Roughly one month after announcing plans to relocate its Baltimore headquarters, T. Rowe Price Group is mapping out new office space on the other end of the Baltimore-Washington corridor…

The firm, now in expansion mode, signed on for a partial-floor lease.

WeWork has settled a lawsuit it filed against its landlord at Capitol Crossing in which it alleged it was not reimbursed for costs incurred to build out its space at 200 Massachusetts Ave. NW. The coworking firm said it was owed nearly $13.6 million.

Meadow Partners purchased a 99-year lease on an office building in the Meatpacking District for about $230 million.

The investment firm closed on its purchase of 860 Washington Street at the end of 2020, according to the Wall Street Journal. According to the terms of the deal, Meadow will control the building but pay ground rent to Romanoff Equities, one of the building’s co-developers.

The building “is very well-leased for the long-term,” Jeffrey Sussman, chief executive of Property Group Partners, told the Journal. “That’s an attraction in a market of uncertainties.”

The building was developed in 2013 by a group venture that included Property Group Partners and Romanoff, which owns a number of properties in the Meatpacking District. Romanoff recently acquired the 120,000-square-foot tower from its co-developer in a sale-leaseback deal that valued the building at $80 million.

A Cushman & Wakefield team led by Doug Harmon, Adam Spies and Kevin Donner advised on the deal.

Its tenants include Tesla, which has a ground-floor showroom, and the SoftBank-backed online lender SoFi.

The deal is one of the few office transactions to take place during the pandemic. As of the end of November, only $5.5 billion of Manhattan office properties had been sold in 2020, according to Real Capital Analytics. During the same period in 2019, that number was $13.3 billion.

A global investment firm has purchased a 99-year lease on an office building in Manhattan’s Meatpacking District for about $230 million in one of the few office-building deals in New York City since the pandemic hit.

Meadow Partners, based in New York and London, closed late last year on its purchase of 860 Washington St., a 120,000-square-foot tower known for a Tesla Inc. showroom on its ground floor and office tenants that include Alibaba Group Holding Ltd. Thanks to the growing popularity of the trendy Meatpacking District, the building is almost fully leased at rents comparable to the top boutique buildings in Midtown Manhattan, according to participants in the deal.

Commercial property sales overall have greatly cooled off in New York during the pandemic, but there have been exceptions for well-located properties that have leased most of their space to tenants with good credit…

Around here, developers don’t just build buildings—they build entire neighborhoods.

Tysons – Greg Riegle

Greg Riegle, chairman of the Tysons Partnership, has worked in Tysons as a real-estate lawyer for 25 years—but he lives in Arlington. “My wife and I live a very Metro-centric existence,” he says. “Most weekends, you’ll find us walking places.”

In other words, he’s precisely the type of person the Partnership has in mind as it coordinates the largest redevelopment project in the country. Ask him where he lives in a few years, Riegle says, and maybe—hopefully—he’ll say Tysons.

He and the Partnership’s incoming president, David Diaz, oversee 100-plus developers, landowners, employers, and other Tysons stakeholders, to ensure they’re working harmoniously as they transform four square miles into a dense, mixed-use city. Tysons has long been a place where people like Riegle work. But the idea is that it will become a neighborhood of up to 100,000 residents by 2050. Ten new buildings have opened so far. Another 2 million square feet is under construction. Forty million more is approved and waiting to get built.

Just over five years into its existence, the Tysons Partnership was ready for new leadership. It has left the “garage band” stage of getting the initial buildings out of the ground, says Riegle, who took over as chair in January. Now it’s time to focus on creating a vibrant place to live, and branding it as such.

Diaz, who starts his new job at the end of March, has spent the last decade leading the revitalization of downtown Raleigh, North Carolina, as CEO of the Raleigh Alliance. In Tysons, Diaz says, “the potential seems limitless.”

Downtown Columbia – John DeWolf

When James Rouse designed the city of Columbia in the 1960s, he placed a shopping mall at its core. Today’s smart-growthers would have laughed. But back then, Rouse was among the most progressive planners in the country. His intention was arguably urban-minded—he wanted malls to serve as town centers for otherwise sprawling suburbs.

Of course, it didn’t quite work out that way. Columbia’s downtown now shows its age. “This place went to sleep in the ’90s,” says developer John DeWolf, executive vice president at the Howard Hughes Corporation and a Rouse admirer. “What excites me most is having the chance to pick up where he left off.”

After a career mostly in retail development, DeWolf joined Howard Hughes in 2011 to manage the 391-acre plan for a new downtown Columbia. Merriweather Post Pavilion already attracts a lot of visitors there, but the mission is to create a bustling, walkable city that could turn some into residents. “Everywhere you see a parking lot, there’s going to be a building,” says DeWolf.

The entire project could take three decades. So far, Howard Hughes has erected Columbia’s first mixed-use building, with 380 apartments, a park, restaurants, and shops. Whole Foods arrived in 2014, and One Merriweather, the headquarters of MedStar Health, opened in January.

The mall still stands. Howard Hughes doesn’t own it, but DeWolf hopes that changes: “We need to get at the mall, deconstruct and rebuild it, to realize the full potential.”

Capitol Crossing – Robert Braunohler

Between Capitol Hill and Chinatown, Robert Braunohler is overseeing the construction of seven acres of brand-new city. The $1.35-billion project, called Capitol Crossing, will mend the divide through downtown created by I-395, with three platforms built over the freeway. Offices, retail, and apartments will rise atop them.

Braunohler arrived in Washington in 1973, just a few years after 395 did. He and his wife raised three kids in Colonial Village, in upper Northwest DC, where they still live. Along the way, Braunohler helped develop a number of notable projects. As a partner at JBG, he oversaw construction of two World Bank buildings. At his current company, now called Property Group Partners, he developed the Securities and Exchange Commission’s headquarters.

The gash from 395 was always meant to be healed. “The highway was built about 26 feet below grade for the very purpose of [covering it],” says Braunohler.

When he was mayor, Marion Barry awarded the rights above 395 to a developer friend, who held them until 2000, when the city demanded them back. Unsurprisingly, litigation ensued. Property Group Partners entered the fray in 2005 and ultimately won out, agreeing to settle the lawsuit for both parties and take over the building rights. Construction started in 2015.

The first of five buildings—an office/retail tower at 200 Massachusetts Avenue, Northwest—will finish next year. All of Capitol Crossing is slated to open in 2022. It will be DC’s first “eco-district” thanks to features such as water cisterns to recycle storm runoff and “eco-chimneys” for filtering car exhaust.

For commuters, the most impressive part will likely be something simpler: When Capitol Crossing is done, F Street will flow uninterrupted from Union Station to the Treasury Department.

The Wharf – Monty Hoffman

Monty Hoffman was born a builder.

The CEO of PN Hoffman grew up on a farm in Pennsylvania coal country, where his general-contractor father taught him how to lay brick, frame a house, and do the plumbing and electric, by the time he graduated from high school.

