District of Columbia officials hoped to spark a renaissance of old downtown when they awarded a development group rights to build a $140 million office, hotel and apartment complex atop the Gallery Place subway stop at Seventh and G streets.
More than two years later the block remains a rundown patchwork of parking lots and empty buildings. The developers have been unable to attract any tenants for the office space in their proposed 12-story building, largely because of the surrounding rundown neighborhood -- the area the new development is supposed to transform.
Without tenants for the offices, the developers have been unable to persuade a lending institution to let them borrow the money needed for the construction of the 1.8 million square foot "mega-building", according to William Fitzgerald, president of Independence Federal Savings and Loan, who along with office building developer Melvin Lenkin heads the 20-member development team.
Their proposed structure will be the largest commercial building in downtown. Three floors of parking and two floors of ballrooms and meeting rooms will be located below ground. The hotel lobby and stores will occupy the ground floor, topped by six floors of office space and five floors of luxury hotel rooms run by the British hotel chain Trust House Forte. The top floor of the 12-story building will contain an estimated 125 apartments.
The ambitious project, the first major downtown development controlled by blacks, is not the only redevelopment work that is proceeding slowly. Four blocks west the city's other major downtown redevelopment effort, Metro Center, also has been delayed as city housing officials and developers Oliver Carr and Theodore R. Hagans have haggled over a sales price for three key parcels of land.
The restoration of the Willard Hotel, an integral part of the revitalization of Pennsylvania Avenue, has been slowed by financing difficulties that eventually prompted a switch in ownership of that project from Florida developer Stuart Golding to Carr.
Gallery Place was seen as the eastern anchor of the band of redevelopment, a spark city officials hoped would set off a revival around Seventh Street, once the address of most of the city's major department stores. That area was economically undermined by the 1968 riots, neglected by the city government, disrupted by the lengthy construction of the subway line under Seventh Street, and overshadowed, like the rest of old downtown, by the popularity of the area west of 15th Street, which has become the new downtown.
"This is quite honestly not the world's hottest location," said Fitzgerald. "But we believe it is an area that will be hot in the next three years and values there are increasing.
"It's right above a Metro subway stop, it's close to the Capitol, the arts community and the courthouse," he continued. "It's a great location for attorneys."
But, according to Merrill Yavinsky, a senior vice president of Walker & Dunlop, which is handling the leasing, no law firms are interested in the building. Attorneys, accounting firms and trade associations are the three major renters of space in downtown.
The federal government is the prime tenant in three other office buildings built nearby in recent years, but budget cutbacks have slowed the demand for government office space.
Yavinsky said that while he has no tenants, he is negotiating with five groups that he would not identify. "People are not banging down the doors to rent space but we hope to counter that with" rental prices at $22 to $24 a square foot. These prices are $5 to $10 cheaper than those generally charged west of 15th Street.
Because it is a tough address to lease, the Gallery team also reportedly is offering prospective tenants part of the ownership in the building as an added inducement. Other downtown developers also are trying to lure tenants with offers to share in the tax benefits, the profits or the appreciation of a building, according to several knowledgeable real estate sources.
At the same time Orlando Darden, another Gallery Place partner and former president of Community Federal Savings and Loan, indicated that the developers are deliberately moving slowly in hopes of getting lower interest rates on the money they must borrow for the project.
"We are hoping that rates will come down and that is a factor we will weigh in determining to go forward," he said. "It is not prudent for anyone to make a mortgage commitment" when rates are at their current levels, he said.
Fitzgerald declared that the project is "right on schedule," adding: "We have not caused any delays. I don't care what the rumors say."
The slow progress of Gallery Place and Metro Center was partially responsible for the urban renewal agency's recent suggestion that it might require the five development teams competing for the Portal site in Southwest to buy that land within six months of acquiring the development rights to it.
The Redevelopment Land Agency usually sells its land two years after it has selected a developer.
RLA asked the Portal bidders for evidence that they have the financial ability to meet the six-month deadline if it is imposed. It is unclear whether the request will have any real effect. RLA also asked the Gallery developers for evidence of financial commitments from lenders.
The five-member RLA board selected the Fitzgerald-Lenkin team for Gallery Place from among five competitors on Nov. 20, l979. On July 7, l981, the developers agreed to pay the city $17 million for the 120,838 square feet bounded by Sixth, Seventh, F and G streets, directly across the street from the Hecht's department store and the National Portrait Gallery.
The following month the developers made a $850,000 downpayment for the land and were given three months to prepare final plans for RLA approval. That deadline was extended another three months in November. The downpayment has been deposited in an account with high interest rates, according to city housing director Robert L. Moore.
The developers are scheduled to give RLA a progress report Feb. 16. In July the developers told the board it would take eight to nine months to prepare the final drawings. According to RLA minutes, the board decided to ask for the plans within 90 days to insure "due diligence" and then grant extensions as needed.
The final plans should be completed in March or April, according to architect Vlastimil Koubek. Construction is proposed to begin in the fall with completion two to three years later, Fitzgerald said.