WPost: On a tenant cooperative project in DC

The Purchase Of a Lifetime
The Bank Balked. Neighbors Grumbled. But These Poor Tenants Would Not
Be Swept Away in the Real Estate Boom.

By Debbi Wilgoren

Washington Post Staff Writer
Wednesday, December 14, 2005; A01

The community room filled early that July night in 2002. The tenants of
Capital Manor were about to learn how much it would cost to stay in
their apartments.

Their century-old complex -- three buildings with 34 units each -- was
a dilapidated eyesore in a gentrifying D.C. neighborhood. Its ceilings
sagged, the window frames were cracking, the front-door intercom hadn't
worked in years. In the summer, residents seeking refuge from stifling
apartments shared the sidewalk with drug-dealing toughs.

Across the way was another threat -- but also proof of what could be.
Refurbished Victorian rowhouses lined the north side of the 1400 block
of W Street NW, reminders of the wave of wealth sweeping up from U
Street and pushing out poor and working-class residents. Rents in the
new, nearby luxury apartments routinely topped $2,000, compared with
Capital Manor's average $663.

These black and Latino tenants knew they had to buy their complex or
risk being displaced by a new generation of city dwellers, most of them
white.

They had chosen a developer to guide them through the process. His
colored marker now squeaked across a whiteboard at the front of the
room.

$1,500 , he wrote. That's what each family would have to come up with
in the next six weeks.

Looks of disbelief spread through the room. The 25 tenants gathered
here were dishwashers, janitors, people on public assistance. They
scrimped each summer to buy school supplies and saved for months for
Christmas. To most of them, the number seemed astronomical.

"How many people do you actually think have that kind of money just
sitting somewhere?" demanded tenant association President Deborah
Thomas, 48, who had spearheaded the purchase effort. "We were talking
about making it so we could afford to stay here."

Their developer explained that the money was needed to show potential
lenders that the tenants were committed to the project, as well as to
pay for engineering and architectural studies.

Then Aaron W. O'Toole, the tenants' attorney, spoke up. "If 50 people
can't sign a reservation form and put down a couple of hundred
dollars," he said, "it's over."

Thomas returned to her apartment with trepidation. Within the hour, her
phone started to ring. In Spanish and English, the callers had the same
message.

No puedo pagar.

I can't pay.

After a year of hard work, of carwashes and raffles, of meetings and
late-night phone calls, the whole plan seemed to be disintegrating
before her eyes.

"I don't want my kids to have to grow up and struggle. I want them to
have a place."

Deborah Thomas, tenant association president

The saga of Capital Manor's rebirth as a tenant-owned cooperative
played out over 4 1/2 years, starting in spring 2001. It finished
successfully last month, with the last original tenants moving into
their freshly renovated apartments. In a neighborhood that has become
one of the most sought after in the city, this was a rare
accomplishment: the $12 million purchase and rehabilitation of three
buildings by tenants whose average income hovered just under $20,000 a
year.

The undertaking, one of the largest tenant purchases in the city, was a
struggle all the way. The residents had to convince the District
government that their plan was worthy of funding and prove to a bank
that they were committed enough to handle a loan. Even then, work
progressed at an excruciatingly slow pace. They faced opposition from
wealthier neighbors, who wanted them gone, and defections within their
own ranks. Their renovation plan changed drastically. The Washington
Post has followed the project since the tenants first organized.

Why they succeeded starts with their leaders -- longtime residents, led
by Thomas, who passionately believed that they had earned the right to
stay in their homes. They came to rely on two young men: their
attorney, O'Toole, who worked at Georgetown University's nonprofit
Harrison Institute, and their developer, Jair K. Lynch, who pulled the
financing together and managed the project. They were lucky enough to
find a sympathetic bank that took a chance on them and to make their
move at a time when the city was under pressure to slow the
hemorrhaging of affordable housing.

"The passion from the tenants was so obvious to us that we certainly
had no option but to find a way to make it work," said Stanley Jackson,
who was head of the city's housing development agency when the project
was launched and now serves as a deputy mayor. "People who otherwise
would not be here will be able to be a part of all of the great
development of this neighborhood."

The three buildings of Capital Manor originally housed middle-class
families but were converted to low-income apartments through a federal
program in the 1970s. Thirty years later, the federal subsidy -- and
the tax benefits that went with it -- were about to expire. Besieged by
developers, the company that owned Capital Manor put it on the market
in March 2001 and eventually signed a contract to sell it for $3.4
million.

Thomas knew that D.C. law allows tenants of an apartment house to match
any purchase offer -- an unusual way to keep tenants from being
displaced and to allow them to benefit when housing values climb. A
decade earlier, the tenants of 1424 W St., just down the block, had
converted their building into a cooperative. Now, Thomas thought, maybe
she and her neighbors could do the same. She began to spread the word.

