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From: Chris R. Otten <crotten2@gmail.com>
Subject: [1617 U Street List] When Will We Stop Selling Off Our Future? Re: [adamsmorgan] $146M Loan For Donatelli's Columbia Heights Apartment Complex Hits Special Servicing
To: adamsmorgan@groups.io
Cc: “Nadeau, Brianne K. (Council)” <bnadeau@dccouncil.gov>, chenderson@dccouncil.gov, kmcduffie@dccouncil.gov, rwhite@dccouncil.gov, abonds@dccouncil.gov, bpinto@dccouncil.us, pmendelson@dccouncil.gov, jlewisgeorge@dccouncil.gov
When Will We Stop Selling Off Our Future?
How many times must we watch public land and air rights handed over by the Mayor and Council, only to be exploited by real estate speculators in pursuit of immense profits? These public land deals—complete with tax abatements and blessed zoning entitlements—quickly enrich fly-by-night land-hucksters peddling the illusion of Inclusionary Zoning (IZ) units and more “market-rate” housing. Meanwhile, they prop up the mercantile class (bankers) at the expense of our public assets, increase displacement pressures, and make a mockery of the basic human right to safe, dignified shelter.
The private real estate market, built on collusion and profiteering, cannot solve the affordable housing crisis it continues to fuel.
Decision-makers with a duty of care to the public must recognize that we cannot build our way out of this crisis with more luxury housing and the woefully inadequate, some say failed “affordable” IZ program.
We need bold policy shifts to decommodify housing, stabilize costs, and ultimately bring them down.
Social housing—a proven model in cities worldwide—offers a real path forward. It’s time to end this cycle of public giveaways and start systemically investing in structurally sound and effective housing policies that prioritize DC's people over some private-developer's profit margins.
The story below is yet another painful reminder of why DC's posture must change. Let’s end the giveaways once and for all.
Chris Otten, SHIMBY
DC's entire housing policy foundations, especially affordable, are built upon the assumption that this project was a run-a-way success. This project receive basically free city land, a tax abatement bailout, allowed to renege on community benefits requirements including affordability, and a zoning free hand.
I was just at a National League of Cities event where everyone was applauding this as the future of housing and public private partnerships.
Let the bailout begin.
William
$146M Loan For Donatelli's Columbia Heights Apartment Complex Hits Special Servicing
The developer of a 373-unit apartment building next to the Columbia Heights Metro station has yet to pay back its loan after it matured in July.
At least two securitized pieces of Donatelli Development’s $146M loan on the Highland Park building at 1400 Irving St. NW were transferred to special servicing in October, according to December servicer commentary in the Morningstar Credit database.
Donatelli didn't respond to a request for comment. The special servicer, CBRE Loan Services, declined to comment.
The property was refinanced for $146M in July 2022, and two pieces of that loan totaling $74M and $30M were sold into commercial real estate collateralized loan obligation pools.
The property was 85% occupied when the loan was issued, and it has since increased to 95%, but it appears the landlord hasn't hit targets for rent increases. The issuer projected the net operating income would reach roughly $9M at stabilization, but the property's latest reported NOI was $7.2M, according to Morningstar.
“It looks like it’s not hitting its plan, and trying to refi in this environment but with this amount of debt was always going to be a challenge,” Morningstar Credit Head of CRE Analytics David Putro told Bisnow.
The 18K SF of ground-floor retail is occupied by Z-Burger, a mediterranean restaurant, a coffee shop and a Lou’s City Bar. The Wawa at the property closed in June 2022, but the company has a corporate guarantee to pay the rent through 2034, according to a Morningstar presale report on one of the loan pieces.
The presale report said Donatelli planned to “increase the multifamily rents, stabilize the residential occupancy, and back-fill the dark Wawa commercial space.”
Highland Park was appraised at $204M when the loan was originated. The property doesn't appear to have any more recent appraisals.
Donatelli completed the project's two phases in 2009 and 2013. The development cost was $70M, according to D.C.'s Office of the Deputy Mayor for Planning and Economic Development, which said 20% of the apartments were reserved as affordable.
The neighborhood surrounding Highland Park has had a few notable closings over the past year. The CVS across 14th Street closed last February, citing crime as the reason. Across Irving Street from the property, the 540K SF DC USA mall saw Petco close last week, while DSW is also set to shutter this month, Popville reported. They follow Five Below’s closure at the mall last January. Just over 81K SF at DC USA is being marketed on LoopNet.
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