In the high stakes, multibillion dollar world of downtown development, only a handful of the developers are black. There is, in fact, only one major black developer.
Recently, some blacks involved in development were reported to have received large shares in downtown projects in exchange for little or nothing down. But black developers say this is part of the development game. They say they have sometimes had to yield control over projects to white builders and investors in exchange for their experience or financial know-how.
Without question, the top black developer in Washington is Theodore Hagans Jr., developer of the $500 million Fort Lincoln new town project in far Northeast Washington. He also has a 30 percent share in a proposed office building complex near the Metro Center subway station in which D.C. developer Oliver T. Carr Jr. has controlling interest.
The size of black developers' projects drop substantially after Hagans. The field includes:
William B. Fitzgerald, president of Independence Federal Savings and Loan Association, and a group of investors recently chosen to develop a $143 million hotel, office, and apartment complex near the Gallery Place Metro stop. Most -- 56 percent -- of the shares in the project are owned by blacks. Fitzgerald has been instrumental in obtaining and coordinating financing for other blacks in Business.
T. Conrad Monts of Travenca Development Corporation, who will soon break ground on an eight-story $41 million office building at 600 Maryland Ave. SW, in which he has 28.5 percent interest.
James Adkins of Adkins Limited, who has worked with the Shaw Project Area Committee and the District government to develop a $4 million project in the middle of the Shaw community at 7th and O streets NW. It includes the O Street Market, a Giant Food Store and a bank.
Navy, Marshall and Gordon, a downtown architectural firm run by blacks that has a$2 million housing development on Capitol Hill in cooperation with the District government, and is planning a new office building near Thomas Circle in Northwest Washington.
These individuals and concerns are all distinguished as developers because they have become major equity partners, and have formulated plans, coordinated financing, monitored construction and taken considerable personal risk on multimillion-dollar projects.
But they are strictly small business when it comes to big-money downtown developers like Carr, Dominic F. Antoneli Jr. and Charles E. Smith, who have shaped the Washington skyline for the past decade.
Although success in this risky, competitive field is hard won by both black and white developers, racism, lack of the right connections, shortage of capital and limited experience in large-scale development projects make it particularly difficult for blacks, black developers say.
They now face skyrocketing interest rates and nearly insurmountable odds in obtaining control of the big parcels of land needed for large-scale, successful development.
Ted Hagans, wearing a blue pinstriped suit, sat in his Fort Lincoln office, and casually talked about how he invested everything he owned in building the Fort Lincoln project. He siad he worked 14 hours a day, and sometimes seven days a week to make the projects work.
Despite the investment and hard work, Hagans said he intentionally kept his name off buildings he constructed in the Fort Lincoln complex: "You don't see Ted Hagans' name all around Fort Lincoln when you drive through here. I just didn't want this project to be like that. I wanted to build it for the people of Washington to give them a decent place to stay."
He has learned to keep his ego out of the way, he said. "You can't develop with ego. You have to develop with intelligence . . . you can't take ego to the bank," he said.
Hagans said he was reluctant at first to build the Fort Lincoln project because he was then financially comfortable: "But no one would have avoided this opportunity. True entrepreneurs take chances. I knew if I was successful that it would make it easier for other black developers to come along. White bankers would say, 'You know Ted Hagans was able to pay back the loan. So will other blacks.'"
Hagans, who wake at 5 a.m., and often flys his amphibious airplane to a nearby lake resort for R and R, said developers are not made, they are born -- "and I am a born developer."
For those blacks who are capable, Hagans said, the political climate and development opportunities are ripe: "With black mayors in Birmingham, Los Angeles, Detroit and other cities, there is cooperation between minorities and government that will provide minorities with a opportunity in development."
He has developed only 15 percent of Fort Lincoln so far, and has borrowed more than $30 million in the past three years. He has had to guarantee every loan personally with all his property and possessions, including apartment buildings and land in Prince George's County, other property in the area, a green Rolls Royce convertible with right-hand drive, a gold four-door Rolls Royce, a late-model two-seater Mercedes Benz, one jet plane, one conventional aircraft and a boat.If anything were to go wrong, he would lose everything he owns and has worked to get for the past 25 years, he said.
Hagans, who also operates a successful multimillion-dollar Dulles Airport parking concession, said he is now reaching a level where he can soon use his corporation to shelter himself from risk.
Until then, however, he said he has no problem using personal guarantees for his projects: "It is only fair that I personally guarantee my loans. If I don't have faith in myself, why would I expect bankers to have faith in me?"
Hagans, who had no prior development experience with a project the size of Fort Lincoln, said one problem some black developers have is that they get too used to comfortable life -- styles. "They just don't want to give up that Cadillac," he said.
He has learned to put his profits back into the business, he said. "People think I'm rich, but I have learned to live modestly," said Hagans, who lives in the former Jamaican Embassy.
