Housing Complex

The H Street Waiting Game

A vacant H Street lot. (Darrow Montgomery)

Thelma Nelson, busily putting a girl’s hair in curlers with her shiny gold fingernails one Friday afternoon, is a lot richer than she feels.

Like many old-time businesses on H Street NE, her Magic Fingers hair salon has seen its clientele cut in half by four years of streetcar construction along the strip. And when the project is done, she fears, the clutch of bars a half-mile to the east will derive a lot more benefit from the shiny new trolleys than she ever will. “I just look at it as a way for people to get as drunk as they want to, so they don’t get a DUI,” Nelson says, in a tone that doesn’t match her bright pink smock.

The irony, of course, is that the streetcar has already boosted Nelson’s net worth faster than hairstyling ever could. She acquired the 1,400-square-foot building in 1985*. Today, it’s assessed at $426,000—a tidy retirement if Nelson wanted to cash out.

For now, at least, Nelson isn’t selling. And she says that other veterans are hanging on too, even as their property taxes rise annually. “The people that can, they’re staying,” she says. “It’s not easy, but they are.”

It’s a strange sort of boom. While Nelson at least keeps her store vibrant, other H Street properties sit vacant, in seeming defiance of the corridor’s boomtown press. Few properties are for sale. City records show that not much has changed hands in the last few years, which you might expect from a neighborhood in transition. What’s going on?

Well, lots of things. Many of the spaces are too small for some businesses. Few could be leased without extensive renovations. But mostly, the scene reflects the same logic Thelma Nelson is using: Hang on as long as possible, because values will keep going up. And if you want to sell, no price is too high.

“People are too unreasonable now. They believe they got a gold mine,” says developer Italo Rodriguez of IS Enterprises, which does renovation work on the strip. “People own lots, they are trying to sell the lots, but they are asking astronomic prices.”

Take 1351 H St. NE, for example: 4,196 square feet, assessed at a half million dollars, and on the market since last February for $950,000. Or 403-407 H St. NE, which is being marketed for a bank is and asking $55 per square foot—about $10 more than downtown’s going rate. Other properties bought by speculators soon after the redevelopment launched have stayed dormant as absentee owners wait for big projects to get going before flipping again or building something new.

That’s the stalemate of H Street: Those invested here are so dazzled by future prospects that they keep the present moving slower than it should.

To understand what’s going on with H Street, think of it in separate pieces. The economic calculus changes radically as you head from west to east.

On the western end of the strip, closer to Union Station, several empty lots will soon see big changes. Louis Dreyfus Property Group is building 302 residential units just south of H Street between 2nd and 3rd streets. Steuart Investment Companies will break ground at some point on a 212-unit apartment project, with a ground-floor Giant grocery store, between 3rd and 4th streets. The area is zoned for the city’s maximum legal height, making adjacent land incredibly valuable: a grassy plot opposite the Steuart site sold for $3.5 million in 2007, for example. The owner hasn’t yet proposed plans for it.

All of those sales affect the prices of the remaining buildings, whose development timelines are tied to the financial fortunes of giant projects. With a few exceptions—like David Bernhardt, who bought buildings and leased them to a coffee shop, a bar, and a yoga studio—not much has changed with the smaller lots, and it’s likely nothing will until developers come in to consolidate the land.

The result is a perverse situation in which the corridor is developing in reverse order. Though officials expected that big projects near Union Station would drive revitalization, the action right now is on the corridor’s more obscure eastern end. Aware that it could take years for downtown to reach them, entrepreneurs there took advantage of cheap land. Nightlife impresario Joe Englert picked up a batch of eight buildings there in the mid-2000s, kickstarting the process. Dozens of restaurateurs followed suit, creating an entertainment zone that is now creeping west.

Alcohol-serving establishments, of course, are better equipped to weather both daytime construction and skyrocketing property taxes. Where old-time businesses want city help handling development-related tax troubles, the bar owners are steering clear. “Only so many hours in the day to bitch and moan, man,” says Englert. “I don’t ask for shit.”

With megaprojects coming to the west side and nightlife hopping on the east, the middle blocks of H Street remain marred by vacant properties and wounded businesses. The city has tried to nudge absentee owners into renting out their spaces by instituting a vacant property tax, which penalizes darkened storefronts by charging owners more than five times the regular rate. But it’s easy to duck that rate, either by razing the building and putting in a parking lot, or by posting a “for lease” sign out front. “I’ve heard that too,” says local broker Steve Solomon, who declined to comment about whether any of his own signs were posted for that purpose.

