REDEVELOPMENT PROPOSAL FOR

THE J. EDGAR HOOVER BUILDING

Capitol Crossing
935 Pennsylvania Avenue NW, Washington, DC

the CASE 2013

MIT Real Estate Case Competition
TEAM 86

Acquisition & Development Strategy

OBSOLETE STRUCTURE
Current structure at 935 Pennsylvania Avenue
does not meet FBIs functional requirements
the building is nearly 40 years old, inefficient,
and obsolete.

RENOVATION IMPRACTICAL
Tailored design to FBI needs in the mid-1970s
creates impractical superstructure for current
market demands in the District.

MUTUALLY BENEFICIAL
This transaction will provide the GSA critical
funds to relocate the FBI while allowing
proactive development in the heart of DC,
facilitating corporate and social growth.

RECOMMENDATION
Purchase site as-is from GSA, allowing design
of a self-contained campus during the three
years of leaseback. Construction to begin in
January 2017 on the new Capitol Crossing.

VISION
Capitol Crossing will consist of high-end and
sustainably-designed office, retail, condo, and
hotel space, with ample outdoor amenities to
supply the city with a multi-functional
community to live, work, and play. Entire
project will come online in July 2019.

TEAM 86

Development Timeline
The 3-year leaseback agreement with the Federal Government will allow ample
time to complete the design and engineering for this world-class complex. Using
this timeline, anchor tenants will be pre-secured through leasing agents. The
compressed construction schedule of 30 months will include all tenant work,
culminating in the projects Grand Opening during the summer of 2019.

TEAM 86

Redevelopment Plan
RE-ENVISIONING LEnfants D Street NW
Pursuant to NCPCs desire to extend D Street NW west to Pennsylvania Avenue
as originally intended, Capitol Crossing will extend the street through its campus
to become a lively, pedestrian-only community area.

E Street NW
9th Street NW

10th Street NW

Pedestrian
Only

D Street NW

SYMPATHETIC Neighborhood Addition

935 Pennsylvania Avenue is the most sought after real estate in the District.
Immediate surroundings include the Federal Triangle, the National Museum of
American History, the E Street Cinema, the National Portrait Gallery, the Verizon
Center, Shakespeare Theatre, Fords Theatre, and a host of restaurants that
make the property extremely valuable and attractive for residents and
businesses alike. Capitol Crossings five-building complex will be a sympathetic
addition to the community, supporting local business while adding the most
desirable amenities to the area.
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A Superior Community Space

STRONG
MEDIUM
WEAK

The business district in downtown DC is fortunate to see

healthy levels of development each year, driven by
government demand and business growth. When Capitol
Crossing enters the market in 2019 it will command
premium rental rates from this citys best tenants and job
creators.

PEER
ANALYSIS

Capitol
Crossing

Year Completed

2019

City
Center
2014

O Street
Market

Square 54

2014

2011

LEED-Certified
Self-Contained
Community

Accessibility
Premier Location
Finishes
DEVELOPMENT ACTIVITY

TRENDED RENTAL RATES (2019)

Class A Office

6.9MM SF

Class A Office

$72 / SF

Hotel

315 rooms

Hotel

$340 / night

Multifamily

95 units

Retail

$ 62 / SF

Multifamily

$750 / SF

Parking

$358 / space

Development activity represents planned and

ongoing construction activity in Washington,
DC through 2014. Sourced: JLL.

TEAM 86

Vibrant Open-Air Mixed-Use Community

Capitol Crossing will be the preeminent location for
Washingtonians to live, work, and play.

RETAIL

CONDO

30 Stores
160,000 SF

95 Units
132,500 SF

3 Buildings
885,000 SF
315 Rooms
132,500 SF

OFFICE

HOTEL

Capitol Crossing will satisfy the demand present in DC for top-of-theline amenities by containing all the modern conveniences required by
the sophisticated, cosmopolitan individual. The development is
expected to include:

Trader Joes Grocery

Equinox Gym with Bliss Spa

Indoor pool and squash courts

Heated, underground parking

TEAM 86

Exclusive restaurants from

branded world-class chefs

Rooftop restaurant and bars

Club level, exclusive gym for

condo residents

Leading by Example Through Sustainable Design

Acquisition and Redevelopment Strategy

LEED Standard: Sustainable Design

The Capitol Crossing complex will uphold the
highest standards of sustainable design,
coming online as the model mixed-use
development in 2019. Leading by example,
the design and engineering will attempt to
maximize energy efficiency and create a
natural and healthy atmosphere for Capitol
Crossings residents, businesses, and guests.

