Crusty, old office buildings often stand in desirable places. The opportunity to earn high rents can sometimes underwrite a very fancy renovation.
Post Brothers, a developer based in Philadelphia, plans to spend $700 million to redevelop Universal Plaza, a concrete office complex built in the early 1960s in the Kalorama neighborhood of Washington, D.C., near the marble embassies of Dupont Circle and fashionable restaurants of Adams Morgan.
The redeveloped community—tentatively renamed The Geneva—will include 524 super-luxury apartments. That works out to a development cost of more than $1 million per unit.
High rents, averaging $7,000 a month per unit, will pay for it, according to Post Brothers. That includes 15 penthouses that will initially rent for $25,000 a month. The million-square-foot redevelopment will also earn income from 500 parking spaces and 50,000 square feet of retail.
Large apartments, with 10-foot ceilings and averaging 1,100 square feet in space, should attract former homeowners looking to downsize in addition to a number of foreign diplomats and their families as well as millennials with small children.
In comparison, recently completed apartments in D.C. have averaged about 700 square feet in size to attract younger renters. “These are going to be much bigger, accommodating a more mature demographic,” says Zak Klinvex, chief investment officer at Post Brothers.
The Geneva will include “over-the-top” amenities including an oversized gym, a rooftop pool, an indoor pool, and even a “snow sauna,” adds Klinvex.
Post Brothers could have spent a lot less to redevelop the building. Its extensive renovation will jackhammer the concrete skin off the complex.
New limestone panels will help it fit in with its very expensive neighborhood, and new windows will insulate the buildings to meet D.C.’s tough new standards for efficiency.
It also is tearing out the existing lobbies and replacing mechanical systems, such as elevators.
The existing office complex is nicely shaped to become apartments. The Geneva will merge two buildings on the site. One is a long, narrow building. The second building wraps its rentable space around a parking garage. In both, the distance from the middle of the building to the nearest window is relatively short—about 30 feet. “It’s a great conversion candidate,” notes Klinvex.