“We worked hard. We worked long hours,” says Hoffman, who paid his way through engineering school with summer jobs, including in a mine three miles underground.

A relentless work ethic comes in handy these days, as Hoffmann is redeveloping an entire DC neighborhood. The Wharf—his glitzy, $2-billion project of residences, retail, offices, and entertainment on the Southwest waterfront—has been so complicated to construct that it has required three acts of Congress.

Hoffman won the rights to reimagine the mile-long stretch in 2006 and has since brought in a partner on the project, developer Madison Marquette. The first phase is on track to open by October. It includes four residential buildings, three office towers, three hotels, a 6,000-seat concert hall, 22 restaurants, a water-taxi system, and four piers. Planning is under way for the second phase, to include an additional 1.2 million square feet, designed by 11 architecture firms. It’s expected to finish by 2021.

Perhaps surprisingly for someone who has spent his career building up DC neighborhoods, Hoffman has been a longtime resident of Potomac. But not for long—he bought a penthouse at the Vio, one of the Wharf’s luxe condo buildings.

All cities bear scars, evidence of past planning decisions, made with the best of intentions, that affect urban space in negative ways over the following decades. For more than 40 years, Washington, D.C.’s northwest quadrant has suffered a particularly prominent one where the District’s downtown meets the Capitol Hill neighborhood to the east: A three-block-long, 200-foot-wide opening above the depressed Center Leg Freeway (I-395), which runs beneath the nation’s capital from New York Avenue down to the Southeast Freeway (I-695).

The opening—bounded by Massachusetts Avenue to the north, E Street to the south, 2nd Street on the east, and a handful of buildings along 3rd Street—is a remnant of the nationwide mid-20th-century effort to revitalize cities by bringing high-speed, multilane highways around and through urban cores. Extensive plans for the District included an interstate loop within the city that would stretch from the west end of the National Mall to the Anacostia River on the east. The eight-lane Center Leg Freeway, which skirts along the U.S. Capitol’s west side, was the second segment built.

North of Constitution Avenue, the section of D.C. the freeway would pass through was a largely black and mixed-European working-class neighborhood that had been in long decline as the city suffered from white flight and economic woes. (Partly in response to the District’s difficulties, a complete reorganization of local government in 1967 gave D.C. semiautonomous rule with its first mayor and City Council.) The area was considered blighted, and there was little effort to resist the project. But seven years after construction on the Center Leg Freeway began, dwindling federal budgets and shifting transportation priorities—as well as sustained protests from wealthier communities within the District about other proposed highway segments—took their toll. The D.C. plan was abandoned, and I-395’s abrupt termination at Massachusetts Avenue, in 1973, was its final gasp. (A congestion-easing, subterranean extension to New York Avenue, a few blocks to the north, opened in 1982.)

Four-plus decades later, the scar is finally vanishing, thanks to the 7.5-acre, $1.3 billion Capitol Crossing development from Property Group Partners (PGP). The project will completely cover the opening with five new 130-foot-high mixed-use buildings (including residences) and public space (20 percent of the site, says PGP), reconnect the gaps in F and G Streets, and offer 2.2 million leasable square feet. Currently under way, with the decking to be completed this year and the first building available in 2018, Capitol Crossing is expected to finish build-out around 2022.

Why did it take so long? In short: the city’s decline, which began (as it did in other urban cores) in the 1960s and didn’t end until almost the turn of the century. Since then, the District has flourished by leaps and bounds, and only in the past decade, notes PGP Regional Vice President Bob Braunohler, has the value of real estate risen to the point that a massive, precedent-setting project like Capitol Crossing makes economic sense. “We and New York are about it,” he says. “We’re building land, and the cost of building the land is less than it would be to buy land” of a comparable scale.

In 1988, a local developer, Conrad Monts, acquired the freeway’s air rights from the city and proposed a several-building project. But things fell apart as the relationship soured, for a variety of reasons, over the years. By 2005, the site remained vacant, and Monts and the city were mired in lawsuits. Sensing an opportunity, PGP—then known as the Louis Dreyfus Property Group, which had been active in D.C. for a number of years—approached both parties, brokered a peace, and began negotiating with the city for the site. The process took years, as the two sides had difficulty agreeing on the value of empty space (which happens to have a massive highway running beneath it). The deal finally closed in 2012 with a novel approach from “clever” lawyers at Arnold & Porter, says Braunohler: PGP would purchase the land below the opening directly from the city for $63 million, as opposed to Monts’s air-rights-only lease, but the number would be subject to a formula that takes into account the cost of building the freeway-hiding deck, meaning the final purchase price has yet to be determined.

Neil Albert, who was the city’s deputy mayor for planning and economic development from 2006 to 2010, under then-D.C. Mayor Adrian Fenty, and now heads the DowntownDC Business Improvement District, where Capitol Crossing is located, says, “On the surface, a project like this shouldn’t get done” given the multiple development jurisdictions in the District, “but there was a spirit of collaboration that set in at an early stage. The stars really aligned.” Everyone, that is to say, bought into PGP’s grand vision.

And that vision has entailed a complexity of design, engineering, and coordination between PGP (and its development team) and the local and federal government (which manages the highway, in addition to other D.C. development-related jurisdictional oversight) unlike almost anything else the city has seen. Even before Capitol Crossing’s official May 12, 2015, groundbreaking, PGP spent more than a year preparing the surrounding area by improving and expanding area infrastructure and utilities. These days, the site is an incredible hive of activity as new freeway access and egress points are engineered and the deck gets built atop a never-ending stream of traffic—although certain aspects, such as setting the massive beams that will support the deck, happen only at night.

Skidmore, Owings & Merrill (SOM)—which developed the master plan for Capitol Crossing, is managing the deck construction, and will provide construction administration services until the project is complete—has been at the center of it all. (The D.C. firm of Lee and Associates is the landscape architect.) “There was both an art and a science to calibrating the plan,” says Kristopher Takács, director of SOM’s D.C. office. “On the one hand it’s very much about extending the street grid, restoring the rights-of-way, restoring a pedestrian network of corridors that creates a seamless public realm, and in that way a horizontal urban design exercise. But with the highway it was at the same time an extremely challenging vertical exercise, designing within constraints around the dynamic needs of the highway, influenced by design decisions [above the deck] that hadn’t been made.”

But the ambition that Capitol Crossing embodies isn’t just about good urban planning, impressive engineering, and significant revenue generation for D.C. ($40 million annually in real estate taxes alone, PGP projects); it’s also about pushing the sustainability envelope. And PGP knows green, having built the District’s first LEED Gold and Platinum commercial buildings. “It’s part of our reputation,” Braunohler says, noting that “with this development, because of its scale, we had the opportunity to try different things.” Big things.

