The D.C. Redevelopment Land Agency voted yesterday to sell 2.8 acres next to the Gallery Place Metro station at Seventh and G streets NW to a minority-controlled development group that will construct a $140 million complex of offices, apartments and a hotel.
The ambitious project is the largest to be undertaken in the rundown Seventh Street corridor in many decades. It also is the first downtown urban renewal project awarded to a black-controlled development team.
The awarding of the contract is the culmination of a 10-year effort to attract major new development into a section of the city that was neglected for years and economically undermined by the racial conflicts of the 1960s.
Capital Landmark Associates, the development partnership, will pay $17 million for the 120,838 square feet bounded by Sixth, Seventh, F and G streets. That is just over $140 per square foot, far less than the $500 to $600 per square foot recently paid for some choice downtown parcels on the private market but, according to RLA figures, comparable to the overall average land price in the old downtown area.
Yesterday's vote by the RLA is final, but the developers still must nail down long-term financing in a time of tight money and high interest rates. William Fitzgerald, president of Independence Federal Savings and Loan and of Capital Landmark, said the developers have "ironclad commitments" from lenders, but they may have to give up some equity in the project in order to obtain the loans.
Fitzgerald assured the RLA board that "we are fully prepared to go forward." If potential lenders obtain more than a 10 percent ownership interest in the project as a condition of financing it, thereby reducing the percentage of minority control, RLA approval of the new arrangements will be required. RLA officials identified the potential lenders as American Security Bank and Fidelity Bank of Philadelphia.
It would be difficult to overstate the importance of Capital Landmark's project to the long-planted redevelopment of the shabby, depressed area around Gallery Place. It is to be the anchor of a planned rejuvenation and rebuilding that would fill the development gap between the booming area around the Convention Center to the west, the Hyatt Regency Hotel to the east, and Pennsylvania Avenue to the south.
RLA board members, voting 4 to 0 to approve the sale, specified that the contract must be signed by Aug. 6. Fitzgerald said Capital Landmark hopes to break ground within eight months after that.
The project, designed by architect Vlastimil Koubek, will consist of a total of about 1.8 million square feet, all in one multipurpose building. The building will contain 590,000 square feet of office space, a hotel of 535 rooms, 205 apartments and 1,100 parking spaces.
Fitzgerald said the developers had a "firm contract" with Trust Houses Forte of Britain, the world's largest hotel firm, to operate the hotel, which will face the National Portrait Gallery across Seventh Street. The apartments, of which 20 percent will be reserved for low- and moderate-income tenants, will be at the Sixth Street end, with the offices in the middle.
At a public hearing that preceded the vote, the discussion focused less on the nature of the project than on the price Capital Landmark is paying for the land. RLA was sharply criticized in the press and by members of the City Council for an earlier sale of a parcel at 12th and G streets NW for $130 a square foot, and several witnesses argued yesterday that the agency should hold out for more at Gallery Place.
Nira Hardon Long, RLA chairman, acknowledged that RLA probably could obtain a higher price if it offered the land for its "highest and best use," which would be all office space, but "that would make our downtown look like Rosslyn." By requiring mixed uses, she said, RLA guarantees "24-hour use of the area," a desirable social goal even if it means a lower return on the land sale.
RLA officials said the price was determined by two independent appraisers, Anthony Reynolds and Clarence A. Richardson, who calculated the site's value at $17 million and $16.5 million respectively. Fitzgerald said another appraiser hired by Capital landmark put the value at $16.4 million.
Fitzgerald argued that it was misleading to compare a site offered by RLA, which can only be developed with RLA approval of design and function, to an unrestricted site that might go for more money.
"If two Rolls-Royces come off the assembly line, but one has the caveat that it must be purple, you can only drive it on Sunday and you must have a chauffeur from Mars, it just doesn't have the same value," he said.
Fitzgerald was asked how the project would be affected by the planned move of the Hecht Co. out of its main store across the street to another downtown urban renewal site at Metro Center, 12th and G streets NW. He said that "it caused us to rethink our position but we don't feel it will be detrimental" because the present Hecht site will be redeveloped by Oliver Carr and Theodore Hagans, the developers of Metro Center.
Officials of the Oliver T. Carr Co. confirmed that as part of the arrangement bringing Hecht's to Metro Center, Carr and Hagans expect to acquire the existing Hecht Co. store on Seventh Street. They said it was too early to speculate on what would be done with it, however.