An Interview With: Richard Lake, Armond Spikell and Todd Weiss

Roadside is gaining buzz for its innovative approach to retail in the region. Among other projects is its pioneering condo development above Best Buy and the Tenleytown subway station in Northwest Washington, an example of vertical in-fill to increase population density around Metros. Although the Van Ness area, just one Red Line stop closer to downtown, has long been jam packed with apartment houses, the same has not been true of the area at Wisconsin and Albemarle, NW, where community groups had opposed dense residential building. Clarendon may have its condos above Barnes & Noble, and even the Ritz has risen above the cinema in Georgetown, but Roadside’s Cityline project is striking because it appeared out of the blue in an area previously thought fully developed and dedicated to retail. Now 204 condo residences, averaging $600k in price, have gone up six stories above the big box once famously occupied by Sears and Hechingers, and now Best Buy and the Container Store. Of course they are all sold out. Beyond that project, Roadside is involved in numerous others that are examples of a focus on integrated or mixed-use retail, rather than destination retail. Lake and Spikell have known each other for 21 years since the pair worked in the retail brokerage division of Smithy Braedon (now Grubb & Ellis), from which they eventually left to form Madison Retail Group, where Lake continues to be the managing principal and Spikell is a primary broker. Weiss was a client of theirs for 18 years, when he worked at development companies, and became a partner when all three created Roadside Development in 1997.

Editor's Note: Tim Mazzucca, formerly the real estate reporter for the Washington Business Journal and now a business reporter for a national newspaper in Washington, conducted this interview for Bisnow on Business.

Tim Mazzucca, for Bisnow on Business: Where did the idea for Roadside Development come from?

Lake: We had clients who were office and residential developers, or families that owned land and wanted to develop their property, but didn’t know how to develop retail and didn’t want to bother with building small retail centers. Retailers like CVS, among others, needed similar services. Roadside has been able to meet the needs of both retailers and owners by constructing quality retail projects. We’ve grown the company and become more investment oriented, more mixed-use development oriented with retail and residential, and also now build and own for our own account. Our projects always emphasize what retail brings to a project and to a community. Remember, we are still retail guys, but recognize mixed-use development is here to stay. Our conversion of the former Sears/Hechinger’s building is the best example. Along with our partner Madison Marquette, we purchased the property in 2000. We ushered the plans through the community and the historic preservation review board processes. Early on with the encouragement of the community, we focused on attracting Home Depot as the lead retailer, but that did not work out. We had to start all over, and we landed Best Buy and the Container Store, then planned residential above. It was a good thing because that process opened our eyes to the project’s residential potential. Today those high-end condos are in one of the highest elevations in the city. What we created there is a model: a denser project on top of a Metro in a neighborhood bringing goods and services to the community. So we are trying to take that model and replicate it. We have several projects in various stages that are vertically integrated mixed-use projects.

Does that mean you’re straying from your pure retail background?

Spikell: There are very few projects that are pure retail anymore. Retail and residential mixes are popular, and we’re doing some office.

Weiss:: The urban model, more the mixed-use way of thinking, is becoming popular everywhere. We’re now starting to see suburban communities that want the same kind of elements as in more mixed- use projects. So, we go out to Loudoun, Prince George’s and Montgomery counties, and the citizens as well as governments are trying to organize projects the same way. They want a retail component. They want a housing component. They really want to make a town-square atmosphere. The traditional suburban shopping center is undergoing a metamorphosis.

You are involved in multiple entities. How do you manage your time?

Lake: We all wear a lot of hats. I have the Madison Retail Group, which, thankfully, is set up with great partners and managers. We have a Virginia office now. Things are working where it’s not as intensive as it was, and we surrounded ourselves with great talent. We manage our time by trying to always do things locally and set our priorities. We have looked at projects in other markets, and for one reason or another. We always come back home to this market, we know the landscape and have our sphere of influence, and so there is less traveling and less wasted time.

Weiss: The key is that each of us, in one capacity or another, is directly involved in each project and in each transaction. This ensures maximum quality and creativity.

What do you mean by “directly involved”?

Lake: We truly maintain a hands-on approach. When we go to a community meeting where we have a project, our attorney is not speaking for us. We’re out there speaking for ourselves. It’s very important for us to understand the rhythm and the feel of what the community is saying so we can respond to it. The community is our customer, and a good retailer always listens to its customers. We’re still retail guys. It’s a lot more time consuming but that makes everything else work. Take Tenleytown, for instance. When you start it right, at the end there was little or no opposition from the community. That didn’t happen overnight. When a community leader says, “I want to see a bigger setback along Albemarle Street,” and we show up at the next meeting with a bigger setback along Albemarle, they say, “Wow, you heard us.” That’s what we like to do, because projects become successful when a community can say, “That’s our project.” We all have families and are all very involved in community, and we try to maintain our sense of priorities.