The biggest property owner on the strip is John C. Formant, the scion of an old Greek real estate family. Formant started amassing his portfolio of around 20 H Street buildings before he graduated from college in the early 1980s. Rising property taxes aren’t a big problem for him; it just means he rents to tenants who can pay, like Cricket, T-Mobile, and Shoe City. As for the neighborhood complaints about the properties he hasn’t yet fixed up or leased, Formant blames District regulations that restrict new chain restaurants in the area, meaning a Five Guys, Chipotle, or Julia’s Empanadas would have to get a special exception to operate.

“They want everything to be sit-down restaurants. And I think that’s a big detriment to H Street,” he says. “If you can’t find a tenant, who’s going to pay for the renovation? All these people up and down, they all complain and make a lot of noise, but it’s not their money. They’re not business people, they don’t know what’s going on.”

On the other hand, you might argue that those annoying requirements result in better-quality businesses that could spur still more development. After the ANC wouldn’t help Formant lease a building to Domino’s Pizza, it sat empty for a year. But today it’s a restaurant called Liberty Tree—reportedly a favorite of former Mayor Anthony Williams, who got the revitalization of H Street going in the first place.

* Correction: Due to a reporting error, this story originally reported that Nelson bought her building for $10.

  • RGFleet

    Lydia,

    Its pretty ridiculous to use the proposed street car as the entire reason her property has appreciated. Its been 26 years, and the streetcar has only been in the picture for H street for 5. Don't ya think her increased property values had to do mostly with, I dunno...the general development DC has experienced in the past 15 years?

    If not, then why has her taxable assesment declined since 2006?

  • Pam – H St “Old Timer”

    Joe Englert,

    As a H St business/property owner and what you referred to as “old-time”, I'm highly insulted by your insinuation that we (old-timers) on H St., --who are majority African Americans and Asians—are looking for a hand-out from the DC gov’t for “development-related tax trouble”, while you, on the other hand, are “steering clear” and “don’t ask for shit.” Au contraire mon ami ! Not only have you asked for “shit”, but you rallied supporters to petition for your “shit” and the city—Councilmember Wells and Ex-Mayor Fenty--- heaped a pile of “shit”, at the tune of approx. $500,000—to support your businesses and the other bars and clubs (newcomers on H St) during the imposed streetscape/streetcar construction projects, which you referred to as a “development-related” problem.

    Case in point: for the last two years, during the massive construction on H St for the streetscape/streetcar projects, DC taxpayers subsidized the H St. Shuttle at approx $19,000 a month to provide FREE chauffeur services for patrons of H St. bars and clubs—which you own several. Although DC taxpayers were bamboozled to believe that their approx. $500,000 subsidy of H St Shuttle was to assist all businesses negatively impacted by the on-going construction, the shuttle only supported H St. bars and clubs. The fact that the H St. Shuttle operated from 5pm – 3am (yes, 3 o’clock in the morning) when 99% of businesses on H St are closed, is a testament to you NOT “steering clear,” from seeking gov’t subsidies to support your businesses during the massive, four-year and still on-going construction projects on H St.

    The DC gov’t’s inequitable support --via the H St Shuttle--provided the bars and clubs on H St with the assistance needed to help sustain their customer-base and insulate their businesses from the hardship that’s being felt by the so-called “old-timers” that operate businesses from 9am – 5pm. Unlike you Joe, the old-timers (as you call us) have neither received any incentives from the gov’t to address the hardship imposed on our businesses by the streetscape/streetcar construction nor have our businesses benefitted from the H St. Shuttle.

    Not only have you asked, received and benefitted from government assistance, you were so infuriated when Colbert King wrote, District subsidize H- Street Partiers, which wasn’t in support of continued government funding for the H St. Shuttle, that you wrote a response to King’s article and plastered the blogosphere with your rationale on why taxpayers need to continue funding the H St. Shuttle. Even Councilmember Wells posted your response to Colbert King on his blog and the city again found the resources to subsidize the H St Shuttle in FY10 to operate from the hours of 5:00 pm – 3:00 am, when 99% of the businesses on H St., are closed, except bars and clubs!

