A photograph in Sunday's Washington Post showing a portion of several buildings on the Georgetown waterfront incorrectly identified them collectively as The Powerhouse. In fact, only the smoke stack shown at the left of the photo is part of The Powerhouse.

Holland & Lyons Associates Inc., the hottest and the trendiest of the Washington real estate firms that rode the boom market of the last decade, is selling off millions of dollars worth of assets in an effort to survive the most serious financial crisis of its short, meteroric history.

Controlled by Robert D. Holland and Bruce D. Lyons, both in their mid-30s and self-acclaimed as the super brats of the Washington land game, the 10-year-old real estate firm, has, over the last several months, slashed its staff from 150 to 30 and shut down or sold off some of its major operations and properties.

The problems of the firm, which boasted $30 million in gross sales in 1978, stem from a combination of a depression real estate market and the decision of multimillionare Warren Avis -- founder of the try-harder rental car company and financial guru to Holland and Lyons -- to pull out of their flagship project, The Paper Mill on the Georgetown waterfront.

But perhaps more, according to the 34-year-old Holland, the firm's troubles stem from his and Lyon's inability to cope with a fast-growing company and "too much waste" in their operations.

"We are trying to get in a more liquid position to shore ourselves up," Holland said in an interview.

"Are we going bankrupt?" he added. "May God strike me dead if I'm lying; no, we are not."

"Are we in trouble?" he continued. "Yes, we are.

"Are we the hot shots we thought we were?" he concluded.

"No, we are not."

The firm's financial retrenchment has included:

Shutting down its restoration division.

Renegotiating its construction loans from the First National Bank of Maryland to complete the $20 million condominium, apartment and shopping project at The Paper Mill without Avis' backing.

Selling or negotiating to sell its Siva Travel Service, its Omicron property management company, its interest in the Georgetown Inn and its Porche-Audi dealership in Annapolis.

"We're not out of problems, not for 12 months," said Holland, "but we have submitted a plan to the banks and for the first 60 days we have adhered to it almost to the nickel."

After years of trading on their image as a casual corporation where the laid-back motif of Lyon's Georgetown office featured a fishing pole sticking out the window over the C & O Canal, Holland said that he and his partner are now under orders from their lenders to "take a very low profile on the street and in the newspapers."

"We have a knack for being flamboyant about what we do," he said, "but now we're going to get our ship in order."

What happened to this brash duo that just a year ago was putting out image brochures under the name Holland, Lyons and Avis, a corporation "with a capital 'C'" in Lyon's words.

Holland and Lyons talk guardedly about their experience. On the one hand they blame the D. C. real estate market for their troubles ("It really went dead in September," said Lyons) and on the other they praise its resilience.

"The market is a lot stronger than I thought," said Holland. "Our mistake was not in real estate, but was personal -- Bruce and I coping with a fast-growing company. We're going to have to pay for a lot of ego mistakes."

Though the Washington market has cooled considerable, "It still hasn't been as bad as 1975 or 1968 because of the outside influence," Holland said. "Europeans are buying in this city. There is a lot of growth happening and there still is a housing shortage."

They may be buying, but not at the rate that Holland and Lyons had hoped would insulate them from recession. The company is carrying 20 unsold units -- most with six-figure price tags -- at the completed first phrase of The Paper Mill.

To the north, on the western boundary of Rock Creek Park, the partnership has worked out a reorganized financing plan with Washington Federal Savings & Loan Association to continue to carry eight newly constructed and unsold houses on Ellicott Street NW near Connecticut and Nebraska avenues, Holland said.

On the other side of Rock Creek park and to the south, little more than half of the condominium units at the company's 2001 16th Street NW project have been sold.

"We'd like to have more settlements, it sure helps the cash flow," said Lyons.

At The Paper Mill, "we sold one unit last weekend and we've got a (sales) contract coming in this weekend," said Holland.

Though the company is facing a period of transition from the jet set of high finance to a relatively austere position in Washington's middle market of real estate firms, Holland points out that not all of the company's activities are troubled.

The firm's hotel properties, among them the Connecticut Inn, the Normandy Inn and a Bedford Springs, Pa. resort all are maintaining high occupancies, said Holland.

Moreover, the Holland & Lyons international division, which brokers and invests in properties -- often with foreign partners -- "is still the strongest part of our company," said Holland, who added that the affiliate had recently brokered the sale of an office building in Florida.

