The plans for a 5M SF development in Northwest D.C., one of the largest projects envisioned in the city, have been scrapped.

The Armed Forces Retirement Home announced Thursday it terminated the solicitation for the mixed-use redevelopment of an 80-acre portion of its campus four years after selecting Urban Atlantic and Madison Marquette to lead the project.

The developers were caught off guard Tuesday when AFRH notified them that it was terminating the agreement, Urban Atlantic Managing Partner Vicki Davis and Madison Marquette Chief Operating Officer Daniel McCahan told Bisnow Thursday afternoon.

McCahan said they are “extremely disappointed” by the decision to terminate the deal, and Davis said they don't agree with AFRH's reasoning, which involved economic conditions.

“We think this development is immediately feasible,” Davis said. “We think not going forward is a terrible missed opportunity for the veterans who live there, most of whom are low-income seniors and don’t have a lot of housing choices. This development was to support them.”

The AFRH's announcement said the project was facing “tough economic conditions,” pointing to rising interest rates, inflation, supply chain challenges and a struggling office market in D.C.

“It was clear that the financial benefit to the Home was now significantly diminished and the terms of the long-term lease were riskier to AFRH,” AFRH Chief Operating Officer John RisCassi said in the release.

“Additionally, AFRH had recently re-phased the effort in an attempt to make it more financially viable, but the economics and other negotiation issues could not be overcome,” he added.

Davis said her team has progressed on and delivered major projects on time even during times of uncertainty, such as the pandemic and this period of historically high interest rates.

“We, having done this for our careers, and our companies do this, were very committed to making this happen,” McCahan said.

Davis said AFRH gave the development team the same reasoning on Tuesday that it included in the announcement and cited “internal issues,” but the decision-makers “were unwilling to explain or unable.”

“It would be our hope that they would undo the termination and rescind it so that we can figure out what the issues are on their end, which they have been unwilling to share, so that we can move forward together for a long-term partnership,” Davis said.

Thursday's release said this might not be the end of the road for the efforts to develop the property, noting that “while the decision represented a setback,” AFRH is actively reassessing its strategy regarding the property.

“The agency remains open to future collaborations and is dedicated to finding solutions that ensure its operational continuity without compromising resident care and services,” the release says.

Plans to turn the 80 acres of underutilized land on the campus — near the intersection of North Capitol and Irving streets NW — into office, residential, retail, hotel, medical, and research and development facilities have been in the works for over 15 years.

The decision to terminate the development comes just over a month after the D.C. Office of Planning filed an application to rezone the property into seven specialized zoning designations. That move came a year after the last public update on the slow-moving project.

AFRH is down the road from the shuttered McMillan Sand Filtration Plant, where the District is partnering with Jair Lynch, EYA and Trammell Crow to develop a mixed-use district spanning 25 acres.

“We are disappointed in the recent turn of events with the Armed Forces Retirement Home redevelopment plan,” a spokesperson for the D.C. Office of Planning told Bisnow in an emailed statement.

“The District welcomes mixed use development featuring affordable housing, retail and new civic spaces as a complement to our multimillion-dollar investment at the former McMillan Sand Filtration Site and we look forward to opportunities to work with AFRH in the future,” the spokesperson said.

Urban Atlantic and Madison Marquette were selected as developers in 2019 and were to execute a ground lease for the property, designed to provide income for AFRH, as it is an independent federal agency but doesn't receive dedicated federal funding.

The firms are two of the highest-profile developers in D.C. Madison Marquette is best known for its partnership to build waterfront megaproject The Wharf. Urban Atlantic has been involved in big developments including Parks at Walter Reed, the Arthur Capper/Carrollsburg redevelopment and the mixed-use project at the New Carrollton Metro station.

UPDATE, OCT. 26, 5 P.M. ET: This story has been updated with a comment from a D.C. Office of Planning spokesperson.