Housing Complex

Blight Flight

Why Douglas Development Wants to Tear Down A Building Rather Than Pay Higher Taxes

In 1875, Michael Talty—a prominent local developer—built three houses on K Street NW at 11th Street. Then, the neighborhood was as fashionable as any in Washington, and these structures were no different: Talty chose Italianate brick and Second Empire architecture, topped the corner building with a graceful cupola, and embellished the columns with acanthus leaves and sunflowers. The original occupants were an intellectual author and the U.S. commissioner of Internal Revenue.

Over the years, D.C.’s wealth moved to Dupont Circle, and Talty’s small mansions were sold as boarding houses. Mechanics and artists lived next to offices of architects and insurance agents, sitting over a beauty parlor and a grocer. Historical records taper off after the 1930s.

Today, it’s a somewhat forgotten block, too far east to be included in K Street’s famed lobby zone and not far enough east to reach the new entertainment axis of 7th Street. A more modern prominent local developer, Doug Jemal, picked up the corner building for $650,000 in 2003, and two of its neighbors a couple years later. In 2004, he bolted a steel frame to the old building to anchor advertisements that span 75 feet by 30 feet. As downtown rebounded and nearby historic properties were restored to their former glory—many of them by Jemal himself—Talty’s creations rotted behind plastic sheets advertising everything from pepperoni to iPads.

Now, Jemal wants to raze the two corner buildings entirely. If city agrees, he’ll get to, and the last remnant of Washington’s 19th-century Park Avenue will be lost. How did we get here?

The answer involves a combination of city policies, generally beneficial on their own, that didn’t work out when combined.

* * *

Douglas Development has a particular method. Jemal, a New Yorker by birth, moved to Washington and started investing in the 1980s, buying old buildings, fixing them up, and leasing them out. Since then, he’s accumulated 180 properties between Annapolis and Northern Virginia. He counts the Sixth & I Historic Synagogue and the Avalon Theatre among his triumphs. But many less august properties sit, and Douglas Development has gotten millions behind on taxes, then paid them at the last minute. The firm just waits—for the right tenant, or the right deal—to start redeveloping.

But while many of Jemal’s boarded-up buildings started coming back to life as capital markets unfroze, those at 11th and K Street stayed dormant. They didn’t fall within a historic district, so weren’t protected by regulations that apply to historic properties. Meanwhile, Jemal was both borrowing against the corner building and collecting revenue from the advertising wrap—one of the 32 coveted “special signs” allowed in the District (seven of which are pegged to Jemal’s properties).

Last month, I looked up the properties, wondering how they could possibly have sat vacant for so long as the rest of the area sprouted glassy office buildings. I learned that Jemal was paying only the standard commercial tax rate of 1.85 percent for two of them. Certainly, I thought, he should at least be paying the city’s 5 percent tax on vacant properties, if not the 10 percent levied on those designated as “blighted.”

As it turned out, the Department of Consumer and Regulatory Affairs had overlooked the fact that the buildings were on separate lots (and Jemal’s people hadn’t volunteered that information). After realizing their mistake, the agency quickly tagged the corner as blighted for the next tax cycle. Instead of paying $46,000 in taxes next year, Douglas Development would have to pay about $249,000.

A month went by, with no word from Douglas. Then, on April 26, Jemal made his move: Instead of paying the blight tax, or repairing the buildings, he asked the city for permission to raze the two corner buildings entirely. If the request is granted, that higher tax bill will never come.

That’s not just up to DCRA. In 2008, the D.C. Preservation League filed a landmark nomination for most of the block, arguing that its architecture was an important reminder of the area’s past. The Historic Preservation Review Board will have to rule on it before the raze permits are approved.

The problem is, by now, the buildings may have deteriorated beyond repair. Douglas’ vice president for construction told the Historic Preservation Office this week that while he hadn’t been inside since the company bought the buildings, they could be in bad enough shape that nothing could save them (an assessment is needed to figure it out for sure).

So why didn’t the city step in earlier by acting on the landmark nominations? Jemal hasn’t done much to maintain the buildings; they could have been in better shape four years ago. But the Historic Preservation Office generally only acts on landmark nominations when the building’s in imminent danger.

“It wasn’t a conscious decision not to hear them. We sort of schedule them when the time is ripe,” says Steve Callcott, one of the agency’s staff reviewers. In retrospect, he adds, “probably the time was ripe.”

As for the owner: Doug’s son Norman Jemal is tremendously proud of the buildings they’ve restored all around downtown, but seems to see historic merit as subjective when it comes to 11th and K. “You could probably ask ten people and get ten different answers,” he says, when I ask whether the buildings are worth preserving. “Beauty is in the eyes of the beholder. While some things may be beautiful, they may not be practical.”

