District of Columbia officials announced yesterday that they will salvage the deteriorating, century-old Sumner School building by leasing it to a development group that plans to build a $40 million office complex around it along M Street between 16th and 17th streets NW.

The city said that it will lease the quarter-block site -- one of the most desirable undeveloped parcels in downtown -- to a joint venture that includes developer Mortimer Zuckerman and other partners.

The developers, in turn, have pledged to protect the historic and architectural significance of the site by restoring the Sumner building, rehabilitating the adjacent 90-year-old Magruder School and constructing an office building with a facade that duplicates the 1920 Beaux Arts style of the nearby Jefferson Hotel.

The new plan, approved after months of study of various designs for the site, will allow school officials to use the restored Sumner Building and calls for conversion of the Magruder building into office space. It also provides for a third structure -- with a Beaux Arts front on M Street -- that will wrap into a nine-story building with a contemporary glass facade behind the Magruder building.

Terms of the lease agreement still are to be negotiated, but representatives of the city and the developer said they anticipate no problem in arriving at the fair market lease value of the land. Office space in the area is now renting for $25 to $30 a square foot, Zuckerman said.

The design approval offers a reprieve to the historic Sumner School landmark less than two years after city officials were ready to raze it.

The school was vacated in 1978 and rains weakened the roof of the four-story, brick structure. City officials said in late 1979 that it was an imminent danger and should be demolished. However, school officials disagreed with that assessment and, on the day wrecking crews were about to move in, obtained a court order halting the demolition.

Since then, according to Associate School Supt. David Huie, "people came together to think this thing through." Last May the city solicited proposals for the site, with the provision that it would be a lease arrangement and the Sumner School would be preserved.

Five developers submitted designs, including proposals for mixed office-retail uses and a major hotel.The winner, 17 M Associates, includes Zuckerman's Boston Properties and First City Properties, a minority firm.

Boston Properties has just finished a 400,000-square-foot office building at 600 Maryland Ave. SW, and is developing an office building in Bethesda and an industrial park in Springfield.

First City is a partnership that includes attorneys Chester Davenport, James Hudson, Willie Leftwich, Keith Seay and Ronald Jessamy. They have developed single-family homes and office buildings. Hudson is the city's bond counsel and also is involved in the development of the Gallery Place Metro station commercial complex. Zuckerman said the minority partners are committed to producing $1.5 million in financing for the Sumner project. The bulk of the overall cost is being financed by Citibank of New York.

Zuckerman said the developers expect to negotiate a 99-year lease for the property and that Boston Properties will own 70 percent of the buildings. First City Properties will own 25 percent, and the other 5 percent interest is being given free to the Metropolitan African Methodist Episcopal Church, which is located a block east of the site on M Street, as a community service to help retire the church's mortgage.

The AME church originally owned the Sumner School site when it was a receiving point on the underground railroad during the Civil War, Seay said. It subsequently sold the land to the city and is one of the last black churches in the central downtown area.

The Sumner School was built in 1871 and named after Massachussetts abolitionist Charles Sumner. It was used exclusively for the education of blacks -- at times serving as a grade school, high school and university -- until the 1954 Supreme Court desegregation ruling.