Weiss: We are staying in our backyard. We’re not catching flights.

Why not venture outside Washington?

Lake: Why would you want to go anywhere else when you have the best market? We all agree Washington and the surrounding areas are world-class. And Washington is our home. We like to do projects in and around the city. We are seeing great opportunities from retailers who are willing to be more flexible to get into an urban marketplace than they would in other places just because of the sophistication of the population here. You have incredible income levels and great education. There’s a great transformation of the Washington consumer going on. You couldn’t say 10 years ago that you were going to build a project where people had to park in garages to go grocery shopping or take Metro to go to a shopping center. Most people would say, “We have to have surface parking, we have to have automobile convenience.”

Any negative signs for the Washington market?

Lake: The things that we see as the biggest risk to Washington are the lack of affordable housing, and the lack of local governments willing to move quickly to take advantage when a market is hot. When you get a market that’s revving, and it takes you three years to deliver a project, you’re missing the opportunity. You’re also squelching the amount of supply, so you’re artificially increasing the values and prices. This is a barrier to entry that is driving our residential prices up. Because of the concern that we could easily squelch all the businesses that want to be here — retailers, government contractors, bio/medical firms — whose employees can’t afford to live close in to Washington or even in the evermore expansive suburban markets, they’re pushed to West Virginia or Baltimore, and they’re commuting. So we’re kind of voiding out the smart-growth concept of density and mixed uses. I think the governments need to step in and figure out a way to provide affordable housing. I’m not talking about just low-income housing, I’m talking about work force housing. People making $60,000 should be able to live here and in the areas where they work. A firefighter or police officer should not have to live 50 to 60 miles away. They’re forced to live so far away from the community they serve. That’s not community building. For us, that’s a great risk that needs to be addressed, and it can be done. It can be done with density. It can be done with smart programs.

What’s driving the strong local real estate market?

Lake: There’s the lack of developable land. There’s also this incredible growth. There needs to be a way to be smart about redeveloping the scarce resources we have, as demonstrated in the case of redeveloping the Sears/Hechinger’s building. People are moving here and jobs are coming to the Metro area. You can’t say, “We’re going to stop building housing or retail so the people won’t come.” We have to find creative ways to meet demand. For example, we’re participating in the University Town Center project in Prince George’s County with Herschel Blumberg’s team, who are long-time owners and developers. We are taking a 1.4 million square-foot traditional suburban office park with surface parking in Hyattsville and creating a vibrant place with 235,000 square feet of retail, which will include a Consolidated Theater and a Safeway, and 900 beds of student housing to serve the University of Maryland and other area universities. There are a few hundred condos that will sit on top of the retail. We’re taking a project that was one dimensional, that used to shut down at 5:30 in the evening, located across from the Prince George’s Plaza Metro station, and we’re helping to create a 24-hour environment.

Spikell: It’s really the purest form of in-fill. We’ve got two other similar projects where we’re planning to take surface parking lots and create mixed use.

What do you think about town centers?

Lake: I think the words “town center” have been overused. Everybody wants to build a town center. A true town center incorporates more than one type of use and should really be creating a sense of place. It only works in certain places and at certain times, certain intervals in a market’s life cycle. You need a certain kind of consumer who is sophisticated and understands structured parking, who understands the benefit to having close proximity of these uses. It’s not for the faint of heart, and it’s not inexpensive. Traditional residential or office developers who introduce retail into their project, they all say, “Oh my god, what did I get myself into?” Because retailers are challenging. They don’t lead; they always follow. And as they are following they try to change the course of everything around them. They’re not the drivers economically in these projects, but they are what everybody needs to create “the place.”

Spikell: Often in mixed-use projects, developers build a building, and they think their first floor has got to be something so they put in retail shops. There’s no real planning for the mix or the dynamic relationship between the uses. That’s not the kind of retail Roadside does. Some of these mixed-use town centers build too much retail. There are some great new mixed-use projects where they lean too heavily on retail, and it becomes a burden on the entire development.

Lake: Armond is so right. When we look at a project, we play with the mix of the retail. How much of it is really needed? Too much and it hurts the pro forma, it hurts the mix, and the retail starts getting repetitive.

Can you give me a local example where the retail planning could be better?

