The Pennsylvania Avenue Development Corp. decided yesterday to allow local developer Western Development Corp. to bring in two new partners, one from Holland and another from Texas, to help build the $200 million Market Square office-residential complex on Pennsylvania Avenue.

The PADC, a quasi-public agency, granted development rights to Western in 1984 after a competition, but real estate industry officials said the company had difficulty getting the project off the ground. The site is on the avenue between Seventh and Ninth streets NW.

Last month, Western asked the PADC for permission to bring in two well-financed partners, Dallas-based Trammell Crow Co., the nation's biggest developer, and the Dutch Institutional Holding Co., the American arm of Holland's largest pension fund.

But agency board members, in their June 17 meeting, expressed doubts about Western's proposal because they said they believed that Western would have been giving control to the new partners.

Board members feared that the new partnership, with Western as a minority party, might alter plans for 225 residences in the complex, or make other changes in its design.

Under last month's proposal, Western and its original partners were to retain 30 percent interest in the complex; the Dutch group would have 50 percent and Trammell Crow, 20 percent.

In the slightly altered Western proposal, approved by the board yesterday by a vote of 10 to 1, with two abstentions, the percentage ownership shares apparently would remain the same.

But the reworded board resolution said that Western continues to be the project's general partner "primarily responsible" for the project, and that the developer "will continue to meet all of the obligations and commitments previously made to PADC."

Under the transaction approved yesterday, the Texas and Holland partners would secure $200 million to build the complex and would pay Western for its cost so far in developing the property, plus about $8 million to be held in escrow by the agency until completion of the project.

Agency Chairman Henry A. Berliner Jr. said the $8 million, which eventually would be distributed to Western and its original partners, is a "guarantee of completion of the project."

The lone board dissenter was lawyer Michael R. Gardner, who said he was troubled by the appearance that Western was "trafficking" in development rights.

"Essentially, what was voted on by PADC {Western} remains as only a 30 percent player," Gardner said. "From a legal standpoint, I just don't like it."

At last month's PADC meeting, a developer that had bid unsuccessfully in the 1984 Market Square competition, Lincoln Property Co. of Dallas, had objected to Western's plan to sell off a part of its project.

PADC officials said yesterday that a legal analysis by the agency found that although there is no precedent in federal law for an agency to allow a selected developer to sell development rights, it appears to be proper.

PADC officials also announced that the Western group had reached agreement to buy an office building adjacent to Market Square for inclusion in the complex. Western and the building's owners had been negotiating since early 1986, when PADC turned down Western's request to acquire the building against the owners' wishes by eminent domain.

The inclusion of the building in the complex will greatly improve the project's design and make the residences more marketable, PADC officials said.