Housing Authority allows developer to not develop its site

By Jeffrey Anderson

The D.C. Housing Authority has struggled for years to provide enough housing and economic opportunities for the city’s low-to-middle income families. Such is the authority’s financial plight that its director, Tyrone Garrett, recently went hat-in-hand to the D.C. Council in need of $343 million next year alone, simply to abate environmental hazards in the worst affordable units.

In all, the Housing Authority will need $2.2 billion over the next 17 years to ensure that its 8,000 units are in good shape, Garrett told the Council.

With DCHA hurting for money, District Dig was surprised to learn that for the last five years, it has been sitting on valuable property at 1133 North Capitol Street NE–the site of its own headquarters.

DCHA’s headquarters encompasses “more than 1 million gross square feet of developable property,” according to its website, and is situated near the geographic center of the NoMa Business Improvement District.

Yet it has allowed a group of developers to hold on to the property since selecting them over eight other bidders, as land values have risen in the surrounding area and eclipsed the cost to the winning team, which has no current written agreement in place.

The Housing Authority issued a request for qualifications in 2013 and sought a new 80,000 square foot office for itself in addition to a mix of retail and residential, with at least one third of the latter set aside for affordable housing. The RFQ stated that the area surrounding the property had undergone “significant revitalization in recent years,” and that the property was “one of the few significant properties untouched by the revitalization of the area.”

In November 2014, in the midst of a mayoral transition, DCHA selected a group led by Mid-Atlantic Realty Partners LLC and CSG Urban Partners to deliver the project.

“The most important thing about this redevelopment is that we will be adding affordable housing units where they currently don’t exist,” former Board of Commissioners Chairman Pedro Alfonso said at the time. “We will work with the MRP Realty/CSG Urban team and other city partners to finance as many units for low and moderate-income families.”

It took three years, however, for the Housing Authority to enter into a Development Agreement with the MRP/CSG group, incorporated as 1133 North Capitol Street LLC, on December 18, 2017. More than a year-and-a-half later, a slew of unexecuted documents and questions remain.

The Dig began asking DCHA about the status of the property in April, and obtained a copy of the Development Agreement about a month later, on May 22, in response to a Freedom of Interest Act request.

The Agreement grants the group and its partners, including by then Taylor Adams Associates, led by former D.C. development official David Jannarone, an option to enter into ground leases in separate phases with an obligation to build new offices for DCHA on the site and pay $7 million to fund a customer “Service Center” off site.

Within 30 days of the Agreement, the developer group was required to enter into a series of related and “Critical Agreements,” and a Letter of Intent under which DCHA and the Office of the Deputy Mayor for Planning and Economic Development would fund the Required Affordable Housing Subsidy after closing on the First Ground Lease.

The development team would pay an additional deposit of $100,000, known as “earnest money,” and a series of additional deposits totaling more than $2 million in the first phase of development, then a base rent of $2 million per year for the second and third phases of development.

The current taxable assessment of the property, according to the Office of Tax and Revenue, is close to $75 million. And though the property is not taxed at the moment, it sits in between a relatively new multi-family building at 2 M Street NE and the National Public Radio headquarters at 1111 North Capitol Street NE.

Adjacent to site’s rear parking lot is the amenity-laden Ava NoMa apartments, featuring ground floor retail alongside a bustling stretch of First Street NE.

A redeveloped property consisting of market rate and affordable housing and retail would be within walking distance of Harris Teeter, Trader Joe’s, multiple coffee shops, dining locations and two Metro stations–Union Station and NoMa-Gallaudet U–which are both less than three-quarters of a mile away.

Since its execution, the Agreement to develop the site has been amended four times to extend negotiations. The fourth amendment expired on February 28.

DCHA says that any “Critical Documents” referred to in the Development Agreement “remain unexecuted.” And the Housing Authority is not willing to say why. “My office will not comment on the negotiations, underlying documents or deal points,” said Deputy General Counsel Edward Kane in an email to The Dig.

The Housing Authority functions as an independent agency with an 11-member Board of Commissioners, the majority of which are appointed by the Mayor and approved by the Council. The Board also appoints an executive director who is charged with negotiating development agreements.

Kane said that Garrett, who took over the Housing Authority in October 2017, just in time to finalize the agreement, is in charge now. “The Board of Commissioners did not (nor was it required to) approve issuance of the RFP (to develop the property),” he wrote. “The Board authorized the Executive Director to negotiate and execute the Development Agreement, but did not reserve to itself an express approval of the agreement itself.”

Of the status of the project,” Kane wrote, “Currently, the parties have agreed verbally to continue good faith negotiations, notwithstanding the lapse of extensions for the Development Agreement.”

Though Garrett and his staff have briefed the Board periodically, Kane gave no indication that he was aware of any material changes to the Agreement that was executed in December 2017. Nor was he aware of the valuation of the property or when it would have occurred.

Kane also added that the underlying deal elements could change in the coming days. He deferred further questions to Garrett, whose office did not respond to an email request for comment.

Neil Albert, a former deputy mayor for planning and economic development under Adrian Fenty, and a former adviser to Mayor Muriel Bowser and her appointee to chair the DCHA Board of Commissioners, did not return calls for comment.

Jannarone, a Bowser administration insider who served as director of development under Albert during the Fenty years declined to comment. MRP President Robert Murphy did not return a call, nor did Simone Goring Devaney, managing principal of CSG.

The Dig also reached out to Deputy Mayor for Planning and Economic Development Brian Kenner.

Kenner is an ex-officio member of the DCHA Board of Commissioners who often serves as the tie-breaking sixth vote on the 11-member board when a Bowser priority is on the agenda. But Kenner, who said he hasn’t seen the Development Agreement, had even less to say than DCHA officials or the developers.

“It’s not a [DMPED] project, so I’m not sure of the status,” he said, during a brief phone interview recently. “The Housing Authority is still in negotiations, so I don’t think there’s anything formal yet.”

Kenner said because the property is not in his portfolio, or any D.C. agency’s portfolio, he really doesn’t know anything about the project’s genesis, the status, or even who is involved. “I’m actually not familiar with who won [the RFP],” he said.

That seems unlikely, given his office would be negotiating with the developer over potential support for the affordable units component.

Robin-Eve Jasper, president of the NoMa BID, says it is unfortunate that the project has not started yet, citing the benefits it will bring to affordable housing, DCHA and the neighborhood, which she hopes will include the addition of a retail and pedestrian promenade that runs north and south between North Capitol and First Street NE.

“The site is a large one and would be a complicated transaction, even for a private developer trying to put it together without a public partner,” said Jasper, who has worked with Jannarone and under Albert during the Fenty administration. “The passage of time and changing market conditions only add to the complexity.”

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