Mill Creek Sells Laurel Apartments For $119M As It Pursues Projects In D.C., NoVa
Mill Creek Residential has cashed out of a Prince George's County development it completed in 2016 and is shifting its focus to new projects elsewhere in the region.
The developer last month sold the Modera Westside apartments, a 484-unit community in Laurel, to Sage Management, Mill Creek Executive Managing Director Sean Caldwell confirmed.
The building traded for $119M, according to a Newmark Knight Frank market report released Tuesday. CBRE's Bill Roohan and Martha Hastings brokered the sale.
Mill Creek broke ground on the project in November 2014 in partnership with Cross Harbor Capital Partners and Strittmatter Cos., which owned the land. The first residents moved in during the first quarter of 2016. Caldwell said it was rare for Mill Creek to pursue a garden-style development in the D.C. suburbs.
"It was a very atypical play for us," Caldwell said. "Most of our developments have been very urban core-focused."
Caldwell said suburban development has become more difficult because the projects do not achieve high enough rents to justify paying the rising construction costs. But for this project, a combination of Strittmatter having the site already prepared for development and Laurel providing economic incentives made the deal work.
At 14100 West Side Blvd., the property sits near the interchange of Interstate 95 and the Intercounty Connector, an east-to-west toll road that completed construction in 2014. Caldwell said the combination of the ICC opening, the National Security Agency jobs in the area and the proximity between Baltimore and D.C. made it an attractive development play.
"We thought there were enough demand drivers out there with less supply that it could yield a positive development," Caldwell said. "It worked out great for us."
Modera Westside has achieved strong leasing velocity and rental performance, Caldwell said, and the development team decided it was the best time to sell and harvest the value it created.
Multifamily properties in the D.C. suburbs have been trading at a rapid pace in recent months, and Caldwell said there was strong investor interest in the property. He said it is especially attractive because of the lack of new supply competing with it.
"The buyer pool is looking at a submarket like this and they're fully recognizing this is a submarket where it's going to be extremely difficult to build new product given the cost of construction relative to rents," Caldwell said. "They'll probably see very solid rent growth over the next few years."
Mill Creek remains active throughout the D.C. region with several projects in various stages of development. It broke ground in March on Modera Founders Row in Falls Church.
The project will feature 394 apartments and 90K SF of retail, anchored by a 32K SF Studio Movie Grill with eight movie screens. Mill Creek has also signed City Works Eater & Pour House, which will offer over 90 beers on tap in its 7,500 SF space.
The 4.5-acre project is a partnership with CrossHarbor Capital Partners, Lighthouse Real Estate Investments and PNC Financial Services. It is located on West Broad Street, the main commercial corridor in Falls Church.
"The combination of vibrant retailers, luxury apartment homes and a prime location will create a true destination community," Mill Creek Managing Director Joe Muffler said in a release announcing the groundbreaking.
Mill Creek is also planning a Northwest D.C. multifamily project near American Unviersity, Caldwell said, though he did not provide more details and said it is still designing the plans.
The developer is leasing up three multifamily projects it recently completed. It built the 134-unit Modera Sedici apartments, a redevelopment of the former Italian Embassy in Adams Morgan. It developed the 276-unit Modera on M project near The Wharf in Southwest D.C., and it completed the 222-unit Modera Mosaic Phase 2 in Fairfax County.
Caldwell said Mill Creek continues to pursue projects in areas where it anticipates positive leasing demand and strong capital investment, but those deals have become harder to land.
"It's extremely competitive, and we're taking a sniper approach to what we're going after," Caldwell said. "We target submarkets we think work for residents and capital partners and attack those submarkets very specifically."
