A small group of tenants at Washington's McLean Gardens apartment complex ended a campaign of nearly a decade yesterday with the purchase of the project in what will be a $100 million deal.
The group went to settlement in Chicago, backed by a Chicago development company and a Chicago bank.
"It's fantastic," said a jubilant Jack Koczela, chairman of the board of directors of the tenants group. "No one ever thought we were going to do it." Koczela and another officer of the tenants association had traveled to Chicago Wednesday for the settlement. The complex was purchased from the CBI Fairmac Corp. which had owned it for several years.
The sale climaxed a fight over the future of the complex, which has 723 apartments. For years it was the largest moderately priced rental housing project west of Rock Creek Park, located just a few blocks north of the Washington Cathedral on Wisconsin Avenue. Currently, there are only about 158 tenant families living there, many of whom earn less than $15,000 a year.
Now begins the difficult process of rehabilitating and converting the complex into a mix of 1,300 condominiums, cooperatives and townhouses. The 10 acres of vacant land at the grassy, gently sloping site will be developed under the tenants' development plan.
A source estimated that the housing units in the development will range in price from $45,000 to $110,000, from efficiencies to two-story duplexes with three or four bedrooms in one of the area's most expensive neighborhoods.
The purchase was accomplished with more than $50 million in acquisition and construction financing from Continental Bank in Chicago. Arthur Rubloff and Co., a Chicago-based real estate development firm, is the managing general partner in the deal. David Kornblatt, a realtor and early investor in the tenants' efforts, is the Washington representative for the Rubloff firm, a company that developed Chicago's largest apartment complex, Sandburg Village, 18 years ago, according to a Rubloff official.
In addition to Kornblatt, Rubloff, and the residents association, other partners who will be involved in the development are William P. MCulloch III, a former World Bank lawyer and housing developer instrumental in helping the tenants buy the complex, and David Marshall, a condominium specialist.
Tenants will get about 27.5 percent of the development profits, Rubloff and its partners about 51 percent, and McCulloch and his real estate partners about 13 percent, with the rest going to various investors, sources said.
Koczela said the McLean Gardens residents plan to use their profits from the sale of condominiums in the first phase of the development to subsidize or discount the prices of condominiums or cooperatives for current tenants.
He said the partners in the new development firm have agreed that tenants who want to leave without buying can do so, and will get $12,000 if they move out by next April. No more than 50 tenants would benefit from this feature.
A few tenants aren't happy with the proposed development package, however. They say they fear that by the time they get to purchase their units, prices may have been pushed up, and they contend the project isn't accomplishing what they were told it would.
"This is a complete reversal of everything McLean Gardens has stood for," said Patricia Cavanaugh, a McLean Gardens tenant for 14 years. "This will not be moderate-income housing. Most of the people here will not be able to stay. We didn't want a developer coming in and putting up high-priced housing. That's what's happening, and we're a party to it."
Koczela said, however, that the residents association came up with "the best deal we could negotiate . . . It was extremely difficult to make everyone happy. But we will achieve our primary goal of keeping everybody there at a price they can afford."