Occupying center stage in last week's decision to remove two of Washington's most prominent businessmen as developers of the potentially lucrative Metro Center project was their refusal to pay the city's $51.6 million asking price for the land.
The backdrop to that unusual action is a tale of how personalities, economics and self-interest combined to make the stalemate almost inevitable, according to a series of interviews with several sources knowledgeable about the talks between Washington's urban renewal agency and developers Oliver T. Carr and Theodore R. Hagans Jr.
The removal of Carr and Hagans throws the future of the Metro Center project into question, and Carr has threatened court action against the city. But according to knowledgeable observers, the state of affairs is not all bad for any of the parties:
The city now has a chance to get its price for the land, and perhaps to award the project to one of the disappointed losers in the recent competition for development rights to the Portal Site in Southwest.
At the same time, Carr and Hagans are saved from having to borrow large amounts of capital at today's high interest rates, to fund a project that could compete with another major development Carr has underway two blocks from Metro Center in downtown.
The story began in September 1978, when Carr and Hagans won a six-way competition for Metro Center with a plan to build a $211 million office, hotel and department store complex on the 3.7-acre site atop one of the city's busiest subway stations. The city expected the project to serve as the centerpiece for redevelopment of the District's traditional shopping area east of 15th Street NW.
Nearly three years passed before discussions began on the land price. The delay came because of a long-established urban renewal policy that a project's land price is negotiated after all other issues are resolved.
The discussions were held back by problems with land appraisals, then slowed further, according to knowledgeable observers, by personality clashes between the two hard-driving primary negotiators, Carr and D. C. housing director Robert L. Moore.
Carr and Moore have a lot in common. Both enjoy reputations for being tough, hard-nosed and aggressive, and both are accustomed to winning.
"It was a clash of titans," said a source who watched the negotiations and asked for anonymity. "It was a question of who was going to blink first."
Carr, a lean, reserved Washington native, came to the negotiations as the city's most successful private developer, responsible for projects from Silver Spring to the Virginia suburbs. With him he brought Hagans, a friend of both D.C. Mayor Marion Barry and Moore.
Moore, balding, jocular, the former director of public housing in Houston, came to the table in his dual role as housing director and a member of the Redevelopment Land Agency, which owns Metro Center. As the housing director, Moore negotiates land prices with all developers designated to build on urban renewal sites, then makes recommendations to his fellow board members. The board makes the final decision.
While the two parried, economic conditions in the city changed, pushing agreement farther and farther from their reach.
In 1980, downtown land prices were escalating because of the voracious appetite of local, out-of-town and foreign developers for downtown land. They were clamoring to build new office buildings to house the prestigious law firms, accounting houses and trade associations that sought Washington addresses.
Because of reports of skyrocketing land prices downtown, last year the city government came under increasing criticism and congressional scrutiny for allegedly selling other downtown parcels too cheaply. "The city got itself in a box because of the criticism," said one knowledgeable source.
Moore pushed for a high price for the land, but as the negotiations dragged on, the recession hit the city and downtown prices leveled off. Interest rates went up, permanent financing became diffficult to obtain, and developers started to slow down.
Some observers have suggested that as interest rates climbed, it began to be in Carr's interest to delay agreement on the land price, in hopes that economic conditions would improve before he had to borrow the money to buy the property.
Carr rejects that interpretation. "We started in October l980, so it is coincidental that the delay period took the question [of the price] into the economics of downtown," he said in an interview last week, adding he was ready to begin the project.
The city started off in July asking $60.7 million, or $378 a square foot, while Carr and Hagans were offering $22 million. By last month the city had come down to $54 million and Carr and Hagans had come up to $37 million.
The city had lowered its price to make it economically feasible for the developers to include a department store, to lower rents so that small businessmen who had been displaced from the area could afford to return, and to save the facade of an old city fire house that stands on one of the blocks.
But the two sides could not resolve the issue of how much the developers would pay for the square block between 11th, 12th, G and H streets that would include a hotel.
Carr argued that the city's asking price made it too expensive to build a hotel, which RLA had approved and which was vital to achieving a "living downtown" that would attract people after dark. Moore argued that the city had never made price reductions for hotels.
During the negotiations Carr suggested that the city charge a lower price for the land and then share in the hotel's profits, according to a letter he later wrote RLA. Carr has such an arrangement with the Pennsylvania Avenue Development Corp. on the Willard Hotel, located two blocks from Metro Center. The city said no.
"Carr accepted that he had to pay a price three times as high as his neighbors because the market had changed," said a source, "but he got mad when they tried to charge him" office building prices for a hotel site.
On Feb. 16 the RLA board threatened to take Metro Center away from Carr and Hagans if the price stalemate was not broken within two weeks. City planning director James O. Gibson, whose office has tried to guide the redevelopment of downtown, tried to use his "good offices" to resolve the dispute.
Carr and Moore were "essentially pessimistic" about finding a solution "but they were willing to try," Gibson said.
On the eve of the deadline, Gibson, with the help of Hagans, arranged an eleventh-hour meeting between the two sides. The next day they told the RLA board an agreement was possible within five days.
Up to that point Hagans had not taken an active part in the negotiations, according to several sources. Hagans will only say, "I was a 30 percent partner," referring to his share of the development rights.
Hagans, also a Washington native, came to the project after Carr submitted his proposals and city officials suggested that he include a minority partner. Both Hagans and Carr, who have jealously guarded their privacy despite their prominence, say their partnership is a friendly one. Observers describe their relationship as arms-length at best.
Carr had had no previous dealings with RLA, but in 1975 that agency made Hagans, a real estate entrepreneur, the city's most prominent black developer when it awarded him the 360-acre Fort Lincoln New Town project in far Northeast.
The city has allowed Hagans, a savvy, unfailingly well-dressed businessman in his mid-fifties, to buy Fort Lincoln acreage as he wanted, and last February, after housing sales plummeted, the housing department took the unusual step of agreeing to subsidize the purchase of nearly two dozen $70,000 townhouses by moderate-income families at Fort Lincoln. Hagans had been unable to sell the homes on the private market.
Last May RLA agreed to sell an acre of land in Southwest Washington at the bargain price of $9 a square foot to the National Business League, an organization of black businessmen headed by Hagans. The league has never paid for the land, although it has held its ground breaking. Both the city and Hagans refused to discuss the delay.
Last week when Carr threatened to take RLA to court, Hagans demurred saying, "I'm not making any court threats."
"Ted did not feel the same passion as Carr did about Metro Center," said one observer, who knows both men well. Another added, "Ted didn't want to go to the wall" for Metro Center because of his other projects with RLA.
Hagans rejected that assessment and said he concurred with Carr's insistence on the lower price.
Carr arrived early for last Tuesday's RLA meeting. Hagans arrived after the meeting was underway. It took the board about twenty minutes to listen to final arguments and vote for removal of Carr and Hagans. Carr was left with his Willard Hotel development and another major project at 15th and F streets NW, both a stone's throw from Metro Center.
Mayor Marion Barry said through a spokesperson that he did not intervene in the fray because "It was [RLA's] decision and they made it."