Developer Q&A: Monument Realty Founder Michael Darby
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Monument Realty is developing The Shaw, a 69-unit condo project with 7,400 SF of retail at 608 T St. NW. The project, sitting next to the historic Howard Theatre and Ellington Plaza, is expected to deliver in March 2019. Bisnow caught up with Monument Realty founder Michael Darby to hear how the project is coming along and see what else the developer has in store for the neighborhood.
Bisnow: When did you acquire the land for The Shaw? How long has it been in the works?
Darby: We bought the land in 2016. We had it under contract prior to that as we went through our approval process. We had control in early 2016 and closed on it in late 2016. There were four owners on the parcel that we finally purchased. Originally there were five owners. The building to the south was part of the initial acquisition, but we dropped it because of concerns in relation to potential additional costs and maybe some additional approvals through historic preservation. We ended up dropping that one and doing the front portion of the site only.
Bisnow: Why did you decide to acquire this particular site? What made it attractive for development?
Darby: It’s really because the Shaw area of Washington was probably one of the fastest areas to move through transition that we’ve seen in a long time. The 14th Street corridor took some time, the recession in the middle slowed it down a little bit, but it was very resilient and is a great corridor. As things kind of expanded down U Street, it looked like it was going to slow down or stop at one point, but it really didn’t. They kept on going and quickly got down to where we were at Seventh and T Street and kept going. And we really liked that. We really liked the fact that the values reflected more of the connection to the high values in the 14th and U Street corridors as opposed to a subordinate value to those corridors.
We always try to buy well. We just saw that the value of land there was potentially disproportionate to the future value of the asset. The land value seemed low compared to what the land values were or would be in the 14th Street corridor when we can see there was a potential for condo sales prices to be competitive with the 14th Street corridor.
Bisnow: Why did you decide to do for-sale condos? Was that always the plan or did you consider apartments?
Darby: We always consider both choices for residential, but the value for condos was such that, with all factors accounted for, including income taxes, for-sale seemed to be a better product, a better bottom line product where the profits could be greater. Also that is a market where we felt there was a lot of pent-up demand for ownership, and we’ve seen a lot of good pricing happening with the adjacent townhouses to that site. We’ve done condos for years, and if you know what you’re doing, you can kind of feel when it makes sense to jump into the condo market.
Bisnow: Tell me about the project itself. How did you design it and what makes it unique?
Darby: It’s a smaller project for us, but we’ve done this before very successfully when we did the Dumbarton at 22nd and P streets back in 2006. That was an office building we converted to residential and did very well with a smaller number of units that were very high-end. This was a similar product even though it’s ground up. It’s a development we could do what we refer to as a little jewel box building where we would have a smaller number of units tailored to a specific type of client that’s looking for a boutique feel, not too many neighbors, high-end product, great finishes and close to everything going on. That kind of product, certainly we're drawn to that.
Also with some of the restrictions that are out there now for financing condo deals, it was a very easy deal for us to finance. We’ve got 170 units at the ballpark, which is a lot harder to finance in today’s climate. A 69-unit building [was] very easy to finance. For all those reasons, and fact that we thought we could really do a building that the people who will live in the building are like-minded and will enjoy the benefits the neighborhood has just as much as the appreciation of real estate.
Bisnow: What are some of the amenities the building has?
Darby: With smaller buildings, it’s harder to have full concierge arrangement. We’ve been exploring a virtual concierge arrangement where there will be fully automated controls coming into the building, fully automated security systems within the building, and a package delivery and drop-off system that no one else in the city has to tie in with the nature of this non-manned building. Obviously there will be staff on call at any time, but we’re going to set it up so you can walk into the building, you can see around you with cameras that will be accessible to your phone. You can see every aspect of the building and who’s where. You can go to an elevator that is a secure elevator with a new type of security system in it that only the owners and guests or delivery people will get in. And then on-floor delivery boxes for UPS packages and Amazon packages and food delivery where the part of delivery box will be an insulated box for delivery of food. Above that, the units will have high-end finishes with high-end appliances and cabinets, many of them have balconies. There will be a rooftop amenity with a community room and an outdoor rooftop area with great views of the city. It’s a complete functioning building with normal amenities for that size buildings and two levels of parking below for residences.
Bisnow: When do sales start? What will the price range be?
Darby: Sales will start around October 2018 and the building will deliver in March of next year. The average price-per-SF for market rate units will be in the $950/SF range.
Bisnow: Who in particular do you think this building will appeal to?
Darby: I’m hoping it appeals to anyone who’s been renting for a long time at what today are very high numbers. If you’re paying $4K or $5K a month for an apartment, which many people are, it seems to me those people should be owners rather than renters. They can gain the value of ownership, including the appreciation of the unit.
Also, more importantly, we just think there are people there who value their day-to-day life experiences as much as they do their real estate appreciation. Those are people who want to be in such a vibrant area as Shaw. We see Shaw as a different area than anywhere in town. There are all these eclectic different experiences you can have discovering the cool coffee shops and restaurants and stores and different things like that. We believe people who are more adventurous, who enjoy that kind of upscale feel, will enjoy discovering something new and different every day.
Bisnow: Your project is fronting Ellington Plaza and next to Howard Theatre, which are both historic and cultural landmarks. How important was it for you to make this project fit in with the neighborhood architecturally and preserve that character of the area?
Darby: Yeah, we always spend a lot of time making sure our product fits the market. But in this situation, the beauty of the market is it is very diversified and it varies. We wanted the building to have its own uniqueness and its own attraction without trying to make it look like something else in the area. I think that’s the beauty of the Shaw area. You’ve got the Howard Theatre, which is a very different structure. You’ve got the Wonder Bread Factory behind it and a row of townhouses. It’s very diverse and with the Atlantic Plumbing buildings once again an unusual architectural look. So we wanted to fit in on the street level by retaining the facades of multiple buildings on T Street. And then above those facades create a look that was unique and interesting and classy. That’s why we did the design that we did.
Bisnow: Are you in talks with any retailers? What type of businesses are you looking to attract there?
Darby: Yes, we’ve had a lot of activity from retailers. It’s exciting. Even before construction started we’ve had a lot of activity. We’re being very selective because we do want something that ties in with the community. Our first floor is the most connected. The east side has been set up for a 3,700 SF restaurant. We’re in talks with some really interesting concepts that we can’t go into yet. Concepts that will be unique and fun for the area, sharing in the uniqueness of what’s already around us. And then we have another 3,600 SF on the west side that we’ll probably break into two locations with hopefully something community-oriented. It’s going to be a coffee store, a different kind of coffee store. That will be on the northwest corner, and the southern corner will be something interesting in a smaller retail area. We hope that’s more of a local-type business that has something fun and unique to offer.
Bisnow: Have you done any other projects in Shaw and U Street or do you have any other projects in the works?
Darby: This is our first foray into this area. Many years ago, we did a project on 11th Street, which probably just hits Shaw, but Shaw has changed in its geographic boundaries. We have another project in Shaw that we’re doing, a small one, a really fun boutique one on V Street that we’re doing just around the corner. We like that area and we’re looking to do more in that area.
Bisnow: Can you tell me more about the project on V Street?
Darby: That’s a 22-unit condo building. It’s going to be a little unique, that’s about all I can say right now. I’m looking forward to bringing it to market. It hasn’t broken ground, but it’s in the design stage. It will move very fast through the design stage and will move very fast through the process.