Investor Opportunity: Capitol Hill Warehouse With Lofty Potential

• November 19, 2012
• 14 Comments

by Shilpi Paul

1237-1239 Rear C Street SE

UrbanTurf often notes the lack of true lofts in DC, largely due to the small number of warehouses and industrial spaces that can be given a new lease on life. However, with the backing of creative investors, this blank-slate property in a Capitol Hill alley could be turned into something special.

The red brick warehouse was built in the 1890s and is located at 1237-1239 Rear C Street SE, in an alley recently dubbed Adolph Cluss Court. Aside from a solid-brick partition wall and a few loft storage spaces, the interior is largely empty. A previous owner used it to store classic cars and furniture.

As we’ve written about before, alleys are having a bit of a renaissance, and listing agent Joel Nelson tells UrbanTurf that an adjacent warehouse was transformed into a two-unit loft residence.

The property is zoned R-4, which means that the site can be used for single-family residential uses (including detached, semi-detached, row dwellings, and flats) or projects up to six units, depending on the lot size.** Currently the building occupies 1,770 square feet of the 4,350-square foot lot.

**For additional details on R-4 zoning, click here.

• Address: 1237-1239 Rear C Street SE (map)
• Price: $450,000
• Year Built: 1890
• Listing Agent: Joel Nelson, Keller Williams Capital Properties

This article originally published at http://dc.urbanturf.com/articles/blog/investor_opportunity_capitol_hill_warehouse_with_lofty_potential/6312

14 Comments

1. Gumpper said at 7:21 pm on Monday November 19, 2012:
   I took a good hard look at this a few years ago, but took a pass because of uncertainty regarding the need to pull water service and the whole zoning/historic/ANC/etc process that made it difficult for me to justify taking the plunge. Great space, though, for those not faint of heart

1. RobDC said at 5:17 am on Tuesday November 20, 2012:
   No mention of the historic preservation easement in the listing. Buyer beware.

1. Joel Kelty said at 1:58 pm on Tuesday November 20, 2012:
   I also took a look at this last time it was for sale and looked at it again yesterday on behalf of a potential purchaser. Those considering making an offer on this property should be aware that it has significant impediments to redevelopment. Specifically: 1) Zoning: See Section 11-2507 which states in part, "Except for use as a one-family dwelling, a structure shall not be erected, constructed, converted, altered, remodeled, restored, or repaired for human habitation on an alley lot." The listing agent and this blog have suggested that it is possible to redevelop this property as a multi-unit investment. This is not the case, at least not by right. 2) Historic Preservation Easement: A prior owner placed a historic preservation easement upon the property which requires any improvements to the exterior of the structure or the lot to be approved by the easement holder, a historic trust. This was a popular trend some years ago where people received tax write offs for the value of the easement until the IRS started cracking down on the crazy valuations being assigned to the easements. It is unlikely that the historic trust holding the easement will allow significant modification to the exterior or the site. They could even prevent the purchaser from erecting a fence around the property. 3) The adjacent apartment buildings to the north and the property to the north-east, appear to be using a portion of the property for pedestrian access and storage of trash containers (though this should be confirmed by checking a house location survey and actually measuring the lot to determine where the property line is). This could result in opposition by the adjacent property owners to any development plans. 4) THERE ARE NO UTILITIES TO THE SITE! The new purchaser will have to undertake extension of sewer, water, electricity and perhaps gas to the property. This is a massive undertaking. The sewer line extension alone will probably cost $75,000-100,000 and dealing with the utility companies is often time consuming and frustrating. While there is power in the alley for street lights, You can not tap a street light conduit to bring power to your property. 5) The current owner attempted to redevelop this property as a single family dwelling and encountered significant opposition from adjacent property owners and the surrounding community, including the ANC (See ZC 18017). This is definitely a cool building and would make a really unique single family dwelling if one could get the utilities extended, get the preservation trust on board and obtain the support of the local ANC and neighbors. However, for the $1 million+ (assuming sale at full asking price) it would take to do the project, you have several other purchase options that don't involve the time, frustration and effort that this one does.

