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Owner of the Year: KSI Services
As multifamily residential projects have taken
off in the region, few developers have been as well-positioned
to capitalize on the trend as Vienna, Va.-based KSI Services.
The company began a flurry of new condominium activity in
2004 that has established it as one of the nation's top 15
developers of multifamily projects. Now the company has its
sites set on new mixed-use projects and new markets.
By Jim Parsons
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Work is underway on KSI Services'
$172 million Midtown Reston Town Center project in Reston,
Va. The first two towers in a three-block combination
of condominiums, lofts apartments and retail space have
already sold. Photo by Bob Narod
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Every cloud has a silver lining,
and for KSI Services Inc., Mid-Atlantic Construction's 2005
Owner of the Year, the cloud was the economic recession of
the early 1990s.
With Northern Virginia's decade-long wave of suburban expansion
slowed to a trickle, the Vienna, Va.-based developer of mixed-use
communities saw the multifamily market as the best hope for
financial stability in those trying times.
KSI gradually augmented its existing land holdings with acquisitions
near Metro stops, the then-embryonic Virginia Rail Express
and major highway interchanges, as well as in the heart of
burgeoning exurbs such as Reston and Lorton.
It was a good move. The region's economic rebound and accompanying
highway congestion enhanced the appeal of transit-oriented
urban living among a growing number of affluent, commute-weary
residents.
Capitalizing on this trend-first with several new and renovated
apartment and condominium projects in the late 1990s and an
explosion of new condominium construction that began in 2004-the
28-year-old company is now one of the nation's top 15 developers
of multifamily projects.
"We're hitting our stride in this market," said
Robert C. Kettler, KSI's founder and chairman. "Our goal
was to build projects that consumers wanted, but in locations
that would be hard to replicate. Given the area's demographics
and transportation issues, more and more people are looking
to upscale, multifamily housing."
Upward bound
KSI's flurry of condominium and apartment construction activity
in the past two years has bolstered the company's bottom line,
with 2004's revenue topping $783 million-a 50 percent increase
over 2002's results. The company also has a five- to 10-year
project pipeline that calls for 6,700 condominium units and
4,400 apartment units in metropolitan Washington and Baltimore.
By 2007, the company will have stamped its "Midtown"
brand of high-rise living in some of the region's hot spots,
including the Reston Town Center, where the first two towers
in a three-block combination of condominiums, lofts apartments
and retail space have already sold.
Other Midtown high-rises also under way have attracted buyers
in North Bethesda, Md., (230 units), and Old Town Alexandria,
Va., (369 units). The October preview of the Midtown Largo Station
drew 3,000 prospective buyers for the four-story condominium's
242 units.
The popularity of multifamily living was evident in other parts
of Northern Virginia during 2005. KSI broke ground for Potomac
Club, a 1,000-unit development of high-end condominiums and
town houses adjacent to a proposed 95-acre Woodbridge town center
in Prince William County.
Work also continued at Metropolitan Park, a 16-acre, mixed-use
development in Arlington County that will add up to 3,500 residential
units in eight buildings near the Pentagon.
KSI has also extended its high-rise reach to Baltimore. The
company is currently teaming with developer and banker Edwin
F. Hale to continue the city's East Side revival with the three-tower,
504-unit condominium component of the Canton Crossing mixed-use
development. It's also working on a separate project that will
add more than 1,000 upscale condominiums, apartments and town
houses in the "Greektown" area.
John Chappelear, KSI's senior vice president for condominium
operations, said these and other projects should quash any notion
of a housing glut in the region.
"The pace of buying has plateaued somewhat, but it is far
from stopped," he added. "We are still not keeping
pace with the region's traditional absorption rates for housing.
And all the trends show that the region's growth will continue
and that more consumers want to trade the backyard-oriented
suburban lifestyle for the urban experience."
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New landmarks
KSI has not strayed from its suburban-style development roots,
however. The company is at work on Harbor Station, a mixed-use
waterfront community on Prince William County's Cherry Hill
peninsula that will include a 272,000-sq.-ft., 234-room luxury
hotel and conference center to be designed by Hellmuth, Obata
+ Kassebaum and a Jack Nicklaus Signature golf course.
In Loudoun County, KSI recently received approval to proceed
with the Village of Leesburg, a 150-acre upscale lifestyle
center that will include more than 670,000 sq. ft. of office
and retail space and 635 residential units, plus a new highway
interchange to ease the expected addition of traffic along
Route 7.
Other multifamily communities are slated for Prince William
and Stafford counties.
All this activity has made for a busy, yet challenging year
for KSI's roster of primary contractor partners, which includes
Washington, D.C.-area firms such as Bovis Lend Lease, Clark
Construction, Hitt Contracting and L.F. Jennings.
"We've contracted between $450 million and $500 million
of work in the last 15 months, but it's been hard to keep
numbers working on pro forma because of escalating materials
costs," said Wayne Hobbs, KSI's vice president of construction.
What hasn't increased has been the area's labor pool, Hobbs
added. "There are only a limited number of subcontractors
capable of doing high-rise projects," he said. "We've
had a hard time finding enough of them to keep up with our
work."
More to come
These obstacles have done little to keep KSI from thinking
big. Among the projects on the company's drawing board is
Midtown Springfield in Springfield, Va., a mixed-use community
that will rise from a nine-acre site that currently includes
the Springfield Tower office building and other existing businesses.
In their place, KSI plans to build three 23-story condominium
towers containing approximately 800 units and a 10-story hotel,
while also adding 100,000 sq. ft. of retail space and 40,000
sq. ft. of office space.
"Midtown Springfield has the same elements as our existing
suburban mixed-use developments, only they're vertical,"
Kettler said.
He added that the project will benefit from its proximity
to the soon-to-be streamlined interstates 95/395/495 "mixing
bowl," Metro and VRE stops, as well as an established
affluent job base that will soon be boosted by the migration
of several Department of Defense agencies to nearby Fort Belvoir.
"Springfield ranks as one of our best opportunities,"
Kettler said. "All the infrastructure is in place, and
the job-growth trends are positive."
KSI is also teaming with Boston Properties, the Urban Land
Institute and The George Washington University to chart the
future of one of downtown Washington's most attractive vacant
lots-the 2.5-acre former site of GW Hospital on Pennsylvania
Avenue NW.
"Potentially, this is one of the most interesting jobs
we'll ever do," Kettler said of what could be a 1-million-sq.-ft.
mixed-use development effort. "There is a host of complex
planning issues involved, from connecting the neighborhoods
north of Washington Circle to establishing a gateway for the
university.
"Plus, there are not many sites like this just a few
blocks from the White House."
A steady pace
Chappelear agreed that demographics and population growth
bode well for high-density residential construction in metropolitan
Baltimore-Washington.
"We've supplied enough condominiums to meet the pent-up
demand," he added. "Now we want build on a steady
pace to supply the continuing demand. We've acquired enough
land to build 2,000 units annually for the next 10 years,
using the same strategy as before."
How will these promising trends affect KSI's growth strategy?
"We're expanding as areas become more integrated with
the metropolitan Washington transportation network,"
Kettler said. "For example, Leesburg and Fredericksburg
are not only commuter-oriented, but also have become employment
centers themselves.
Washington/Baltimore, while still unique markets in many ways,
are now more of an integrated region."
Hobbs said the region's construction community will benefit
as well. "We're a relationship-driven company and prefer
to stay with people who've helped us in the past, but there
will be more opportunities for others to get involved,"
he said. "We're particularly eager to get started in
Baltimore and get to know the subcontractor market."
And Kettler added: "There is plenty to keep us and everyone
else busy."
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