City officials have unveiled an agreement to sell Metro Center, a prime downtown redevelopment site, for millions of dollars less than the project's developers had offered to pay for the parcel only a year ago.
Last year, developers Oliver T. Carr and Theodore R. Hagans had offered $37 million for the potentially lucrative site, which sits atop one of Washington's busiest subway stations. At the time the city demanded $51.6 million.
Under the agreement made public yesterday, the developers would buy the Metro Center parcel in pieces over the next four years. They would pay roughly $14.5 million in cash as the purchases were made and another $14.5 million in 30-year-notes at favorable interest rates.
At the same time, the city would share in the future profits from the office, retail and hotel complex to be built on the land. That unprecedented arrangement would generate more money for the city, but it is unclear how much or when.
The agreement must be approved by the city's urban renewal agency, the Redevelopment Land Agency, before it can take effect. The RLA is expected to act next month.
The sale agreement was negotiated last November by James O. Gibson, then city planning director, and later modified by Ivanhoe Donaldson, deputy mayor for economic development.
Donaldson said in a letter to the RLA that because of current difficult economic conditions, the agreement contains "a number of mechanisms that have not typically been contained" in land-sale arrangements.
Donaldson said usually the city would "delay sale until the market improves" but "in the case of Metro Center, the administration concluded that other public benefits warranted the non-standard terms of payment."
The letter ended by saying that the proposed agreement was "fiscally prudent as well as capable of being financed in these difficult economic times." Donaldson was not available yesterday to elaborate on his letter.
Neither Carr nor Hagans was available for comment yesterday.
The release of the agreement is the latest chapter in the city's lengthy attempt to redevelop the parcel of land located on the north side of G Street NW between 11th and 13th streets. City officials had expected the project to serve as the centerpiece for redevelopment of Washington's traditional shopping area east of 15th Street.
The agreement would give Carr most of what he was asking for last year when negotiations over the land price broke down, leading to court battles and lengthy delays. At that time, former housing director Robert L. Moore wanted the entire Metro Center parcel to be purchased at once, for $51.6 million. Carr, one of the city's foremost developers, wanted a lower price and the right to buy the parcels in stages.
The agreement is aimed at allowing construction of a new Hecht's department store on the Metro Center block between 12th and 13th streets NW to start before the end of the year.
It provides for the developers to obtain the land for the Hecht's store simply by placing $3 million in an interest-bearing account for the next three years. The interest from that account would go to the city at the end of that period, and the principal to the owner of the parcel, which by that time will be the Hecht Company. Financial arrangements between Carr, Hagans and Hecht's will be worked out separately.
City Housing Director James E. Clay said the city accepted this arrangement because officials wanted to keep Hecht's, one of the city's two largest department stores, downtown.
The agreement provides for the developers to buy the remainder of the Metro Center land for a total of $29 million on a timetable that spans the next four years and that can be extended to 1989. It allows for some adjustment of the purchase price to account for inflation, based on a complex formula keyed to changes in the local consumer price index.
The developers would pay half the purchase price in 30-year notes at an interest rate adjustable every five years and pegged at or below the interest rate paid on five-year U.S. Treasury notes.
The rate for five-year Treasury notes sold in February is 9.8 percent.