Housing Complex

Monument Rolls Dice on Logan Circle Redevelopment

Would you cash out for seven times what you paid? What would you do if you were offered $800,000 for a condo you bought ten years ago for $120,000 in one of the city's hottest neighborhoods?

That's the choice facing 54 homeowners and their families in Logan Circle in the next few weeks, as big-time developer Monument Realty makes a bid for four separate parcels that operate as part of the same condominium association.

You probably know the properties: The plain brick townhouses between Riggs and S Street on 14th Street and clustered around 11th and N Street that don't quite fit with the large apartment buildings and historic facades around them. The city built them in the 1970s as rental housing, and finally made them available for tenants to purchase in 1998, selling the three and four-bedroom units with backyards and parking spaces for between $100,000 and $150,000. Now 54 privately owned homes, the pieces were consolidated into the Frontiers East and West Condominium Associations, and now help give the neighborhood a modicum of income diversity.

They also, however, represent some of the biggest chunks of re-developable land in the downtown residential core. And now, two developers are vying to buy them all at once, rezone for higher density, and build as much as they can.

Last night, Monument presented its offer to residents. It's a bit complicated. I'll try to fit it in a nutshell.

If the 14th Street parcel ("Frontiers West") were successfully rezoned to allow four stories, owners would get $810,250 for their units, which is 175 percent of the current assessed value. The price offered for the units on the other three parcels on and around 11th Street ("Frontiers East") would depend on the additional density Monument was able to achieve, putting the payout at between $681,000 and $794,500. The developer would even pay residents $115,000 just for agreeing to sell if the zoning change were allowed, even it weren't and the sale never went through. If the residents want to stay in the neighborhood, Monument said it could make units available in the new buildings for them.

Sweet deal, right? Here's the catch: According to how the condo associations were set up, 80 percent of all 54 homeowners would have to vote to dissolve the "master" condo association. And then, each of the two separate condo associations would have to vote unanimously to dissolve themselves. So one homeowner in each of the associations could throw the whole opportunity off for everybody. For its part, Monument could end up getting both, either, or none of the parcels to redevelop. Buying the whole thing would cost around $40 million, but hundreds of new units—either sold or rented at market rate—would pay that off in a hurry.

Even though it might be in their economic self-interest to take the money and run, judging from last night's meeting at the Washington Plaza Hotel, at least a few people seemed too emotionally attached to their homes to leave. Others seemed willing to listen—and hold out for a better price.

"We're living on a gold mine!" one resident protested.

"You can live on the gold mine for the rest of your life!" said Monument's Josh Olsen, whose patience started to erode after several minutes of audience chaos. "You're not going to get gold out of the gold mine unless you sell!"

The residents were asked to fill out surveys indicating their interest in the offer, and Olsen said he wouldn't pursue the project unless a majority came back positive. It's an interesting case: Because of how their associations are set up, each person has the power to singlehandedly forestall a big lurch forward for gentrification. From an urbanist standpoint, that means a few acres of prime land stay underused. On the other hand, it's difficult to get excited about replacing 54 mostly low-to-moderate-income households of color with yuppies who can afford pricey condos.

Either way, Monument's suits—and the other nameless bidder waiting in the wings—have a real job on their hands.

  • Hillman

    Simply no way this goes forward. If each homeowner has veto power then it'll quickly devolve into a push for more money.

  • Eli

    Couldn't the homeowners just vote to change the rules? Otherwise, I agree with Hillman...there will always be a holdout (see the oft-cited story of the guy at 4th and Mass).

  • Will

    "it's difficult to get excited about replacing 54 mostly low-to-moderate-income households of color with yuppies who can afford pricey condos"

    Why can't we get excited about these households of color making a killing on a real estate deal? Great for them if it works out, Monument is offering a more than fair deal for the owners.

  • Anon

    It's very easy to get excited about it. And I think Eli is on the right path...also, it's likely this meeting was at the Washington Plaza on Thomas Circle-- not in Foggy Bottom, right?

  • Lydia DePillis

    @Anon - Yes, thankyou, fixed!

    @Will - True, there's nothing wrong with people cashing out if they want, and obviously I'd love to see that space used more efficiently, the street livened up, etc. But there's something to be said for class and race diversity in a neighborhood. So that's what takes the edge off my enthusiasm.