It starts with infrastructure: power and water. A freeway-level cogeneration plant on the 2nd Street side will provide the entire site (and possibly surrounding buildings) with electricity and usable heat, saving tenants about 20 percent on their power bill, Braunohler says. Extensive water harvesting at roof and street levels will retain more than 90 percent of stormwater, reducing potable water usage by 45 percent and landscape water usage by 50 percent; what isn’t used will be cleaned before its release into the city’s combined sewer system. And by tapping into D.C’s high water table, Capitol Crossing will capture more than enough groundwater to service all of the site’s cooling towers—no city-provided water needed.

Sean Cahill, PGP’s senior vice president of development and a friend of U.S. Green Building Council (USGBC) founder Rick Fedrizzi, Honorary ASLA, says, “We approached USGBC starting 10 years ago because Capitol Crossing was going to be innovative” in ways the council wasn’t considering, such as an early adoption of “ecochimneys” that will filter parking garage air through ground-level plantings before returning it to the sky, cleaner than the surrounding atmosphere. Cahill credits Bill Browning of Terrapin Bright Green, a noted sustainability strategist who was involved in early working sessions, with bringing “large, out-of-the-box” thinking to the development.

PGP describes its vision as “beyond LEED Platinum certified.” And the USGBC is trying to keep up—happily so. “What they’re doing is taking a much more integrated approach than the current [rating] systems are capable of dealing with,” says Brendan Owens, the organization’s chief of engineering, who uses the word “singular” when describing Capitol Crossing. “They are mirroring a vanguard thinking that blurs the lines between infrastructure and building projects,” he continues. “As the project has evolved, we’ve been evolving our own systems. They’ve challenged some of our thinking, in a positive way.”

The National Capital Planning Commission (NCPC), which in 2009 developed D.C.’s first ecodistrict initiative (a comprehensive initiative to turn a 15-block area in the city’s southwest quadrant into a highly sustainable neighborhood), views Capitol Crossing’s approach with high regard. “This is the first time we’re going to see an actual group of buildings thinking at a district scale,” says Diane Sullivan, director of the agency’s Urban Design and Plan Review Division. “This project is going to pave the way for a lot of district-scale sustainability.”

For many reasons, Capitol Crossing is certain to reverberate throughout the real estate industry even before the project is fully built out, inspiring other cities to reconsider what’s possible with below-grade urban highways. But one of its most profound local impacts will be on future development in D.C., especially the stretch over I-395 immediately to the south. The NCPC, for one, is already starting to think about what comes next. Capitol Crossing, Sullivan says, could be a “starting point for the whole [Center Leg Freeway] corridor to change.” Although the evolution would be many years in the making, it’s not too early for mild speculation.

A block south of Capitol Crossing, at D Street, sits the U.S. Department of Labor’s 1.8-million-square-foot headquarters, almost half of which covers the Center Leg Freeway to Constitution Avenue. Completed in 1975, it was among the first federal buildings to acquire air rights for its development. In late 2015, the General Services Administration announced its readiness to find a new Labor headquarters and release the 10.5-acre site (a large portion of which is not over the freeway) to the private sector. Given the development forces at play in D.C. and the parcel’s proximity to the Capitol and the National Mall, it’s easy to envision mixed-use commercial and residential buildings, parks, and more atop a new state-of-the-art platform 10 to 20 years from now.

Between the Labor building and Capitol Crossing, however, I-395 is only partially covered by a plaza bridge that belongs to the U.S. Tax Court, to the west, and was designed by the court’s architect, Victor Lundy, as part of the 1974 federal project. A celebrated example of federal modernism, the Tax Court was given historic designation in 2008 and so will be around for many decades. Which means the plaza will remain as well, along with the large openings on either side that provide a view to the freeway beneath—constant reminders, in the heart of the nation’s capital, of America’s landscape-altering obsession with automobiles. Not every scar can be completely erased.

Project Credits

Developer Property Group Partners, Washington, D.C. Master Plan Skidmore, Owings & Merrill, Washington, D.C. Landscape Architecture Lee and Associates, Washington, D.C. Architecture Kevin Roche John Dinkeloo and Associates, Hamden, Connecticut; Kohn Pedersen Fox Associates, New York; and Beyer Blinder Belle, Washington, D.C. Traffic Engineer STV, Washington, D.C. General Contractor Balfour Beatty Construction, Fairfax, Virginia. Structural Engineer Leslie E. Robertson Associates, New York.

Capitol Crossing is a 2.2 million square foot mixed use development occupying the air rights to the 6.8 acres above Interstate 395 in Washington, D.C. It is the largest air rights project that has ever been undertaken in Washington. Planned as the first “eco-district” in the nation’s capital, it includes five buildings built over three blocks, with office, retail, and residential space. The project aims to fulfill Pierre-Charles L’ Enfant’s original vision of the city by reconnecting the otherwise empty space to the street grid and urban fabric.

The North block is comprised of two buildings supporting three towers, which provide multiple amenities for the primarily commercial tenants, residents, and visitors to the space. Enveloped in glass curtain wall, the towers are connected on the second level by the Pedestrian Way, a 55 feet wide gallery which offers a lively retail environment. Suspended glass screen walls spanning 50 feet create prominent entrances to the west and east lobbies along Pedestrian Way and to the main entry on 3rd street into the concourse, and lobbies on the ground and second floor. A green roof with terraces on both towers offers panoramic views to the Capitol and Washington Monument. The west building has an additional green roof with a terrace on the fifth floor. The project also includes a below grade parking garage for 1,146 cars and 440 bicycles is below the three blocks.

The exterior of the complex is composed of two curtain wall types. Between the third and twelfth floors, the curtain wall has a grid of floor to ceiling 2″ wide polished stainless steel frames on a 5′ module set beyond a plane of satin finish stainless steel. At towers’ corners and recesses, the curtain wall is flush structural glazing. The subtle contrast of curtainwall types gracefully accentuates the building’s geometry. At every floor level, fritted glass fades into clear glass at the height of 3′-6″. Along the exterior of levels one and two, a granite cornice and series of pilasters form the base of the buildings.

The project incorporates numerous assets to enhance the buildings’ sustainability. The 45,108 sq. ft. of green roof mitigates heat island effect and addresses storm water runoff. Advanced energy recovery devices, indoor air quality controls, water conserving plumbing fixtures, and the elimination of supplemental irrigation help minimize consumption of energy and resources. The insulated glass on the exterior improves thermal efficiency. The Pedestrian Way features two eco-chimneys, which will address the below-grade vehicle exhaust. The project anticipates LEED Platinum certification.

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Deck over active highway supports $1.3-billion development

Constructing a podium for the largest air rights project to date in Washington, D.C., is one thing. Doing it in a confined work area over an active highway is something else entirely. Topping that, the project includes moving Washington’s oldest synagogue—twice.

The nearly 1,100-ft-long and 120-ft-wide concrete deck is just off Massachusetts Avenue and covers open-cut portions of Interstate 395. Completed in October, the deck spans a six-lane trench dividing Capitol Hill from the city’s East End that was built in the 1960s for a full inner loop highway system, halted because it would have bisected residential neighborhoods. The project also extends an existing on-ramp tunnel by 1,000 ft so it can more efficiently filter traffic to the freeways underneath the platform and improve pedestrian safety above it.

