One of the three groups competing for development rights to the coveted Metro Center site in downtown Washington yesterday revealed an arrangement in which minority partners will receive a one-quarter share in the proposed $250 million project in return for a total investment of just $100,000.
During hearings before the Redevelopment Land Agency, which coordinates Washington's urban renewal, the team, led by an arm of the Rockefeller family, said it would lend its five minority partners the money needed for the project beyond the $100,000.
A second team, led by local developer JBG Associates and the Metropolitan Life Insurance Companies, has agreed to make cash advances to their minority partners if these partners became financially unable to make their own contributions. The third team bidding on the development rights has said it would give no assistance to its minority partners.
The RLA has required since 1979 that major developers bidding on city-owned parcels, such as Metro Center at 12th and G streets NW, offer blacks and other minorities at least 25 percent of ownership. The Rockefeller arrangement marks the first time that a majority partner has agreed to finance the participation of blacks in a venture.
The Rockefeller team's arrangement with its five minority partners reopens the sensitive question of whether minorities should be exempted from having to pay for their participation in major development projects. RLA rules require only that minorities be included.
"There will be no cash calls demands for money that we have to come up with cash for," attorney Ruby McZier, one of the black partners in the Rockefeller venture, told the RLA board yesterday. The other black partners include attorney David Wilmot, consultants John Clyburn and Marie Barksdale and Senate staff member Carolyn Jordan.
Later, McZier said the five black partners would only be required to put up $20,000 each in cash and the Rockefeller Corp. would lend them the rest. These loans would be secured by promissory notes, but the partners would not be personally liable for their repayments.
Instead, the notes would be repaid from 80 percent of the black partners' share of the cash flow from the project, with the partners themselves receiving the remaining 20 percent.
After the meeting, McZier said the arrangement helped black partners. "Everybody goes and borrows it money from someone . . . We are saying we are borrowing from our partner. Isn't it better for me to borrow from my partner," than from an outside lender who would probably ask for a share in the ownership, she said.
Housing director Robert L. Moore, the only RLA board member who raised a question about the arrangement, asked McZier if blacks were really "sharing the risk" in the project.
"I wanted to know if minorities were sharing the same risk as the major partners . . . and the answer was no," because of the loan arrangement, Moore said after the meeting.
Rockefeller senior vice-president Peter C. Haeffner Jr. said during the hearing, "It is the typical way we have to deal with partners . . . This is not a concoction." After the meeting, Haeffner declined to name other Rockefeller partners or projects that had involved similar loan arrangements.
Haeffner said that the Western Development Co., a local development company, which also is a member of the Rockefeller team, would be required to pay its own way and would receive no loans.
The team led by JBG Associates said the nine minorities in that venture would be expected to pay their share of all costs, but that other partners would advance them money if they were unable to make their cash calls.
"We think they minority partners can come up with their share," said Don Brown, of JBG, who acted as the team's spokesman. The nine black partners on this team also have a 25 percent share.
The third group, headed by developer William Zeckendorf and the Starrett Housing Corp., indicated that its six black partners, who own 25 percent, would receive no financial assistance from the majority partners.
Also at yesterday's hearing, the Rockefeller-Western team indicated that it wanted to change its proposal to allow Hecht's department store to move to Metro Center.
Officials of Hecht's have said for some time that they want to leave their location at 7th and F Streets NW. and move into Metro Center. The other two teams both allocated 300,000 square feet to accommodate the department store, but the Rockefeller-Western team had allocated only 208,000 square feet.
In their presentation yesterday Haeffner and others used the 300,000 square foot figure, but RLA officials said they had nothing in writing from the team to indicate the revision.
Haeffner said the smaller space was a mistake based on incorrect information from Hecht's officials. But sources familiar with the proposal said the smaller number was deliberately put in by the team as leverage to negotiate a favorable swap with Hecht's for the 7th and F site.
Rockefeller and Western officials denied they wanted to swap parcels.
RLA chairman Nira Long said the board hoped to select a developer in two weeks.