Four large multi-family apartment properties in Southwest/Near Southeast have been put on the market. This potentially transformative development has raised a number of concerns from residents and neighbors. Property transfers can lead to displacement of residents, higher rents, and new buildings on former open spaces.
The owners of the Onyx on First (1100 1st Street SE), a 266-unit high-rise property; the Jefferson at Capitol Yards (70 I Street SE), a 448-unit high-rise; Channel Square (325 P Street SW), a 223-unit complex consisting of a tower and garden apartments and Capitol Park Towers (301 G Street SW), a 488-unit tower recently notified their tenants that their buildings are for sale.
Basics of the Transfer Process
The particular circumstances of the properties vary, but all are subject to the DC Tenant Opportunity to Purchase Act (TOPA). Under TOPA, a landlord must provide tenants with an offer of sale via notice and certified mail. This can be done before or after the landlord has signed a contract with a third-party buyer. The offer must include certain information, including the asking price, a building floor plan and an itemized list of monthly operating expenses.
For properties with five or more units, only a valid, incorporated tenant association has the right to take advantage of the law. If an association already exists, they must provide a statement of interest within 30 days of the notice. If there is no corporation, the tenants have 45 days to organize and submit their statement of interest to the DC Department of Housing and Community Development (DHCD). There are a number of requirements to incorporating a tenants association, including the requirement that it represent at least 40% of the tenants.
If a tenants association is successfully organized, the TOPA process generally results in a negotiated agreement between the residents in the association and an ultimate buyer. Tenants can settle for upgrades to the common areas of the property and/or waived rent payments. Tenants have the right to sell or assign their rights to yet another third party-buyer. In exchange for these rights, the new developer converts the property into a condominium or a cooperative, sometimes with financial incentives accruing to the tenants in the association. In some cases, as Urban Turf has reported, TOPA-negotiated settlements can bring hundreds of thousands of dollars to each resident. (“Logan Circle Residents Sitting on a Gold Mine”).
If an association is successfully formed and approved by DHCD, the association has 120 days to negotiate a sales contract, and then an additional 120 days from that date to secure financing and go to settlement.
The tenant association has the right to speak and negotiate on behalf of all the tenants. Tenants who do not join the tenant association are not able to participate in the voting or negotiating process. In the case of a conversion to a condominium or cooperative, tenants who moved within 90 days are not counted within the 51% needed to file TOPA rights. Those who are disabled or are over 62 years are exempt from having to move or participate in the conversion process.
Impacts of the Process
It can be very challenging for tenants to exercise their rights of determination, requiring tremendous unity and energy from a strong tenants association. When tenants come from diverse backgrounds and low-to-middle income levels, they’re invariably less able to understand the impact of various choices. Fortunately, there are some resources like the DC Office of Chief Tenant Advocate. Also, the District has created a Housing Production Trust Fund to bridge the gap for lenders who work with tenants, although the fund isn’t always adequately funded.
Notably, the TOPA law places a significant burden on property owners who must wait for the legally-mandated process to transpire and respond to the financial proposals of tenant associations. Indeed, the TOPA law has been cited as a reason for the high cost of apartments in DC.
Several years ago DC formed a Housing Strategy Task force to determine to best preserve affordable housing. While some of the recommendations were implemented, the future of TOPA remains unclear, as Urban Turf recently reported. (“The Uncertain Future of TOPA”) Regardless, any legislative changes won’t impact the properties currently for sale.
The Jefferson and Onyx are both properties less than five years old and did not yet have preexisting tenants associations. At the Jefferson, the tenants’ initial filing was challenged by JPI, the current property owner. A revised application is being developed to meet the criteria for incorporating an association.
The Onyx on First Tenants Association filed an application with DHCD in August but it is being challenged by the owner, Los Angeles-based Canyon-Johnson Urban Fund. If the tenants are unsuccessful, the pending $82.5 million sale to Chicago based Equity Residential could proceed. The association president reports that tenants are worried the transfer to Equity could result in increased rental rates and decreased services and amenities. In the meantime, the association is exploring other options including converting the units to for-sale condominiums.
Channel Square and Capitol Park Towers, both built in the middle of the 20th century have long been diverse and affordable rental communities. The former complex is under rent control and the latter has accommodated many Housing Choice Section 8 voucher recipients.
Channel Square’s tenant association just filed papers to DHCD to exercise their right to purchase. Although an association already was in existence, the bylaws needed to be tightened and the tenant participation rate increased. The association is looking forward to meeting with developers and financial partners. But lacking a successful arrangement, UIP’s $35 million bid could proceed.
Capitol Park Towers tenants are facing perhaps the most complicated process. Jair Lynch Partners put a $1.7 million deposit on the property in August, which given prevailing standards would translate to a property offer of at least $30 million. Tenants recently formed the New Capital Park Towers Tenants Association and are negotiating with Lynch. However, a pre-existing lawsuit must also be settled before any transfer can occur.
By Kael Anderson, President of the Southwest Neighborhood Assembly (SWNA).