Randall Marshall of Navy, Marshall and Gordon, an architectual firm that recently commanded a $1 million fee for designing a downtown office complex for a major developer and is constructing an office building near Thomas Circle, says developers have to build large projects to reap profits. "It just does not make sense to build small office buildings that carry the same risks as larger buildings," he said.
The difference between a large developer such as Oliver Carr and a small black developer, Marshall said, is that financial institutions and land owners are sure -- because of Carr's track record -- he can deliver. "It is all a matter of clout," Marshall explained.
Another problem black developers face, he said, is they often must get support from experienced builders and/or investors who want a piece of the action in return for their backing. "What you want if you are a small black developer is someone with foresight and money and willing to take a risk. Those kind of people always want to control the action in return for their money or expertise," he said.
William B. Fitzgerald, president of the minority-controlled Independence Federal Savings and Loan Association, was among a group of blacks who tried unsuccesfully to be selected to redevelop the old Willard Hotel downtown. In order to improve their chances of being chosen by the Pennsylvania Avenue Development Corporation, which has control over the project, the group needed the exercise and track record of a major hotel chain, Fitzgerald said.
Representatives of the chain would agree to help and provide their services, if the chain received 45 percent equity interest in the project and did not have to contribute any money toward the $100,000 cost of planning for the project bid, he recalled, explaining, "It is just the way business is conducted."
Fitzgerald said he and other minority investors had to use their own funds to pay the $100,000 upfront cost of the bid, which was unsuccessful.
James Adkins, developer of the O Street Market, comes from Macon, Ga., has a disarming approach and the shrewd sense of a high-powered developer. He said his friends and Shaw community leaders laughed at him when he first told them about his plan to attract a grocery and bank to the site of the O Street Market.
"You will never get a major supermarket chain to invest in the city," he said they told him. Because of the riots and the more than 10 years that had passed since a new supermarket had been built downtown, they were convinced that supermarket chains would continue to turn their backs on the city.
"Now, on any night I can go out and get $100,000 from people willing to invest in my ideas," he said. He said he has even convinced a major supermarket chain, which once turned him down, that investing in the District is not a bad idea. Adkins said both Giant and Safeway are now considering building another store downtown.
Adkins, who will first tell you he was graduated from a small college in Cambridge, Mass., instead of simply spelling out his credentials as a Harvard University graduate in economics and finance, was not always sophisticated in the business of development.
Five years ago, he said, after successfully operating a seafood restaurant on 14th and Randolph streets NW, as well as a grocery and another seafood restaurant in a Southeast farmers' market, he decided he wanted to develop the O Street Market. The story he and his wife tell is that they went to a lawyer, wearing their blue fishcoats "smelling like fish" and asked him if he thought they could purchase and develop the O Street Market for $75,000. Well, $4 million later, through long-term loans and with the backing of the Shaw Project Area Committee, Giant Food Store, and the D.C. government, the project is now under way.
"I'm a fighter. I have character and perseverance. I won't take no for an answer," the 48-year-old developer said as he explained his recent success. "If it (the O Street Market) fails, I will. If it succeeds, I knew what I was doing five years ago when I planned the project."
T. Conrad Monts, who came to the District from New York three years ago, said the development field too frequently offers more headaches than profits: "In this business you often have to take less profit than you planned and be willing to give up more than you thought you ever would."
Monts, 37, who has been a partner in developing seven office buildings, including projects in New York and San Antonio, came to Washington after conducting a nationwide marketing study. He chose Washington because it is close to New York and ripe for development. He explained: "You don't fall into development, you work your way into it. You have to mortgage everything you own, and you make some money and you lose some."
The developers have found that help from local government has become crucial for blacks -- even for Hagans.
Robert Pickeral, vice president of real estate at Riggs National Bank, outlined the difference the government can make. "It was simple for Hagans to develop that project," he said, "because the government released the land in stages to him. He did not have to contend with the expensive carrying cost of the land."
The difficulty and risk involved in development has reduced the number of both black and white developers entering the field, noted Robert Blakeman, Washington area division manager for Equitable Life Assurance Society of the United States, the third largest insurance fund in the country, and responsible for permanent mortage financing for major local development projects.
There is an unwillingness on the part of young, gifted, wealthy individuals to take big risks necessary in development, he said: "They can get jobs with IBM and the government and not take any risks at all."
Pickeral, vice president of Riggs, the largest banking institution in the city, said some developers are willing to put up everything -- "even their children's meals -- and I am thinking of millionaires when I tell you this" -- on a bet they can make a project work.
To make a project work, he said, a developer has to predict interest rates, housing or commercial needs and construction costs, and hope the project is finished on time.
Oliver Carr has participated in a large share of the billion-dollar downtown development. He said it takes time to learn the complicated aspects of the business, and most beginning developers learn it all the hard way. "There are those who believe you can hang out a shingle and develop a $20 millon office building," he said. "That is not the way I did it."