How Much Should Developers Pay for Surplused D.C. Buildings?
When the District wants to offload real estate, there are lots of rules about how the city must prove that it indeed no longer needs the property, how the developers have to bid on the property, for how much the resulting units of affordable housing can be sold, how much of the work must be done by small and minority-owned businesses.
One of the things that seems less cut-and-dried is the purchase price.
Topher Mathews over at Georgetown Metropolitan has some good thoughts on the Hurt Home, which is to be disposed for a mere $1.37 million–though it's assessed at almost $9.5 million. He comes down more or less in favor of the action, considering the amount of money that the developer, the Argos Group, will need to pour into the building in order to create sellable units. Yes, the fiscal impact statement says that the District's assets will be reduced by quite a bit through offloading the property at such a bargain price, but in this case it's better to start collecting property taxes than to spend District money to redevelop.
That's neither the least nor the most the District wants to dispose properties for.
Consider two other buildings in that batch. 4800 Nannie Helen Burroughs Avenue, a not-much-to-look-at brick building out in Deanwood, is assessed for $525,000. But the city is deeding it to Charliemay LLC for all of $1, in a deal that will result in 3,000 square feet of retail, 6,000 square feet of office space, and 70 affordably priced residential units, 23 of them priced at 30 percent of area median income.
Then there's M.M. Washington High School at 44 P Street NW, valued at $12 million. The city is proposing to sign a 99-year ground lease for $1 per year, and will issue $6.4 million worth of bonds for the development. In exchange, the developer will agree to build 80 to 90 senior apartments, only ten percent of which will be priced at market rate, and 15,000 square feet of community space.
For both of these, it's unlikely a developer would take on projects with those kinds of affordability restrictions if they had to buy the buildings outright.
For the Stanton/EastBanc project at the Hine Junior High School at 301 7th Street S.E., however, the price is a little steeper: an annual rent of 5 percent of the value of the property. At $21 million assessed value, that comes out to a little over $1 million per year. In return, the developers get to build 97 condos, 35 apartments, potentially a 100-room hotel, and office and retail space. Over 20 years, the disposition analysis estimates that the District could collect over $126 million in tax revenues on the mixed-use development.
The last properties in the batch still under consideration by the Council are the West End Library and Firehouse, to be disposed to a group including EastBanc, the Warrenton Group. They're valued at $12.2 million and $17.8 million respectively, but a proposed price hasn't yet been made public.
All of these are delicate calculations of how much value the District can get away with while still making it worth a developer's while to meet the needs of the neighborhood. It's valid to keep an eye out for sweetheart deals, and hold developers accountable for what they've been given. But sometimes it's worth the taxpayers' while to give things away for free, or close to it.