Three black Washington lawyers recently obtained 15 percent ownership of a $41 million development project here. They paid $600.
The same lawyers have a 15 percent interest in a proposed $25 million Metro Center project. They put up no cash in that deal.
Three other blacks lawyers who sit on D.C. zoning boards and the Alcoholic Beverage Control Board will receive a 30 percent interest in a proposed $80 million development above the Gallery Place Metro stop if their white partner wins the right to build there. They also will put up no money.
These blacks are being given multimillion-dollar shares in major downtown projects by developers trying to meet new affirmative action requirements imposed by local supervising agencies such as the District's Redevelopment Land Agency (RLA) and the Pennsylvania Avenue Development Corp. (PADC).
The RLA and PADC purchase land in urban renewal areas and then sell or lease it to developers who erect highly profitable private commercial centers.
Over the last two years, the RLA has developed a strong but unwritten policy that minorities should own at least 25 percent of buildings erected on land controlled by the RLA.
"We never discussed with the staff about writing up a policy," said former RLA chairman Patricia King, the driving force in extending the affirmative action goals in this way. "But it always struck me as unfair that in a city as ripe for redevelopment as Washington is now, none of the people getting an opportunity to participate in the redevelopment are minorities. To me, that's crazy."
The PADC also recently formulated a written policy of its own that minorities must have at least a 5 percent interest in private projects built on land purchased by the PADC.
Neither agency has any guidelines setting out how much blacks should contribute in cash or services for their minority interests in these development partnerships. RLA and PADC officials say they have no controll over these private arrangements.
As a result, even though n some cases blacks have put up cash and assumed financial risks in tandem with their white partners, a number of Washington developers think they are under pressure to give away shares to blacks to win approval for their projects from government agencies.
Other white developers have solicited black partners and have apparently offered free interests in the hope that the presence of these politically connected balcks in the partnership will help them win RLA and PADC approval.
Both beleifs are fueled by the fact that the RLA and PADC, whose members are politically appointed, decide in private deliberations which developers will get approval for their potentially lucrative projects.
Thus, as Washington goes through its current redevelopment boom, there has emerged an uneasy alliance between the white-dominated development firms here and some blacks who have political connections to the new home-rule government.
Bethesda developer Nathan Landow, who is heading the Maryland campaign to Reelect President Carter in 1980, says he was given no alternative but to take on black partners who would contribute no money.
Landow gave 15 percent of the ownership of his proposed $25 million Metro Center project at 12th and G streets NW to black lawyers James L. Hudson, Willie Leftwich and Chester Davenport. He said the lawyers dictated a deal in which they would provide none of the capital and would accept no risk if the project fails.
Landow said, "I sat across the table from these guys and said, 'Look, how much are you willing to put into this.' They looked back and said, 'This is the way it has to be. No money.'"
The lawyers, who are principals in the firm Hudson, Leftwich and Davenport, are bond counsel for the city and Leftwich is a former RLA board member.
Landow continued: "The whole attitude of the RLA board is, 'How much are you going to give away. . . (and) don't even bother to come in unless you're with the right people,' The thing is, they've got you by the n---."
Hudson, who said he and his partners perpared Landow's affirmative action plan for the development project, countered that developers -- as well as their partners -- often put no cash into development deals.
"You don't have to put any money in the deal," Hudson said, " all you need is the ability to swing the deal . . . because I know what they (RLA) board members) are looking for; I know their interest in (creating) jobs; I know their interest in equity and I can couch the affirmative action plan in those terms."
Hudson acknowledged that developers might view the members of his firm as attractive partners because of their perceived political influence in the city.
Hudson said that this perception is no different from that of a developer who seeks out "an Irish partner in Boston" or a member "of the Daley machine in Chicago," referring to the late Chicago Mayor Richard Daley.
In mid-1977, Hudson and Leftwich scored their first success as minority partners on a major RLA development deal. The lawyers were partners in a development team competing with three other developers for the right to build a 400,000-square-foot office building at 600 Maryland Ave. SW.
Boston developer Mortimer B. Zuckerman, the managing partner in the deal, said hw was putting up $4 million for his 45 percent share of the $41 million project. The lawyers, according to the partnership agreement, would contribute $600 for their 15 percent share.
Though the RLA professional staff ranked Hudson, Leftwich and their partners' proposal last on its merits, the team had the greatest amount of minority ownership, and won the RLA contract award.
King, who was RLA chairman at the time, said she would not comment on specific RLA decisions.
"I know of no other way to do it in order to make it attractive to developers to bring in (minority partners) than if the developer knows it will increase the likelihood of his being able to get the project," King said.
Again in late 1978, Hudson, Leftwich and Davenport joined in a proposal to redevelop more than a city block above the Metro Center station at 12th and G streets NW. This time, the lawyers were partners with Landow. The team was competing against developer Oliver T. Carr and Herbert Miller's Western Development Corp.
