The Museum Square Apartments have been the subject of two lawsuits and three D.C. Council bills.
The Museum Square Apartments have been the subject of two lawsuits and three D.C. Council bills.

We know D.C. Get our free newsletter to stay in the know.

Residents of the Museum Square Apartments in Mount Vernon Triangle were surprised to learn in June that their building was worth $250 million. It doesn’t look it from the outside, where it’s the lone aging structure on a strip of K Street NW dominated by sleek new residences, or on the inside, where all of the drab apartments are occupied by tenants receiving Section 8 subsidies from the federal government. But the property owner, the Bush Companies of Williamsburg, Va., had just notified the tenants—-mostly Chinese, largely elderly, and with limited knowledge of English—-that it would tear down the building at 401 K St. NW unless they managed to pay the building’s value, which it set at $250 million.

That’s considerably more than the $36 million at which the city assessed the property this year, and it comes out to nearly $828,000 per apartment. The price seemed so exorbitant that it spurred D.C. Councilmember David Catania and Mayor Vince Gray to draft legislation that would cap the amount property owners can charge their tenants under the Tenant Opportunity to Purchase Act to prevent demolition of the property. Bush has since dropped its stated intention to opt out of its Section 8 contract, although the clock technically continues to tick on its TOPA offer.

So how did Bush justify the $250 million pricetag? Documents obtained through a Freedom of Information Act request shine some light on how Bush arrived at that figure—-or at least how it defended it when the city questioned whether it was truly a “bona fide” offer, as required by law.

According to a series of July emails and letters from Richard Luchs, the high-powered lawyer for Bush dubbed “the most feared landlord’s attorney in the District” in a 2006 Washington City Paper profile, to Rental Conversion and Sale Administrator Lauren Pair, the property would fetch a price of $250 million “if it is developed as [Bush] intends, into a combination of 800 condominium and apartment units.” Luchs argued that with 800 units, the price per unit wouldn’t be $828,000 but a much more reasonable $312,500.

The latter figure, Luchs argued, is less than many apartment buildings sell for. Luchs pointed out to Pair, for instance, that the JBG Companies sold the Louis at 14th apartment building to TIAA-CREF in June for $634,000 per unit. That doesn’t seem like an entirely fair comparison, given that the Louis didn’t require expensive demolition and reconstruction, and that its apartments, at the highly sought-after corner of 14th and U streets NW, were renting for as much as $2,629 for a studio and $9,624 for a two-bedroom. Nor does his allusion to the pending sale of the Residences on the Avenue at 2221 I St. NW for $666,000 per unit, a building where many George Washington University students—-or, more accurately, their parents—-plunk down an average of nearly $4,000 a month for swanky apartments.

Luchs, who did not respond to a request for comment, challenged the authority of Pair and the D.C. Department of Housing and Community Development to weigh in on whether Bush’s sale offer was bona fide. “With due respect,” he wrote to Pair, “you are not qualified to opine as to the bona fide nature of an offer of sale because you are neither the Property owner nor a licensed appraiser.”

Pair didn’t buy Luchs’ arguments, writing back to him on Aug. 14 to request a better justification of the asking price and explaining, “As the [Rental Conversion and Sale] Division has repeatedly expressed, the asking price of $250 million does not appear to have an objective valuation measure or other reasonable basis.”

By that time, Bush had notified the U.S. Department of Housing and Urban Development that it wouldn’t be opting out of its Section 8 contract. But that didn’t resolve the TOPA sale offer question. Pair wrote to Luchs, “It is the Division’s intention to work cooperatively with the Owner, however your continued refusal to provide requested information will result in the Division examining alternative actions to obtaining appropriate responses.”

Luchs responded the next day and disputed that he had not provided the requested information, citing the justification he did provide. He also noted that Bush had just commissioned an independent appraisal of the property. “It is our anticipation,” he wrote, “that said appraisal will fully support the price for the Property which my client has previously determined.”

Photo by Darrow Montgomery