Meetings were held in the fluorescent-lit basement room, where men in
work boots sat on mismatched chairs next to tired-looking women, some
with squirming children on their laps. Everything was translated into
Spanish, since many of the Latinos spoke little or no English.

They soon learned that buying the buildings would be only the starting
point. The complex was badly in need of repair. Fixing it now would
more than triple the price tag, their advisers told them, but would
avert a crisis later.

The tenants formed an association and elected Thomas president. They
could not have picked a more committed leader, or someone who had more
at stake.

She'd lived on W Street for nearly 30 years. Her life, in dramatic
ways, had paralleled the fortunes of the block.

When it was a respectable working-class haven, she was a church-going
young woman who made good grades and followed the strict rules laid
down by her mother, a hotel maid. By her mid-twenties, though, the 1400
block had become the city's largest open-air narcotics bazaar, so bad
that police sometimes barricaded the street in a futile attempt to keep
the addicts away. Thomas was living in an apartment a few doors down
from Capital Manor, working a series of low-paying jobs. She steered
clear of drugs for awhile but eventually tried crack cocaine and got
hooked. Already the mother of two sons by two men, she gave birth three
months early to a daughter who, she soon learned, was blind.

Thomas decided that she could not be both a mother and a crackhead. "I
just stopped" using drugs, she said. She was working again and leading
tree-planting efforts to beautify her battered neighborhood when an
estranged boyfriend hurled a Molotov cocktail through the open window
of her apartment, setting it ablaze and leaving her severely burned.

By this time, the U Street Metro station had opened, and the drug trade
was melting away. Luxury developers were buying up long-empty lots.

Back on her feet, Thomas became immersed in the issues transforming W
street and was elected an advisory neighborhood commissioner. With the
help of a federal housing voucher, she rented a three-bedroom apartment
in Capital Manor. When the complex was put on the market the next year,
she saw her chance.

Ownership would mean stability -- for her family and her neighbors. "I
don't want my kids to have to grow up and struggle. I want them to have
a place," Thomas would say. "They'll never have to worry where they're
going to live."

"If you can't put together a yard sale, how are you going to buy this
building?"

Marian Siegel, a housing counselor

Thomas's top lieutenants were Peggy Fitzgerald, an old friend who was
elected association vice president, and Osmin Rodriguez, a Salvadoran
immigrant who had moved into the complex as resident manager five years
earlier.

Fitzgerald, 59, had lived at Capital Manor for 28 years and had no
intention of ever leaving. She'd raised three children and was now
raising two grandchildren. Divorced for two decades, Fitzgerald had
worked construction until her mid-fifties, then retired on disability
after her back gave out. She struggled with diabetes and high blood
pressure. Now she spent her time plotting strategy with Thomas and
tracking tenant association dues and membership figures.

Rodriguez, 35, often worked alongside them, acting as a liaison to the
Latino tenants. As resident manager, he earned more than most Capital
Manor tenants, enough that a small house in the suburbs would not have
been out of reach for him, his wife and their toddler son.

But Rodriguez was attached to Capital Manor. When he was hired in 1996,
he'd been given a mandate to clean up the complex, at that time barely
two-thirds full. In his first few weeks on the job, Rodriguez said, he
initiated more than 20 evictions, many for drug-related reasons.

By 2001, when the complex went on the market, the drug dealers had
moved down the street and the vacant apartments had been filled with
new families. A community was being built here on W Street, Rodriguez
felt. He did not want the overheated real estate market to blast it
apart.

In those early months, the tenant leaders invited a parade of speakers
-- public interest advisers, city officials, developers -- to educate
them about the tenant purchase process.

Marian Siegel, a housing counselor, was one of the first. She provided
a crash course in collaborative entrepreneurship. In a pronounced Long
Island accent, her face shiny with perspiration, she reeled off a long
list of suggestions and cautions, pausing every few sentences so
Rodriguez could translate.

Interview at least three lawyers and three developers before picking
one of each to work with you, she advised. Charge monthly dues to
members of the tenants association, even if it's only $5 or $10.
Organize fundraisers.

"If you don't do something out of your own pockets, it lessens your
commitment," Siegel said. "And if you can't put together a yard sale,
how are you going to buy this building?"

She left them with a warning: "Be patient. Because this will take a
long time."

"They're survivors. They were here when things were tough."

Jair K. Lynch, developer for Capital Manor

In fall 2001, while Washington was reeling from the Sept. 11 terrorist
attacks, the tenants selected Georgetown's public-interest law clinic
to represent them. The clinic assigned them O'Toole, a 29-year-old
lawyer who spoke passable Spanish and had guided three smaller
tenant-purchase efforts.

