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OZ Financing Propels New Projects On 66-Acre D.C. Campus Despite Rising Interest Rates

The Parks at Walter Reed, a 66-acre campus with an anticipated 3.1M SF of development, is about 70% completed or under construction.

New projects have continued to move forward on the campus in part because of an opportunity zone designation that has kept the development attractive to investors even amid a challenging economic environment, said Caroline Kenney, managing director of public-private ventures at Urban Atlantic.

Caroline Kenney of Urban Atlantic speaks at a groundbreaking ceremony for The Reynard and Aspen Square, two multifamily projects on The Parks at Walter Reed campus, on Sept. 15, 2022.

"Has it been tougher to get deals to pencil? Yes," Kenney told Bisnow at a ceremony Thursday. "This was designated an opportunity zone, and I think that’s been instrumental in our ability to continue attracting capital even in an environment where interest rates are going up."

Kenney, in addition to Deputy Mayor for Planning and Economic Development John Falcicchio, NVHomes Vice President Pat Donohue and other partners with projects on the campus were on hand Thursday to celebrate the groundbreaking of townhome project Aspen Square and The Reynard, a multifamily project with more than 300 units along Georgia Avenue. 

Urban Atlantic's joint venture partners on the project include Hines and Triden Development Group, and the team has also received opportunity zone investments for multiple buildings.

The Reynard project was financed in part with an investment from an opportunity zone fund managed by CrossHarbor Capital Partners. The Hartley, a 323-unit project that has begun lease-up with expected move-ins next month, received opportunity zone investment from Bridge Investment Group. 

The campus has seen strong demand for lease-up and sales at several properties, Kenney said.

A view of The Vale apartments from Aspen Street. Aspen Square, NVHomes' 50-unit townhome community on The Parks at Walter Reed campus, neighbors The Vale to the west.

The Vale, the first apartment project on the site that was acquired by CIM Group in July 2021, is nearing full lease-up, Kenney said. The Brooks, a condominium project with 89 units, has about eight units still available, and sales have begun on Kite House, a 109-unit condominium project.

The strong apartment demand at projects like The Vale, where ground-floor retail is still leasing up, has helped the developers finance other phases of the development, Kenney said.

"You're creating a submarket, you're creating a new place, so I think the lease-up there has been really instrumental," Kenney said. "The combination of the belief in the submarket, the belief in D.C., seeing that we’re filling that gap in the market, has made a huge difference."

New projects are continuing to move forward on the campus. NVHomes began work Friday on Aspen Square, a 50-unit townhome project on a southern parcel of The Parks, and it expects to begin sales in January. Toll Brothers is also pressing forward on plans for a 280-apartment building on 13th Street.

Meanwhile, a 54-unit assisted living facility for low-income seniors called Abrams Assisted Living began moving in its first tenants. That project was able to target low-income residents thanks to collaboration from more than a dozen District agencies, Kenney said.

Abrams Hall, which contains a 54-unit assisted living component for low-income seniors, on The Parks at Walter Reed campus just south of the Walter Reed General Hospital historic building.

The steady development pace has not been without its challenges. Kenney said the developers have signed building materials contracts before shoring up finances for certain projects, a reflection of supply chain challenges and the developers' confidence in the future of The Parks.

"We, Hines and Triden we are so committed to the overall success of this that those are the kinds of commitments that we’re going to make," Kenney said. "To keep that going we’ve been able to do what it takes."

New buildings on the Parks at Walter Reed campus in D.C.

Elsewhere, the developers have moved forward on key parcels surrounding the new Parks Marketplace plaza at the base of The Hartley. 

The retail component of that section is anchored by a 42K SF Whole Foods, but will also feature The Charmery, Mezeh, nailsaloon and an as-yet-unnamed national bank. Kenney expects to announce another round of retail tenants in the marketplace, which offers 58K SF of retail in total, in the next month. The full retail slate is expected to open next year.

"Once retailers can actually get over there, do a hard hat tour, we’ve had a huge pickup in activity," Kenney said. "We're pretty grateful to be where we are today."