The concept of tenant capitalism--the joint development of an apartment complex by both a developer and tenants--was received with fanfare in the summer of 1979 at the Ordway Gardens apartment complex in Northwest.
Under the concept, tenants not only would get their apartments at reduced rates, but also would share with the developer the profit from renovating and selling unoccupied apartments.
The experiment at Ordway Gardens, a 166-unit complex that covers one block of Ordway Street and sweeps down the hill to Porter Street NW, east of Connecticut Avenue, was one of several proposals citywide in which tenants, facing a wave of condominium conversions, sought to share in the development profits with developers.
Three years later, however, the tenant capitalism concept has failed at Ordway Gardens, in part because of interest rates that skyrocketed unexpectedly, mistrust and bickering among tenants, developers and project managers, and construction delays and planning snafus by people with little experience in real estate and redevelopment.
Last year, after most of the complex had been renovated, only 67 of the original 120 tenants who wanted to buy their apartments were able to afford them. The cost, emotionally and financially, has been steep. Some of the tenants went to settlement with interest rates as high as 17 1/2 percent for prices nearly double what they had been quoted at the outset.
When the B. F. Saul Co., then owners of Ordway Gardens, put the complex up for sale in 1978, the tenants were an urban mixture of older people, young professionals, government workers and a smattering of Hispanic families lured to Ordway Gardens by its tree-shaded lawns, spacious apartments and rents of about $200 a month. It was a prime location, less than half a block from the proposed Cleveland Park Metro subway stop at Connecticut Avenue and Van Ness Street NW.
When the tenants learned of the upcoming sale, they used a city law guaranteeing tenants first right of refusal on property up for sale to gain time to organize and seek financing to buy the buildings. About 135 tenants formed the Ordway Porter Tenants Association, vowing to save their homes. But the group could not find financing and time was running out. According to Coyle, one of OPTA's former presidents, banks did not trust an untested organization and were not interested in the group's initial plan, which offered little potential profit.
As the deadline drew near, some elderly tenants who had lived at Ordway Gardens for about 40 years, and others who had become discouraged, abandoned the effort. The organization began to dwindle.
At about that time, John Trask, a transplanted South Carolinian who temporarily lived in the complex, offered his financial backing to secure a bank loan in return for a split of the profits from sales of vacant units. Trask, then deputy director of the Small Business Administration under former president Jimmy Carter, also agreed to serve as on-site project manager. The tenant group agreed and together they bought the buildings in 1979.
"When the tenants chose to strike a deal with John Trask, there were two merits to it: money and professionalism," said another former OPTA president, Gene Heller. In retrospect, Heller said, Trask had limited real estate experience.
"The original plan for renovation was simple: Keep it to a minimum, do it quickly and do it for the tenants," said Joe Coyle, one of five presidents in the first two years of the Ordway Porter Tenants Association, called OPTA.
Tenants had planned to renovate the basically sound brick buildings by replacing plumbing and heating pipes and electrical lines without changing the buildings' basic design. The projected cost to the tenants was estimated at between $30,000 and $34,000 for a one-bedroom unit.
Soon it became clear that Trask's vision of what the new complex should be contrasted with what tenants originally said they wanted. He proposed new skylights, heat pumps and other features that improved the property but also increased the cost. By the completion of the project, one bedroom apartments would cost $54,000 with a parking space.
By the end of 1979, tensions had mounted as developer and tenants began to recognize the limits of democracy. Trask found the association's 20-member executive board only slightly less intractable than its general membership. Tenant leaders emerged briefly, were consumed by the project, resigned or were thrown out. The membership splintered into shifting alliances that tried to persuade OPTA to pursue their special causes: solar energy, heat pumps, development of the then-vacant Porter Street apartments.
"Everyone's basic behavior during a tenant conversion is the same as their regular behavior, only more extreme," said Heller. "It's like being drunk. Conversion only loosens your inhibitions."
Exasperated at what he said was the loss of six crucial months in the project's development, Trask bid for centralized control. He offered tenants a fixed price on their soon-to-be-renovated units in return for forfeiture of future profits on the Porter Street development and full control on the Ordway project. They turned him down--a move for which he later said he was grateful.
The membership preferred a floating price on their units, plus a cut of the profits. OPTA's goals had changed slowly but irrevocably since its inception. Says Margie Radovsky, an advertising production manager and tenant: "At first we were here to keep our homes, not to make money. That changed real fast."
The tenants' rejection of Trask's offer still left the problem of lack of centralized control. OPTA's lawyers advocated setting up a separate partnership composed of four tenants and Trask to avoid corporate and personal taxes on profits from developing the Porter Street property. Known as "General Partners," this entity eventually became divorced from OPTA and took on most of the decision making ability from the membership.
"Going partnership killed the project," said Coyle, adding that he had cast the sole dissenting vote against setting up General Partners. The partners were blamed for everything that went wrong for the remainder of the project, he said. Tenants accused them of not pushing the pace of construction or anticipating the skyrocketing interest rates.
OPTA members claimed they were not told about the project's progress. Some of the problems clearly were within the control of the partners; others simply were part of the bleak Washington real estate picture of the 1980s.
During the power struggle, tenants became physically dispersed and emotionally exhausted. Paul Buhlig, 56, a University of Maryland instructor, was among those displaced while his apartment was being renovated. What he had thought would be a few months' displacement stretched into a year.
"The main problem was uncertainty," he said, now reestablished in the one-bedroom apartment he has lived in for more than 20 years. "You keep imagining that you'll have to move somewhere else, and what I see of other places doesn't please me much. So if you're an anxious person--and most of us are--you wonder what will become of you."
As the frustration mounted, some tenants were offered $4,000 to leave the project, and many did so because high interest rates and escalating prices were eliminating them from contention for their units.
Those who still could afford to buy their apartments began to move back last year as the Ordway Gardens sales office opened and prospective buyers came to see renovated (but vacant) units. But sales were slow. To help sell the units, prices were slashed anywhere from $10,000 to $25,000 per apartment.
All units in the Ordway Gardens complex now have been sold. But the Porter Street apartments, vacant and deteriorating, remain years away from renovation as are the profits of $8,000 or more that each original tenant had been promised.
Three years after their dream, many tenants or former tenants are bitter. Coyle chose not to buy his apartment and lives in Silver Spring. Heller also chose not to stay at Ordway Gardens. Dan and Margie Radovsky, who bought a two-bedroom loft, said their purchase held little satisfaction because of the trauma resulting from the conversion.
"I look around and I think I would rather live in the suburbs, or 100 miles from here," Dan Radovsky said. "Anyplace but here."
Most OPTA members say that they remember cynically their high hopes for "tenant capitalism."
"It was not tenant capitalism," said Buhlig, former OPTA treasurer. "It was simply capitalism as usual."