Next, the association interviewed developers. Most offered a package
known as a low-income tax-credit deal, in which investors purchase and
renovate a building in exchange for a federal tax break. After 15
years, the tenants can buy them out at a preset price.

But these tenants, who had been meeting for months, wanted to buy their
buildings right away. Advocates including Siegel had told them that
they could form a cooperative. That way the buildings could never be
taken from them, and they, too, eventually could benefit from the
soaring property values.

"This tenants association has already voted, and we want ownership,"
resident Nerissa Phillips snapped at one developer who offered a
tax-credit deal. "So you can make your presentation, and we will
listen. But that's our goal."

Only Lynch, 30, said he would find a way. He said he would seek
financing from private lenders, foundations and government and obtain
the help of a nonprofit housing development group.

Lynch grew up in the District, the son of a college professor from
Trinidad and an economist from Colombia. A world-class gymnast, he
graduated from Sidwell Friends School, then earned a degree in urban
planning and engineering at Stanford University. In 1996, he won a
silver medal at the Olympics in Atlanta. He returned to the District to
launch his own development firm in a restored U Street rowhouse.

Capital Manor's tenants deserved to share in the corridor's rebirth,
Lynch often said, because they had endured the worst of times. "They're
survivors," he said. "They were here when things were tough."

Some tenants worried privately about Lynch's youth and relatively
limited experience. But the March 2002 vote to retain his firm was
unanimous.

One year into the ownership drive, Lynch and the tenants agreed on a
plan: Refurbish and sell one of the three buildings as market-rate
condos, then use the profits to repair the other buildings. Those
buildings would become a low-income cooperative, collectively owned by
the tenants. Lynch's firm would be paid about 10 percent of the cost of
the project, conforming to the city's affordable-housing guidelines.

A few people expressed concern about giving up one building. But Lynch
said it was doubtful that more than two-thirds of the tenants would
commit to join the cooperative. Nowhere near that number had been
paying monthly dues or showing up for meetings.

He pledged to help those who left the complex find decent places to
live, as close by as possible, and the tenants agreed.

It was better, Thomas thought, than watching the entire complex soar
beyond their reach.

"We need to demonstrate the commitment of this group to the lenders. "

Aaron W. O'Toole, tenants' attorney

Four more months had passed by the time Lynch announced the $1,500
deposit figure and people started bailing out. Thomas called an
emergency meeting of the tenant board. They compared notes, tallied the
number of tenants threatening to quit and started to panic.

Thomas appealed to O'Toole, the attorney, who said there was nothing
sacred about the $1,500 amount -- it was just Lynch's estimate of what
would cover costs and impress the banks.

What's the smallest amount that would impress them? Thomas asked.

What's the most you think the tenants can give? came the reply.

Together, they agreed to gamble on $500, still a huge amount for most
tenants and perhaps enough to convince the banks.

Only $100 would be due at the July 23 tenants meeting, less than two
weeks away. Tenants would have until Sept. 15 to come up with the other
$400. If they succeeded, the rest of the down payment would be due when
renovations began.

The day of reckoning was a sweltering evening that felt even worse
inside the community room. About 40 people showed up, many more than
had been coming in recent weeks. Lynch sat in the front row, watching
and waiting. He had received an e-mail from O'Toole with the revised
numbers. If the smaller deposits meant enough people would sign up, he
would find a way to make it work. "This is a partnership," he said
later. "You ask and sometimes they say no."

The tenants listened to presentations about city-funded programs
available to poor home buyers and classes to teach them ways to save.

Then O'Toole stepped forward, holding the reservation agreement, which
guaranteed a spot to all who signed up and paid.

"This is critical for us. Absolutely critical. We need to demonstrate
the commitment of this group to the lenders," O'Toole said. "We want
enough money to show that people are serious. But hopefully an amount
that they can come up with. And that's . . . " -- he paused to glance
at Lynch--" . . . $500."

O'Toole reminded the tenants that they needed commitments from at least
half of the 102 households by the end of the summer -- but that more
would be better. He began reviewing the four-page legal agreement,
clause by clause, in English and then Spanish.

The line formed before he finished the second page. Black and Latino,
young and old, at least two dozen tenants in all. Some clutched five
crisp, $20 bills; others held freshly inked money orders.

Over the next seven weeks, 55 households put down deposits of $500, or
as close to that as they could manage.

The last payment came 40 minutes after the deadline of midnight Sept.
15, when a woman knocked on Peggy Fitzgerald's door, panicked that she
might be too late. Smiling even though she had been roused from her
bed, Fitzgerald assured her that she was not.

Tomorrow in Metro: Financial problems and complaints from neighbors
threaten to derail tenants' dreams.