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A D.C. Superior Court judge has approved a plan to sell an office-to-residential conversion project in Tenleytown after the project’s developer, an affiliate of Steve Schwat’s Urban Investment Partners, allegedly defaulted on a nearly $29 million loan backed by its stake the property at 4620 Wisconsin Ave. NW, per a complaint filed against the developer and its principals.
Judge Tanya Jones Bosier issued an order Aug. 5 authorizing Marcus & Millichap to begin marketing the 146-unit conversion project, which UIP is calling the Broadcast. UIP picked up the property in 2016 as part of a larger acquisition from American University that also included the longtime home of National Public Radio affiliate WAMU. UIP first floated plans for the project in November 2016.
UIP’s lender, Olney-based Sandy Spring Bank, acquired earlier this year by Atlantic Union Bankshares Corp., sued Schwat, UIP affiliate Wisconsin Manager LLC and Peter Bonnell, also a UIP principal, in April for allegedly breaching the terms of a loan it took out in 2021. The loan had an outstanding balance of $25.7 million as of mid-March, according to the bank’s suit.
In its complaint, filed by Nikolaus Schandlbauer of Adams & Reese LLP, the bank claims Wisconsin Manager failed to meet promises, complete construction by February 2024 and repay the loan by its August 2024 maturity date. Schwat and Bonnell had signed on as guarantors to the loan, according to the suit.
After the loan matured, the lender and borrower agreed in December 2024 to a forbearance agreement to give the UIP team more time to line up an equity investment and complete the project, according to the lender’s suit. The deal extended the loan until Feb. 15, 2025, or either full repayment or a forbearance default, the lawsuit said.
As of March 11, UIP hadn’t completed the project or repaid the loan, according to the bank’s lawsuit, triggering the decision to sue. In its complaint, the bank accused the defendants of breach of contract and sought the appointment of Black Dog Receiver and its principal, David Bowman, to step in and oversee the property. Black Dog, in turn, filed a motion July 10 to appoint Marcus & Milichap to sell the property.
As the Business Journal reported in November 2021, when the building at 4620 Wisconsin Ave. NW had been stripped almost to its bones, it was part of a larger wave of new development in Tenleytown.
In an email on behalf of the defendants, Schwat said he has struck an agreement with the bank to repurchase the loan and that the receivership will be canceled, though documents had not yet been filed with the court as of Wednesday morning indicating such an agreement. Schwat did not immediately respond to a request for more information about that.
Schwat, in his email, said the project was funded by crowdsourced equity. The developers needed to raise additional funds due to inflation, and it took longer than expected to fill the gap, he said. Meanwhile, the loan with Sandy Spring was nearing maturity. The bank was reluctant to extend the loan further amid the pending Atlantic Union acquisition, he said, and the new bank preferred to sell the loan rather than extend it further.
“Thus, we are purchasing the loan with our investor and will complete the project,” he said, adding he expects to start work soon, putting the project on track for completion in about seven months. The developers have lined up retail leases with European Wax Center and Ice Cream Jubilee, per a marketing flyer from KLNB. Schwat said there’s a third lease with a bakery, coffee shop and sandwich restaurant taking around 3,000 square feet.
Read more at the Washington Business Journal.
View Broadcast Apartments.
Marcus & Millichap is the nation’s largest brokerage firm focused exclusively on investment sales. It is based on a simple premise: matching each property with the largest pool of pre-qualified investors. With over 2,000 investment sales and financing professionals located throughout the United States and Canada, Marcus & Millichap is a leading specialist in commercial real estate investment sales, financing, research, and advisory services. Founded in 1971, the firm closed 8,954 transactions in 2020 with a value of approximately $43 billion. Marcus & Millichap has perfected a powerful system for marketing properties that combines investment specialization, local market expertise, the industry’s most comprehensive research, state-of-the-art technology, and relationships with the largest pool of qualified investors. To learn more about the company, please visit www.MarcusMillichap.com.