by Sean Madigan
An upstart U Street development company has reached a deal with Horning Bros. to transform a shabby strip center into a $100 million condominium project.
The 18 month-old company, Level 2 Development, is buying the Nehemiah Shopping Center, which runs a full block along 14th Street between the U Street corridor and Columbia Heights.
Franco would not disclose the purchase price for the retail center, but a representative for the seller said the cost was "north of $13 million."
The project, on 14th Street between Belmont and Chapin streets NW, is a joint venture between Level 2 and Chicago-based Centrum Properties. The companies also are collaborating on an $80 million, 170-unit condo project called View 14 at the former Petrovich auto repair shop across the street.
"These projects really act as the gateway to Columbia Heights," Franco says.
Developers and restaurateurs have invested millions in the U Street corridor. And several blocks north are more than a half dozen large-scale condo and retail projects, including the $140 million Target-anchored DC USA complex, in various stages of development. With investment creeping both north and south along 14th Street, Level 2's projects will link both areas.
Despite the ongoing investment, especially in housing, "there is an absolute dearth of retail" in the neighborhood, says Philip Rachels, a vice president at Walker & Dunlop who represented Horning in the Nehemiah deal.
Franco says Level 2 is planning about 13,000 square feet of street-level retail space at View 14 as well as a 20,000-square-foot gym, which will be built below grade. But the company, which won zoning approval for the project in January, has not yet found a gym operator.
At the Nehemiah site, the company would like to lease space to one or two restaurants as well as a small, gourmet grocer, Franco says.
Construction is not expected to begin for at least 12 to 18 months because the company needs zoning changes to accommodate its development plan.
In the meantime, Level 2 is working with existing tenants who want to relocate their businesses, Franco says.
Level 2 was not Horning's first suitor.
PN Hoffman, a prominent condo developer that is building a pair of large residential projects nearby at 14th and V streets, tried to reach a deal with Horning and its partner, the Development Corp. of Columbia Heights, but the deal collapsed last fall because PN Hoffman was unable to reach agreements with several existing tenants.
"The numbers that they are demanding are just pretty doggone ridiculous," PN Hoffman President Steve Earle told the Business Journal in October.