The seven-acre Capitol Crossing project is finally mending Washington, D.C.’s original street grid by creating three square blocks of real estate. The $1.3-billion multiuse development—including $270 million for utility upgrades and replacements and foundation work—will ultimately include five buildings containing 2.2 million sq ft of office space, apartments, green space, shops and restaurants.

Washington’s oldest synagogue was moved about 40 ft off the footprint of the development’s 750,000-sq-ft underground parking garage. Once the garage is complete, crews will move the synagogue back, atop the garage’s at-grade deck. Once that is done, work will begin on a Washington Jewish history museum, adjacent to the synagogue.

With an 11-year entitlement and permitting process and more than three decades of starts, stops and financial woes, Capitol Crossing is a complicated development, says Robert Braunohler, Property Group Partners (PGP) regional vice president. “The real challenge with a project like this is to have sufficient land value to justify the cost of building the platform, and there are only two cities where land value is high enough and that’s New York and Washington,” Braunohler adds. “There aren’t just empty sites just sitting around.”

Designing the foundation

Capitol Crossing’s $200-million deck is designed to withstand a 100-MW fire in the tunnel beneath it to meet federal highway requirements for fires and blast resistance put in place after the Sept. 11, 2001, terrorist attacks. The concrete deck was designed by the project’s structural engineer, LERA Consulting Engineers, based on recommendations from geotechnical engineer ECS.

LERA designed the deck with extra reinforcing steel in all the slabs to prevent disproportionate failure; if any one column fails, the deck and the buildings’ floor slabs are designed to survive.

The design team held at least three full-day charrettes with federal officials, blast experts and modeling experts to determine the design criteria for the deck and tunnel extension.

Foundation work was further complicated by poor subsurface conditions, says William Faschan, a partner with LERA.

Crews from Case Foundations installed drilled polymer slurry caissons, 8 ft to 10 ft in diameter with a 30-ft steel casing at the top. The caissons were cast up to 130 ft into the ground. An onsite slurry plant produced concrete mix for the caissons and the 867-ft- long and 3-ft-thick slurry wall. The wall is as tall as 76 ft.

The deck contains steel girders as long as 60 ft and as deep as 6 ft and concrete planks as long as 32 ft and as thick as 10 ft. The deck’s depth varied across the three city blocks and was limited to fit between the top of the highway right-of-way and the street grade.

To solve the challenge of long steel spans and limited deck depths, LERA considered various systems in concrete and steel. Ultimately, the engineer chose a system of composite structural steel and concrete box beams supporting 10-ft precast planks with 4-ft-deep composite cast-in-place concrete slabs. “Even in the temporary condition, the deck has to support heavy loads since the formwork and weight of the wet concrete of the superstructure needs to be supported during construction,” Faschan says.

The project’s complexity stemmed from balancing “the practical needs of construction and preserving design flexibility for future vertical development,” says Kristopher Takács, the Washington, D.C., practice leader in the office of architect-engineer Skidmore, Owings & Merrill. SOM provided master-planning, entitlements, infrastructure planning and urban design for the project. It is also providing architectural services for some of the buildings.

Designing the foundation with utility relocation and avoidance in mind, engineers had to accommodate a “spaghetti” of existing city utilities, some of which crews discovered during excavation, says Bob Robidoux, the purchasing director for the project’s general contractor, Balfour Beatty Construction D.C.

The utility design and planning also required onsite surveying and offsetting caissons from below their columns. The columns for the building superstructures are supported on transfer girders at the platform level, including a 63-ft-long and 4.5-ft-wide double-plate transfer girder that runs across the Massachusetts Avenue bridge that abuts the deck. The transfer girders are supported by columns, says Faschan, “which are, in turn, supported directly on caissons, one for one.” Faschan added that there are no caisson caps and each column is constructed directly above a single caisson.

“Caisson dowels have tension couplers so the caissons could be paved over after installation,” says Faschan. “Each caisson had to be designed to independently resist all applied loads, including horizontal forces from accidental loading since it was impractical to install grade beams across multiple lanes of traffic to interconnect groups of caissons.”

The design team also coordinated its plan with the traffic maintenance plan as one side of the highway, either northbound or southbound, was always required to remain open.

In late 2014, workers from Balfour Beatty began relocating utilities and installing new ones needed for a new highway portal and the surface street grid redesign. This included storm and sewer lines, water lines, electrical and telecommunications duct banks.

Massachusetts Avenue could only be closed on Saturdays or Sundays during the nearly completed utility phase. If it rained on those days, “you were in trouble,” says Robidoux.

Long Nights

Around the same time utility work was getting underway, city officials rebuffed PGP’s proposal to close a portion of I-395 for more than a year during construction. The developer said closing the highway would allow completion of the project in about 20 months instead of the 60-month mandated deadline, which was part of the purchase agreement with the District Dept. of Transportation and Federal Highways Administration.

Balfour Beatty created a 3D digital sequencing model that ultimately convinced officials to allow the closure of one side of the highway from 9 p.m. for eight hours. “We had to be cleaned up and gone by 5 o’clock to open up for rush hour every single morning,” says Robidoux.

The nearly eight-month deck operation began with workers from Case Foundations Co. drilling caissons on the east shoulder and the median of the highway. They installed a slurry wall on the west shoulder of the highway, too. Then, Facchina Construction Co. formed and placed 48-in.-dia concrete columns on top of the caissons and slurry wall. L.R. Willson & Sons erected the steel girders and the precast wall panels at the highway median before Facchina set the precast planks on top of the girders.

Finally, crews cast the self-consolidating concrete in the steel box girders along with the concrete topping over the precast planks before Davenport sprayed on fire-resistant material to protect the steel.

The team installed the foundation and deck from north to south for ease of construction and to be able to deliver the deck’s northeast portion in time to build the first building.

“You are trying to move equipment in and out, move material in and out, get concrete trucks in and out,” Robidoux says. “We were trying to pour concrete at 4 o’clock in the morning. Once you start pouring a caisson you have to finish it, and getting concrete here at 4 o’clock in the morning [presented] some challenges.”

Used to lift girders, the project’s 300-ton lattice-boom truck crane was driven by the operator onto the highway worksite every night. The 26-ft-wide crane was parked all day just off the highway before it traveled a half mile per hour to its working position through an opening in the deck columns with a 3-in. clearance. “Every night for eight months they moved it in and out, in and out,” says PGP’s Braunohler.

Eco-district

The developer says Capitol Crossing is planned as the first “eco-district” in the nation’s capital. All five buildings are designed to qualify for a LEED Platinum rating. The buildings will have green roof areas and a water capture and containment system. Eight tanks—one 23 ft deep—will store groundwater from a riverbed beneath the project. The captured water will be minimally treated and used for cooling. The system is expected to save about $40% of the complex’s potable water intake.

