Skyland is WBJ’s Deal of the year

Daniel J. Sernovitz, Washington Business Journal

It took more than 20 years and had more plot twists than a Shakespearean tragedy, but a team led by McLean-based Rappaport followed through on its long-standing pledge to deliver community supporting retail to the site of the former Skyland Shopping Center in Ward 7’s Good Hope neighborhood.

On Sept. 27, Lidl became the first full-service grocery store to open east of the Anacostia River in 15 years. And it marked the biggest turning point in a development that’s been on the books for its two builders for 20 years, in a long underserved part of town.

The German discount market chain was just one of several new merchants in Skyland Town Center’s second phase. In addition to the 29,436-square-foot Lidl, the $17 million development included the District’s first drive-through Starbucks, a PNC Bank, Tropical Smoothie Café, Mezeh, Maizal and &pizza. That’s in addition to the project’s first phase, which brought to the community The Crest at Skyland Town Center, a 263-unit multifamily building with such ground-floor retailers as CVS Pharmacy, Roaming Rooster and a Trek bicycle shop.

An eminent domain battle, the loss of its first anchor retailer and multiple starts and stops were among the trials and tribulations that earned Skyland Town Center, with a new anchor tenant in tow, the Washington Business Journal’s Perseverance Award in 2020. Then again, as Walmart’s 2016 decision to pull out of the project showed, nothing’s for certain until the punch list is completed and the ribbons are cut, especially amid a prolonged pandemic.

All in, including acquisition, relocation, site work and construction, the city and development team have spent north of $130 million, with a third phase still to come.

To appreciate the new mix of tenants, it’s important to consider what they replaced, says Henry Fonvielle, president at Rappaport. Previously anchored by Safeway, which moved across the street to East River Plaza, the former, 170,000-square-foot retail center at Alabama Avenue, Naylor Road and Good Hope Road SE was a “ramshackle collection of retail,” including an auto parts store, pharmacy and post office, he says. The neighborhood deserved more.

“When we are part of the community like this, this is such a pride,” Fonvielle says. “It affects everybody. If you look in the apartments, if you look in the Starbucks, you look in Lidl, it’s going to be people from this community. It’s not moving out a certain group and moving in another group. This is serving the community.”

A different basket of goods

After D.C. seized Skyland Shopping Center in 2005, it would spend the next seven years unraveling various legal challenges — the city spent a total $30 million to acquire Skyland through eminent domain and $9.5 million to relocate its tenants.

But that was only the beginning of Skyland’s hurdles.

Walmart backed out of two stores east of the Anacostia, one at Skyland and a second at Ward 7’s Capitol Gateway. Yet, setting aside that exit, which alone could have killed the project, the team also needed to overcome: a Safeway-related covenant that D.C. had to buy out, a Housing and Urban Development investigation into the District’s use of Community Development Block Grants to purchase the center, multiple negotiations over D.C. subsidies, multiple trips to the D.C. Zoning Commission, structural and technical challenges, and neighbors’ protests over construction dangers. The list goes on.

When it came to a replacement anchor retailer for Walmart, Rappaport courted multiple. Among them was Whole Foods, which came close to signing a deal before its stock plummeted and the chain was acquired by Inc. in 2017. The rebound came about two years later, on the sidelines of the International Council of Shopping Center’s big Las Vegas Recon meeting in May 2019. A series of closed-door meetings led to a momentous announcement from D.C. Mayor Muriel Bowser: Lidl had stepped up to fill the void.

“For us, serving the community begins with being part of the community,” Lars-Oliver Hamann, Lidl U.S. regional vice president, said the day of the store’s grand opening.

Rappaport, along with D.C. multifamily developer WC Smith, had already recalibrated the project to lead with The Crest, which opened in April 2021 and is now substantially leased. They broke ground that June on the project’s second phase.

Meanwhile, the Skyland team had held dozens of meetings over the course of two decades with stakeholders and groups, including the Marshall Heights Community Development Organization Inc., Washington East Foundation and the Office of the Deputy Mayor for Planning and Economic Development, to identify the right mix of tenants and uses that would not just be successful but also support the surrounding community.

In addition to the market and restaurants, that resulted in businesses like a barbershop, a nail salon and Edenbridge Health, a health care provider for seniors.

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More to come

Those businesses meant new job opportunities for the community, but area residents would need the right skills to fill them.

Enter the Skyland Workforce Center, which launched in December 2014 as an extension of the Ward 8 nonprofit Building Bridges Across the River.

The center has supported more than 4,000 area residents to gain job skills and employment, some with businesses at the town center, some outside of it. Lidl hired more than 60 employees, the majority of them residents of wards 7 and 8. Starbucks hired another 25, and most of them live in Southeast D.C.

“It’s a testament to both Rappaport and WC Smith. They really have made some sacrifices to get it done,” says Babatunde Oloyede, president and CEO of the Marshall Heights CDO, which has worked closely with the development team since it was selected in May 2002 by the National Capital Revitalization Corp. to redevelop the property. “Eminent domain, Walmart — there’s just a lot of things that have transpired over the years that, I would say, a lot of developers would say, ‘This may not be the project for me anymore. It’s time to move on.’”

And the story isn’t over. Rappaport and WC Smith have proposed to develop 126 for-sale townhomes on the northern part of the site, where the Walmart was to be developed, and have brought on NVR Homes to develop the new units. There’s also a 75-unit senior center, with 10,000 square feet of retail and a 1-acre park, planned for that block.

It was a long and winding road, one that neither Rappaport nor WC Smith could have predicted from the starting line two decades ago. Still, the result so far is a development that has lived up to expectations, says Chris Smith, chairman and CEO of WC Smith.

“I think the team over here, although a little exhausted, is pretty excited about the final product that has been delivered,” Smith says. “Projects like Skyland Town Center end up being like legacy projects. You have to have a strong fortitude and a long-term commitment when you take on something like this.”

Behind the deal

  • Developers and partners: Rappaport and WC Smith, with Skyland Workforce Center, Washington East Foundation, Marshall Heights Community Development Organization Inc., D.C. Deputy Mayor for Planning and Economic Development
  • Architects: RVA Architecture, L2M Architects
  • Contractor: LF Jennings
  • Size: 42,390 square feet
  • Value: $17 million, including $4.1 million in New Market Tax Credits
  • Certificate of occupancy (phase 2): Feb. 1, 2022