Developers Turning To Adaptive Reuse; Eye Excess U.S. Property

What's a developer to do? With development financing still very tough to come by and construction levels at all-time lows, many are turning to redevelopment, adaptive reuse and jump-starting stalled projects ahead of an expected broader recovery as a potentially less expensive and more lucrative alternative to ground-up development.

Developers are closely monitoring dual legislation from the White House and in Congress that could result in the disposition of thousands of excess or under-used federal buildings. The potential disposition targets include choice properties in top U.S. metros, which could be converted or repurposed as hotels, apartments, shopping centers and commercial office projects.

In a rare occurrence of bipartisan agreement, both political parties have supported efforts calling for more efficient use of government space. Last May, the administration sent a bill to Congress that would establish a commission to consolidate, shrink and realign the federal property footprint by expediting the disposal of properties.

On Feb. 7, 2012, the interests of lawmakers and would-be redevelopers of excess federal property converged in the nation’s capital. The GOP-led House of Representatives passed a similar bill to the President’s, the Civilian Property Realignment Act (HR 1734). The legislation, patterned after the Defense Department’s Base Realignment and Closure Commission the 1990s, was introduced by Rep. Jeff Denham, R-CA, who cites an Office of Management and Budget report that such a "Civilian BRAC" commission could raise $15 billion from property sales, and generate much more in savings by eliminating future operating costs of the buildings.

The same day the Civilian BRAC legislation was introduced, the U.S. General Services Administration (GSA) confirmed it had selected an investment group headed by Donald Trump’s hotel group and private-equity firm Colony Capital to redevelop the 113-year-old Old Post Office Pavilion at 1100 Pennsylvania Ave. in Washington, D.C. With its distinctive 315-foot clock tower, the Old Post Office will be redeveloped into a 250-room luxury hotel as part of a $200 million adaptive reuse project.

By Randyl Drummer