A 2-MW cogeneration plant will generate electricity and heat. Two of the three generators in the plant will be fired by natural gas. The third will be powered by the heat generated from the other two generators. The system will reduce the tenants’ electric bills, Braunohler says.

Eco chimneys, made of large plants, will filter garage exhaust. An axial ventilation system was installed in the expanded highway tunnel with Saccardo nozzles that move air through the tunnel in the direction of traffic. The original portion of the tunnel previously used a traditional lateral ventilation system that blows air in the middle of the tunnel and sucks it out of vents.

With the new method, air moves southbound on one side and northbound on the other side. “This is a much safer ventilation system because if there’s an accident or a fire you are blowing the smoke away from the traffic that’s trapped” and out the far end of the tunnel, Braunohler says.

The new system required Balfour Beatty to modify and taper the tunnel walls to create concrete ductwork that channels exhaust out of the tunnel.

Years in the making

Local developer T. Conrad Monts acquired the air rights over the highway in 1989 but was embroiled in litigation with the city over land ownership. In 2005, PGP began negotiating to pay Monts the cost of a settlement so PGP could buy the property from the city at fair market value. After Monts died in 2009, PGP acquired the air rights for the project after paying an undisclosed amount to Monts’ widow to settle the lawsuit. PGP also worked out a deal with D.C. officials that uses a formula to determine how much it will ultimately pay the city for the property based on how much it cost to build the deck. The amount will be determined within 17 months, says Braunohler. PGP has already paid the city $9 million.

PGP also is paying up to $500,000 to move the 140-year-old Adas Israel synagogue and $9 million to the Jewish Historical Society of Greater Washington for its new adjoining museum, according to Braunohler.

The synagogue was originally moved three blocks in 1969 to Third and G streets to make way for the Metropolitan Area Transit Authority headquarters. In November, Wolf House & Building Movers transported the 273-ton brick structure about 40 ft to a temporary position.

Wolf House spent weeks setting up the move. First, crews detached the building from its foundation and used hydraulic lifts to install a framework of steel beams under the 24-ft by 60-ft structure. Then, on moving day, remote-controlled dollies slowly drove the synagogue about 1 foot per minute to a temporary location in a little less than an hour.

The synagogue will remain there for about two years while the Capitol Crossing garage is built. Then, crews will move it another 1,000 ft to its final location.

Balfour Beatty weatherized the synagogue and braced the windows. Two air-handling units will cool the interior during the summer, and weekly maintenance will be conducted.

The 103-year-old Holy Rosary Catholic Church also adjoins the deck at Third Street NW. Crews will demolish the church’s rectory before building a $10-million annex behind the church, on the deck. PGP says it will expand the church’s cultural center as well.

Meanwhile, on the opposite end of the deck, construction of the project’s first office building is more than half complete. The 12-story, 430,000-sq-ft structure is slated to open in 2018. The other four buildings should all be completed by 2022, Braunohler says.

“It’s an urban planning victory to be able to reconnect the city street grid and make a highway disappear,” Braunohler says, “and that’s really a great feeling to be part of that.”

WASHINGTON (ABC7) — For the second time in its 140-year history, Washington’s oldest synagogue was relocated Thursday, making way for the massive Capitol Crossing project in downtown D.C.

Like a biblical event, Adas Israel Synagogue floated away from its foundation. The synagogue at 3rd and G Streets NW was only shifted slightly, about a dozen yards. But this move took months of preparation and a lot of faith.

Capitol Crossing developer Bob Braunohler said, “It’s just a masonry structure so it can crack easily.”

This summer, crews punctured steel beams through the building’s base, reinforced the corners, dug out the foundation and gently lifted the 273 ton structure over a large platform with wheels.

Just before the move Thursday morning, a rabbi offered up prayers while crews smoothed out the soil to ensure no sudden bumps or friction.

“We have plenty of insurance. That helps me sleep better,” Braunohler said with laughter.

In all, it took about 30 minutes to move the structure about 40 feet. All of this played out in slow motion, with the wheels barely moving, less than 1 mile per hour.

In the end, the building was parked Thursday in a temporary space just off 3rd Street NW.

In 24 to 30 months, the building will move to a new, permanent location a block south at 3rd and F Streets NW.

The Jewish Historical Society plans to build a new museum there exploring Washington’s Jewish history with the synagogue as its centerpiece.

The synagogue was dedicated in 1876, with President Ulysses S. Grant in attendance.

“It’s the first time a U.S. president had attended a synagogue service,” said Wendy Turman, deputy director of the Jewish Historical Society.

Over time, the building transformed from a Greek orthodox church to a grocery store to a BBQ pork carry-out restaurant.

“So there was a neon pig on the corner of this former Jewish house of worship,” Turman said.

In 1969, when Metro was building its new downtown D.C. headquarters at the synagogue’s prior location, the building was saved from demolition and relocated a few blocks east.

Property Group Partners has developed an office building at 860 Washington Street in Manhattan’s meatpacking district in partnership with Romanoff Equities.

Mr. Sussman, 70, is the founder and president of the Property Group Partners, which develops and manages office buildings.

Interview conducted and condensed by

VIVIAN MARINO

Q. How did you decide on a new name after your separation in 2011 from Louis Dreyfus?

A. The Louis Dreyfus family changed ownership and didn’t want to be associated with real estate anymore in the U.S., and so it was very amicable.

Property Group was what we had been known as when we were Louis Dreyfus. It’s a little generic. The only other alternative was to put a name on it, but I think we’re all in this together on this team.

Q. You founded the Louis Dreyfus Property Group more than 40 years ago. Any plans to retire soon?

A. Absolutely not!

Q. How is business these days?

A. We have never been busier. We have more projects under way than we’ve ever had at any one time.

We have three new projects. One is in Washington, D.C., which is called Capitol Crossing, and it’s about 2.2 million square feet of office space. The second is here in New York in a venture with the Romanoff family, at 860 Washington Street. And we have a building at 52 Lyme Street in London, which is right next to Lloyd’s of London.

Q. Is 860 Washington your sole holding in New York?

A. Yes. In 1985 we finished 527 Madison Avenue at 54th and Madison. And 148 Lafayette Street we sold just over a year ago, which was a complete renovation and rehab of the building, an office building. One Forty Eight Lafayette Street was owned in a fund, and the fund had a finite life, so that’s why we disposed of that.

We would like to increase our holdings in New York.

Q. Let’s talk a little bit about the Washington Street development, which is expected to include 120,000 square feet of office and retail space.

A. We’re on the east side of the High Line and the new Whitney Museum is on the left side.

It’s a 10-story building. We are breaking ground on and about Oct. 1. There’s a dinner theater on the site right now, and they leave on the 28th of September. All of our plans have been submitted to the building department, and we’re moving forward.

It’s going to be a green building — hopefully we’re going for gold.

