Thursday, January 6, 2011

Douglas Development sitting on 5 million square feet of vacant space

You know how you walk around DC and see all of those "Douglas Development" signs in empty retail windows?  If you think you're seeing a whole lot of that, and that Douglas must be sitting on a great deal of vacant properties, you're quite right.  But it's probably worse than you think.

According to a recent tweet from WCP's Housing Complex reporter Lydia DePillis, 50% of the square footage owned by Douglas is vacant.  This amounts to over 5 million square feet of empty space.  To make matters worse for the city, Douglas is failing to pay property taxes on much of its vacant portfolio.

This news came up in a discussion at last night's ANC2C meeting, where two new potential Douglas projects were discussed, both in the Mount Vernon Square neighborhood near 6th and New York:  a 200 unit apartment building, and a massive 300,000 sf office building with ground level retail.  One of the reasons Douglas executive Paull Millstein was before the ANC last night was to request relief on the "blighted" designation of one of their Mount Vernon Square properties, which under the District's blighted property tax rate would cost Douglas $92,000.

According to Millstein, Douglas could incur costs of up to $30,000 to renovate the property to the point where it was no longer blighted, but with redevelopment of the parcel "imminent," he was requesting an exemption altogether.  Millstein argued that the lack of development on the site was a result of the ongoing economic turmoil, and thus Douglas shouldn't be faulted for that.  The ANC agreed, voting 2 to 1 to support a one year tax relief for the site.

That's fine and dandy, but with 5 million square feet of vacant space spread throughout the city, I would not hold my breath for either of these developments to break ground anytime soon--in spite of assurances from Millstein that they will.  And Mount Vernon Square residents will be forced to contend with a blighted property for at least another year, while the District continues to fail to collect on unpaid property taxes from properties among Douglas's holdings.

The wheels on the bus go round and round...


Anonymous said...

Is it financially beneficial to sit on properties rather than lease them to local businesses? I don't get it. I know there is more to it, but it seems DD gets way too much credit for urban revitalization i.e, Chinatown when in reality they jus sit and wait for the highest bidder.

Anonymous said...

Not to thread-jack, but this is insane! What kind of whackos live in this neigbhorhood. And why does the silent majority sit back and let this happen??

FourthandEye said...

These two projects in Mount Vernon Square WILL happen. The American Association of Medical Colleges is buying the land from Douglas for the office project to build a new HQ building. Similarly Kettler is taking the reigns on the apartment project.

When DD has no partner that they'll announce by name they are likely just spinning their wheels. But when named partners are involved it is more trustworthy.

Unknown said...

"Imminent" to me does not mean that you need a blanket 1-year property tax abatement. I know real estate deals take a long time, so saying one is "imminent"--to me--means that it is going to happen almost immediately. If it does, fine, tax abate it, but if it doesn't, then the taxing authority has just been had. Why not say "Development is imminent? if it happens in 3 months, then you get your tax abatment, if not, then it's not imminent and you owe us for the bighted property. We are giving you the benefit of the doubt, but plans fall through, and why should you benefit at our expense if they fall apart?"

A similar issue is happening with Jim Graham's ridiculous 20 year tax abatement for the Adams Morgan church-cum-hotel project. What if--surprise surprise--the development is a huge success and all the projections are exceeded and it turns out that a 20 year tax abatement was not needed to meet the development objectives/projections? Too bad for DC tax coffers, because--surprise surprise--someone was able to pull the wool over Jim Graham's eyes and cut a sweet deal from an elected official. There needs to be some version of a "windfall profits tax-abatement revocation because it is not needed anymore." Sure, the devil is in the details on how to figure out when the project has exceeeded expectations, but if a developer is able to say "we need $X in tax abatements to make this project work" on the front end, then I don't see why you can't revisit the issue every 2 or 3 years to make sure that the developer didn't make unreasonable assumptions that only benefits the developer and not the city (again, job creation, etc., is something that is agreed to in the deal on the front end, if the project turns out to be a windfall winner then DC gov't--which provided the necessary financing on the front end in the form of tax abatements--should be able to share in that success because without the DC tax abatement it never would have happened at all (or so the developer's like to pitch). And, again, if the tax abatement is still needed, then fine, it stays.

Just cutting all these deals without thinking about the future and facing the reality that plans frequently turn out differently than presented is just plain bad governance, and should be rectified immediately.