WASHINGTON, DC-As we reported earlier this week, Somerset Development Co. and the National Housing Trust-Enterprise Preservation Corp. created a joint venture to purchase and redevelop Channel Square Apartments, a 223-unit housing complex at 325 P St. SW. Jonathan Rose Cos. and the Rose Green Cities Fund – Jonathan Rose's investment fund with Citi Community Capital -- have invested in the joint venture via a $24.6 million first mortgage loan. In addition, an application for additional financing has been submitted to the D.C. Department of Housing and Community Development.

The project turned heads because of its strong green creds, but a backstory to the deal is also worth noting: it was largely driven and structured by the tenant association.

Another tidbit worth noting: the tenant's association pushed for--and received--several considerations but it was the developers that were the drivers behind the green development, although the tenants agreed to it.

To learn more about the transaction, GlobeSt.com spoke with the principals from these companies: Nathan D. Taft, director of Acquisitions at Jonathan Rose Cos., Scott Kline, vice president, National Housing Trust – Enterprise Preservation Corp., and William Whitman, principal with Somerset Development.

The deal originated when the property was put under contract by another party, which triggered the rights of tenants through the Tenant Opportunity to Purchase Act. They elected to purchase the building and interviewed several developers to find a partner. In the end the liked Somerset….and National Housing Trust. "They basically asked if we would partner for the project, which we were happy to do," Whitman tells GlobeSt.com.

Whitman says that one reason why the tenant's association ultimately chose them was because of the heavy emphasis on the tenants even though they are not the legal partners in the JV. "We agreed to put together a series of plans – a management plan, an affordability plan and we are dedicating a percentage of revenues from the project back to tenant association for resident programs," Whitman says.

At the time the tenant's association chose Somerset and National Housing Trust, Somerset was in discussions with Jonathan Rose Cos. about financing for another project in the District and asked it wanted to get involved in the Channel Square deal. They did. "This was our second TOPA deal, but we also had a history with both Somerset and National Housing Trust," Taft tells GlobeSt.com.

This deal went well, the three men agreed – and they hope there will be opportunities for other three-way partnerships in the District. "We are very busy, but we are seeking new projects and transactions and shaking the trees trying to find projects that will fit the three of us again," Kline says.

Instant Insights /

Channel Square: A Tenants' Story

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