Lake: If you take a traditional urban street like Georgia Avenue, NW, there are two big problems. One is the zoning. You have a 100-foot depth of commercial zoning on either side of the street, so you can’t get any size or create a place. And you have just too much retail spread all along the street – no real retail focal point.

Spikell: Compare that to Connecticut Avenue NW, where you have nodes. Now that’s good planning and good retail.

What are you working on now?

Spikell: We’re doing a real interesting project in Purcellville in western Loudoun County that will be a nontraditional shopping center. It’s not a strip. It’s a grocery-anchored, neighborhood-serving shopping center. The project includes historic preservation, single-family homes, office space and a bank. It’s not a strip shopping center.

Lake: Everybody wants something a little bit different. Over are the days of stripping down the land and plopping down something that has repetitive architecture and expecting to lease it. It’s not happening. In the project Armond just mentioned, the community and the town of Purcellville said that they recognize the center has to be commercially viable but they want us to create something that they will be proud to have as the “gateway to our community.” So we took that to heart and took our design team – our architect, RV Architects, and engineer, Walter Phillip, Inc. – and we came up with an incredible design that everybody’s enthusiastic about.

Spikell: A lot of it has to do with our urban experience. Here we are in a suburban town in western Loudoun County, but we’re introducing things like retail up against the street with a sidewalk that furthers the pedestrian connection to existing housing and neighborhoods. Before if you wanted anything, step one was get in your car. These are more urban concepts and, yet, it applies in a small-town setting.

Do you have any projects in very early stages?

Lake: Another project we’re down the road with but we’re not talking too much about is we own the O Street Market, at Seventh and O streets NW. We’re in planning and are looking at redeveloping it with a significant mixed-use component. We’re currently in discussions with Giant Food, the community and the city.

And you have things going on in Maryland?

Lake: Another project we’re doing is in northern Montgomery County, Clarksburg, where we are developing the retail at Cabin Branch, a planned-unit community on Rte. 121, just west of the Interstate-270 and right next to where Adventist is planning to build a hospital complex. Our retail will be the front door to a 2,200-unit residential project. We’re planning a little less than 100,000 square feet of retail. We’re looking at ways that we can integrate our retail plan with the hospital plan and the residential community that Winchester Homes is creating. We hope to have these different uses interact. And we’re going to have the same pedestrian linkage as in the Loudoun project with live-work units and other residential product that will be next to us.

Spikell: It’s a little different kind of thinking. Traditional retail says you get your anchor, you get your satellite tenants, and you build it and then you go away and it sits there. Our thinking is little bit different. Whether we’re building the residential or not, just trying to integrate everything so it has lasting life and a more organic quality about it.

Lake: Also, we’re about to start construction on The Village at College Park on Rte. 1, just north of the Beltway across from Ikea. After Ikea was constructed, they had 14 acres left over, and they originally planned to do office. Eventually, Ikea contracted with Summit Properties [now Camden Properties, a multi-family REIT], which went to the city and the county for permission to build residential rather than office. As a condition, the county and city required that the project have a significant mixed-use component along with the multi-family. Camden selected Roadside to buy five acres and to construct the mixed-use component. We’re building 88,000 square feet of stuff. We have 12 town homes, 20,000 square feet of office, and 39,000 square feet of retail. All of these uses act as the front door to the larger multi-family component, and all these mixed uses are vertically or horizontally organized. That’s what got this project through both county and city approvals. Coming up with something that is architecturally exciting and organizes the uses was compelling. It is expensive to create this environment, but it will pay off. This site even had a marker for a historic tavern that few knew existed.

Really? A marker for a tavern?

Lake: It was an old historic tavern. Ikea constructed a park that marked the original location, so it sits there. You can’t get to it. You have to park your car and really want to see it because it’s hard to find.

Weiss: What the design team did was to incorporate the marker into Panera Bread’s outdoor seating so people will now see it and understand its historic significance.

Lake: Our landscape architect, Trini Rodriguez, came up with a plan. We outlined what the house was. We will be using stones that are level with the grade to create a pattern of the original floor plan of the tavern and wherever there were fireplaces we will place benches so you get a sense of what the house looked like. It marks the site, and it actually makes it something of interest. Now there’s parking right up against it, and there is an opportunity for the community to appreciate an historic element.

How’s your pipeline looking?

Lake: The pipeline is good. We’ll start the project in College Park this year and continue our work at University Town Center. We have three major projects that we’re taking through pre-development and entitlement that keep us very busy. We are still on schedule to start two projects in 2007. We will hopefully get O Street started in 2007. So, our pipeline is pretty solid for the next three years. :)