A lawsuit filed against the District government by two of the city's biggest developers over redevelopment rights at the Metro Center site in downtown Washington is scheduled to go to trial this morning after court-imposed negotiations between city officials and the developers broke off last night.
The two sides had negotiated privately for nearly a week in an effort to avoid a trial on the issue of whether the city had the right to remove developers Oliver T. Carr and Theodore Hagans from the Metro Center project last March.
According to sources close to the negotiations, tentative agreement was reached Friday on the land price -- the issue that caused city officials to try to take the $300 million project away from Carr and Hagans in the first place -- and on the construction schedule for the project.
But late yesterday, the sources said, talks reached a stalemate over one portion of the legal proceedings connected with the disputed project. D.C. Superior Court Judge Leonard Braman ordered the two sides to keep talking and said if no agreement is reached by this morning, he would begin the trial.
After Carr and Hagans were removed from the project in March because of a failure to reach agreement on a price for the 3.7 acres atop the Metro Center subway station, they sued the city, asserting that officials had no right to take that action. They won a preliminary injunction barring the city from giving the project to new developers, and the city appealed.
That appeal has not yet been decided, and it is the future of that action that is the sticking point in the current negotiations. Carr and Hagans want the appeal dropped or continued indefinitely, according to sources close to the negotiations, because the developers fear that their work on the project might be jeopardized by a future appeals court decision in favor of the city.
But former city housing director Robert L. Moore, now acting as a consultant to the city on the Metro Center project, said one portion of the ruling on the preliminary injunction would have the effect of lowering the price the city can demand for its urban renewal property. He said the city wants to continue its appeal in hopes of overturning that portion of the ruling. "We don't want [that] ruling to stand," he said.
Meanwhile, even though the initial appeal has not been heard, trial was scheduled to begin yesterday on the suit itself, which challenges the city's right to remove Carr and Hagans from the project because of the price dispute.
Braman, who had earlier urged the two sides to try to resolve their differences out of court, delayed the opening of the trial by one day as negotiations continued behind closed doors at the courthouse.
Sources close to the negotiations said the two sides agreed to an undisclosed price for the land north of G Street and between 11th and 13th streets NW. Instead of receiving the sales price in one lump sum, the sources said, the city agreed to settle for only a portion and take back a second mortgage for the remainder. That means the city will receive the rest of the money sometime in the future.
In addition, the city backed off its requirement that the entire project, which is mostly office space, be developed at one time. The developers had objected to that requirement because Washington currently has a glut of office space, and many builders are having trouble filling their new projects.
The sources said both sides agreed to begin work with construction of a new Hecht's department store on the block between 12th and 13th streets.
Hecht's officals have complained that they are losing money at their current 7th and F street NW location and want to move to Metro Center as early as possible. This spring, store officials threatened to close the downtown store and leave the city if the Metro Center redevelopment did not begin promptly.