TEAM 86

Cost
Savings

Energy
Efficient

Local
Materials

Natural
Light

Air
Quality

Recycled
Water

Reduced
Footprint

Public
Spaces

Green
Roofs

OFFICE: Pennsylvania Avenues 2nd Most Exclusive Office

OFFICE HIGHLIGHTS

SPACE: 885,000 gross square feet of Class A

office in the heart of the Capitals Business
District; ideal space for future GSA tenants,
law firms, or expanding tech firms from N.
Virginia.
UNIQUE ACCESS: Four nearby Metro stations:
Federal Triangle, Metro Center, Gallery Place
Chinatown, and Archives.
SOCIAL: On-site and nearby retail provides
opportunity
for
leisure
and
client
entertainment.
PRESTIGE: Location on Pennsylvania Avenue,
just six blocks from the White House and one
block from the National Mall, with direct
views of the Capitol.

OB1

OB2

OB3

An awning along Penn. Ave and office

perimeters for pedestrian weather
protection will be included per PADC
recommendation.

RETAIL: Community Support, Staples and Commerce

FUNCTIONAL: 30 stores over 160,000
square feet of 1st floor retail space will wrap
the perimeter of all five buildings.
OPTIONS: Cafs, a high-end grocery, a spa,
luxury retailers, and a gym will provide
residents and visitors with a multitude of
options.
CONVENIENT: Retail will be open at a
minimum 18 hours per day, with select
stores operating 24 hours.
ARCHETYPE: This urban center will set the
benchmark not only for Washington but
also for the nations ever-evolving cities.
TEAM 86

CONDO: A City Home to DCs Power Brokers

MULTIFAMILY

LOCATION: The 95 exclusive condominium

residences at Capitol Crossing will have the
privilege of being equidistant from the
National Mall and the city's entertainment
hub surrounding the Verizon Center.
DESIGN: By teaming with the top
architecture firms, these condominiums will
offer world-class living amenities.
LUXURY: The fixtures throughout the
residences will represent the finest in quality
in kitchen appliances, countertops, cabinets,
and baths. All homes will include fine
hardwood and marble flooring, as well as
balcony space.

TEAM 86

HOTEL: Providing a New Era in Luxury to the Capital

RETAIL

WORLD CLASS: The 4-star, 315-room luxury

hotel at Capitol Crossing will be branded by
one of the worlds leading hoteliers,
drawing both tourists and Washingtonians
to its amenities.
ATTRACTIONS: The hotel will feature the
best restaurants in the District for nights
out and client entertainment.
AMENITIES: There will be a swimming pool,
racquetball and squash courts, and an
exclusive gym for hotel guests.
WITH A VIEW: With only one other highend rooftop bar downtown, Capitol
Crossings rooftop bar will offer a new and
sophisticated alternative, while boasting
views of the Capitol to the southeast down
Pennsylvania Avenue and DCs other
historical monuments.

TEAM 86

10

RETAIL

Financial Summary
FINANCING ASSUMPTIONS
PHASE 1
Purchase asset outright with
internal equity. Finance 85% of
purchase price with a
combination of 70% first and
15% mezzanine interest-only
financing.

PHASE 1
Acquisition Price

$600,000,000

LTV

85%

Senior Mortgage

70%

Senior Rate

4%

Mezzanine Debt

15%

Mezzanine Rate

10%

WACD

4.3%

Mortgage

$510,000,000

Origination / Closing Cost

2%

Annual Payment

$22,368,600

Term

PHASE 2
Use joint venture equity to repay
initial equity investment. Coinvest with LP alongside the
$700MM construction loan.

3 years

PHASE 2
Construction Loan
Rate (+ LIBOR)
Term

$700,000,000
6.5%
4 years

Common Equity

$441,533,856

GP

10%

LP

90%

Total Budget

$1,141,533,856

Perm Financing Loan

Rate
Amortization

TEAM 86

$944,679,664
6%
30 years

11

Financial Summary

RETAIL

SOURCES & USES (PHASE 2)