Overall, the District’s blight tax is working. Since Ward 4 Councilmember Muriel Bowser pushed for the higher bracket in 2010—after years in which the taxes for vacant properties changed with every D.C. Council session—DCRA’s vacant building unit has tagged hundreds of eyesores, many of which have at least been repaired enough that they no longer shelter rats and drug dens. There’s nothing like the prospect of a hefty tax to get people moving: Douglas started developing a property at 14th Street and Pennsylvania Avenue SE after an old KFC there got hit with the higher bill in the second half of 2011. (Norman Jemal says plans were in the works long before.) Some 2,257 properties were identified as vacant or blighted last year, and 1,217 of them became occupied. Some have been razed to avoid the tax, which doesn’t apply to vacant lots, but none are as historic as Jemal’s.

Ultimately, that means D.C. doesn’t collect much in taxes from properties designated as blighted. Reuben Pemberton, head of the vacant property unit, figures the Office of Tax and Revenue will recover less than 5 percent of the blight taxes his inspectors booked last year. But that’s not the point of the policy, he says. In fact, his office will often forgive the tax as soon as an owner shows concrete signs of returning the property to productive use.

It’s too bad Pemberton hadn’t gotten to the stately mansions on K Street a couple years ago, so the system could work before they crumbled beyond repair. It’s also too bad Jemal chose to hide them behind a billboard, rather than maintaining them at a level that would allow for restoration—a blight on his record, not just a corner of downtown.

Photo by Darrow Montgomery

Got a real-estate tip? Send suggestions to ldepillis@washingtoncitypaper.com. Or call (202) 650-6928.

Comments

  1. #1

    Lydia-
    A lot of people who know thier way around DC Government have asked about those buildings for years. IMO, there must be more to this story.

  2. #2

    FYI — Streets of Washington had a nice post on this property a few days ago: http://www.streetsofwashington.com/2012/05/last-of-k-streets-mansions-is.html

  3. #3

    Nice reporting, and from what I could tell, no sarcasm! Hopefully this and the streets of washington article will stir the preservationist blood of the OHP to save this vestige of our history, and for what it's worth, they ought to save it as an ensenble, becasue the tower element would look out of place with out it.

  4. #4

    Great reporting, and great job getting DCRA's gears turning to tax it at the proper rate. While we can all agree that leaving the buildings to rot as billboard supports makes no sense, I am just baffled at the uncritical pro-preservation, anti-development stance your article takes. It's not at all clear to me why it makes sense to restore/preserve these buildings from a smart growth standpoint. That lot is prime commercial real estate, and could support another big, productive "glass box" housing hundreds of super transit-accessible jobs like my office across the street at 1101 K, jobs which otherwise end up in Arlington, Fairfax, or MoCo.

    Those of us lucky enough to have jobs in the transit- and bike-accessible urban core (I'll count you too, Lydia, up in Adams Morgan) shouldn't be so cavalier about blocking that opportunity for hundreds of other would-be workers. Just last week my sister told me she got an internship in DC this summer, and I was thrilled that she'd get to spend a summer working in this wonderful city. Then she said she was placed in her architecture firm's Tyson's Corner office. That's one more would-be DC resident forced to drive all over on the suburbs' clotted roadways, because DC can't get its head out of its a** and just let the developers build more office space where everyone wants it and it's transit-accessible: downtown.

  5. #5

    @Jeff

    Destroying such an elegant row of buildings in the name of "smart growth" is misguided. Smart growth is about more than transit and bicycle accessibility, it is about place-making.

    Glass office buildings may offer space for office workers in the District, but they do nothing to create a sense of place, that is, something indelible and unique that makes a city feel distinct from other places. It's expressive and characterful buildings such as these that induce them to live in the city. Sure, people live in Crystal City because it's a functional and transit accessible choice, but is anyone there excited or proud to call it home?

    This part of the city sorely needs buildings like these, and there are ways to redevelop the site that incorporate them into the urban collage. We do not need to sacrifice them for the sake of a "productive" glass box and a half-baked urban design theory.

  6. #6

    hey Jeff. Have you ever considered that your little sisters firm might have a Tysons office for other reasons? Maybe its more accessible for their VA employees and for their clients? maybe they dont' want to pay DC rent prices? the DC Gov is an easy scapegoat but i don't think they're the main reason your little sister has to work in Tysons.
    Maybe your sister is just plain ugly and they don't want their high end clients to see her lurching around the DC office.

  7. #7

    oops. didnt mean to direct that at Jeff. it was meant for Lampredotto.

  8. #8

    this is why the DC Preservation Society's continued use of Jemal buildings (the Wonderbread factory last year and the bank near Gallery Place this year) is such a pathetic joke. Yes, Jemal fixes up some places nicely, sometimes. But he lets many places rot, and treats taxes like they're optional until the buildings are about to be seized.