Q. Sustainable development has been your focus.

A. It’s wise to do things as environmentally acceptable as you can. We also found that the biggest economic driver were users. Law firms in Washington want it. There’s an emphasis on long-term sustainability. We’re looking at doing a cogeneration plant for the buildings on our site in Washington. It’s a higher first cost, but you’re able to control your long-term power costs.

Q. Any early interest from potential tenants for 860 Washington?

A. We’ve gotten inquiries.

This may be an opportunity for a single user for the entire building who may be interested in it not as just a location but as a branding opportunity. We are abutting the High Line. Our first floor is 25 feet high — the retail space — which brings us to pedestrian level of the High Line. And our second floor is 17-feet high.

Q. What kind of company could you see leasing there?

A. There are a couple of industries. One would be fashion and the other would be tech; we’re in talks with people in those industries.

Q. And rental rates?

A. I think we’re a little early to say, but certainly the office space will have spectacular views. The windows on the east have views of the Empire State Building and the Chrysler Building. The windows on the west have great views of the Hudson, and south we have all of Lower Manhattan.

Q. This building would probably sell out quickly if it had a residential component?

A. Thank God it wasn’t allowed to have residential — otherwise we can’t compete for the pricing.

Q. How do you see the meatpacking district evolving?

A. It’s going through what a number of new areas go through. When people originally moved there, mostly retailers, pricing was relatively inexpensive compared to the then-established areas, like SoHo and the West Village. Over time as it became more popular and landlords wanted to get increased rents there was some turnover. That happened when the meatpacking district wasn’t very mature, and I think it’s getting very mature. There have been some terrific new renovations.

Q. What do you do for fun?

A. I love the real estate business.

Q. Do you have any other family members in the business?

A. No. I have a 5 ½-year-old grandson who goes to bed at night with a brick — it’s plastic — and he is remarkable with Lego. So there’s hope.

Long-Anticipated Development of Vibrant Mixed-Use Community to Move Forward Following Historic Closing.

Property Group Partners, a leading owner and developer of Class-A commercial real estate, has acquired the fee interest for three blocks of the recessed portion of Interstate 395 located in downtown Washington.

With today’s news, preliminary work on the 2.2 million-square-foot, mixed-use development known as Capitol Crossing is cleared to begin, with the development of the platform and the first office building to commence in 2013.

Designed to achieve LEED Platinum certification, Capitol Crossing will be built on the largest contiguous, undeveloped site remaining in downtown Washington. Spanning from Massachusetts Avenue on the north to E Street on the south, the platform will cover the expressway between Second and Third Streets NW and create seven acres of property when completed. The development also will reconnect the Capitol Hill and East End districts that were cut off from each other by the construction of I-395 in the late 1960s.

The specific financial terms of this landmark transaction remain confidential.

“As a development firm that has constructed iconic buildings throughout the world, this is by far the most creative project that we have ever tackled. Thanks to our partners and scores of District and Federal officials who helped us reach this point, we can now move forward to make this long-awaited dream a reality,” says Jeffrey Sussman, president of Property Group Partners.

A team of local CBE partners led by The Jarvis Companies will participate in the project.

Current plans call for five major buildings to be built on the site, one 150-unit residential building and four office buildings of between 300,000 square feet and 685,000 square feet. All will be built to 130 feet and will have stunning views of the US Capitol and the Washington Monument. The office buildings will achieve LEED Platinum ratings. The residential building will be at 600 Second Street and will contain 180,000 square feet of space, while the four office buildings will be addressed as 200 Massachusetts Avenue, containing 407,000 square feet of space; 250 Massachusetts Avenue, offering 546,000 square feet of space; 200 F Street, with 685,000 square feet of space; and 201 F Street, containing 297,000 square feet. Each high-rise building will feature exclusive ground-floor retail space designed for a mixture of restaurants,
boutiques and service-oriented merchants.

The site is located three blocks from Union Station, offering immediate connections to AMTRAK and the MARC and VRE rail lines. The Judiciary Square station of the Washington METRO system is located one block west of Capitol Crossing, The project is in close proximity to entertainment and hospitality amenities such as Verizon Center, the Washington Convention
Center, cultural institutions and a large number of retailers and restaurants.

Skidmore, Owings & Merrill designed the master plan for the project, and Kevin Roche John Dinkeloo and Associates and Kohn Pedersen Fox Associates are design architects for the north and south block office buildings, respectively.

Real estate services firm NAI KLNB served as originating broker of the transaction, and a team of leasing brokers from the Washington office of Cassidy Turley represents Property Group Partners as the designated leasing agent for the project.

Company Says First Office Building to Begin Construction In 2013.

Property Group Partners (PGP) has acquired the fee interest for three blocks of the recessed portion of Interstate 395 in downtown Washington, which PGP said will enable work to begin on the 2.2 million-square-foot Capitol Crossing development, part of which will be built on a huge platform over the interstate.

Development of the platform and the first office building in the unique mixed-use project — formerly known as “the air rights development” as reported by CoStar earlier this year — to be built on the largest contiguous undeveloped site remaining in downtown Washington, is now slated to begin next year, according to a PGP statement.

The platform will cover the roadway between 2nd and 3rd Streets NW, spanning from Massachusetts Avenue on the north to E Street on the south, creating seven acres of property when completed.

The project also will reconnect Capitol Hill with the East End district, cut off by the construction of I-395 in the late 1960s.

“As a development firm that has constructed iconic buildings throughout the world, this is by far the most creative project that we have ever tackled,” said PGP President Jeffrey Sussman.

PGP’s plans call for five major buildings, including a 150-unit residential building at 600 2nd Street and four office buildings addressed as 200 Massachusetts Ave., 407,000 square feet; 250 Massachusetts Ave., 546,000 square feet; 200 F Street, 685,000 square feet; and 201 F Street, 297,000 square feet. The office portion will seek LEED Platinum certification.

Skidmore, Owings & Merrill designed the master plan for the project, and Kevin Roche John Dinkeloo and Associates and Kohn Pedersen Fox Associates are design architects for the north and south block office buildings, respectively.

NAI KLNB served as originating broker of the transaction, and a team of leasing brokers from the Washington office of Cassidy Turley represents PGP as the leasing agent.

Property Group Partners has acquired the air rights above a three-block long recessed portion of the Center Leg Freeway from the District.

Formerly the Louis Dreyfus Property Group, New York City-based Property Group Partners announced Tuesday that it has closed a deal with the D.C. government for the fee interest of the three blocks between Massachusetts Avenue NW to the north and E Street to the south.

Terms of the arrangement were not disclosed.

Update: Property Group Partners paid $11 million at closing and will make additional payments totaling as much as $109 million, the Washington Business Journal has learned.

“We’re closed. We own the air and land and we’re moving forward,” said Jeffrey Sussman, PGP president.

The 2.2 million-square-foot Capitol Crossing will feature five buildings — one 150-unit residential building and four 130-foot office towers, plus more than 1,100 parking spaces and 63,000 square feet of ground floor retail — on a new deck atop the freeway.