SOURCES
Land

USES

$600,000,000

Construction Loans

$700,000,000

61.3

Common Equity

$441,533,856

38.7

Soft Costs

$68,001,399

Hard Costs

$452,964,026

GP

$44,153,386

10.0

$11,568,431

LP

$397,380,470

90.0

$1,141,533,586

100

Contingency &
Escalation
Interest
Reserve

$2,000,000

Loan Fees

$7,000,000

TOTAL USES

$1,141,533,856

TOTAL SOURCES

SALES ASSUMPTIONS

TEAM 86

Closing

12-31-2016

Sale Date

12-31-2023

Exit Cap Rate

8.0%

Sales Costs

2.0%

Gross Sales
Proceeds

$1,363,390,453

12

Performance Summary

RETAIL

PROMOTE STRUCTURE
Hurdle

DEVELOPMENT COSTS

Promote

% of CF

GP

GP

Coinvestor

0%

10%

90%

Tier I
(pari passu)

9%

Tier 2

16%

5%

15%

Tier 3

20%

10%

--

20%

Thereafter

Office Vacancy
Retail Rent
Retail Vacancy
Condo Sales
Condo Vacancy
Condo Absorption
Hotel ADR
Hotel Occupancy
Parking Rate
Parking Vacancy

$72 / SF

$272 / SF

Condo

$228 / SF

Hotel

$450 / SF

Retail

$251 / SF

Parking

$43,134 / space

85%

TI Total

$24,362,249

20%

80%

LC Total

$26,004,908

TOTAL

$534,533,856

30%

70%

MARKET ASSUMPTIONS
Office Rent

Office

*all rates in 2017 inflated dollars

JV FUND PERFORMANCE
Exit
Cap Rate

IRR

Multiple

Net Profit

6.5%

28.1%

3.51

$1,151,497,324

7.0%

26.9%

3.25

$1,034,623,300

0%

7.5%

25.7%

3.03

$ 933,332,478

3 / mo

8.0%

24.6%

2.84

$ 844,703,010

8.5%

23.5%

2.67

$ 766,500,537

9.0%

22.5%

2.52

$ 696,987,229

9.5%

21.6%

2.38

$ 634,791,110

10.0%

20.7%

2.26

$ 578,814,604

10%
$62 / SF
10%
$700 / SF

$340 / night
70%
$358 / mo
25%

*all rates in 2019 inflated dollars

TEAM 86

13

Program Summary

RETAIL

CAPITOL CROSSING COMPLEX

Office 1 (8 floors)

220,000 SF

OB1 Ground Retail

(25,000 SF)

Office 2 (8 floors)

220,000 SF

OB2 Ground Retail

(25,000 SF)

Office 3 (7 floors)

570,000 SF

OB 3 Ground Retail

(75,000 SF)

Hotel (9 floors)

150,000 SF

Hotel Podium

(48,000 SF)

Hotel Ground Retail

(17,500 SF)

Condo (9 floors)

150,000 SF

Condo Podium

(48,000 SF)

Condo Ground Retail

(17,500 SF)

Parking (4 levels BG)

675,000 SF
1,588 spaces

COMPLEX TOTAL

OB1

OB2

OB3

PUBLIC AREAS
Outdoor / Public

75,000 GSF

Lot Size

1,985,000 GSF

6.6 acres

% Open Space

26%

FAR

6.90

GSF BREAKDOWN
OB3

34%

OB1

Office
Condo

OB2

Hotel
Retail

Res

Parking

44%

Hotel

8%
7%

7%
TEAM 86

14

Benefits to Interested Parties

RETAIL

PROJECT STAKEHOLDERS
GSA

FBI

NCPC / PADC

DCOP

Investors

The immediate purchase of 935 Pennsylvania will provide

needed funding to develop future FBI headquarters. The
leaseback agreement provides reasonable timeline for all
parties activities.

Provides suitable operating space during 3-year lease

term, allowing for smooth transition to next headquarters
at beginning of 2017.
Project recognizes NCPCs desire to re-imagine LEnfants
plan by reestablishing D Street NW as a pedestrian
community space. The project conforms to PADC
development guidelines such as providing awnings for
pedestrians and other amenities as stipulated.
Exciting mixed-use development incorporating new
housing into area, foundational retail and an active public
space with leadership in energy efficiency.
Investment in a premier property while earning short-term
yield and an opportunity to re-envision a transitional
property within downtown D.C.. Return offers significant
opportunity.

RESOURCES
Materials provided in the CASE
Jones Lang LaSalle public market reports
CBRE public market reports
dc.about.com
dc.urbanturf.com
bizjournals.com/washington
Zillow.com
TEAM 86

15