    That being said, I along with the other so-called “old-timers” on H St. are appalled by your divisive and erroneous comments in The City Paper that depict us as incompetent, relics that are “bitching and moaning” for the government to save our businesses when in fact you and the bars and clubs on H St have pleaded for rescue from the government’s imposed, obstructive streetcar/streetscape construction projects that were negatively impacting your businesses. And, for the last two years, the DC gov’t has responded with approx. $500,000 in life-support via the H St. Shuttle to help keep bars and clubs afloat on H St, while the so-called old-timers haven’t received a dime or any type of incentives to shore-up their businesses.

    The businesses that you disrespectfully refer to as “old-time” have never negated the injury that four years of on-going construction on H St has caused your establishments or other businesses and property owners on H St. We have not discount anyone’s claim or request for relief due to the hardship that the construction on H St has caused businesses and property owners.

    It is very divisive of you to try and pit the new businesses against the long established ones. Understandably, the construction negative impact varies from business to business, but that doesn’t nullify or devalue any business’—be it new, old, African American, Asian, Caucasian, etc.—claim and desire to receive at least the same consideration and attention that was extended to the bars and clubs on H St.

    Therefore, as a fellow entrepreneur on H Street corridor I’m asking you please not to state comments that are untrue and have the potential to incite disdain and discourse amongst the diverse business owners along the H St. Corridor.

    Thank you,

    Pam

  • deeceefooodeee

    Pam,

    I'm sorry, I stopped reading when you race baited in the first sentence. I could give a flying "shit" about your race or ethnicity.

    Good day and good luck!
    -Nick

  • Mrs. D

    Pam,

    What kind of business are you RUNNING that isn't open past 5? I typically don't patronize businesses that close while I'm still at work. Sure, I have to take the day occasionally to go to the doctor or dentist, and they typically close at 5, but there's no retail business that I would patronize that closes that early. I don't take days off to go shopping for clothes, food, household supplies, or anything else. I get my hair done in the evenings or on weekends. Perhaps it's your business model, only being open during the hours most people are at work, that is hurting you more than the "imposed" improvements.

    FWIW, my patronage of H street businesses has only increased during the streetscape/streetcar project. Yes, I go to the bars and restaurants there, as a neighborhood without bars and restaurants (like the one I live in) is one in which I won't spend much money. Sometimes I go just for dinner or drinks or dancing, but if I go somewhere to go shopping, it's usually more than just what I went for. I'll grab a friend to look for an outfit and then we'll grab lunch or dinner. I don't typically like to shop for personal goods in places where the retail options are limited to personal goods and services, without refreshments available. My personal shopping doesn't really happen on H street because the retail options are limited, but I also take dance classes at Joy of Motion...but, oh, they're a "newcomer" too. Guess it doesn't matter that I usually pop by a retail store for a bottle of water before class, or grab a drink or eat afterwards.

    The H street shuttle was a godsend when I had classes after 7 at JOM. The best way for me to get home is the D8, but that becomes scarce after rush hour. I could come all the way back downtown on the X2 just to double-back to nearby but not walkable from H street, or take it to near Union Station and Metro from there, but it's also crowded and scarce late in the evening. I could pop off the shuttle at 5th and have a short walk to Union Station, and I was guaranteed that it would show up in 30 minutes max, unlike the many, many days that NextBus told me that the D8 and X2 were an hour or more away. It was also a lot more convenient if I came from downtown during the evening rush, as the X2 was always a nightmare at that time.

    When you think about it, every city service is a subsidy to businesses if it runs along a route that contains a business district...buses, sidewalks, roads, streetcars, police, traffic lights, crosswalks, parking lanes...everything. The transportation options for H street were lacking, and the shuttle was the solution. $500,000 annual for a minibus is a deal...and it also clogged up traffic less than more buses or bus routes would have done. 5 PM is not so late that the shuttle should have ONLY subsidized the bars and restaurants, but if you close a retail shop at 5, you're not going to get a lot of people shopping there. Offer goods or services people need or want (not just bars...clothing shops, household goods shops, art shops, furniture shops, hair salons, financial planning services...the list is endless), and operate them during hours that people can use them (outside of normal business hours), and people will patronize them. Why do you think banks are on this kick of staying open until 6 or later (at least on Fridays) and having Saturday hours?

