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D.C. Overstating Payoff From School Closings, Specialists Say

A proposal to close 16 D.C. public schools has become an emotional issue for parents and students, but it also is a matter of dollars and cents -- and a lot of those numbers don't add up.

A key part of the plan is to sell or lease the shuttered buildings to help pay to fix other schools. But the school system's emergency board of trustees has made highly optimistic assumptions about how much money the buildings would bring, according to a wide range of real estate specialists, community activists and others familiar with the schools.

It is still unknown which of the buildings will close, but the board estimates the value of all 16 schools at $42 million, based on an analysis performed free by the real estate firm Smithy Braedon/Oncor. A school-by-school review shows that complicating factors -- market conditions, zoning, historic status and environmental concerns -- decrease that estimate. The buildings may be worth half of the estimate or less.

For example, the trustees are counting on Stevens Elementary School, at 1050 21st St. NW, to bring in more than $21 million, but that estimate is not supported by market prices for commercial land in that area. The poor condition and locations of most of the rest of the properties raise questions about whether they can bring in any cash at all.

All have lacked regular maintenance. They also present environmental problems because of asbestos and other contaminants, all of which increase the cost of demolition or renovation. In many cases, the board values the sites as potential offices, although they are zoned for residential use. Changing zoning can be a long and expensive process.

No value was assigned to nine properties because there is no identifiable market for them. Still, the trustees put a total value of $7 million to $9 million on them. (Two of the nine will be kept and renovated; one, which counts among the 16 on the potential closings list, would be razed and rebuilt.)

"I think they're going to be difficult properties to move," the Rev. Jim Dickerson, founder of Manna Inc., a D.C. nonprofit housing developer, said of the 16 schools. "Some of them are going to have to be almost given away to have them redeveloped, because the costs are prohibitive."

But Suzanne Conrad, a board of trustees staff member who is coordinating the real estate program, defended the value estimates.

"I think those numbers are not unreasonable at all," she said. "I think there are a lot of people who think none of the properties will sell. I think the problem in the past was it was so difficult [procedurally] to sell them. . . . I think there is a market out there."

On the commercial side, the office market is perking up, and some new construction is underway. But there is little office demand in the residential neighborhoods where most schools are. Even in commercial neighborhoods, land prices are 35 to 50 percent below their 1980s peak.

On the residential side, there is little incentive to build housing in most parts of the District because of the city's declining population. Nonprofit developers are building for low- to moderate-income residents, and they work by keeping costs to a minimum.

Converting school buildings requires creativity, said Pamela Jones, executive director of the nonprofit New Columbia Community Land Trust, but it is important for neighborhoods' health. "When you shut them down, if you don't do something with them, you almost immediately create big blight," she said.

At the old Buchanan School on Capitol Hill, which closed in 1992, the nonprofit Holy Comforter-St. Cyprian Community Action Group has proposed a community learning center that would include a church school, mentoring programs, a senior citizens' center and a gym.

The group estimates that renovating the building, which has been damaged by flooding, would cost $8 million, and it has offered to raise the money to pay for the renovation -- but only if the city donates the building.

Besides closing schools, the trustees have undertaken to get rid of dozens of schools that have already closed.

Conrad said she has received inquiries, including several from private schools, about some of those buildings. Proposals for dealing with them give an idea of the challenges involved in reclaiming an old school.

David E. Kaplan, president of Strategic Realty Advisers Inc., said that before the trustees took over, Rock Creek International School approached the city about renting two vacant Georgetown schools. "We essentially had no response," he said, adding that Rock Creek is still interested in them or in Hearst Elementary School in Cleveland Park, which is on the latest list.

Kaplan said his client would pay about $5,000 a month on a 10-year lease to rent a building but also would want a rent credit "to mitigate part of the cost for renovation."

That cost could be substantial. According to the trustees, fully renovating Hearst would cost $1.6 million, not counting fixing environmental problems.

Here is a closer look at some of the 16 properties:

Stevens: The board estimates that it can get $21.43 million for the site -- or $100 per square foot of any building that could be developed. That is consistent with prices for downtown land during the 1980s real estate boom. But by last year, a site on the 1600 block of I Street NW sold for less than half that rate, according to industry sources. A lot at 20th and K streets NW is priced at $65 per developable foot.

Conrad said she could not cite comparable sales figures supporting the $100 estimate, but she said the improving market for office space should boost prices by the time a sale moves forward. In addition, she said, Stevens was appraised in 1993 at $17 million.

Other factors could reduce the price. The building, constructed in 1868, is a D.C. historic landmark, which could make it difficult to demolish. In addition, as part of the sale, the board plans to require a developer to build a new public school for 250 children within the project.

That requirement reduces what a developer would be willing to pay, both because there is space that can't be used for offices and because the developer would have to spend about $3.6 million to build the school. Even if the site is worth $65 per developable foot, a bid would likely be closer to $8 million after subtracting those costs.

