Mill Creek Residential senior managing director Sean Caldwell acknowledges that multifamily capital is more selective in today's environment. But after breaking ground on two major apartment projects this month, the Mill Creek team seems to have found a successful formula for how to launch new residential construction in the current climate.
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Yesterday, Mill Creek broke ground on its Italian Embassy Residences, a project to convert the former embassy, coupled with a new high-rise, into 134 luxury apartment homes. On Oct. 11, the developer broke ground on Phase 2 of The View at Waterfront, which will feature 276 apartments and 3,900 SF of retail.
Sean, pictured on the right, is confident both of these projects will succeed in the current climate because they are quality assets in core locations with appropriate financing.
"Great sites, appropriate product, platinum sponsorship with our valued capital partners is how we sustain inevitable cyclical turns," Sean tells Bisnow. "Our group spends more time than ever focusing on how and where we should be placing our human and financial capital."
The projects are financed from different lenders, with Helaba Bank providing construction debt and Rockwood Capital providing equity for the Embassy, while John Hancock provided debt and equity for The View at Waterfront. While Sean couldn't share the terms of the deals, he says they were both financed "conservatively," which will allow them to focus on the long-term success of the assets.
"One common element is our equity capital partners have very long horizons," Sean says. "While they will look at today’s economics, they are primarily focused on the longer-term view of 20 years or beyond. If we hit a temporary dip, we will work our way through it, but over the long haul these will be great investments for Mill Creek and our partners."
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Both of the projects also have some unique elements that can help differentiate them in the market.
For the embassy residences project (rendered above) Mill Creek is redeveloping the old Italian Embassy, which was built in 1925 and has languished for the last 15 years, into luxury, townhouse-style residences and building an adjacent nine-story high-rise. The challenge was to preserve the neo-Renaissance architecture of the embassy building while designing the high-rise to be consistent with the existing style.
"It's about attention to detail, we wanted to make sure the two buildings complemented each other in both the exterior and interior design," Mill Creek project developer Joe Muffler, in the center in the above picture, says. "We didn’t want to have a historical structure juxtaposed with a modern high-rise addition, with limited cohesion between the two buildings. Our goal was to create a singular, luxury community that incorporates contemporary elements in a classical environment."
The townhouse units in the embassy building will be high-end, designed with an eye toward empty nesters, while the high-rise will have a variety of unit types aimed at all demographics, including affordable housing.
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The View at Waterfront's Phase 2 also has the challenge of incorporating existing architecture. The two historic neighboring buildings were designed by legendary architect I.M. Pei.
"We did a great job of not trying to mimic it," Sean says. "We tried to complement it by saying these two buildings should co-exist, one in the '50s and one in the new millennium."
In order to keep the appearance consistent with the Pei buildings, and to appease anxious residents, Mill Creek elected to build less density than they could have. The project will be composed of two seven-story buildings totaling 276 units.
"Current residents and the neighborhood association expressed concern about density and building two high-rise structures that could tarnish the integrity of the existing community," Mill Creek vice president of development Josh Posnick, who will speak at Bisnow's Future of Southwest DC and The Wharf event on Nov. 10, says. "We listened and collaborated with the community to design complementary buildings that respect the context and scale of the neighborhood."
The project is also unique in the materials of which it will be composed. Following recent regulatory changes, the buildings will be five stories of wood frame atop two stories of concrete, the first of its kind in the District.
The View at Waterfront sits just steps from The Wharf, the $2B, 3M SF mixed-use development on the waterfront.
"We are excited to have had the opportunity to collaborate with this passionate community and contribute to the resurgence of Southwest DC," Josh, standing on the left in the first picture says.
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