Penn Branch Shopping Center Enters Foreclosure

ICG Properties' original rendering for Penn Branch Shopping Center. The Washington Post reported that Penn Branch is going into foreclosure, with an auction set for May 8. Photo Courtesy: ICG Properties

In 2005, ICG Properties, a DC-based real estate development firm, purchased Penn Branch Shopping Center with the hope of giving the property a much-needed upgrade. Eight years later, the project is facing foreclosure. With an auction scheduled for May 8, it marks an end of a hopeful, but problematic, plan to revitalize a property in need of extensive renovation and upgrading.

Why Penn Branch?

Located on the corner of Pennsylvania and Branch Avenues, Penn Branch was built in 1964 with Safeway as an anchor tenant. Today, that space is home to DC government offices for the police department and the Department of Motor Vehicles (DMV). Despite having amenities like a CVS Pharmacy and Wells Fargo Bank, poor parking patterns, broken escalators and an overall dated appearance made the shopping center an eyesore. 

However, Penn Branch's location made it an attractive purchase. The property is in close proximity to affluent neighborhoods, such as Hillcrest and nearly 50,000 cars travel pass the property every day. With Skyland Town Center a lawsuit-plagued uncertainty at the time, redeveloping Penn Branch seemed to be the best way to bring better retail options east of the Anacostia River.

Redevelopment Plans

By 2009, ICG began presenting their plans. The idea was to turn the shopping center into a mixed-used property, expanding the office and retail spaces and adding a residential area to the back. They also planned to update the signage, replace the escalators, install elevators, redesign the parking lot, and build two new retail pads for a coffee shop and a sit-down restaurant, with outdoor seating. 

While both Wells Fargo and CVS would keep their spaces as anchor tenants (with an expansion for the latter), ICG hired Tom Papadopoulos, one of the city's top restaurant brokers, to find more retail tenants. Some potential tenants they considered included Ledo's Pizza, Dunkin' Donuts, and Ben's Chili Bowl.

Government Holdup

Although the city and ICG agreed on a 10-year lease extension for Penn Branch's DMV office in 2010, progress stalled when then-deputy mayor of planning and economic development Valerie Santos, failed to send it to city council for approval. During a March 15, 2010 hearing for the Committee on Economic Development, Santos stated, “The current leases are expiring in 2012, so there is time to ensure that if any government leases continue at that site, they are surrounded by the type of quality retail that neighborhoods want.” Then-Councilmember Kwame Brown called her statement “unacceptable,” arguing that it was not fair for residents to continue waiting for a project that is ready to begin. In fact, the extension was not approved until after Vincent Gray became Mayor in 2011.

Money Issues

According to the Washington Post's Capital Business blog, ICG paid more than $24 million for Penn Branch and spent nearly $500,000 on designs and plans over eight years. However, ICG could not clear its plans with its lender, leaving about $20 million of the loan unpaid. The company could lose up to $5 million on the project. 

Ayanna Smith, vice president of the Penn Branch Citizens Civic Association (PBCCA), said she discussed Penn Branch's financing issues with ICG principal Daniel Stern last fall. “...[M]y commonsense told me his funders were not going to support the redevelopment without a strong revenue plan,” she wrote in a post to HillcrestDC's listserv. She also wrote that some tenants were not paying their rent and “a faithful few,” including CVS, Wells Fargo, DC government, Cricket Wireless, and “perhaps” Subway, supported the mortgage. 

Community Reactions

“Of course I was disappointed when I heard,” said Ward 7 Coucilmember Yvette Alexander. “I'm a Penn Branch resident, so this hits close to home.” She plans to work with the new owners, the community, and Office of the Deputy Mayor for Planning and Economic Development. “We will continue to advocate for Penn Branch Shopping Center, so it will be a premiere dining, retail, and residential destination,” said Alexander. 

Julie Rones, a resident who grew up in the Penn Branch area, had a stronger reaction. “This economic correction should warrant greater outcry, shouldn't it?” she asked. “I somehow feel loss and deception because the pictures painted have consistently been that economic development at this site would be happening. Why was the community kept in the dark about this?”

Kweku Toure, the president of PBCCA, was more optimistic. “It's not entirely bad news,” he said. “This is a chance for a new start.” Toure says the community rejected the residential portion of ICG's plans. “Once the community rejected the condo aspect, the plans fell apart,” he said. He, along with the PBCCA, plans to work with the new owners, but hopes they can reach a compromise that satisfies both parties. Smith agrees, adding, “We have to be more realistic in our expectations. If we want the businesses in our community to survive and thrive, we have to support them.” 

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