Million-Dollar Properties, $1 Deals | WAMU 88.5 - American University Radio

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Million-Dollar Properties, $1 Deals

Day 2: Deals for Developers, Cash for Campaigns

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The Minnesota Benning development in Northeast D.C. was appraised at more than $13 million and awarded to two developers, Donatelli and Blue Skye, for $10.
The Minnesota Benning development in Northeast D.C. was appraised at more than $13 million and awarded to two developers, Donatelli and Blue Skye, for $10.

Few developers were better at winning D.C.'s taxpayer-owned real estate than Blue Skye Construction and Donatelli Development. The two firms have won or partnered on a quarter of the land deals since 2008, a total of five projects that span the city.

The appraised value of all this public land, according to city records: $17.5 million.

The price paid by the developers to the city, a little more than a parking ticket: $88.

Description Recipient Payment to DC Appraised Value
3800 block of Georgia Ave Donatelli Development $1 $1500000
Hayes Street Apartments Blue Skye Development $1 $1802160
The Nannie Helen at 4800 Blue Skye Development $1 $525520
Minnesota-Benning Phase 2 Donatelli, Blue Skye Development $10 $13176000
Strand Theater* Blue Skye Development $75 $496170
  TOTAL $88 $17499850
* Blue Skye's owner Scottie Irving said his firm Blue Skye Construction was contracted for the project but is no longer involved.

The District government has given away more than $200 million of taxpayer-owned land to private developers over the past five years. The city sold or leased these surplus properties at deeply discounted prices. The firms winning these deals are required to build affordable housing and hire local businesses.

A WAMU investigation found that these properties often ended up in the hands of politically connected developers who donated handsomely to local campaigns, and the jobs promised by developers sometimes went to individuals with political ties to city officials.

Chris Donatelli hosted a birthday fundraiser for Fenty at his home in 2008. Both men enjoyed the mayor's luxury box suite at sporting events and Irving even starred in a campaign ad for Fenty's reelection bid.

While critics like Parisa Norouzi of Empower D.C. see these as sweetheart deals for connected firms, developers such as Donatelli see complicated public-private partnerships that require companies with a track record of success.

"It's not really a question of who's in power and who do I know," said Donatelli, who said his company has won land deals under several mayors, not just Fenty.

Chez Billy
Donatelli Development was awarded storefront property along Georgia Avenue. One of those parcels is now a "Chez Billy," a restaurant co-owned by the developer. (WAMU Photo by Patrick Madden)

And Donatelli says the appraised value of the properties doesn't tell the whole story: "That's what the land is worth if it's sold in the open market and the city doesn't have affordable housing requirements." Donatelli says he must create subsidized housing on these projects and pay for them.

  • The Hurt Home, a mansion in Georgetown valued at $9 million and sold for $650,000.
  • The Strand Theater, valued at nearly $500,000 and sold for $75.
  • Storefront property near the Georgia Avenue metro station, valued at $1.5 million and given away for $1.

A WAMU investigation shows the winning team of developers donated hefty sums of campaign cash to city officials over the past decade –$75,000 on average. Firms often “bundled” contributions to candidates by using employees, family members and affiliated businesses. Our investigation shows the five development teams that gave the most campaign cash won the biggest giveaways.

The biggest land subsidies were awarded to the development teams that donated the most money. Of the 20 land deals WAMU examined, the top five development teams — in terms of contributions over a ten year period — also won the top five land deals.

Project Payment to DC Value of Land Contributions by Development Team
Hine Jr. H.S. $21,800,000.00 $44,700,000.00 $194,045.00
West End (Library & Fire Station) $18,000,000.00 $30,018,000.00 $127,295.00
The Wharf $1.00 $95,000,000.00 $126,732.81
Capital Fire Station $15,000,000.00 $40,300,000.00 $123,646.00
Minnesota-Benning (Phase 2) $10.00 $13,176,000.00 $122,076.00

Developers not only gave money, they held fundraisers for city officials, Norouzi said.

“It became very clear that there was some significant immediate ties between the developers who were receiving land subsidies and those who were even hosting fundraisers at their homes,” said Norouzi.

District officials say political connections and campaign contributions play no role in the awarding of land. “The process is competitive,” said Chanda Washington, a spokesperson for the city’s development office. “We submit a request and developers will respond to our solicitations – we don’t control who will respond.”

