January 26, 2009 - Jon Peterson - Developer Aloft Hotel National Harbor, Hyattsville MD

National Harbor Hotel Developer Is Unfazed by Gloom

Update - May 19, 2009 Disney Buys Land

Update June 23, 2009

National Harbor Hotel Developer Is Unfazed by Gloom

National Harbor

Jon Peterson's timing doesn't seem to be ideal.

Two years ago, the son of longtime Washington area developer Milton Peterson started the construction of a boutique hotel Aloft at his father's massive National Harbor project in Prince George's County. Now, with the economy in the tank and a dim outlook for the hospitality industry, the 190-room hotel is set to open at the end of March.

But he says he's not too worried.

"The hospitality market was in a stronger state two years ago when we started construction on this hotel," Jon Peterson said of the $48 million project. "We are confident this hotel will do well because of all that National Harbor has to offer, including the vibrant restaurant, retail and waterfront."

Jon Peterson's partners in the deal include Vann Avedisian, who was his roommate at Middlebury College in Vermont. Avedisian is the co-founder of Oxford Capital Partners, a private-equity real estate investment firm in Chicago.

The Aloft hotel, which is similar to Starwood's boutique W hotel brand, will have a spa and restaurant. It will be the fifth hotel at the National Harbor project, after the 2,000-room Gaylord National Resort & Convention Center and a Westin, Hampton Inn and Residence Inn. National Harbor also includes a sprawling complex with an office building, condos, restaurants and shops, with plans to build an additional 5 million square feet.

Gaylord Entertainment said earlier this month that its same-store revenue at its resorts fell 5.4 percent in November as its group business declined. Revenue at its National Harbor site was $16.1 million in November, with 56 percent occupancy. In December, the hotel's revenue was estimated to be $12.8 million, the company said.

Aloft's opening at National Harbor is part of Starwood's plan to expand the franchise. There are 17 Aloft hotels, including one at Dulles International Airport, in the United States and overseas. More than 100 Aloft hotels are expected to open in the next few years, including one at Baltimore-Washington International Marshall Airport, one at Arundel Mills Mall and another at Dulles.

Original Story - Washington Post

May 19, 2009 Update - Press Release

The Peterson Companies announced today the sale of land at its National Harbor development near Washington, DC to Walt Disney Parks and Resorts. Disney is considering using the 15-acre site overlooking the Potomac River in National Harbor, MD as the location for a resort hotel for families and others visiting the National Capital Region. “We’re thrilled Disney has decided to invest in National Harbor,” said Milton V. Peterson, chairman of the Peterson Companies. “Disney is the top family entertainment company in the world, and its purchase is a great vote of confidence in the future of National Harbor and the Washington area as a top family tourism destination.”

The new resort hotel would be one of Disney’s stand-alone resort hotels separate from the Disney theme parks. This new resort hotel, like the project under construction in Hawaii, will be in a prime geographic location and will provide guests with the same comfort, fun and amenities for which Disney is famous.

“As we began identifying possible locations to grow our business, the Washington, DC area immediately jumped to the top of the list,” said Jay Rasulo, Chairman of Walt Disney Parks and Resorts. “National Harbor offers an array of entertaining activities for regional visitors, but it is also a family-friendly base camp, from which visitors from around the world can explore the stirring sights and inspirational stories of our nation’s capital. We believe National Harbor has the unique opportunity to offer a new level of family-friendly hospitality.”

Disney purchased the Maryland property from the Peterson Companies for $11 million.

Update June 23, 2009

A Resort Downriver From Washington

Milton V. Peterson, the developer of National Harbor, next to “The Awakening,” a sculpture by J. Seward Johnson that has been brought to the resort.

The Gaylord National Resort and Convention Center has an 18-story glass atrium and 2,000 rooms.

For decades, a manmade cove on the eastern bank of the Potomac River just downstream from the nation’s capital was the focus of ambitious development plans, but repeatedly the dreams ran aground. Now, however, despite a deep recession, a mini-city with the hopeful name National Harbor is rising at the site.

The initial phase of the project, which sits on 300 sloping acres, includes the $1.1 billion Gaylord National Resort and Convention Center, a 2,000-room property that had its first anniversary in April. Four hotels are clustered nearby, along with about two dozen restaurants and shops, a marina, condos, office buildings and parking for 6,000 cars.

The project already fills several square city blocks of low to midrise buildings, many with water views. Only the Gaylord soars — by Washington standards — with an 18-story glass atrium. Slicing through the property toward the waterfront, the American Way is a grand pedestrian boulevard modeled after Las Ramblas in Barcelona, Spain, with shops, a wide median and 96 London plane trees.

On weekends, National Harbor draws tens of thousands of visitors — a mix of convention-goers, business people, tourists and local residents. National Harbor officials expect the crowds to swell as the development grows.

Last month, the Peterson Companies, National Harbor’s developer, announced that Disney had paid $11 million to acquire 15 acres of prime real estate there for what is expected to be a family-themed resort hotel. Disney is already building a themed resort in Hawaii, its first, for a reported $800 million and has not disclosed a timetable or cost estimate for the resort at National Harbor.