Work on the platform is expected to kick off in the third quarter of 2013. The project will be constructed in phases, with the north pad, all office, to be built first.

The 247,000-square-foot, 7-acre footprint is the “largest contiguous undeveloped site remaining in Downtown Washington,” according to Property Group Partners. The project is expected to reconnect the eastern edge of downtown Washington as it extends F and G streets NW over the freeway.

Few planned projects in the District have generated as much skepticism as Capitol Crossing, not only because D.C. and PGP needed five-plus years to complete their negotiations, but also because it’s difficult to wrap your head around the decking concept. Sussman said people “really get the hang of it” when they visit PGP’s Capitol Crossing marketing room at its D.C. office, 1101 New York Ave. NW.

“I think we’ve established ourselves as credible,” Sussman said. “And when they come and look, they understand we’re not just building a bridge and stacking buildings on top of it.”

The Washington Business Journal reported in March that PGP was in early talks with Georgetown University to establish a school presence at Capitol Crossing. Sussman said Tuesday that those talks are “constant,” but they have “not progressed to any point.” Cassidy Turley is Property Group Partners’ broker.

The developer lined up an equity investor in October 2011 to finance a large portion of the platform. The Federal Highway Administration and the D.C. Zoning Commission also have OK’d the project.

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 Conrad Monts and his Washington Development Group. That deal ended in litigation and a healthy payout to Monts, who died in 2009. Louis Dreyfus resurrected the project in 2007.

Capitol Crossing’s planned buildings:

– 250 Massachusetts Ave. (office): 546,740 square feet
– 200 Massachusetts Ave. (office): 406,996 square feet
– 600 Second St. (residential): 180,384 square feet
– 201 F St.: (office): 297,311 square feet
– 200 F St.: (office): 685,430 square feet

Property Group Partners has sold a renovated SoHo office building at 148 Lafayette St. in New York City for $126.5 million to real estate investment firm Epic, city records show.

The 12-story, 154,953 s/f, class A office tower features 14,000 s/f of ground-floor retail space at the corner of Lafayette and Howard Streets.

The firm purchased the property in 2007 for $59 million, when it operated under the name Louis Dreyfus Property Group, city records show.

At the time, the building was in “dreadful shape,” with a single tenant, said Jeffrey Sussman, president at PGP. The firm launched a comprehensive renovation project with the help of Cook + Fox Architects, adding a new lobby, windows, restrooms, elevators, electrical and mechanical systems, and a 5,327 s/f top-floor penthouse.

The company put the price tag on the renovation around $15.5 million.

The building was also refitted with new electrical and mechanical systems and achieved LEED Gold certification in 2008, now a staple in the firm’s new and renovated buildings.

The original tenant was the aptly-named women’s clothing store Lafayette 148, which now occupies four floors in the building, Sussman said. Dolce & Gabbana, Seattle-based architectural firm Callison, Tower Research and Utrecht Art Supplies are among the building’s other tenants.

While it was the firm’s first project of this scope in New York City, Sussman said he hopes to expand further into the market and is currently bidding on several unnamed properties.

“It was a great renovation and we’d like to do a dozen more,” he said. “It’s just very, very, very difficult to find buildings of size in SoHo or Tribeca, or even true Chelsea, where we can do office. We’re constantly in competition with people who are doing residential and it’s tough.”

Douglas Harmon, Adam Spies and Kevin Donner of Eastdil Secured represented the seller. PGP owned the building in partnership with Bruce Toll and members of the Louis-Dreyfus family.

Epic did not return calls seeking comment.

The Interstate 395 air rights project, briefly known as “Return to L’Enfant,” is now “Capitol Crossing.”

So developer Property Group Partners (PGP) has settled on a name, which is nice (“Return to L’Enfant” is more of an idea than a marketing moniker), but the title is far less important than the plan. And there is one for Capitol Crossing: closing on the sale of the air rights with D.C. in June, groundbreaking on the freeway platform as soon as the second quarter of 2013 and first move-in sometime in 2015.

There are many nonbelievers. Whenever I write about the project, I’m inevitably asked, “Do you really believe this is going to happen?”

The developers are asking us to believe.

“We’ve been at it six years,” said Sean Cahill, vice president of Property Group Partners. “We’re not going to mothball. We’ve got the equity to build the deck and we think we’ve got the market to see it through.”

The 247,000-square-foot development site is bounded by Massachusetts Avenue and Second, Third and E streets NW, on either side of the Center Leg Freeway. The project will include five buildings — four office and one residential — constructed in phases, ground floor retail and five levels of underground parking. The north pad, all office, will be built first.

The idea of decking over I-395 dates to 1989, when then-Mayor Marion Barry awarded rights to develop on top of the highway to developer Conrad Monts and his Washington Development Group. That deal ended in litigation and a healthy payout to Monts, who is now dead. Louis Dreyfus Property Group, now Property Group Partners, arrived in 2006 to resurrect the project.

Capitol Crossing was unveiled Monday night as PGP opened its marketing center on the 9th floor of 1101 New York Ave. NW. The room features several models of the $1.3 billion, 2.2 million-square-foot project, as well as touch screen monitors with information about each building, available parking, the new freeway deck and the green features — water recapture, a co-generation power plant, green roofs, etc.

As one PGP executive said, “This is not placebo green.”

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.

The District’s Center Leg Freeway, the scooped-out limb of Interstate 395 that splits downtown D.C., could be decked over as soon as 2013 and built out three years later with swift movement on permits, environmental studies and land acquisition, the developer and District leaders say.

Louis Dreyfus Property Group and Mayor Adrian Fenty’s administration are finalizing terms on the purchase price for a sliver of District-owned land around the freeway and the air rights above, and perhaps just as important, how the site bounded by Massachusetts Avenue, Second, Third and E streets NW will be assessed for the purpose of property taxes.

The deal calls for a payment in lieu of taxes, or PILOT, through which Louis Dreyfus would remit a negotiated fee — rather than real estate taxes based on an Office of Tax and Revenue assessment — for the air rights over the highway until the freeway deck is completed.

“We believe the use of a PILOT is a creative way to assure a fair taxation of this real estate asset during construction,” Robert Braunohler, Louis Dreyfus regional vice president, told a D.C. Council committee during a recent public hearing.

Under the arrangement, PILOT payments would accrue until Louis Dreyfus requests its first vertical building permit, at which point all payments would be due, minus $2.4 million to offset 50 affordable housing units. Each building on the deck, once the shell is finished, would be taxed like any other D.C. real estate.

John Ross, senior adviser in the office of the chief financial officer, estimated the city will lose roughly $5.1 million in the PILOT, because the deal as proposed “will result in payments to the District that are significantly less than what would otherwise be paid in real property taxes.”

The 2.1 million-square-foot development will be mostly Class A office space, with some residential and retail. F and G streets NW, which stop suddenly on either side of the freeway, will be reconnected over it, though the G Street extension will be open only to pedestrians.