The RLA staff recommended that Carr be granted deveopment rights for the entire project. Instead, the board voted to give Carr three of the sites atop the Metro station and the fourth was given to Landow.
In a similar partnership, Georgetown developer Miller gave 30 percent of his proposed $80 million development above Gallery Place Metro stop to three politically influential blacks: Ruby B. McZier, chairman of the Zoning Commission; Leonard McCants, chairman of the Board of Zoning Adjustment, and Larry C. Williams Sr., a member of the ABC board and an early supporter of Marion Barry during the 1978 mayoral campaign.
The Miller group is competing with four other development teams for the right to develop the RLA site. The black partners will provide no capital for the proposed development, although Miller said at least one of them will devote full-time services to the project.
In some cases, developers have formed partnerships with blacks in which there are explicit agreements that the blacks will make cash contributions to the project.
For the largest project at Metro Center, Carr is a partner with black developer Theodore Hagans, who will be a 30 percent owner of the completed project.
A spokesman for Carr said that "several hundred-thousand-dollars will be required for initial investment in plans for the project." Hagans will be required to put up 30 percent of those costs. Moreover in return for his 30 percent interest in Carr's project, Hagans will give Carr 30 percent of the ownership in the shopping center development Hagans plans to build in Northest Washington.
White developers for the most part acknowledge a responsibility to include black investors in projects where government agencies make the project possible through land purchases in urban renewal areas.
"The reason this is so sensitive is that both sides are fumbling," said one major developer who asked not to be identified. "The developers don't want the threat of an uncooperative govenment if they don't include the right people."
But black political officials, after decades of watching the redevelopment of Southwest Washington where virtually no blacks played partnership roles, appear more than willing to use political power in order to share in the economic bonanza that flows from commercial development.
Earlier this month, Mayor Marion Barry sent a 10-page letter attacking the PADC for failing to include sufficient numbers of minorities "in the investment, contracting and employment opportunities afforded" by $1 billion on pending PADC projects.
Barry reminded the presidentially appointed PADC board of its statuatory obligations to "give primary consideratin to local needs and desires and local and regional goals and policies" in affirmative action.
Said one black entrepreneur, who hopes to participate in future development projects, "It's not going to happen unless you use the political power because political power begets economic power."
"It's time to redistribute the wealth, we can't continue to give it all away," said black attorney James W. Cobb, who is negotiating with Florida developer Stuart Golding to become a 5-to-15 percent partner in the Willard Hotel. The Willard is being restored under the supervision of the PADC.
"The only leverage we have is on the public parcels (of land)," said Hudson. "Blacks are politically dominant and represent 70 percent of the population, so there ought to be a way they can get in on major development."
From interviews with more than 20 developers, black investors and government officials, it is clear that the push by blacks to win ownership positions in the city's remaining major developments is being cast by many as a racial struggle.
Equity is a new struggle and it's a fight," said Hudson, "but unless black people get into major economic development, there will always be alienation between the people who run this town and the people who live in it."
"It's racial," said Cobb, "and it will have far-reaching effects. It will do more to erase the ugliest form of racism," which, he said, is the exclusion of blacks from economic power.
Some black investors argue that often developers themselves put no hard cash into a development project; that banks and institutional lenders are willing to finance an entire project if they are satisfied with the past performance record of the developer.
"There are many ways financing can be put together so it can work," said Cobb. "I'm not a developer, I haven't got any money. . .(but) this is 1979 and this is Washington, D.C., and people are no longer going to accept what was.
"One of the answwers," Cobb continued, "is the redefining of who can be involved in a project."
To complaints from developers who are resisting the new partnerships, Cobb, said, "I would hate to think that it's a shotgun marriage."
Some black partners acknowledge the claims of developers that sometimes hundreds of thousands of dollars or more are required to plan and manage a major project.
"You do need front-end money for architects' fees, marketing studies, housing and transportation planning," said McZier, chairman of the D.C. Zoning Commission and a 10 percent partner in the proposed Gallary Place project with developer Miller.
"But $100,000 (in front-end costs) shouldn't keep blacks from getting involved in a $100 million project," she said.
McZier herself said she is contributing no cash to the proposed Gallery Place project. "The way I look at it, my involvement and my expertise is worth my equity."
But in a city where the average cost of a house is $100,000 and where many lenders require $20,000 in cash for such an investment, the idea of owning part of a multimillion-dollar development for no money down is remote for most people.
"I think very few people know that," said Hudson. "I know of a deal where a guy got 10 percent of the deal just for introducing a developer to a group of blacks."
But if there is a consensus among blacks in the development field, it is simply this: equality means equity -- the ownership in the most visible part of the city, downtown office buildings, hotels and retailing centers.
"People have attacked the requirement and the fact that (in some cases) minorities don't put up any money and that it looks like a front and a sham," King said, adding.
"To me, you've got to give people an opportunity to break into all levels of development, but if I were a major developer, I would go out and find a minority who has some money."