“For us to get them now, in this economy, is almost like an unnatural act,” said Milton V. Peterson, the company’s 73-year-old founder and owner, beaming as he spoke. His family company has long been a major developer in the Washington area.

“At the end of day, we’re storytellers,” said Jay Rasulo, chairman of Walt Disney Parks and Resorts, “and we felt National Harbor with its proximity to the nation’s capital, and all the stories behind it, could serve as a fun-filled destination for local visitors on a weekend getaway, but also as base camp for distant visitors to explore those many inspirational stories from our nation’s capital.”

Disney’s investment is a tangible vote of confidence in the project on the cove, which was first named Smoot Bay, after the sand and gravel company that dredged it decades ago. The soil was used in construction of the Pentagon during World War II.

The groundwork for a large development at the site was laid in 1983, when it was rezoned for mixed use. Initially called the Bay of the Americas, the project was renamed Port America by another developer, who hired the famed architect Philip Johnson to design a 52-story office tower as its centerpiece.

But the tower, which would have been the tallest building between New York and Atlanta, ran into opposition from federal officials, and the project was redesigned. Then, after a groundbreaking in 1987 and construction of a $5 million marketing center, the economy soured and the project went into foreclosure.

Mr. Peterson bought the property in 1995 for $30 million from the Resolution Trust Corporation, which was selling off the assets of failed savings institutions.

Unlike the earlier developers, who had focused on office development, Mr. Peterson concluded that the site “should be a destination-waterfront resort,” he said.

The Potomac has been “such an underutilized resource,” he said. Along his 6,700 feet of riverfront, he resolved to change that. In addition to the marina, there is a water taxi that runs to Old Town Alexandria, the historic riverfront Virginia town. Eventually, it will also carry baseball fans upriver to the Washington Nationals ballpark.

“D.C. is the third-largest tourist destination after Las Vegas and Orlando,” Mr. Peterson said. “All good parents take the patriotic pilgrimage to the nation’s capital.”

John A. Lally, a land-use lawyer formerly involved with the project, said, “The magic wand it took was making it a tourist attraction as opposed to a business center — someplace Mom and Dad would want to come to with the kids.”

Mr. Peterson said that the Gaylord and the other hotels house an estimated 3,000 people daily, who naturally patronize its restaurants and shops. Special weekend wine and food festivals draw thousands more.

“Weekends are packed — the foot traffic along the harbor is amazing,” said Nicole Benolken, general manager of the Aloft Washington National Harbor, a boutique hotel that is part of the Starwood chain. The 190-room hotel, with nightly rates of $119 to $249, opened on March 26 and has had several sold-out weekends, she said.

Mr. Peterson asserts that the development is using “an urban plan.” A proponent of public art, he acquired “The Awakening,” a sculpture by J. Seward Johnson of hands and feet and a head rising from the ground, previously installed at Hains Point in southwest Washington, and he commissioned Albert Paley to create “The Beckoning,” an 85-foot-tall abstract sculpture.

The Capital Children’s Museum, which had also been in Washington, is scheduled to relocate here in 2013 as the National Children’s Museum.

But the centerpiece of the development is still the Gaylord National Resort, which broke ground in 2005 and opened for business in April 2008 with 1.5 million room nights presold and commitments for three conventions that had previously been held at the 1,300-room Washington Marriott Wardman Park Hotel. This year, the quadrennial Texas Black Tie and Boots Inaugural Ball, which had drawn 8,000 to the Wardman in 2005, attracted 13,000 to National Harbor, Gaylord officials said.

The hotel-convention center, which sits on 46 acres that Gaylord owns, features a voluminous atrium with Potomac sunset views, six restaurants, shops, a spa and fitness center, and 470,000 square feet of meeting space.

It generated $14.8 million in cash flow in the first quarter of 2009, “a solid performance in this challenging economic environment,” said Colin V. Reed, chairman of Gaylord Entertainment, which also owns Opryland in Nashville.

While the recession has not been as deep here as elsewhere, National Harbor has not been immune to the downturn. “Everyone is feeling the pain,” said Steven B. Peterson, who oversees the project with his father and his brothers, Jon and William, and sister, Lauren.

The vacancy rate in the two office buildings, which were completed last June, with a total of 160,000 square feet in five- and six-story structures, was around 78 percent a month ago, according to Jon M. Peterson, a senior vice president. Now, it is 23 percent.

As incentives, the company cut its annual office rental rates 15.7 percent, from $38 a square foot to $32, and raised agent commissions. These changes, Milton Peterson said, resulted in “letters of intent going back and forth.”

Sales of the project’s 420 residential condominiums, in three buildings up to 12 stories high and priced from $300,000 to $3.5 million, have also been affected. “They were sold out,” Steven Peterson said. “Then the financing crunch changed the rules of the game,” resulting in cancellations. Now, more than 200 have been sold and others are in contract. Price reductions, Mr. Peterson said, are on a “unit by unit” basis.

But the developers can be certain the location will outlast the downturn. “Its site is absolutely beautiful,” said Mr. Rasulo, the Disney executive. “We at Disney are very focused on design and location and accessibility, and certainly National Harbor has all that in spades.”