  • hmph

    One of the great ironies about what's going on with all the great developments on H St amidst a handful of run down, vacant buildings, is that the guy who runs H Street Main Street is himself a vacant property owner and, indeed, did not pay his taxes on his vacant building for so long that it was listed at the recent tax sale.

  • Pam – H St “Old Timer”

    Mrs. D,

    I meant to type 9a -7p, not 9a -5p. Thanks for bringing this typo to my attention.

  • Jesse

    "The irony, of course, is that the streetcar has already boosted Nelson’s net worth faster than hairstyling ever could. In 1985, she acquired her 1,400-square-foot building for $10. Today, it’s assessed at $426,000—a tidy retirement if Nelson wanted to cash out."

    $10!!! That is crazy.

  • Paul

    Hey Pam. Please reread the article. The author used the phrase "old timers," not Joe. As someone who owns a house one block from 13th and H, I strongly recommend that you join with the "new" biz owners to ensure success for the entire corridor. A rising tide lifts all boats!

  • Ms. Johnson

    As a long time DC Resident, the assistance should be open to all of the businesses on H Street.

  • Ms. Johnson

    Before this wave of new businesses appeared, the "old timers" were the ones that kept the glimpse of hope that H Street will eventually get the opportunity to have new development. That being the case, all businesses should have the same opportunity.

  • Hernando de Soto

    ...who are majority African Americans...

    This city will be so much better off when this line ceases to be used as an excuse for lack of good business sense.

  • Sara

    Anyone that doesn't believe that the streetcar has caused a decline in her sales hasn't been to H St recently. Paying $10 for a property is one out of a million. Think of the others that used their savings to start their business.

  • Ms. Johnson

    Good business sense or opportunity? Don't confuse the two

  • Pam H “Old-Timer”

    Hernando de Soto,

    I wrote,"who are African American and Asian." Why did you omit Asian?

    FYI, because of our good business sense, we invested in H St., decades ago when others wouldn't and therefore, we not only own our businesses but also our COMMERCIAL BUILDINGS @ a rate of 30% of the businesses and commercial properties on H ST are owned by us. You tell me who is lacking savvy business sense?

  • MeOnHSt

    Wait a minute, what is all this frenzy about? Through multiple comments, unfortunately, I only see division showing its ugly form. There is no denying this corridor is being developed and with that comes a host of challenges and benefits at the end. Because of its geographic location and planned developments, everyone wants a piece of the pie. What I really did not expect is this challenging time would turn business owners against each other or bring about exclusivity. If there is any hint of exclusivity it has been the operation of the H St Shuttle, yet nobody objected to it .In fact I never benefited from the shuttle services but when asked, I spoke for the continuation of its operation because I know it is for the benefit the business community in which I belong. This should be a business community that works hand- in-hand to build a stronger sphere. This should not be a forum to divulgate personal info that has nothing to do with the issue before us.

    Let us stop the BS! How one had acquired a property for such and such consideration or the taxes they owe on their property is not the real issue. The last time I checked everyone can own and enjoy real property in the US. In fact property ownership has been promoted for a long time.

    What we are losing sight of is that the City has not done justice for ALL of its small businesses on H Street. They unfortunately have not benefited from thorough communication, basic consideration and mechanisms to transition from pre- to- post streetscape/streetcar construction. This situation has exacerbated the capitalistic nature of the market to the detriment of some small businesses that have not been able to withstand the hardship caused by the construction.

    This should have not been allowed under the watch of local councilmember Wells who should have demanded better planning and implementation, and put in place mechanisms for small businesses to navigate.
    Thank you.

  • dc_publius

    I don't agree with the whole premise of this article. There is no 'waiting game'.

    Since 2000, H Street area has _exploded_ in terms of development. Housing is plentiful and becoming expensive. Businesses are opening all the time. I'm sure we can all think of all the businesses that were not around 1/2/5 years ago.

    And prices have similarly exploded. Sadly, I think I am almost priced out of H Street at this point. 500K houses are becoming the norm, not the exception.

    If this development is not fast enough for your taste, exactly how fast do you think a neighborhood can transform? You seem to be under the illusion that Adams Morgan, then Colombia Heights, then U Street, and currently Petworth were all built overnight?