Developers Deny Connections Land Them Deals

Developers winning these properties also dispute that there is any connection between campaign cash and these discounted land deals.

“It’s a fiction to think that we are disproportionately preferred because of campaign contributions,” said Anthony Lanier of EastBanc, a development firm that won two of the biggest land deals in recent memory: The Hine School and The West End project.

“Not like some people think, we go and schmooze them to convince them that we’re better,” said Lanier, who held a fundraiser for Fenty in 2010 and whose firm Eastbanc has donated more than $50,000 to city officials over the years.

And developers say it’s unfair to judge these deals based on how much the developer paid the city. “The cost of a public private venture is far higher than that of just buying a piece of land,” Lanier said.

He says all of these projects require affordable housing, which eats into profits. And in some cases, like EastBanc’s West End project in the Foggy Bottom neighborhood, the developer promises to rebuild a library or fire station, which can cost millions of dollars.

“Unlike some of the people who claim that these are giveaways, look at our self as nothing else, as a project manager, executing a job that is solicited by the city,” Lanier said.

Property Value Appraisal Flawed
Some critics say the city’s system for appraising the value of its own properties is flawed.

EastBanc’s West End land deal, for example, is tied up in court right now. Local activists filed a lawsuit claiming the land – which the city valued at $30 million – is actually worth $100 million. Activists say the city miscalculated the appraisal. Lanier and the city disagree. 
 
“There is no $100 million giveaway on the West End,” Lanier said.  
The city’s development office says these properties are appraised based on the max density of the site and what is the highest and best use for the property. This value is used as leverage to pay for public benefits, including affordable housing.

“The reality is that there is no hard and fast requirement for the city to do a fair market evaluation.”  said Ed Lazere with the non-partisan DC Fiscal Policy Institute. “It's more of a negotiation and it's not always clear in the end whether the city got its money's worth.”

Holding Developers Accountable

There’s another reason it’s unclear if the city is getting its money’s worth. The D.C. government – by its own admission – has failed to track whether developers are holding up their end of the bargain.

As part of these land agreements, the developers are required to hire small and minority-owned firms based in D.C. known as “certified business entities” to help build these projects. 

WAMU asked the District government for the contracting records on these land deals and the city didn’t have the paperwork for nearly half of them.

And for the records that were available, WAMU found some of the small firms hired by the developers had political ties to city officials signing off on these deals.

Chez Billy
Blue Skye paid a dollar for the property in Northeast D.C., which was valued at $1.8 million dollars. But the project required affordable housing and local hiring. (WAMU Photo by Patrick Madden)
In 2009, the District government picked Blue Skye Construction to develop city-owned land at 4427 Hayes Street in Northeast D.C. The property was valued at $1.8 million; Blue Skye paid $1.

But there were strings attached. Blue Skye promised a third of the units would be affordable housing and that more than 35% of the contracting jobs would go to small local businesses known as “certified business entities” or CBEs.

Before the land agreement could be finalized, however, the developer needed the D.C. Council to sign off.

“I look forward to hearing from Blue Skye,” said Ward 7 Council Member Yvette Alexander at a February 2009 oversight hearing. She praised Irving for promising to hire people from Ward 7 to work on the project. Even better, Alexander said, Irving even showed her the employment records.

“This is the first for me as a council member that a developer brought into my office ‘W2’ forms of employed individuals in my community,” said Alexander at the 2009 hearing.

It turns out one of the “employed individuals” on the project is Alexander’s 2008 campaign manager, Darryl Rose.

Blue Skye paid Rose’s company Roxbury Development $24,000 for  “consulting,” according to spending reports obtained through a Freedom of Information Act request.

Alexander, in an interview, said she had no idea Rose had been hired on the 4427 Hayes Street project when she voted to approve the land deal.

Alexander says Rose’s contract with Blue Skye is not problematic because he doesn’t work in her office as an employee.

As for Blue Skye’s requirement to hire local firms or CBEs, the spending reports show that four of the subcontracts on the project worth nearly $400,000 went to N&M Construction. The firm is owned by Mark Irving, the brother of Blue Skye’s owner Scottie Irving. Blue Skye declined to comment for this story.

The DC Council overhauled the land disposition process in 2009, requiring developers to partner and subcontract with smaller, local firms known as “certified business enterprises” or CBEs.  But city records obtained through FOIA show some of these CBEs that won contracts on these land deals have political ties to council members.

