The Next Mini-City Coming to MoCo
A new Chinese-backed developer and a relatively new Bethesda real estate firm have partnered to buy a massive plot of land, and they have ambitious plans for a "mini-city" at the end of the Red Line.
1788 Holdings founder Larry Goodwin and Lantian Development CEO Brian McLaughlin chatted with Bisnow at 1788's Bethesda office (along with their furry office co-habitant) to discuss the 31-acre parcel they just bought. They're planning on investing up to $500M for a multi-phased, mixed-use development with office, residential, hotel and lots of retail. Right now, there are seven office buildings on the site, many of which are occupied. But 1788 and Lantian paid owner TA Associates $50M so they can start developing now, and try to compete with giants like Federal Realty Investment Trust and Westbrook Properties in Montgomery County with Pike & Rose and Crown. That’s not necessarily what any company would do. “The timeline of this opportunity doesn’t fit the lens that many institutions look at opportunities through,” Brian says. “It’s not at the end of its useful life.”
The property went to market in early 2012 and didn’t sell, Larry says. The wounds of the recession were too fresh. 1788 looked at the property then, but, seeing a more fertile mixed-use development landscape, made an off-market offer to TA in spring 2015, and brought in Brian to JV. Lantian is a year old after forming with $100M from a group of private Chinese investors. But it’s not Brian’s job to just park that money and collect rent; he wants to build big projects with vision. “We look for projects with a compelling and interesting story,” he says, “and to finish that story, we look for the right partners.”
Larry, a former Goldman Sachs manaaging director, founded 1788 Holdings in 2010. It is currently developing the Lauren Condominiums in Bethesda (the one with the $10.5M penthouse, rendered above) and the Estate Condominium at Quarry Springs in Potomac (equally swanky). “DC’s got an incredible amount of wealth, and no one is building residential condos of the size these [well-off] guys want,” he says. “The wealth is there, surf it.” But while the as-yet-unnamed complex a mile from the Shady Grove Metro station seems like a departure for an ultra-luxury developer, Larry disagrees. “The best way to compete is don’t compete,” he says. The area is one of the largest biomedical office markets in the country, the average resident income is well over six figures, and the population is quickly veering toward empty nesters who want walkability almost as much as Millennials do. “This offers us the opportunity to sell something the audience wants, because there are no other mixed-use projects in the area.”
Bisnow ventured up I-270 this week to scout out the location. The office park is vast and, as Brian points out, “there’s not an eatery anywhere on the 31 acres.” Gables Residential completed construction in July on the 551-unit Gables Upper Rock apartment complex across Choke Cherry Road, and none of the four buildings have ground-floor retail. A Home Depot-anchored shopping center is across Shady Grove Road, but that’s a thoroughfare no one is going to want to walk across for lunch or dinner. Other than Westbrook's massive Crown development on the other side of 270, “there are no mixed projects anywhere nearby,” Larry says. The development master plan has to be approved by the city of Rockville, a process Larry expects to take about 10 months, after which site planning can begin.
The first shovels should be in the dirt in early 2017. But the first phase will only knock down two office buildings, and redevelop the space with a grocery store, 30k SF to 50k SF of restaurants and shops, apartments, an office building, medical office and a hotel. Five of the buildings will stay for now, and over the next three months the JV will be renovating them, and it has retained Avison Young to try to fill them with new tenants. A key goal, Brian says, is to keep every tenant, many of whom have been on site for 20 to 30 years, as the office park transforms. The whole development will take five to 10 years to complete, maybe more, and the latter phases are harder to predict for what goes in. Larry says the area is “under-hoteled,” so it’s likely two hotels will be somewhere on the site. There figures to be plenty of medical offices as well. “The door is open,” Brian says. “We’re not going to pretend we know the right mix for the whole site at the moment. It will be decided by who wants to be here.”
Next for Lantian is the development of two even bigger parcels in Prince George’s County. The company owns a 100-plus acre site two miles from National Harbor, and it bought the former campus of Washington Bible College, a 60-acre plot. Brian is planning to develop a "walkable housing community" on the 100 acres and an international learning campus where WBC once stood. Larry expects to open the Lauren next year and is scouting sites in DC for his next big-ticket condo project. “We want to do a really off-the-charts project,” he says, and he’s in talks with a seller already.