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The latest volley has been fired at the Museum Square Apartments, the central battleground in the wars over affordable-housing preservation and tenant rights, with the owners of the threatened apartment complex filing a lawsuit against the city for its efforts to intervene.
In June 2014, the Williamsburg, Va.-based Bush Companies informed residents of Museum Square, at 401 K St. NW, that Bush would demolish the building unless the residents paid $250 million. The Tenant Opportunity to Purchase Act gives tenants the right to buy a building before it’s sold or razed. Usually, the price is determined by the market. But in the case of demolition, it’s up to the owner to make a “bona fide offer of sale.” And in this case, some city officials deemed Bush’s offer, which came out to more than $800,000 for each of 302 Section 8-subsidized apartments, to be less than bona fide.
So they took action. After learning of the issue, then-D.C. Councilmember David Catania quickly drafted emergency legislation to prevent landlords from charging these exorbitant prices to residents in order to avoid demolition. Then-Mayor Vince Gray offered up companion temporary legislation, and both measures passed the Council and became law.
Now Bush, under the name of its affiliate that technically controls Museum Square, Parcel One Phase One Associates, is suing. On Friday, Parcel One filed its complaint with the U.S. District Court for the District of Columbia, alleging that the Council has unfairly targeted the property owners with its legislation.
“Through a series of legislative maneuvers, the City Council has specifically targeted Museum Square and injected itself seemingly retroactively to: halt Parcel One’s plans to redevelop the Property; strip from the owner well recognized aspects of the value of property on which a housing accommodation sits; and effectuate a transfer of wealth (i.e., the development value) from Parcel One to the [Tenant] Association,” the lawsuit states.
There are several layers to the complaint, some of which appear to undercut one another. First, Bush argues that its $250 million valuation was legitimate. After demolition, Bush could build 450 apartments and 350 condos on the site, the company states. Valuing each condo at $350,000 and each apartment at $291,000, the total value of the parcel becomes $250 million, which Bush calls “Parcel One’s objective good faith and fair analysis of the residual value of the property based on the property’s intended use.” But that calculation does not appear to factor in the substantial cost of tearing down and rebuilding the property.
Then the lawsuit states, “The legislative history of the emergency and temporary amendments is devoid of any evidence or findings of a wide-spread condition concerning bona fide offers of sale present in the District of Columbia or which needed to be addressed by emergency legislation.” In other words, the legislation is aimed directly at Bush—-because, it’s implied, Bush is the only company to make such an exorbitant offer. Likewise, the lawsuit makes no mention of the fact that under the legislation, the sale price would be determined by an independent appraisal; if Bush is correct that $250 million is a fair price, then the appraisal would presumably back up that assessment.
The lawsuit also takes issue with the Council’s attempt to have the legislation apply retroactively to all properties in this situation since January 2014—-a move the lawsuit says aims to target Museum Square. But the Department of Housing and Community Development has already determined that the legislation won’t apply retroactively to Museum Square.
Spokesmen for DHCD and the Office of the Attorney General did not have any comment at the moment.
This lawsuit is the second one involving Museum Square since the $250 million offer was made. In October, Museum Square tenants sued Bush for an alleged violation of the TOPA law, arguing that the $250 million sale offer was not “bona fide.” That case remains pending.
In August, following the uproar over Museum Square, Bush sent a letter to the U.S. Department of Housing and Urban Development informing the agency that it was changing course and would not opt out of the Section 8 contract for the building. But according to the lawsuit, Bush contacted HUD again in October to announce its intention to opt out of the contract, effective Oct. 1, 2015.
In other words, the clock may be ticking for the low-income residents of Museum Square, most of whom are Chinese and many of whom are elderly or speak little English. But that clock could easily be stopped by an ever-growing number of factors: the tenants’ lawsuit, the city’s legislation, DHCD’s inquiry into the matter, and now Bush’s lawsuit to top it off.
Photo by Darrow Montgomery