This week’s news about an offer on a portion of the land previously planned for the failed Navy Hill project got the attention of one interested party in particular: real estate developer Douglas Jemal.
The founder and president of D.C.-based Douglas Development had made his own bid for the bulk of the city-owned properties shortly after Navy Hill was voted down in February. That was months before this latest proposal from the Navy Hill project’s development team to buy and redevelop a 3-acre portion of the site.
After BizSense broke the news of the offer this week, Jemal, who has rarely commented about his local projects, spoke out about the offer – and the status of his own.
“It’s very interesting if you read through the lines,” Jemal said Wednesday in a call with BizSense.
“If that group is offering up ($3.17 million) for that, I would offer them $4 million,” Jemal said. “Obviously they have a lease with VCU to build that site, and why all of a sudden now don’t they need any public money or tax-increment financing? Why has that changed?”
Jemal in February offered the city $15 million in cash for nearly 15 acres of the Navy Hill project area, stressing in his offer letter that his development would not require tax-increment financing or other public funding, as Navy Hill had. The $1.5 billion project from NH District Corp. had relied on a TIF district to help fund a new arena to replace the Richmond Coliseum, which Jemal proposes to refurbish instead.
The recent offer from Capital City Partners, the development group that NHDC enlisted for Navy Hill, seeks to purchase only what was known as “Block D” in the project, part of a city block that houses the city’s Public Safety Building between Ninth and 10th streets and between East Leigh Street and the Department of Social Services building on Marshall Street.
CCP’s offer does not ask for city funds or include the Richmond Coliseum, which was the part of the Navy Hill plan that would have involved TIF funding, in which a portion of real estate tax revenues from a section of the city would have gone toward paying off bonds that the city would have issued to fund the new arena.
While Jemal’s proposal did not call for TIF, it also did not include certain project details that city administrators said were needed before City Council could formally consider it. Officials said they would follow up with Douglas to acknowledge receipt of the proposal and request the missing information, but Jemal said he never heard from the city.
“I never heard anything from the municipality other than what they answered in the (press), that it has to go through an RFP process and be voted on,” Jemal said, referring to a city code rule that officials had cited in which council is required to solicit additional offers, either through an invitation for bids or a request for proposals, before it can act on an unsolicited offer.
The city mentioned the rule in the letter it sent Feb. 24 to Jemal’s broker, John Boland of Newmark Knight Frank, who had submitted Jemal’s offer letter to the city. An email thread provided by the city shows that Boland responded the same day to the email from Leonard Sledge, the city’s economic development director, stating that he and Jemal “will respond accordingly.”
Reached Thursday, Boland said they never responded with the requested information because he and Jemal read the rule to mean that an RFP would be forthcoming. Boland said they were waiting to respond to the RFP so as to provide all of the needed information at one time.
Sledge said an RFP is put out at council’s discretion and is not automatically triggered by receipt of an offer. He said further action wasn’t taken because the city never heard back from Douglas, which he said could still respond to a subsequent RFP.
Sledge also noted that council had requested that the city complete a small area plan for the Navy Hill area before going forward with any RFP.
‘You can’t do pieces and parts’
Nonetheless, Jemal said his offer for the 15 acres still stands. His letter from February said the offer would expire May 18, a week from this coming Monday, but Jemal and Boland said they’re willing to extend it.
Jemal took issue with the prospect of the city selling off parts of the project area, contending that it needs to be developed all at once as a master-planned project.
“It needs to involve the whole thing. You’ve got to look at the whole picture,” he said. “What I offered was that the city is not spending any money. You can’t do pieces and parts. Navy Hill, for it to make a great impact, needs to be done as a total project, not hopscotch-jump stuff.
“It’s an opportunity of a lifetime for Richmond,” he said. “Whether I get it or somebody else gets it, it needs to be master-planned.”
In addition to renovating the Coliseum, Jemal’s offer letter described a mixed-use development with similar components to Navy Hill, including a “high occupancy” hotel to support the Greater Richmond Convention Center, retail and Class A office space, a grocery store, and a transit center to be leased back to the city.
It also referred to an unspecified number of apartments and condos with varying price ranges, with 10 percent designated for low-income housing. That percentage is below the city’s required 15 percent threshold for new multifamily residential development.
City administrators said the proposal was lacking specific addresses of property to be purchased, as well as economic benefits to the city such as projected investment value, tax revenue and job creation. It also did not mention minority business participation, which was one of several requirements the city made for Navy Hill.
CCP’s proposal for the Block D parcel is to replace the Public Safety Building with a $350 million mixed-use development with a 20-story VCU Health-anchored office tower. CCP, led by Michael Hallmark of Richmond-based Future Cities and Susan Eastridge of Fairfax-based Concord Eastridge, is offering $3.17 million for the 3-acre parcel, based on an appraisal by CBRE that put the parcel’s land value at $8.5 million.
Hallmark declined to comment when told of Jemal’s remarks. He said CCP’s offer is based on the Block D site being made “shovel-ready,” meaning it includes the cost of demolishing the 66-year-old building and infrastructure costs related to a planned extension of Clay Street through the property.
Plans for Broad Street buildings
While his offer remains in limbo, Jemal said he is not dissuaded from investing further in Richmond, where his company has been ramping up activity with several projects underway. It’s in the process of converting the former Stumpf Hotel at 728 E. Main St. into apartments, and earlier this year filed plans for a Hyatt hotel in the former Virginia DEQ building at 629 E. Main St.
The company also owns dozens of properties in the area of East Broad and Second streets, near the Central National Bank building that Douglas bought in 2005 and redeveloped as apartments several years ago.
While some local observers have been critical of Jemal for apparently sitting on those properties, arguing that not developing them is holding the corridor back from reaching its potential, Jemal said he does have plans for the buildings.
“We have an opportunity there to do something really great,” he said of his Broad Street holdings. “I want to focus on something bigger than just a pawn shop and just street retail. I’m looking to upgrade it and do some residential over there.
“You’re talking about service retail along Broad Street and some density of residential in there, so it becomes a living downtown. And it’s working, but it’s not something that happens overnight,” he said. “The restaurant industry right now has been rocked big time with this virus. Retail in itself has changed dramatically, as we all know. And Broad Street, needless to say, is a retail corridor.”
Despite the economic downturn caused by the coronavirus, which has impacted the retail and restaurant industries that Douglas’s developments often cater to, Jemal said he’s not looking to unload any of his holdings along Broad Street or elsewhere in Richmond.
“I’m very bullish on the Richmond market. I think it’s going to be a great market,” he said. “I think people are going to move out of urban areas and move into cities like Richmond where it’s not that densely populated. I think at the end of the day, there’s going to be a big opportunity for a resurgence of population in Richmond from this coronavirus.”