After buying a 31-acre site along Shady Grove Road in Rockville last year for $50M, 1788 Holdings and Chinese-backed Lantian Development had discussed plans to build a 2M SF "mini-city." The JV has since made significant changes to the original plan, and now plans to submit a preliminary project plan in mid-November.
The new plan, with the working name Shady Grove Neighborhood Center, would divide the site into two distinct parcels, 1788 founder Larry Goodwin, above, tells Bisnow. On the front 10 acres next to Shady Grove Road, the developer plans to build a 1.1M SF mixed-use development with 600k SF of apartments, 200k SF of office, 100k SF of retail and a 100k SF hotel.
On the remaining 21 acres, the JV plans to build 280 for-sale townhouses. Larry says these houses will be a more natural fit with the adjacent King Farm village, and will be easier for neighboring residents to support.
"It made it less obtrusive feeling to the neighbors," Larry says. "It looks like an extension of King Farm."
The revised plan will also shorten the development period from 10 to 15 years to seven to nine. Larry says shortening the development cycle makes the project more economically feasible. He expects the mixed-use portion to cost about $480M, and the total to come to about $600M.
After the developers submit the plans, Larry expects it will take 12 to 18 months to complete the approval process, after which he hopes to begin development right away. He says he will have the townhouses ready to break ground upon approval.
The mixed-use portion may take a bit longer, as the leases at the current office buildings don't allow demolition until Q1 2019. He plans to start the mixed-use portion in the middle with retail and is in talks with grocery stores to anchor the development.
The order of the office, multifamily and hotel components depends on where the demand is at the time. Larry says he has already gotten some interest from biotech companies, which have a strong presence in the area, and he believes they have a good chance of signing one as an office tenant.
We caught up with Larry at Quarry Springs, one of 1788's luxury condo communities in Bethesda. The living room above is the Adams unit, a 3,690 SF, three-bedroom, 3.5-bath condo where Billy Joel would feel right at home.
In a JV with IHP Capital Partners, 1788 delivered the 50-unit Phase 1 last year. They have 20 units sold or under contract, and Larry says they are in the process of writing another three contracts, bringing them close to their goal of 25 sales by year-end.
This week, 1788 announced it secured $50M in refinancing from a subsidiary of Apollo Commercial Real Estate Finance. Larry says there had been concerns after sales were slow out of the gate that they wouldn't have the capital to support more sales, and this deal helps secure confidence.
"This amendment provides the venture with the financial flexibility necessary to meet all of its financial obligations throughout the sales phase of the project," 1788 said in a statement.
The units range from 2,200 to 4,500 SF. The larger ones have sold for $3.9M to $4.1M, around $1,150/SF. The smaller units have gone for about $1M and the average sale price has been $800/SF. Larry says they have nearly sold out of the two-bedroom units after lowering the price.
"People were commenting on how much they loved them but they weren’t buying," Larry said. "We dropped them to mid-500s (per SF) and then, boom."
The kitchen above is in the Georgetown unit, a 3,400 SF, three-bedroom, three-bath condo.
"It's like buying a custom home," Larry says. "The rooms are really generous, they feel like private homes, not like condos."
This is the site behind the existing Quarry Springs buildings, where Phase 2 will sit. The JV plans to break ground on the 47-unit Phase 2 in Q2 2017. Larry says Phase 2 will have similar unit sizes and pricing as the first 50 condos.
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