Project CBE Partner Name Name Political Connection Role
Hayes Street Roxbury Development Darryl Rose Yvette Alexander, Kwame Brown Campaign Consultant
Capitol Fire Station Paramount Ben Soto Adrian Fenty, Muriel Bowser Campaign Treasurer
Capitol Fire Station DC Strategy Group Claire Bloch Mary Cheh Campaign Consultant
Wharf Paramount Ben Soto Adrian Fenty, Muriel Bowser Campaign Treasurer

Campaign consultants, campaign managers, campaign treasurers – people with direct political ties – also scored development deals on these taxpayer-owned properties.

A former campaign aide to Council Member Mary Cheh, Claire Bloch of DC Strategies Group, is one of the development partners on the Capitol Hill Fire Station. Cheh voted to support the surplus of the property, helping authorize the city to turn over the land to developers.  “It never occurred to me that I had any connection,” said Cheh on the land deal involving her former campaign aide.

David Wilmot is one of City Hall’s most prolific lobbyists and fundraisers. He’s also served as the personal lawyer for Council Member Yvette Alexander. He was added as a development partner on the Hine School land deal. He said he has a long history of working on developments in D.C. and said his role as a fundraiser played “no connection” for his selection for the project. “Campaign contributions don’t mean a thing,” Wilmot said. “That’s the American way.”

The Wharf Deal
No land deal is receiving more public subsidies than the “Wharf”, a billion-dollar project to remake 27 acres of the Southwest Waterfront. The deal included more than $200 million in public subsidies. The developers paid a dollar for the land. of the development team on the project includes:
  • A firm led by a former zoning official Geoff Griffis.
  • A firm whose owner was married to campaign consultant Joe Ruffin.
  • A firm run by Mayor Fenty’s campaign treasurer Ben Soto called Paramount Development.

Soto oversaw the fundraising for Fenty’s 2010 re-election effort. He’s now performing the same role for Muriel Bowser in her bid to be mayor.  Soto says it’s “somewhat offensive” to suggest he was hired because of his political ties. Soto said he has lost more solicitations than he has bid on. He says his background working with city officials and agency heads is helpful on these major developments because of all the bureaucratic red tape.

“At the end of the day, to do a major public deal you’ve got to be able to have relationships with District officials to move the project along,” said Soto. “But the suggestion that’s the reason why these projects are awarded to a company like mine is not consistent with the facts.”

The presence of campaign consultants and fundraisers on these land deals is not surprising to Bryan Weaver, a candidate for D.C. Council and activist who spearheaded last year’s unsuccessful effort to ban corporate contributions in local politics.

“When you are looking at city-owned properties and city-owned spaces there’s a certain trust you have with the citizens of the District of Columbia that you are looking out for their best interests,” Weaver said “And a lot of times I think decisions were made based on campaigns.”

Public Auctions

Activists and even some council members have asked why the city just doesn’t hold a public auction for these properties and award them to the highest bidder.

It turns out that’s what the city does for dozens of smaller vacant properties it has acquired over the years through foreclosures and eminent domain. And even some of these properties have a way of ending up with the individuals with ties to the city.

In 2011, the D.C. Department of Housing and Community Development (DCHD) held a public auction for 11 vacant or run-down properties. Two of the properties went to the firm owned by Ben Soto, Fenty’s former treasurer. Another pair went to Providence Construction — whose owner worked on the controversial Parks and Recreation contract during the Fenty administration. A fifth property was picked up by Spectrum Management, a firm owned by a Fenty appointee to the National Capital Planning Commission.

City officials say there was nothing unusual about the auction. “The manner and the time for advertisement and the basis and price for awards were proper and appropriate,” said Michael Kelly, director of DCHD.

And as Soto points out, the properties all went to the highest bidders so political connections could not play a role during the public auctions. Though Soto admits the lack of bidders at these auctions was interesting. “To be quite honest I was surprised there wasn’t much competition on these auctions,” said Soto.

Not that he’s complaining. One of the properties he won at an earlier auction, 501 Rhode Island Avenue Northwest, he bought for $89,000. 

Soto built a two-unit condo on the land and sold it last year for $490,000.

This article was updated at 10:18 a.m. to reflect the status of Blue Skye Construction on the Strand Project.

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