An Interview With: Charles Welch "Chad" Tiedemann

We here at Bisnow on Business humbly aim to bring you interviews with the top players among developers, architects, contractors, brokers, and others who influence the booming Washington commercial real estate scene. But just like hairdressers know what’s really up, so too do the behind-the-scene lawyers. And one of the top such players is Chad Tiedemann, who heads the firm-wide real estate practice at Holland & Knight [a Real Estate Weekly sponsor]. The H&K practice is, reportedly, no less than the largest in America, with more than 225 real estate attorneys nationally, 60 in the mid-Atlantic. Tiedemann grew up in Scarsdale, New York, and graduated from the University of Notre Dame and Catholic University law school. After working for a real estate syndicator in-house for three years and then the real estate legal boutique Glassie Pewett Dudley Bebe & Shanks, he went with a group to Hazel & Thomas for six years, then to Holland & Knight where he has been for 13. His own practice has evolved from working with institutions such as pension funds and life insurance companies, to focusing in the development area where today he represents equity participants and investors in commercial real estate, as well as developers, such as Monument, Akridge, Holladay, and Champion Partners.

Bisnow on Business: What’s the biggest change you’ve seen in the practice of real estate law over the 25 years you’ve done it?
Real estate projects here and nationally have gotten far more complex. In the D.C. area today, many of the deals involve multi-use projects which may include office, residential, and retail. The simple, straightforward, environmentally clean sites that are owned in fee, are generally few and far between. Today you’re looking at more difficult sites. They can involve complicated assemblages and complex land use issues, ground leases, air rights, environmental clean-up, historic preservation issues, and condemnation challenges. You’ve got to have counsel with experience and expertise in each of these separate specialties. The other thing that’s gotten more complex is the ownership and financing. Part of that is simply due to deal size and greater capital requirements. Something you’ll see in mixed use projects, that you never saw 20 years ago, is having two developers, who appear on the surface to be competitors, teaming together to do a project, because one may have a greater experience in residential and the other in office or retail. I represented Akridge and Holladay in such a project in Arlington. And with mezzanine financing and securitized lending, the whole financing picture has become much more complex.

Another trend?
The players are bigger and more are national. When I started in this business, you had many locally owned banks and thrifts that supplied much of the real estate finance needs, particularly construction loans. Most of the developers were closely held, or family-owned enterprises. Over the last two and a half decades you’ve seen local banks get gobbled up and become parts of large national and international financial institutions. You’ve seen a number of the locally owned real estate companies go public or be acquired by larger enterprises.

How do these changes impact real estate lawyers?
It means that the law firm must have many more resources, even though no one project is likely to need them all. From the lawyer's perspective these changes mandate that I be able to assemble a team that on one hand has experience negotiating equity structures and mezzanine and securitized debt with New York law firms, and at the same time be able to work with the government of the District of Columbia and citizens groups on land use, historic preservation, or environmental issues.

You’re heavily involved in real estate around the baseball stadium because you represent Monument. What’s happening?
The baseball park district in Southeast Washington, D.C. which essentially is bounded by M Street, South Capitol Street, the Anacostia River and New Jersey Avenue, is a large example of prospective multi-use development. There’s the potential there for about eight million square feet of development which could generate over four million square feet of residential development and over three million square feet of high-rise commercial development. Within the commercial development there will be office, retail, hotel and parking, as well as the ball park itself. The plans hope to create four to five thousand households with nearly six thousand residents. This development is predicted to create ten thousand permanent jobs. By the time the baseball district is entirely built out, there will have been well over two billion dollars worth of development, and if you include land cost, nearly three billion dollars worth of investment, generating in excess of a hundred and fifty million dollars in additional tax revenue each year for the city.

When did people start to buy up that property?
There are individuals who either secured small parcels down there or held on to parcels they owned, recognizing, and aerial photos will show this, the proximity to downtown and to the Capitol, and they were also betting on baseball. They knew that as the city continued to grow and sites became more difficult to find, this area might some day get developed in some manner. So clearly there were people who speculated in the general area in advance of definitive plans for the baseball stadium.

Are there a lot of moms and pops who have become rich because they sold out recently, or had much of that been already transferred to speculators over the years?
There clearly has been some of both. There have been some well-reported stories of relatively small businesses that had a three hundred thousand dollar building and collected a three million dollar check.

But there’s also been some big speculators who started buying up down there long time ago because of that aerial map analysis?
I think that’s right, or acquired ongoing businesses that would help cover the carrying cost for the underlying land. And some of the speculation was done by individual investors.

So what are you doing down there now?
The development in the ball park district may end up being accomplished by six, eight or more developers, some working together in various teams that are already aligning. The preliminary proposals call for a substantial amount of residential and a critical mass of retail, and so I think that the opportunities are only limited by the developers' and architects' imaginations. But you have a lot of legal challenges. There are parcels that are currently controlled by WMATA. There are parcels that are within the control of the District of Columbia. You may see some ground lease opportunities. There is ongoing condemnation by the District. Because of past uses in the area, there are environmental cleanup issues to address. There are historic preservation issues. There will undoubtedly be construction challenges. We have represented owners in acquiring about sixty million dollars worth of real estate within the baseball district already. We represent some long time property owners in the baseball district. We are representing some owners who are conveying land to the city that’s within the footprint of the baseball stadium. We’ve got a lot going on for a number of different clients.

Were you involved yourself in helping clients purchase land? Did you put on some fake glasses and go down there in disguise?
No suitcase full of money. For the most part, the initial conversations took place with brokers who were well tied in to the local scene, and a lot of the preliminaries are done at that level, not necessarily directly by our clients, much less by us.

Will the legal challenges be resolved in time to deliver the stadium by the start of the ’08 baseball season as hoped?
The Stadium itself is a public construction project and I certainly hope nothing will delay it. The level of current activity at the site is impressive. I don’t think anything should stop or delay the rational and sensible development that the District and development community have envisioned. I think there are lessons to be learned from the area around the Verizon Center, in the sense that not everything was in place and operating on opening day. Clearly with this area being much more extensive, it will take years for all of it to come on line, to say nothing of what the time frame may be for relocating the Frederick Douglas Bridge. Think about Gallery Place and what a fantastic amenity that is to the East End at this point. But think about how long the MCI Center had been opened before Gallery Place and some of the other area amenities opened. I think if one keeps that in mind you’ll get a sense of the kind of phasing that’s inevitably going to happen in the ballpark district as well.