2012-03-23, 12:47

Getting in the DC Development Game: Ideas for Out of Town Developers

By: Pamela V. Rothenberg, Esq.
A thoughtful multifamily real estate friend recently asked us to share our thoughts about the hurdles faced by out-of-town developers who want to get in the DC development game and whether there were tactics the developer could employ to be perceived as more “D.C. connected.”

Here is our response:

As is the case with most states, any entity “doing business” in D.C. must be qualified in D.C. To qualify, an entity formed in a different state must have a D.C. registered agent with a D.C. address.

If timing is an issue, an out-of-town developer can initially contract to buy the D.C. property with a foreign entity (i.e., one formed in a different state) and then later qualify that contracting entity in D.C. By the time that the developer acquires title to the property, it should do so with a D.C. formed or qualified entity.

If the developer will be going through any extensive entitlement or zoning process for the property and in connection with that effort, the developer will undertake substantial work with the D.C. Government, it should probably use a D.C.-qualified entity to do so because those activities constitute “doing business” in D.C. In this case, the contract purchaser for the property should probably be a D.C. entity, such as a single-member, disregarded LLC formed in D.C.

Every development/construction project in D.C. is subject to the D.C. Government’s requirements that the entities doing the work hire D.C. based small contractors and D.C. residents. These are documented in the “First Source Employment Agreement” and “Certified
Business Enterprise Utilization Agreement” that are forced on any significant real estate development. The developer can have its general contractor be responsible for most of the obligations under these Agreements, especially the monitoring and reporting requirements.
Developers with multiple projects and multiple Agreements will probably receive better treatment from the District than a developer with a single project.

If the developer plans on going through a rezoning or zoning amendment or planned unit development, it will have to deal with the Advisory Neighborhood Council and other local groups. In this circumstance, there may be a benefit to the developer to being
perceived as partially-local rather than out-of-town.

Are you an out-of town-developer? Please share your views about the obstacles you face for development projects in DC and the innovations you have developed for overcoming them.

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