After 18 months of controvery between developers and tenants, the 800-unit Columbia Plaza apartment complex on Virginia Avenue NW is under contract to be converted to cooperative ownership by a subsidiary of First Condominium Development Co. of Chicago. The firm plans to buy the five-buildings for $55 million.
Canadian firms had been negotiating to buy the complex for condominium conversion, but the plans were blocked by Columbia Plaza's tenants.
Harold Louis Miller, chairman of First Condominium Development Co., said this week that the tenants will be offered prices on their units that are 30 percent below the level originally set by the Canadian firms. Under District law, the tenants have a right to make a counter offer to the current owners, but they have failed in previous attempts to convert the buildings themselves.
Barbara Otis, president of the Columbia Plaza Tenant Association, said:
"We've heard rumors about another agreement to sell the buildings but we are waiting to hear a new offer. I do know that tenant approval is needed. At this point I haven't the foggiest notion of what will happen."
Miller said that the average price to all tenants will be $82 a square foot, or about $80,000 to $90,000 for a one-bedroom-unit. He said that "our plan, as always, will be to deal fairly with the tenants who hold the key to a successful conversion." He added that specific details of the offering will be given to tenants by mid-November.
The sale will not include the ground under the buildings, the 1,000 parking spaces and the commercial space. The current owners of the complex, who include Realtor Warren Montouri, developer-investors D.F. Antonelli Jr. and Kingdon Gould Jr, and investors Dr. Laszlo Tauber and Edward Mernone, said that the previous contract with the Canadian companies, Cadillac Fairview and Daon Corp., ended in July.
The tenant association at Columbia Plaza had made an unsuccessful effort to match the Canadian offer and had worked with attorneys and local development specialists in an effort to set up a tenant conversion.They have the right under District law.
The Chicago firm is planning to go co-op to take advantage of an existing $19 million, FHA-insured loan on the complex that has a rate below 6 percent. The firm says it also plans to use a considerable amount of the purchase price due the present owners for permanent loans to tenants who want to buy their apartments. In effect, the sellers would hold individual mortgages for tenant buyers.
If Columbia Plaza tenants approve the cooperative plan, which calls for rehabilitation of the 15-year-old building, Miller said that it is likely that more than 60 percent of the tenants would become purchasers.
"Our experience at the large Carl Sandburg Village high-rise complex in Chicago, and in other conversions, indicates that favorable prices and reasonable deadlings with tenants results in a high coversion rate," he said in an interview here.
One of the current partners here said the owners also insisted on a 30 percent discount price to tenants below the earlier offering prices as a means of assuring success of the conversion.
Under the cooperative ownership concept, individuals buy shares of stock in the building and receive the right to occupy a certain dwelling. Each actually owns a share of the entire building. Unsually, there is common mortgage on the total property and one tax bill.
In a condominium, purchasers own their actual units and have separate mortgage and tax bills. The income tax advantages for mortgage interest and taxes are abourt equal in both cases. However, co-op owners often have to pay cash or arrange private financing for the price of a unit above the share of the common mortgage. Only recently have local lenders have been making individual loans to co-op buyers.
Both the nearby Watergate complex in Foggy Bottom and the Harbour Square complex in Southwest are co-ops, as are the older Westchester and Tilden Gardens buildings in Northwest. Recently, an FHA-financing procedure has made it possible for moderate-income tenants in rental buildings to become co-op owners at a relatively minimum cost.
The plan for the redevelopment of the 1,051-unit Promenade in Bethesda also calls for cooperative ownership with one common mortgage loan and individual loans to purchasers set up through an area savings and loan association. That developer is American Invsco, another Chicago specialist in conversions. However, a tenant group has been fighting that conversion, despite the fact that it has not been found to be in conflict with existing Maryland law.
In the District, tenanat approval of a developer's plans and offering to them is almost tantamount to a successful conversion to either condo or co-op ownership. Tenants of several buildings have hired or set up their own development efforts under terms of District law. The largest was McLean Gardens, where units are still being sold to non-tenants.
Regarding the plan to convert Columbia Plaza to condo ownership, First Condominium Development's Miller stressed that the firm does not handle its own management or sales of buildings. (The Shannon & Luchs real estate company has long managed Columbia Plaza.)
Miller added that purchases by investors and speculators are discouraged because "we like tenant occupants in the buildings."
The Washington area now has more than 70,000 converted and newly built condominimum and cooperative apartments. An estimated 15 to 20 percent of them are owned by non-residents.