  9. #9

    @Harold

    Super-classy!

  10. #10

    sb -- DCPL is stuck. Most of their major donations come from developers. So they get boxed in. And Jemal does save buildings. Even if it can take years (decades) for the buildings to get rehabilitated and used. But he is still problematic.

  11. #11

    It would be great if it could be saved. The LAST thing K Street needs is another glass box. That building is the last remnant of an important part of DC's history.

  12. #12

    Douglas Development owns many historic buildings here in downtown Richmond. It is the same story - he picked them up around 10 years ago, and has let them sit empty. He bandied about the idea of a 7th St (DC) -like revitalization, bringing chains downtown...but he did nothing. He is a major barrier to improving the Broad Street corridor. The economy is no longer an excuse - over the past 2 years we've seen 500 apartments and condos built downtown, with 500 more coming, and demand to match.

  13. #13

    @Lampredetto-- That's a fair argument. I agree that beautiful historic buildings have value, which should be factored into these kinds of decisions. The comparison to Crystal City is a really good point, and I agree I would never want to remake DC completely in that image. I hadn't considered the possibilities of redeveloping these buildings in a both historically-accurate and more economically feasible way, partially because I haven't seen anyone (including this blog) detail such ideas, but that is an intriguing third way, maybe like the AdMo hotel.

    Given the simple choice between restoring it in its current facade/footprint, vs. permitting its owner to replace it with a 10/12-story office building, I still think the benefits of bringing more jobs to DC outweigh the historic/aesthetic benefits of restoring that one building. This is partially because I think DC as a whole is poorly zoned, restricting most possible office locations to the extremely small central business district; I'd prefer to permit more mixed-use building throughout the city and then might have a different opinion on this building. But given how very little land (with a very low ceiling imposed relative to almost every other mid-sized or bigger city in the US) this city has to build offices on, I stand by my belief that we should let developers max out that space in most instances. But I really appreciate that you acknowledge preservation comes with some costs, and that you explain why you think the benefits outweigh the costs in the case. It made me reflect that I had not given a similarly fair argument in my earlier post.

  14. #14

    @Harold-- I'm gonna have to agree with Lampredetto. Super classy on the insult. As for your other arguments: the overly high rent in DC is exactly my point. I'm sure that's a big part of why they have more office space in Tyson's. Rent in DC is high because demand is high but also because (in part) supply here is so constrained--by zoning, by permitting, by the many veto points and long approval processes that can strangle a good project in its cradle. Are there other reasons this particular firm (or any other one) might have a Tyson's office? Sure. People consider lots of things in office locations, but rent is a big one, so if office rent in DC was not so much higher than VA rent, I bet they'd put a few more employees in DC.

  15. #15

    Hope they dont' take the same approach with one of their other long-neglected properties - the Wonderbread factory, in Shaw. While the rest of Shaw has blossomed (O St. Mkt, Progression Place, Howard Theater, restaurants, condos), the Jemals have continued to neglect the Wonderbread factory, content to have it be a neighborhood blight, infested with rats and a hangout for vagrants.

  16. #16

    @Jeff

    I get your point about the lack of remaining developable land in the CBD. And you have to balance preservation with the demands of progress. But there are better ways of creating space than simply destroying salvageable remnants of an era that, at least for this part of town, has nearly vanished. You should look at the building at 7th and E NW, a great primer on how to integrate 19th century buildings into a new edifice.

  17. #17

    @ richard layman: I think DCPL can figure out a model that avoids taking handouts from people/companies who actively work against their ideals. If they can't, it's a pretty big problem.

    And while Jemal might eventually rehab some buildings, letting them get so bad that there's nothing left to rehab or the building becomes dangerous, is not acceptable in my book. You and I might have different definitions of "save."

  18. #18

    @ Lampredotto and Jeff.
    I was just kidding around.

  19. #19

    Lydia - So happy you printed this! I do hope that keeping this story in the news will bring support to the landmark app.

  20. #20

    So do I, Kim.

  21. #21

    The city is also to blame for the loss of 2228 Martin Luther King, Jr. Avenue SE in Anacostia. In this case, the city owns and neglects the property. One can point to public and private sector demolition by neglect but the solution always comes down to dollars. The land these buildings occupy is perceived to be better suited to other uses and no one is stepping up to restore what's there becasue it doesn't meet their cost-benefit model.

  22. #22

    Take it from me developers are in business to make money -ROI nothing more they could care less about historic preservation . Douglas Development will demo the structure and use every bit of space to maximize profit. The DC Gov will let him do it because they want tax dollars.

  23. #23

    This property has been reported numerous times since at least 2007. Previous "inspectors" and Councilman Jack Evans are probably in Jemal's pocket.

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