1. brian said at 1:17 am on Wednesday November 21, 2012:
   Joel: Fascinating summary. Thank you. Can you shed more light on the utilities question? Do they have to dig new sewer lines through the alley? What dies Pepco require? Would it be different if you also owned whatever the street property in front was ( could you just draw off those utilities somehow)?

1. Kevin said at 4:35 pm on Thursday November 22, 2012:
   There are a number of huge problems with converting this to a residential property. To name a few: you can only do one unit on an alley lot (R-4 usually allows more but there is a specific restriction on an alley lot use). Also, the property must be on a 30' alley in order to use as a residential property. This alley is 25'. The last owner tried to do a single family residence conversion and was shot down by all of his neighbors, the ANC and Zoning. You are also restricted in terms of height--typically you can only go up as high as the alley is wide, so 25'. These are serious challenges.

1. Joel Kelty said at 1:33 pm on Friday November 23, 2012:
   Kevin, according to Baist's (historic real estate maps), the alley abutting the property to the south is 30' and the alley to the west is 29'. Even so, 25 feet is plenty of height for a single family two story dwelling. Brian, you are correct that the one would have to dig up the alley to run new utilities, including sewer. Pepco typically requires concrete encased conduit for their service. You would be required to restore the alley after the work and would likely be required to post a bond to guarantee satisfactory completion. If you owned adjacent property, it might be possible to do a utility easement or combine the lots but that doesn't necessarily mean the existing services are capable of handling the additional load. A creative and expensive solution might be to try to go "off the grid" using solar for power and either caching rain water or digging a well for water. You'd still have to figure out what to do with your sanitary waste and your grey water. Even if feasible, getting all these sorts of unconventional systems approved by DCRA would be a near insurmountable challenge...and extremely time consuming and expensive. Redeveloping this site would be loads of fun (at least to me) but really isn't practical for most people and doesn't make sense economically. It would be a good hobby project for someone with more money than they know what to do with.

1. biggie said at 9:40 pm on Friday November 23, 2012:
   I too looked at this last time it was on the market (and the structure across the ally which has since been renovated). It's a fantastic property with lots of potential and even more issues than any one person could ever include in a single blog post. If you decide to make an offer, be sure you have a long study period (i'm thinking 4 to 6 months with an option to extend if needed) and a great zoning/land use attorney (and a budget to match). Alley dwellings are great and the city is slowly coming around to supporting them but that's a long long ways out. I hope someone buys it and makes it something great!

1. Anonymous said at 5:44 am on Saturday November 24, 2012:
   Considering the above comments, particularly Joel Kelty's, redeveloping this property seems near impossible. The entanglements are many and complex. Zoning issues. Historic preservation concerns. Litigious neighbors. No utilities. Hmm...this litany will give even the most intrepid developer reason to pause. This property seems destined to stay as it is: a storage facility. Perhaps it could be spruced up a bit, with electric hooked up for lighting. If partitioned into units, the space could serve as neighborhood storage. In that respect, it is worth $450,000? Could someone make the numbers work? e.g. 45 spaces @ $1200+ each/year.

1. A said at 7:06 am on Saturday November 24, 2012:
   There may be an exception in the DC law allowing for art galleries in alley buildings, which this could be a cool space for, although the challeng eofnit needing to be destination location and no foot traffic.

1. Joel said at 1:30 pm on Sunday November 25, 2012:
   Art gallery would be cool but I don't believe an art gallery is an allowable use in an R4 zone. You would still need to condition the space, both for guest comfort and for housing art. You would still need to provide toilet rooms for staff and guests. Not trying to be negative, just realistic...

1. Sam Brownell said at 10:23 pm on Monday November 26, 2012:
   Does anyone know what happened with this property? It doesn't seem to be on the market anymore.

1. Mark Wellborn said at 10:05 pm on Tuesday November 27, 2012:
   Sam, The property went under contract the day before Thanksgiving. More info here: http://dc.urbanturf.com/articles/blog/under_contract_gone_in_about_a_week/6339 Mark Wellborn Editor

1. hma said at 5:50 pm on Tuesday January 29, 2013:
   back on the market

1. Deb said at 7:01 pm on Sunday February 23, 2014:
   Nothing is happening with this property. What is its status?