Code Violations Plague Owner

"NWJ has shown their hands for years: profits over people," said Bryan Weaver, chairman of the advisory neighborhood commission that is helping the tenants on Ontario Road. "The best way to rid people from a building is to create a climate where they feel unsafe and unwelcome, and eventually they'll just leave."

Records show that in 2004, Kretschman and NWJ President Nickolas Jekogian III, under a series of limited liability companies, advertised the sale of four of its seven properties for roughly $12 million -- $4 million more than the company had paid for those buildings. In an interview this week, Kretschman said the company was not "buying and then flipping" buildings but adjusting its holdings by selling smaller properties.

Tenants in three of the buildings sued, saying the company's efforts to sell had violated their rights under District law, which also gives tenants the chance to buy their buildings before they are sold to outside bidders. One of the properties was the Mount Pleasant complex that burned, known as the Deauville, at 3145 Mount Pleasant St. NW.

In 2004, tenants discovered that NWJ was in negotiations to sell the building to another company for $6.5 million, about $2 million more than the purchase price. Tenants said they weren't offered the opportunity to buy it first and reached an agreement with NWJ in late 2004 to try to purchase the building. Tenants teamed up with a nonprofit developer and made a $326,000 down payment.

Over time, the building racked up thousands of code violations, including holes in ceilings, loose doors, broken cabinets, rotting floors and windows, and defective electrical outlets, records show. Officials with the city's Department of Consumer and Regulatory Affairs said the agency had spent $60,000 to help make repairs.

Kretschman said that NWJ had substantially renovated the entire building, installing a new elevator, a new roof and an updated fire alarm system, and that tenants were using the violation process for leverage.

In June 2005, tenants asked NWJ for more time to pull city funding together to buy the building. NWJ refused. Tenants asked for their deposit back. Again, NWJ refused, saying that tenants had not acted in good faith to buy the building and that the company had lost $400,000 in rental income over the eight-month negotiation period.

Tenants again filed suit, leading to a draft settlement dated last month. Under the agreement, NWJ would hire a neutral reviewer to inspect the building, return most of the deposit money, make repairs to unrenovated units and pay for the temporary relocation of tenants while the work was being done. NWJ also would reduce rents and make a one-time cash payment of roughly $230,000 to the tenants association.

"Both sides were fully committed to the deal," said tenants' attorney Richard Lucas, a partner at Arnold & Porter, which was handling the case pro bono.

Kretschman agreed that the settlement made sense. "We're not looking to make enemies out of tenants," he said.

Then came the fire in mid-March, the first five-alarm blaze in the city in 29 years, leaving 200 people homeless. The cause of the blaze has not been determined. Late last week, NWJ and the tenants reached a partial settlement; the company agreed to return to tenants $256,000 from the building deposit, keeping $70,000. But tenants might never get the chance to reap the benefits from the rest of the settlement, local leaders say, because NWJ estimates it will take 18 months or longer to restore the four-story building. The city has pledged to help speed up the rehabilitation. Kretschman said he did not know what the company would do with the building.

"It was a human tragedy," he said. "When I woke up that morning, I felt terrible for the tenants, and we all did here."