Last week, the DC Council held a hearing on the proposed surplussing of the Hurt Home, a large District-owned building at 3050 R St. Neighbors saw flaws in the substance and process of that decision, and several went to the hearing to have their voices heard. The Council did not act on the surplus request last week, but will vote on it this WednesdayCORRECTION: No Council Vote is planned right now.
What was revealed last week are the terms of the proposed disposition of the property to the Argos Group. The most salient provision is the proposed purchase price: $1.3 million.
As GM discussed a little while back, that purchase price was likely going to have to thread a couple of tight needles. Make it too high and the only way the developer can afford to recoup its costs to rehab the building is for it to build either too many apartments (as far as the neighbors are concerned, at least) or build the apartments too expensive to sell. Make it too low and you risk giving away a valuable publicly owned property for peanuts. Plus the developer may just go ahead and build too many apartments regardless.
On the face of it, $1.3 million seems way too cheap for such a grand property. By comparison, that amount will typically get you a pretty nice (but not amazing) three bedroom rowhouse in Georgetown. Halycon House, which is about as large as the Hurt Home, is selling for $19.5 million. (Yes, yes, it’s ridiculous to compare Halcyon House, which is an elegant mansion, to the Hurt Home, which is a decrepit dormitory. But would it really take over $18 million in renovations to turn the Hurt Home into something comparable to Halcyon House?). For the record, the District says the appraised value is about $6 million (and that’s accord to the Deputy Mayor of Planning and Economic Development’s office. According to the tax assessment, the property is worth nearly $9.5 million).
For additional comparisons, consider this:
- The Phillips School:
- Sold by the District to Washington International School in 1970 for $500,000 (about $2.7 million in today’s money)
- Sold by WIS to developer in 1998 for $2.1 million
- The Wormley School:
- Sold by the District to Georgetown Univ. in 1998 for $1.5 million
- Sold by Georgetown University (after doing nothing with it) to developer in 2005 for $8 million
It should be said that the District can be justified is selling the property for less than the assessed value. For instance, turning the property into a multi-unit building could lead to higher overall assessments, with higher real estate taxes. Plus the agreement calls for 34% of the units to be affordable. There’s been some discussion of units being reserved for the blind, or for police and firemen, but the agreement doesn’t specifically discuss this. Finally, the city has an interest in increasing its population. A mansion doesn’t do that; condos do.
The real sticking point remains the number of condos. The agreement calls for 35. The neighbors still think that’s too much. They would like to see something in the teens. At the hearing, Gilberto Cardenas, a principal of Argos Group, indicated that they were still open to negotiating the number of units down. Of course, it would seem that that would mean an even lower price.
Either way, the only way that the public will feel comfortable with the price is for the economics of the deal to be fully vetted by a third party. The primary goals are to save a historic structure and to bring it into use again. Making it profitable to the developer is a means to reaching that goal, but it is not a goal in and of itself. We must be certain that the profit being taken is reasonable but not excessive.
Here is the agreement itself (note that there is no clear reversion clause that would prevent another Wormley School-flip):
This post was updated to correct the statement about the Council vote and to clarify that the price is not final.