Interstate 395 Project Secures Equity Investment

The developer of D.C.’s $1.3 billion Center Leg Freeway project said he has lined up an equity investor to finance a “significant” percentage of the planned three-block deck that will top the highway.

Sean Cahill, vice president of lead developer Louis Dreyfus Property Group, declined to identify the investor until closing the deal sometime next spring with the District government and other parties: the Jewish Historical Society, Holy Rosary Italian Catholic Church and the estate of former Center Leg developer Conrad Monts.

“Ours is not offshore money,” Cahill said. “We have an equity backing that is significant.”

It has to be, given the economy, because “even if we brought 70 percent to the table, I don’t think we could get a loan for the other 30,” he said.

News of a likely equity investor, the conditional OK of the Federal Highway Administration and the D.C. Zoning Commission’s April approval of the application for a planned unit development suggests this two-decade-old project, which Louis Dreyfus is now terming “Return to L’Enfant,” is very real.

The idea of decking over Interstate 395 dates to 1989, when then-Mayor Marion Barry awarded rights to develop on top of the highway to Monts and his Washington Development Group. That deal ended in litigation and a healthy payout to Monts, who is now dead. Louis Dreyfus arrived in 2007 to resurrect the project.

“We are creating the last big block of office space in Northwest D.C. that has views of the Capitol and the [National] Mall, and we’re reconnecting downtown with the east end,” Cahill said. “We’re re-knitting the city.”

The agreement between the District and Louis Dreyfus — which spells out the development terms, the previously agreed-to payment in lieu of taxes and the fee simple purchase price for the air rights — is generally complete, the parties said, but it will not be made public until the closing.

The development site is bounded by Massachusetts Avenue and Second, Third and E streets NW, on both sides of the freeway, essentially three city blocks that today provide no economic or environmental benefit.

Some call the freeway the “scar downtown,” because it effectively cuts off one side of downtown’s eastern end from the other.

The air rights project will reconnect those parts with three decks and two bridges — taking F and G streets NW over the freeway. Three new overhead pads, built in phases in no more than five years, would cover a total developable area of 254,670 square feet.

Atop the deck, Louis Dreyfus plans 2.2 million square feet of predominantly office space, with some residential and retail offerings. Groundbreaking is expected in 2013, and the office buildings will be constructed simultaneously as each deck phase is completed.

Louis Dreyfus plans to open a marketing center at its 1101 New York Ave. NW headquarters in the next month.

Little more than marketing can happen until the federally mandated National Environmental Policy Act review, or NEPA, is complete. The Federal Highway Administration’s NEPA review will examine air quality, noise, realigned roadways, traffic impacts, historic elements and visual characteristics.

The project will, after all, create a 1,100-foot tunnel, eliminate the Third Street entrance to I-395 and place millions of square feet of development atop a highway that carries upward of 85,000 vehicles a day.

The environmental assessment was publicly released Oct. 19, ahead of a Nov. 2 public meeting.

The project will be “extremely, extremely green,” Cahill said, perhaps “the most sustainable project in North America.”

The deck, he said, will be built for Platinum certification in the Leadership in Energy and Environmental Design program.

Co-generation power plants will feed “Return to L’Enfant” with heat and electricity, perhaps taking it off Pepco’s grid. The project will capture and recycle runoff and will take dirty air from the parking garages and loading docks, fire it up through an “eco-chimney” and purify it before sending it back into the atmosphere.

“Sustainability is very good business,” Cahill said.