bidding process -- but the company still faced some peculiar design challenges. City regulations restrict the height of new apartment buildings to 110 feet. That has proved more than a nuisance for Millennium Partners, which believes that the distinguishing feature of apartments is always height. In most cities where it has properties, they're the tallest apartment houses there.
The height restriction also makes it tough to create floor plans. It results in "long and interminable corridors," Jeffries said. To get around the problem, Millennium Partners will build two separate lobbies for each of its condominium buildings so that no corridor is longer than the ones in units built in New York and other cities.
In solving one problem, Millennium Partners discovered that it had created another: The interior courtyard between the hotel and apartments at the West End project is larger than a football field. Now the company plans to use the extra space for a multimillion-dollar private park with fountains and ponds.
Meanwhile, at the Georgetown incinerator site, the Ritz-Carlton lobby will have to be wrapped around the smokestack, a designated historic landmark. The hotel company has decided to place a restaurant in the old incinerator building, too.
Another challenge in Washington is to lease the retail space that will
be a part of both complexes, Jeffries said. Combined, the projects will
have 70,000 square feet of space for shops; he hopes to fill it with major
retailers carrying a wide range of expensive products such as clothing,
books and groceries, the sort that might want to be located in the tony
West End and Georgetown neighborhoods.
"The most interesting phenomenon to me is that people get more
money forthe office building spaces than they do for the ground floor,"
Jeffries said. "I want retail in this building, and assuming the
apartment sales goes as we anticipate, the retail is relatively unnecessary
from a return [standpoint]. All the profit is in the hotel, so . . . we
will subsidize a retailer to have them
come."
Politicians here swiftly approved Millennium's plans, largely because
the company is aligned with Eastbanc Inc., the president of which, Anthony
Lanier, has developed several retail projects in Georgetown and has a
strong relationship with the community. To avoid protests from residents,
Millennium decided against seeking a variance to construct taller apartment
buildings at both sites, a company spokesman said.
"We knew the likelihood of a variance was pretty slim," the spokesman said.
After listening to concerns by Georgetown community leaders, Millennium
agreed to retain and refurbish three houses on the incinerator site. Before
construction, the company plans to move the houses to a church parking
lot across the street. Once the project is completed, the homes will be
returned to the site, the developer said.
Although not criticizing the Millennium projects, some community leaders oppose changes in zoning laws over the past decade that allowed for more mixed-used developments in their neighborhoods.
Maria Tyler, an advisory neighborhood commissioner from the West End, said projects like Millennium's increase traffic and erode the culture of the neighborhoods.
"The mistake was done way back and now it's compounded," Tyler said. "Developers are out to make money. And for developers, it's more profitable to get the land zoned for commercial use. . . . It is a very livable area, but it has been destroyed by the zoning regulations."
The flip side to that is the dollar signs conjured up by mixed-used
projects. City governments typically make more money off the spending
habits of baby boomers, Millennium's principal target, than they pay out
in services, economists said. Their spending at clothing stores, restaurants
and other establishments helps generate hundreds of new jobs. The wealthy
also pay
higher income and property taxes.
"Bringing in rich folk is good for the economy," said Stephen Fuller, professor of public policy at George Mason University. Fuller also did the research for Millennium Partners' economic and fiscal impact study for the West End site. "The nicest part is, this facility places no demand on the city for public services."
Fuller estimates that the West End project alone will contribute nearly $64 million a year to the city's economy. The condos, parking garage, health club, hotel and retail shops will generate 609 full-time jobs, he said. The condo residents will pay nearly $4 million in combined property taxes and $2.4 million more in annual income taxes.
More important, Fuller said, the two new Ritz-Carlton hotels will "expand the hospitality sector beyond the folks who are walking up and down the Mall. This will be a real asset to that end of the market."
Jeffries is gambling that his projects mark a turning point for residential development in Washington. "We believe that Washington real estate has been asleep for the last 20 years and that Washington is going to be the next great renaissance city in the United States. That's our belief."
What Buyers Will Get
Average unit size: 1,900 square feet
Average one bedroom: 950 to 1,000 square feet
Average two bedroom: 1,400 square feet
Average two bedroom and den: 1,800 square feet
Average three bedroom: 2,400 square feet
Duplex/penthouses: 2,200-6,000 square feet
Amenities:
Prospective buyers will be able to make changes to apartment layouts because the units will be sold during the construction process. For example, a buyer may choose to have a wall removed to make a room larger or more open.
Plans call for top-notch apartment finishes, including mahogany floors, granite window sills, high-speed Internet lines, multiple telephone lines, top-of-the-line kitchen accessories such as Sub-Zero refrigerators.
What Buyers Will Give
Anticipated prices are $500,000 to $3 million
SOURCE: Millennium Partners