    Even the 'riverfront' area that was basically bought out by the city and razed to build everything new took about 10 years, and it has hardly 'arrived' yet... still plenty of vacancies and very few businesses.

    So... I think H St is developing just fine. It is completely unrealistic to think it should develop faster.

  • er

    pam,
    don't let the haters get you down. you called joe out for saying, that he "don’t ask for shit", and then laid out your well researched and informed argument. you convinced me. he asked for shit. he lied when he said he didn't.

    i go to his bars and loved what he's done around the city, not just h st. But calling people out for lies is what you should do! so thank you.

    i must say though, that as i read the article, i didn't think joe was criticizing all business on h. just ones that are slow to change. it was not a blanket statement.

    which business is yours?

  • er

    pam suggests that bars account for only 1% of business on h street. is this true? how many business's do exist?

  • Horace

    Lydia,

    Interesting article on the waiting game, but please consider correcting the inaccurate and misleading line that four years of "streetcar" construction has cut businesses' clientele in half. The streetcar construction is just a part of the larger Great Streets (utility overhaul, total street/sidewalk reconstruction, streetcar) project and it is not the primary cause of the disruption (see Colombia Heights, a much smaller project that caused similar disruption).

    Furthermore, as Amanda Abrams documented in her interesting 8 October, 2010 article, in at least some cases, decline in clientele also has to do with the changing demographics of the street (i.e. older patrons being replaced by younger residents with different tastes).

    Finally, I thought that the vacant property tax hike had been discontinued?

  • Karen

    As someone who has lived off of H St. for 8 1/2 years now, there is a big point missing in the explanation for what is going on in the "middle" and the whole H St. explosion. There is a master plan for the development of H St. and it is developing primarily according to plan with the Eastern end being a theater/arts region with the Atlas (a major player that was not mentioned in this and a large project that anchored the eastern H St. development) as an anchor. The Western end is to be residential and commercial, with the housing and offices being built.

    The central area is already anchored by three large properties with poor urban design, the strip mall between 8th and 10th on the southern side and the Autozone. The final is the huge, ugly H St. storage between 6th and 7th on the northern sides. These properties are there and their current design hampers the development in that area. These properties contain businesses that are currently operating and in many cases successfully. But their designs do not lend themselves to the kinds of overhaul that others large parcel redevelopments do.

    Additionally, the municipal building between 6th and 7th is slated for redevelopment that will be residential with commercial on the ground floor. That project is supposed to be moving ahead though I haven't heard much about it recently (and it is around the corner from my house). I assumed the project slowed down because of the financial market collapse.

    There are lots of offices, small business, non-retail that exist in this stretch, a lot of the businesses Pam was talking about (e.g., psychologists office, accountant, commercial printer). They are not retail offices and really didn't benefit from the H St. Connection. That said, I appreciate the new businesses, but care has to be taken in thinking about redevelopment without pushing folks out and honoring the fact they were there before it was "sexy".

  • oboe

    This article is fundamentally flawed: it begins with the story of a functioning business on H Street (a hair salon), and attempts to lump it in with the slum lords and speculators who own rotting empty shells on H Street.

    As far as the H Street Shuttle being a "hand-out", that seems incorrect to me. The shuttle program is a transit program, that provides a service to folks who want to come and spend money on H Street. You can take issue with whether the cost is worth it--and in a sense there's something of a subsidy to H Street businesses--but it's not comparable to a handout to bars, etc...

    Folks like "Pam" above could very easily have petitioned to have the shuttle service expanded to, say, 11am-3am or something like that, but it's pretty obvious that there'd be no customers on that shuttle. So the shuttle money was stimulus of existing demand, not a direct subsidy.

    Finally, I don't understand why we don't just do the obvious thing, which is to apply the punitive vacant property rate to properties that are vacant-regardless of whether they've got a "For Lease" or "For Sale" sign hanging on them. If they're vacant for more than, say, six months in a five-year period, slam them with the punitive tax rate. Let the owners figure out what the optimal lease/purchase price would be.

  • Mark M

    Where old-time businesses want city help handling development-related tax troubles, the bar owners are steering clear. “Only so many hours in the day to bitch and moan, man,” says Englert. “I don’t ask for shit.”