"The strength of our position is that our assets outweigh our liabilities," said Holland. "We have sold off all of our operations that were marginal or losing money. We are going to solidify our position and then carefully go back and do other real estate deals."

In trimming the size of the company's management staff to 30 people, Holland said that he and his partner had acknowledged that there was "too much waste" in their operation.

"We no longer want to be a corporation with a capital 'C,'" said Holland. "The problem was that as we tried to diversify into other areas, we were turning away from the things we were good at."

Ironically, more than a year ago in an interview with Real Estate Washington Magazine, Holland had said that the reason for their diversification into other businesses was to protect the company from cash flow fluctuations in their real estate operations.

"Bruce and I are back into running the company," said Holland. "Bruce is working personally on Timberlawn (a detached housing development in Bethesda) and I am working on The Paper Mill."

Clearly the most serious set back to the young partnership was the pullout by Avis, who built an investments empire on the proceeds of his rent-a-car business, which he sold in 1955.

His Avis Enterprises, based in Ann Arbor, Mich., became the financial dynamo for Holland & Lyons in 1976. Though the Washington whiz kids touted their association with Avis, It was in fact a joint venture relationship with no permanent ties.

"There was never a partnership," said Lyons, "I'm not trying to undo any public relations. He (Avis) was very helpful to us in making some very big steps."

Holland and Lyons caught Avis' eye in 1976 when he purchased an Adelphi, Md. project that was being managed by the twosome soon thereafter, Avis invested $500,000 in a Holland & Lyons condominium restoration at 4710 Connecticut Avenue.

Then began the discussion that resulted in Avis lending his financial weight to The Paper Mill project.

"They (Holland and Lyons) didn't begin to have the money to do the project," Avis said at the time. "So we put up a couple million dollars in credit and with our firm's reputation they were able to get the financing."

Said Lyons: "I doubt that we could have gotten an $11 million loan on our own signature" for the first phrase of construction at The Paper Mill.

In an interview this week, Avis said that his company decided last fall to withdraw from all construction ventures nationwide because of the uncertain economy. "Our business decision had nothing to do with them, (Holland and Lyons)," said Avis.

"We look very pessimistically at this economy," he added, "We don't know whether we're going into a war economy or a recession ecomony. We have stopped a lot of projects because we want to see a clearing.

"It was our business judgment to put our money in other places," said Avis.

Holland and Lyons were not in a strong position to buy out Avis' interests in their ventures with cash, Avis said, so he structured his withdrawal to put a minimum of strain on the pair.

"Our pulling out didn't hurt their cash position at all and the money we took out was only money that we had earned," said Avis.

Basically, according to Avis and Holland, the Michigan entrepreneur was paid by signing over to him second mortgages on the Paper Mill units. Avis also took a mortgage interest instead of cash on planned commercial space planned for the second phrase of The Paper Mill.

Moreover, Holland said that 20 percent of the international division was signed over to Avis.

"On the Paper Mill, we relieved their cost of carrying the building," said Avis. "Our withdrawal shouldn't have caused them any cash flow problems. When we decided not to go (forward), we didn't do anything that put them in a bad position. If anything we picked up properties that helped them."

Avis also acquired one Holland and Lyons property that he had always admired, The Powerhouse, the old brick structure at 3255 Grace Street NW that served as Holland and Lyons headquarters until recently.

"I'm just fascinated with that building," said Avis.

Because he retains a financial interest in their largest projects, Avis is still wedded to Holland and Lyons. "But they're going ahead (alone) and they should abe able to make it without us. They have a relationship of their own with the banks," said Avis.

As for the future of his former partners, Avis expressed some optimism: "Sometimes the student surpasses the teacher. I think they will weather very well unless the economy goes to hell in a handbasket. I don't feel there is any question but that Washington will always be good, it just wasn't our ballgame."

With some of the old, characteristic bravado, Holland and Lyons express the same optimism but they mix it with some new qualifications.

"The market has been tough and we've had some problems, but everybody has problems," said Lyons. Warren (Avis) came in four years ago and did a lot for us, but we're a lot different than the little two-man shop we were then."

In contrast, a somewhat subdued Holland said in a separate interview. "Everybody is hyper around here, we're all tired and I've been through the hardest 60 days of my life.

"In 10 years in the business, we've never had to face a recession and everybody has told us we would have to go through this learning process," said Holland.

"We're not out of the woods," he added, "but we've reorganized and the banks feel more comfortable, but it will be a while before the banks and the public have confidence again."