The owner of a downtown office building where the D.C. government leases office space for about 800 employes is seeking to evict the city, and at least two agencies--the public schools and the D.C. auditor--say they are taking the threat seriously enough to have begun looking for new space.
Laszlo N. Tauber, a Bethesda physician and real estate investor who owns the nine-story Presidential Building at 12th Street and Pennsylvania Avenue NW and who filed the suit against the city, is scheduled to go before a D.C. Superior Court judge Friday to ask that the city adhere to a promise to leave the premises.
Tauber contends in his suit, filed last January, that Sam D. Starobin, then director of the city's Department of General Services, sent him a letter in 1978 saying that Congress had appropriated funds for a new municipal office building and that the city planned to move by Dec. 31, 1981.
Tauber is seeking to enforce that letter, even though the city holds a 20-year lease, signed in 1975. At the heart of the dispute is the low rent that the city is guaranteed through the lease, less than a third of the going rate for downtown office space.
"I'd hardly call it a frivolous suit," said George H. Margolies, counsel for the school system, the biggest tenant in the building. "I would say the litigation is serious. It would be a massive move, to move the central school headquarters. Nonetheless, the District does feel they are legally correct."
Margolies said school Superintendent Floretta D. McKenzie has asked her nine-member executive committee to look at alternative sites for school headquarters.
And D.C. Auditor Otis Troupe, whose office is in the building, said he has looked at relocating his 13-member staff in the nearby Lansburgh building or in the District Building "as an outside contingency."
Spokesmen for the other agencies in the building--including the Department of Transportation, the controller and the office of the inspector general--said they have not focused on the suit and would rely on the city's Department of General Services, which handles logistics for city agencies, to secure new space in the event they have to move.
Lawyers for the D.C. government would not comment publicly on the case, but, in papers filed with the court, Corporation Counsel Judith Rogers argued that Starobin's termination notice was invalid because he "was without authority" to send the letter.
The Corporation Counsel also argued that a letter was sent Nov. 3, 1979, to revoke Starobin's termination notice, after it had become clear that the city would not be able to construct a new municipal office building by then.
"That's a poor excuse," Tauber said. "They notified me several years ago that they wanted to vacate the building. They haven't left. I refuse to accept that."
Privately, several D.C. officials said they believe Tauber's goal is to pressure the city government into renegotiating the lease, and does not intend to evict the city agencies at a time when the commercial real estate market has turned sour.
Tauber conceded that his suit was prompted in part by a desire to renegotiate the unprofitable lease, but he said he intends to go through with his eviction efforts if the city continues to refuse. The city currently pays Tauber $4.59 a square foot to rent 216,168 square feet of space--less than a third of the going rates for downtown office space in Washington.
That lease is typical of many rental agreements signed a decade ago when prime downtown Washington commercial office space often went begging at $4 and $5 a square foot. In the last decade inflation, energy costs and increased demand have tripled those prices.
"It should be costing him five dollars a square foot to operate the building, based on the industry average," said John O'Neill, executive vice president of the Apartment and Office Building Association. "No wonder he wants them out of there."
"We have had several people go to bankruptcies with those kinds of leases," O'Neill said. "Nobody today is offering anything past a five-year lease, and that lease contains an escalator clause" that automatically boosts rental rates based on increases in operating costs, he said. said John O'Neill, executive vice president of the Apartment and Office Building Association. "No wonder he wants them out of there."
"We have had several people go to bankruptcies with those kinds of leases," O'Neill said. "Nobody today is offering anything past a five-year lease, and that lease contains an escalator clause" that automatically boosts rental rates based on increases in operating costs, he said.