Peabody: The board estimates that it would get $4.375 million, or $143 per square foot, for Peabody, a landmark building that faces Stanton Square on Capitol Hill.

That price appears to be in range with the few other recent office sales in the neighborhood, where some historic town houses have been converted to offices. For example, in 1995, a brownstone on Stanton Square sold for $147 per square foot. Another one sold that year for $188 per square foot. In both cases, the buildings were in good shape. Peabody isn't -- the board of trustees estimates repairs at $2 million, plus environmental costs.

It is unclear from property records whether Peabody is zoned commercial. The neighborhood is a mix of offices and residences.

A developer said converting Peabody into housing would make more sense than commercial development because of the slow office market nearby and the building's historic status.

A few other 19th-century schools across the city have been successfully converted to high-priced condominiums, including the former Carbery School on Capitol Hill, where units sell for about $200,000. Peabody's Capitol Hill location could be attractive. Those conversions are too expensive to target moderate-income buyers, several developers said.

Developer T. Conrad Monts, who has a contract to redevelop the John A. Wilson Building, the District's old city hall, has his offices in one of the historic buildings near Peabody. He said he would consider bidding on Peabody but said he needs to know more before venturing a price.

Hearst: The property is near Sidwell Friends School, which could make it attractive as expansion space. Other private schools, including Rock Creek International, have expressed an interest.

Hearst might be most valuable, however, if it is knocked down. It sits on 3.7 acres of land in one of the city's most expensive neighborhoods, one where little vacant land is available for development. The land is zoned for single-family detached homes on 5,000-square-foot lots -- which could be as many as 31 lots.

Several people said any developer who tried to build that many homes on the land would face fierce community pressure and be forced at the least to build fewer homes.

Real estate agent Peter Clute said land accounts for about 25 percent of final home costs, and he estimated that new homes in that neighborhood likely would sell for $500,000. That works out to a price of about $2.5 million for the land, minus the cost of demolishing the old school building, versus the board's $1.89 million estimate.

Some Hearst parents have raised a complicating issue, saying it's not clear whether the District or the federal government holds title to the land. Conrad said that's not a major concern. "Once a school is set for closing, if there's a title issue, the [D.C. financial] control board will address those," she said.

Lewis: The school sits on the edge of the Howard University campus. Although the trustees' briefing book says the most profitable use for the property is as an office building, it is zoned for apartments.

A Howard University spokesman said the school wasn't aware that Lewis was for sale and would consult the community before considering a purchase.

Evans, Harrison, Keene, Patterson, Petworth: The board's briefing book lists the most profitable use for those schools as offices, but all five are zoned residential and are in residential neighborhoods. All require expensive repairs, aside from environmental costs. If a developer wants to build housing on any of the sites, it likely would be cheaper to demolish the buildings than preserve them.

The neighborhood around Harrison has languished since the 1968 riots, but some development has begun since the U Street Metro station opened. In 1995, the city agreed to sell a nearby 1.3-acre site -- almost twice the size of Harrison -- for $650,000 to a developer who plans to build condominiums and stores. Critics said that price was too low for a site assessed at $6.6 million.

The sale hasn't closed yet because the developer is still working to get financing, according to a city spokeswoman. The city also is negotiating to sell another nearby site.

D.C. SCHOOLS BEING CONSIDERED FOR CLOSING

SCHOOL AND ADDRESS

VALUE*

REPAIR COSTS*

Blow Pierce Elementary, 725 19th St. NE

no market price

$3.4 million

Evans Junior High, 5600 East Capitol St. SE

$720,000

$4.5 million

Harrison Elementary, 13th and V streets NW

$750,000

$3.4 million

Hearst Elementary, Tilden and 37th streets NW

$1.89 million

$1.6 million

Lewis Elementary, 300 Bryant St. NW

$1.35 million

$4 million

Keene Elementary, Riggs Road and Fort Totten Drive NE

$1.05 million

$2.8 million

McGogney Elementary, 3400 Wheeler Rd. SE

no market price

$3.8 million

McKinley Senior High, Second and T streets NE

no market price

$8 million

Nalle Elementary, 50th and C streets NE

no market price

$3.8 million

Patterson Elementary, South Capitol and Elmira streets SW

$750,000

$4 million

Peabody Elementary, Fifth and C streets NE

$4.37 million

$2 million

Petworth Elementary, Eighth and Shepherd streets NW

$900,000

$5.3 million

Richardson Elementary, 53rd and Blaine streets NE

no market price

$3.5 million

Stevens Elementary, 1050 21st St. NW

$21.4 million

$2 million

Woodridge Elementary, Carlton and Central avenues NE

no market price

$3 million

Kelly Miller Junior High, at 49th and Brooks streets NE, may be razed and replaced.

*Estimates

SOURCE: D.C. SCHOOLS EMERGENCY BOARD OF TRUSTEES