A Columbia Heights apartment building that was the subject of a lawsuit filed by the former D.C. attorney general has been sold and will undergo extensive changes.
SK Management LLC, controlled by D.C. real estate investor Jared Kahn, is in the early stages of planning a redevelopment of 2724 11th St. NW, a 26-unit building, after buying the property for $5.3 million last month. Nick Murray, Marty Zupancic and John Slowinski from Marcus & Millichap (NYSE: MMI) brokered the sale.
“Their mission here is to preserve affordable housing in Columbia Heights and this property while also preserving the historic nature of the building itself,” Murray said.
The new owner, who deferred questions to Marcus & Millichap, is looking at a number of options for the building — perhaps digging out the basement to expand the building with larger units, or seeking entitlements to add a floor and additional units. The idea is to cater to families as opposed to the current one- and two-bedroom units. SK plans to interact with the community and local housing organizations “to ensure the redevelopment harmonizes with the neighborhood’s character.”
A timeline for the work was not immediately clear, nor was a price tag.
Tenants and the previous landlord, Florida-based attorney Ellis J. Parker, had been at a loggerheads for years, the former alleging decrepit conditions and the latter saying improvements weren’t possible without sharply raising rent.
In 2017, D.C. Attorney General Karl Racine filed suit against the owner accusing him of “a multitude of recurring and ongoing code violations” and violating consumer protection laws by promising to tenants a livable home. In September 2021, D.C. Superior Court Associate Judge Anthony C. Epstein ordered the owner to pay $422,000 in rent restitution to tenants, which the OAG said was the largest-ever such award in D.C., plus $215,000 to the District and additional civil penalties.
“Defendants misrepresented to their tenants, many of whom have low income, that they would provide habitable apartments free of housing code violations, mold, and other serious conditions that threaten their health and safety,” Epstein wrote in his September 2021 order.
Jefferson-11th Street LLC, the single-asset corporation controlled by Parker, his wife and children, filed for Chapter 11 bankruptcy in March 2022, per court documents.
An order confirming the Chapter 11 plan, the key component of which would be the sale, was approved by a bankruptcy court judge in July. All liens and debts were to be paid out after the sale, and the property was to be transferred without any liens attached, according to court records.
The property generated a lot of interest, Murray said, with about 15 offers coming in from affordable housing and market-rate developers. But the transaction was an extremely complex one and so has required “a lot of flexibility and patience,” he said. Kahn’s firm, which also includes Falls Church real estate investor Sam Swiller, has been involved in a number of other redevelopment projects around the city.
Ultimately, tenants opted not to seek a right to return to the property, Murray said. “They want to part ways.” The District’s Tenant Opportunity to Purchase Act did not apply in this case because the property was sold through a bankruptcy, according to court documents.
Marcus & Millichap is the nation’s largest brokerage firm focused exclusively on investment sales. It is based on a simple premise: matching each property with the largest pool of pre-qualified investors. With over 2,000 investment sales and financing professionals located throughout the United States and Canada, Marcus & Millichap is a leading specialist in commercial real estate investment sales, financing, research, and advisory services. Founded in 1971, the firm closed 8,954 transactions in 2020 with a value of approximately $43 billion. Marcus & Millichap has perfected a powerful system for marketing properties that combines investment specialization, local market expertise, the industry’s most comprehensive research, state-of-the-art technology, and relationships with the largest pool of qualified investors. To learn more about the company, please visit www.MarcusMillichap.com.