    Pam,

    The above two sentences are the only ones that the author attributed to Joe Englert. I interpreted his statments to mean that he is picking his battles with the D.C. Goverment and does not feel that it is worthwhile to waste his time asking for concessions in this particular case. It's likely that he knows that he can't prove that streetcar construction has directly caused him any hardship.

    As for the H Street Shuttle, it was a benefit for all businesses on H Street whether it operated during their business hours or not. The shuttle put non- neighborhood people on the neighborhood sidewalks and made these folks aware of the entire business community. In theory, these people would return in their cars (when they weren't drinking) to patronize the unique shops that they saw while they were enjoying the nightlife.

  • Lydia DePillis

    Hi everybody - Thanks for reading and commenting. There are a lot of good points being made.

    @dc_publius: You're right, H Street has grown incredibly rapidly--certainly on par with places like U Street--and it would be silly to be dissatisfied with the pace of development. I'm just pointing out that real estate speculation, which is totally rational on the part of the property owner, prevents the corridor from changing as quickly as it otherwise might.

    @Horace: You're also right, the "streetcar" construction also involves a total utility and streetscape overhaul that will also make the abutting properties much more valuable. I'm also aware that many of the shops are losing their clientele for reasons having nothing to do with pedestrian access, as Amanda pointed out in her excellent article--I just didn't want to get into it this time.

    @Karen: You're totally right, and I wish I'd had the word count to explain in the article. Places in the middle reaches of the street like the government office buildings and H Street storage are street life killers, born of an era when any development was thought to be good development. Fortunately, H Street Connection and the Autozone will be razed and rebuilt in the coming years, and I think they'll add a lot to their immediate area.

    @oboe: I explicitly differentiated between businesspeople like Ms. Nelson and the types of people who were sitting on properties without doing anything to them--but they both have the same economic motivation, which is to hang on to their buildings until the potential sale value is highest.

  • Pam – H St “Old Timer”

    Lydia,

    I'm reading this article for the second time and you wrote that in the 80's a property owner paid $10—that’s ten US dollars--for a commercial building on the H St., N.E. corridor. That's questionable and hard to believe!

  • beth

    The article could have meant $10 a square foot for 1400 square feet. I find it hard to believe that it cost $10 dollars flat out.

  • Adrian Bent-Me

    Pam, you "old-timer" you. How can a self-proclaimed old-timer of this corridor be skeptical of the price of real estate in DC in the 1980s. The only conclusion I can come up with is that you aren't really an H-Street "old-timer", just a fucking poser. You see, if you were in DC during the 80s, you would have known that this area and lots of places in NW DC (Columbia Heights, U Street, Logan Circle, hell, even the K Street NW corridor up until 14th Street) were all war-zones. No one wanted to purchase anything in most of these areas. 10 dollars is a fucking premium to have paid for anything on H Street in the 1980s. If you were a real old-timer, you would have known this...

  • Near H

    @Lydia: good points, especially the separate follow-up citing the number of registered vacant properties on H, only 5 of which are exempt.

    @Adrian Bent-Me: $10 is not crazy for H Street real estate in the '80's. Think "tax sale in a blighted neighborhood 2 blocks from crack central." Literally (do a search for Rayful Edmonds, or better yet, watch the documentary, and take note where his crew operated).

    A case in point: In 1996, H St. CDC bought nearly an entire H Street block, or 33,435 square feet of land area, for $50,000. That's about $1.50 per square foot. At the time, it had already leased the property to Pep Boys (which put an AutoZone there).

    In 2011, H St. CDC sold that lot for $3.9 million. That's a 6800% profit in 14 years, or 485% profit per year. That's the kind of return not even Madoff would promise.

    What do you suppose the 27 other non-exempt registered vacant properties on H Street are holding out for? The right tenant to build out for?

    Doubt it. They're waiting for their pay day.

  • Pingback: In Hill East, a store for every corner | DC Crank Tank

  • sam

    I take exception to the developer's quote at the end: "They’re not business people, they don’t know what’s going on."

    He's not in government. So he doesn't know what's going on.

    He doesn't give a shit about everyone's needs and how to try (keyword: TRY) to make sure that things are good in the long run along the H St Corridor. He doesn't give a shit about society. Hes just in it for himself. I can't stand it when slimy right-wing types (and that includes the Bill Clinton school of Democrat) think that the corporate way is the only way to go!

...