  • RT

    Lydia, you've become the most powerful voice in CRE news. Your stories are fresh and filled with the "little details" that keep journalism relevant. Kudos!

    As for the story itself, they won't sell. People aren't rationale beings. There are emotions and sentiments involved. This is true anywhere, not just affordable coops. I'm sure you'd have the same issues in an upscale suburban neighborhood.

  • Bob

    @Lydia

    If Monument is really making units available to the owners, why would the race and class diversity change at all? If anything this just presents the opportunity to have greater race and class diversity in the neighborhood while removing one of the biggest eye sores of 14th Street.

  • Eli

    Plus, there are plenty of (very nice) places in the neighborhood for less than $800k...

  • vahoya

    One item to note is that any new development will be subject to the District's inclusionary zoning laws. If they get a substantial boost in density, the redeveloped buildings might actually include more affordable housing units than are currently on the site. They won't be townhouses that can fit a large family, but they'll be affordable all the same.

  • http://www.flickr.com/photos/mr_t_in_dc/ Mr T in DC

    Also, just from the standpoint of aesthetics, these are bleak, unattractive examples of bad 1970s architecture. Just about anything that replaces them would surely be more inviting and attractive.

  • Devoe

    Another thing to note is that at least the R St. condos have enormous surface parking lots which has struck me as ridiculous every time I've walked past it for the past 15 years.

    But while we're talking about ugly developments in prime locations that don't fit the neighborhood and have enormous out-dated surface parking lots (I'm pretty sure that's what we're talking about), what about the developments in Mt. Vernon/Shaw/Truxton - specifically on 5th between N and 0 streets and up at 3d and R just south of FL?

    To answer my own question, it'll probably be another 20 years before these people are sitting on a gold mine.

  • meanteeth

    @vahoya-- as implemented currently, MIZ hasn't worked out like that. It would be great if it did, but it also isn't designed to supplement the stock of existing affordability.

  • Stefano

    Given that the Frontiers residents can sell on the open market, the gentrification of the Frontiers will happen over time anyway.

    In that scenario, new residents would, doubtless, do renovations which might modestly ameliorate the ugliness of the development. But the larger picture of aesthetic blight, underutilized land, and loss of diversity/affordability wouldn't change, and the selling residents would get a less than the $800,000 Monument is dangling. Seems like a lose-lose scenario.

    In comparison, a larger redevelopment (not necessarily the whole thing, I would think that the first 100' back from 14th Street would make be a very decent redevelopment site) would almost certainly result in a denser, mixed-use development, more architecturally appealing (it couldn hardly be worse, honestly), a percentage of longterm affordable housing (thanks to Inclusionary Zoning), and higher payoff for those current residents willing to sell. Seems like a win-win. I hope that greed and racial politics don't kill it, the way they killed the Sorsum Corda redevelopment scheme.

  • Samwise

    If it is more than those units are worth on the open market, they should take the money and run.

  • Danmac

    I wish these lucky people well . I just wonder if Monument has the kind of finance available to purchase those properties raze them , go through all the hoops of permitting etc and build new aren't there other vacant lands in NOMA or Mt Vernon Square especially since Donohue says they can't develop the 5th & I NW property as planned. It would seem that if they have that kind of money available they could buy the adjoining properties on 5th St and move ahead with the original plan. No?

  • Ace in DC

    Why not just buy them one at a time, then rent them out as you go? Some people will jump on the 800k right now, some won't. It's just a waiting game. No way, everyone would sell. Not a chance.

  • Tres

    @Ace

    I think the reason you wouldn't do that is each sale increases the risk of a single holdout ruining the operation. If you sink 35 million into buying individual homes, the last dozen holdouts are going to want more than $800k -- because they're more attached but also because they realize how bad the developer's position is if they don't sell. Meanwhile, that 30 mill sunk playing the waiting game for years could be spent developing another project with willing sellers today.

  • Unlikely

    Some of the properties have been fully renovated on the inside and selling for 800K is actually not a great deal. Some of the units, in fact, have sold just in the last few years for quite a bit. It is completely inaccurate to think that all of the current owners paid the 1998 price and would be making the profit indicated.

    Also, knowing the properties and many of these homeowners personally, I do not see this development having any chance of going through.

  • Begla

    LOL @ "underused" like this is Manifest Destiny and God wants the land to go to whomever won't let it lay fallow.

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