A Crash Course in Dealmaking
Wednesday, June 1, 2005
The competing developers stepped over condoms and other trash in the stairwells to make their pitch to tenant association President Thaia Grace and her neighbors at 1020 Monroe St. NW.
The 22-unit apartment building, within walking distance of two Metro stations, had a tentative offer on it for $1 million -- proof that Washington's almost insatiable demand for luxury condos and rentals had reached the eastern edge of Columbia Heights, where barren lots, graffiti and crumbling sidewalks had been the norm.
Under D.C. law, tenants have the right to match any offer on their building or, as is most often the case, assign it to a developer for a price. When the market turned its forces on their building early last year, the teachers, college students and day laborers at 1020 Monroe were thrust into the role of neophyte dealmakers.
Their task? To hold their own in a hyper-competitive market that tempts them with quick cash and puts them in the same room with real estate professionals eager to seal the next deal.
At 1020 Monroe, tenants were offered new windows and doors by one suitor and steep discounts to own their overhauled apartments by another. All dangled thousands in cash to renters who would pack their things and leave.
"It all sounded good," said Audrey Roberts, 29, who weighed the offers while juggling graduate studies and two small children. Even after choosing a developer, she and other tenants later would question whether they made the right choice. "It was confusing because it was something most of us had never done."
A cottage industry of lawyers and pro-bono advocates has formed to help tenants. Even so, advocates for the poor said renters who have little education often end up with nothing or are intimidated into accepting small sums that are depleted quickly by higher rents elsewhere.
Many who write the checks aren't happy, either. Owners of multiple apartment buildings, in particular, are complaining that a law intended to protect affordable housing has been hijacked by tenants who stall legitimate sales. Because the agreements are private, they fall outside the purview of city regulators that monitor rental housing.
"By the time we know anything, the land owner has made the tenants an offer they can't refuse," said James Aldridge, an administrator at the D.C. Department of Consumer and Regulatory Affairs. "It's becoming so sophisticated that tenants associations will approach the owner to get the best deal they can."
The Lure of Cash
As soon as the D.C. law governing apartment sales and conversions was instituted in 1980, renters began trading those rights for cash and other incentives, a practice that continues today but is largely unnoticed by those not directly affected. Recently, the trade in these government-granted rights has drawn attention from city officials and residents who contend that the rush for quick cash is making it more difficult for low wage-earners to remain in the city .
Demand for units in the price range of people working at or near minimum wage outstrips availability by 2 to 1, even though about 20,000 units of affordable housing have been built or preserved since 1999, said Milton J. Bailey, executive director of the D.C. Housing Finance Agency. The steep cost of land makes preservation difficult, he said.
Almost everyone agrees that the competition to win over tenant associations with offers of cash -- an enticing lure for those living month to month -- doesn't help.