Rappaport, WC Smith Could Make Skyland Town Center Even Bigger Without Walmart

Perhaps it’s decades of running successful family businesses in the increasingly cutthroat DC real estate market, or perhaps it’s overcoming 12 years of obstacles with their Skyland Town Center redevelopment. Whatever the reason, neither Gary Rappaport nor Chris Smith seem to be sweating the loss of Walmart from their transformative Ward 7 project.

Chris (left) and Gary, CEOs of WC Smith and Rappaport, respectively, met each other around 2004, when WC Smith was brought in to develop the residential portion of the future Skyland Town Center, previously a retail-only development.

DC issued the original request for proposals to lead the critical redevelopment east of the Anacostia River 15 years ago, and the Rappaport-led team’s bid won the project a year later. After years of eminent domain negotiations and a covenant restriction battle with Safeway, construction was finally underway until January, when Walmart abruptly backed out.

Through everything, all of the partners on the deal— WC Smith, Rappaport, the Marshall Heights Community Development Corp, Washington East Foundation and Harrison Malone Development—have stayed together, and Gary and Chris’ enthusiasm has not waned.

“It is going to get built,” Gary tells Bisnow. We met with the pair at WC Smith’s offices in the Capitol Riverfront yesterday. They will each be panelists at our DC State of the Market Part 1, June 9 at the Renaissance Downtown hotel.

Gary says the property is going to be bigger, better, and more successful with more choice of retail for the constituents and customers in Ward 7 and 8 than it might have had before.

Gary and Chris found out they lost the anchor for their joint development—one of the biggest projects either of them have ever done, more than a decade in the making—at the same time the whole country found out Walmart would be closing 154 stores in total, including killing the planned store at Capitol Gateway, also in an underserved part of DC.

But neither of them say they took it very hard. It was a disappointment, sure, but by the end of the day they were brainstorming about what to do next. After all, there were 13 years in between winning the RFP for the site and actually buying the land from DC last year. The $256M project had overcome all kinds of obstacles before.

The developers have finished the utilities work on Naylor Road and Alabama Avenue and put a pause on construction, but Block 2, with 85k SF of retail and 263 apartments, isn’t waiting for Walmart’s replacement(s).

Chris tells Bisnow the five-member team plans to resume site work in the fall and start building sometime in 2017.

Gary is leaving for Las Vegas tomorrow for ICSC RECon to talk with all types of retail tenants. This is a Walmart-sized opportunity for Rappaport, who can market 350k SF of retail that would deliver before 2020. Rappaport is also a founding partner of Bisnow’s Beltway Bash on Monday at 5:30pm at the Wynn Intrique Nightclub.

“The story is no longer about one big box now,” Chris says. He and Gary noted how hard the DC government has worked to find replacement retail. “The city didn’t just sit back. They’ve been very proactive in trying to help figure out how we’re going to keep the project moving forward. Very soon, I think we’ll be announcing that we’ll be back on the site in full force.”

Chris and Gary hadn’t worked together before Skyland, but over the years, they’ve become friends and understand one another. The partnership had cost them each millions before they closed on the deal last fall. But the closing papers were the first documents they ever signed for the project.

All those years, the partnership was held together by a handshake.

“It’s like a marriage. I’ve had a lot of really good partners over the years, and I’ve never had a partner better than Chris,” Gary says.

Chris credits Gary for holding the quintet of partners together.

“That says a lot about you,” Chris told him in the 10th floor office at 1100 New Jersey Ave, Nationals Park clearly in view from the window. “You were there 15 years ago. There could have been a lot of disillusionment, and people saying ‘let’s move on.’”

“It’s nice that you say that, but…” Gary interjected. Chris laughed immediately, waving off his friend's protest.

“We’re going to have our first disagreement!” Chris said.

That bond is why, when the time came to redevelop the 35k SF retail strip Rappaport built on H Street NE in the late ‘80s, Gary thought of WC Smith immediately.

Rappaport and the J. Gerald Lustine family owned the parcel on H Street between 8th and 10th Streets 50/50, and once Lustine signed off on WC Smith, the family sold its interest in the residential portion, retaining its 50% stake in the retail.

Rappaport owns half of the proposed 44k SF of ground-floor retail and half of the proposed 420 apartments above it, and WC Smith’s construction arm is building the whole project, which will take up every square foot of its two-acre lot.

With two complex projects at the same time and over a decade of meetings, it’s no wonder the two have become close. They go out to dinner with their wives. They take pride in their community work—the Skyland Workforce Development Center they built and fund has been open 14 months and has already placed 220 people into full-time employment.

“More and more of real estate is being consolidated into larger and larger companies,” Gary says, adding being a family-run firm is a hard place to be.

“You have a responsibility, because you do have your name on your company,” Gary continued, “and you want to be good business people. But why we’re so aligned is we want to be good people.”