The city urban renewal board's 1979 decision to require minority ownership in all their redevelopment projects created some fairy-tale opportunities for black professionals previously closed out of the lucrative real estate market here. But not everyone is living happily ever after.
While the partnerships formed to satisfy the board's unwritten policy remain intact, some signs of strain are showing as blacks wrestle with the demands of high-pressure financial deals and as established white developers, used to working with a close circle of longtime associates, adjust to the strangers in their midst.
"The city means well when they insist that minorities have parts of these deals," said businesswoman Flaxie Pinkett, a member of the team developing the $335 million Portal project, who says she plans to leave the partnership for personal reasons. "But unfortunately their experience and the experience of the minorities is terribly limited . . . it works out to be almost impossible."
Since 1979, the urban renewal agency has selected development teams for four major projects. One of these, Gallery Place in downtown, is controlled by blacks. The three others are controlled by whites, with blacks in each case owning at least 25 percent interest in the projects.
Interviews with more than 20 persons closely involved in these partnerships revealed concern among whites that some of their new partners may find difficulty in meeting the requirements of these massive projects, and fears among blacks that their lack of experience in big real estate deals will somehow lead to a loss or reduction of their share in the profits.
In particular, blacks express concern about facing sudden or unexpectedly high "cash calls"--demands by the partnership for each member to come up with his share of cash needed to pay expenses of the project. Such calls are a traditional and accepted way of meeting the cash needs of major, long-term real estate projects, but they can place severe burdens on a partner who does not have ready access to substantial amounts of cash.
"Most of the people who participate in these transactions do so based on a credit line, borrowing against other accumulated assets, and blacks don't have those other kinds of assets to borrow against," said business consultant Timothy Jenkins. "Blacks are most vulnerable because their assets are thinnest."
"I was given less than 30 days to come up with $28,000" after the Portal team won the rights to its project earlier this year, said Pinkett, president of John R. Pinkett Realty Co. "Most of us never had an experience like that in our life. Our money comes hard and we don't have much of it."
Not everyone agrees that cash calls pose difficulties for black partners in these transactions. "It's not a problem that causes anyone any alarm," said mortgage banker Orlando Darden, treasurer for the Gallery Place project.
Fear of unexpectedly frequent or high cash calls led one group of blacks involved in the current bidding for the Metro Center project to hire a lawyer and arrange to have their white partners lend them most of the money needed for the $250 million venture if the partnership wins.
"We got competent counsel to make sure we weren't victims," said David Wilmot, one of five black members on the team led by the Rockefeller Center Development Corp. and Western Development, a local company. "I know people who have been squeezed . . . and I was determined that wasn't going to happen here," he said.
"We realized we needed to be fully protected," said Ruby McZier, another team member. "We were certainly made aware of some problems and we certainly weren't going in and be confronted with a washout potential."
Neither Wilmot nor McZier could offer specifics about black partners who had run into cash call problems in the past.
In the Portal project, the black partners recently refused to contribute their shares of what they understood to be a $1.5 million cash call from the partnership.
James Adkins, owner of the O Street Market, said he and the other black partners, architect Louis Fry and attorney William Harris, balked because they did not want to borrow money and begin paying interest, only to have the land negotiations between the development team and the city last for months.
"I don't see any need for it additional money until the price of the land has been established," said Adkins. "I know I have to pay it and I don't mind paying it," but he added that he did not want to start paying interest "until I know we have something."
"We are not asking anyone to put up any money in advance of our needs," said developer Melvin Lenkin, one of the leading partners in the Portal project. "Anyone who thinks otherwise hasn't been paying attention."
Lee Narrow, a partner in Portal and the lawyer for the partnership, said the whole thing was a misunderstanding. He said the announcement that prompted the black partners' response was not a request for more money but simply a reminder to all partners, black and white, that the partnership had promised to pay the city for the land by the end of September.
If any partner anticipated any difficulty in paying his share, Narrow said, the group needed to know early so the problems could be resolved before the city's deadline. He declined to explain why the $1.5 million figure had been mentioned at the meeting.
Only a handful of blacks have the financial wherewithal to participate in lucrative real estate deals. Many of those who could afford to participate, particularly wealthy doctors and rich black churches, have shown no interest in these ventures.
"Those who get involved have their foot in the door because of their professional services," said consultant Larry Goodwin.
In some development deals lawyers, architects and other professionals who became partners give their professional services in lieu of cash payments. In other deals these partners pay their share of the costs along with the other partners, then are paid separately for the services they provide to the partnership.
Sometimes, according to several sources, blacks are chosen for their political connections rather than their bank books.
"Some developers and bidders look for influential black participants and not those who can pay their share," said attorney R. Robert Linowes. "The desire to provide equity to blacks has been perverted."
While Linowes declined to give examples, black lawyers and others agreed with his general assessment.
"One of the big problems I found was that many blacks who get involved have never been involved in development," said Goodwin, who is one of the minority partners on a Lenkin-led team that is constructing an office building at 14th and I streets NW, "and therefore they don't know what kind of business deal they are getting into."