“There is no more important project because it will undo much of the damage caused by the construction of this semi-freeway going right through downtown,” said Councilman Jack Evans, D-Ward 2. “It really erected a division.”

The District has wanted to build above I-395 since 1988, when then-Mayor Marion Barry turned over development rights to Conrad Monts’ Washington Development Group. D.C. later sued to regain control and lost in court, a judgment that cost the city more than $8 million.

The price for the air rights has not been finalized, officials said, and the amount of the initial PILOT payment won’t be determined until closing. Legislation authorizing disposition of the air rights to Louis Dreyfus, and establishing the PILOT, is currently before the council.

The District and the developer are expected to go to the Federal Highway Administration for its approval of the deck this summer. Then the environmental impact statement process begins. Officials will evaluate issues such as what effect decking over a highway will have on vehicle emissions.

Braunohler said the plan is to finish the deck by 2013 and build out by 2016. Louis Dreyfus is partnering with The Jarvis Co. LLC on the project.

The air rights disposition is a major step in the effort to “re-knit the city’s grid” and eliminate “the scar downtown,” said Councilman Tommy Wells, D-Ward 6, who represents the project area.

Kaiser is leasing close to half of an approximately 507,000-square-foot building developed by Property Group Partners, the real-estate arm of French Louis Dreyfus SAS, and Fisher Brothers of New York.

Washington’s acclaimed redevelopment of Union Station roughly two decades ago was a catalyst that helped transform an area north of Massachusetts Avenue from a patch dotted with low-rise industrial buildings and empty lots into one of the city’s hottest office destinations.

Now health provider Kaiser Foundation Health Plan Inc., of Oakland, Calif., has signed the city’s biggest lease of the year in a speculative office development in that area, a sign Union Station’s crowded corridors of shops and restaurants still have drawing power despite the recession.

The developer also signed an earlier lease with the American Chemistry Council to occupy about 90,000 square feet. That makes the building about 60% leased, a level that would give comfort to most developers hitting the market with space during the worst recession since the end of World War II.

The deal is in part a testament to the continued draw of the location and the appeal of its connection via an underground walkway to Union Station, says Bruce Pascal, executive vice president of CB Richard Ellis in Washington, who represented Louis Dreyfus in the transaction. “Large deals are still happening in our city,” Mr. Pascal says.

In a better market, Kaiser might have had a harder time beating out more-traditional office tenants for such prime space. Many landlords prefer not to mix consumer-oriented companies like medical offices with more traditional office users, brokers say.

These days, however, nearly any tenant is a good tenant, and large, credit-worthy companies like Kaiser are in the driver’s seat. Jeffrey Sussman, president of Louis Dreyfus Property Group, says the company would be pleased to have leased the space to Kaiser in any market.

The building, designed by Pritzker Architecture Prize-winner Kevin Roche, is a short walk from the Capitol building and is part of the Station Place development complex that also includes the Securities and Exchange Commission headquarters. Kaiser says it will open the company’s Capitol Hill medical office in the space in 2011. Patients will be able to visit primary and specialty-care doctors in the building, and pharmacy, laboratory and imaging services also will be available.

The deal comes as Washington’s office-vacancy rate has risen to a second-quarter rate of 11.7%, from 9.4% in the year-earlier period, the first time it has risen into the double-digit range in about 10 years, according to property consultant Cushman & Wakefield.

Landlords in the submarket that includes the Station Place property have even more headaches, as the area posted a second-quarter vacancy rate of 17.4%, partly because of the surge of new projects conceived in better times, Cushman & Wakefield says.

Rents for prime space like the kind leased by Kaiser have fallen to the high-$40-a-square-foot range, down from the mid-$50 range that some buildings fetched in the area at the peak of the market a year or so ago, says Sigrid Zialcita, director of research for Cushman & Wakefield in McLean, Va. Louis Dreyfus and Kaiser declined to comment on rental rates.

The north of Massachusetts Avenue office market, dubbed Noma by brokers, has grown in recent years as developers, facing rising prices and height restrictions in the traditional central business district, have pushed out from Capitol Hill.

The image of the area has been changed by the renovation of the city’s beaux-arts Union Station in 1988, improved transportation connections and the companies and agencies that have moved to the area.

“People said nobody would ever want to live or work here,” recalls Sam Rose, a partner in the development firm of Greenebaum & Rose Associates. “They were wrong.” Last year, National Public Radio announced it would move its headquarters to the area.

Property Group Partners’s 801 Seventeenth Street NW is officially the first ground-up office building in D.C. to win a platinum rating by the U.S. Green Building Council.

It is the first such building to get the highest Leadership in Energy and Environmental Design designation in D.C., according to the USGBC. It received the rating under the council’s core and shell 2.0 system.

The $48 million, 327,500 square-foot property was completed earlier this year by Clark Construction Group LLC.

The 11-story building sits where the Federal Deposit Insurance Corp.’s headquarters formerly sat and 92 percent of demolition waste from the old FDIC building was recycled and existing foundation walls were salvaged. Many of Lafayette Tower’s materials are low-VOC, regional, or recycled.

The Tower Cos.’ flagship building at Tower Oaks in Rockville, another multi-tenant office building built from scratch, snapped up the first platinum rating in the D.C. area last month.

Kaiser Permanente has inked a deal for 200,000 square feet of space in the Station Place complex adjacent to Union Station.

The office will open early 2011 and offer primary and specialty care, full-service imaging, laboratory and pharmacy services and space for outpatient procedures.

Louis Dreyfus Property Group and Fisher Brothers own and developed Station Place.

Kaiser Permanente, which has regional offices in Rockville, said it chose the site because of its proximity to federal employees, public transportation, and parking.

The company will join the American Chemistry Council, which is leasing 90,000 square feet and the Securities and Exchange Commission, which leases two of the three buildings in the 1.6 million-square-foot Station Place development.

Designed by Kevin Roche, the development at 700 Second St. NE is the only Capitol Hill office building with underground walkway access to Union Station.

The CB Richard Ellis team of Bruce Pascal, Roberta Liss, Andrew Felber, Tim Hutchens, Mark Klug and Bobby Blair represented Louis Dreyfus. Kaiser Permanente was represented by Rita Robison and Andy O’Brien of Jones Lang LaSalle.

Two new office buildings in D.C. are officially gold LEED.

Both 20 M St. SE, developed by Lerner Enterprises, and 1101 New York Ave. NW, developed by Louis Dreyfus Property Group, achieved a gold rating from the U.S. Green Building Council’s Leadership in Energy and Environmental Design program for sustainable core and shell construction.

The 190,000-square-foot Lerner building, designed by WDG Architecture PLLC, was completed in March 2007 and is still vacant.

Kevin Roche John Dinkeloo and Associates LLC designed the Dreyfus building, which contains 400,000 square feet and was completed earlier this year. Ernst & Young is the main tenant.