A D.C. Superior Court judge has ordered Western Development Corp. to pay delinquent rent that could total more than $900,000 for its offices at Washington Harbour, the distinctive complex on the Georgetown waterfront that a Western partnership developed and once owned.
Two successive owners of the office complex -- a subsidiary of CSX Corp. and a group led by Washington real estate investor Conrad Cafritz -- had alleged that Western failed to pay more than $900,000 of rent from September 1988 to May 1989.
The judge's ruling is another ironic chapter in an unusual real estate saga.
Western developed Washington Harbour in the mid-1980s in partnership with a subsidiary of CSX, the Richmond-based railroad, and located its headquarters there. In March 1988, amid squabbles over the project's management, CSX replaced Western as manager of the property.
Nine months later, in December 1988, CSX orchestrated the sale of the real estate to a group of Japanese investors led by Cafritz, a longtime business rival of Western Chairman Herbert S. Miller.
The CSX subsidiary and the Cafritz partnership later sued Western, charging that the development firm stopped paying its full rent after CSX took over management of Washington Harbour.
The trial is still in progress, but Judge Rufus King III resolved the largest issue in dispute last month by ordering Western to pay the back rent. The court has not yet declared the exact amount due. CSX and Cafritz said in court filings that it was more than $900,000.
Western, best known for its development of Potomac Mills and other discount shopping malls, countered with arguments that Washington Harbour was not managed in a "first class" manner. The development firm cited "a horrendous sewage backup," frequent false fire alarms and inadequate security at the building. Western also said it was owed $190,000 for office construction finishes under its 15-year lease.
Western leases more than 50,000 square feet at Washington Harbour at an annual rent of nearly $1.5 million.
Most of the back rent would go to the Cafritz group. Cafritz's purchase of Washington Harbour was seen at the time as one-upmanship in Cafritz's simmering competition with Western's Miller. Cafritz's need for the cash is acute. He has been asking his lenders to restructure hundreds of millions of dollars of delinquent loans in a bid to avoid personal bankruptcy. In May, he relinquished almost his entire interest in Washington Harbour to his Japanese partners as he scrambled to raise cash.
Western has been showing milder signs of strain lately. A company spokeswoman said the number of employees at Western headquarters has declined from about 200 to 160 this year. Western is also seeking to move from the building it developed to less expensive offices next year, company spokeswoman Patience O'Connor said.