Housing Complex

How Much Should Developers Pay for Surplused D.C. Buildings?

4800 Nannie Helen Burroughs Avenue NE, leased for $1. (Google Maps)

4800 Nannie Helen Burroughs Avenue NE, sold for $1. (Google Maps)

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.

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  • mm

    DC should be forced to consider neighborhood views and not just whatever church/developer/non-profit has it's eyes on a site. Unfortunately, it only paid token support to the neighbors of M.M. Washington. M.M. Washington has now joined the rest of the social services dumped in our neighborhood that the of the city doesn't want to look at.

    Thank you Fenty for looking out for your religious vote.

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  • Trulee Pist

    Councilmember Kwame Brown raised an excellent point at a recent joint roundtable hearing he held with Councilmember Cheh on disposition of these and other properties.

    He was specifically talking about the Hine Jr. High site at 8th and Pennsylvania Avenue SE near Eastern Market. The winning developer, Eastbanc and Stanton Development, won the bid to develop the site but now concede that they have exactly nothing to offer.

    They'd promised a hotel, they have no hotel to offer.

    They'd promised a benefit to Shakespeare Theater as a sop to the many Shakespeare Theater supporters in the neighborhood, but now will not do so.

    They swore up and down that their financing was in place and they'd ask no financial support from the city, but now it turns out their biggest potential tenant won't move from No Va to the Eastern Market site without a sizeable bribe from the city taxpayers.

    Under questioning from Brown, Cheh and (reluctantly, local Councilmember Wells), it turns out Eastbanc-Stanton:

    Has no tenants signed up!

    Councilmember Kwame Brown's excellent point was that Penn Branch shopping center, across the Anacostia on Pennsylvania Ave. SE, has had its development held up by Mayor Fenty for 18 months now, because the city will not sign a longterm lease to remain in its DMV space until the developer has a signed agreement for a "quality tenant" on the other side of Penn Branch. The developer says progress on getting such a tenant is stalled until the city signs its lease to remain in the DMV space.

    Brown's question: Why should the Council move forward with this sweetheart development deal for the Hine site for a developer who has got exactly nothing to offer, and no tenants signed up at all, but won't move forward on the Penn Branch development by signing a lease to keep DMV there as an assist to a developer who does have something to offer?

    And it's a super sweetheart deal Eastbanc Stanton is getting at Hine! The best part of the deal deserves its own news story on Housing Complex. It was revealed at this joint roundtable hearing that after the RFP and bidding and selection process was complete, the city agreed to change the terms of the deal by slicing off the north end of the site and letting Eastbanc Stanton buy that slice of property while leasing the rest of the site.

    Doing that takes all the pressure off Eastbanc Stanton to ever actually demolish the Hine building and proceed on development on the leased parcel, since by purchasing the north slice of the property, Eastbanc Stanton has insured that no matter how they delay and bolix up the development of the rest of the site, the city can never take back the lease and give it to a better developer (that would be DSF Street Sense). By buying the north slice, Eastbanc Stanton locks in the lease no matter what.

    Sweet! For Eastbanc Stanton. And Councilmember Brown's question is why such a sweet deal for the developer in one neighborhood along Pennsylvania Avenue SE and such a hardball approach to the other developer in a different neighborhood on the same corridor?

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