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Embassy Real Estate Holdings, LLC v. District of Columbia Mayor's Agent for Historic Preservation

March 20, 2008

EMBASSY REAL ESTATE HOLDINGS, LLC, PETITIONER,
v.
DISTRICT OF COLUMBIA MAYOR'S AGENT FOR HISTORIC PRESERVATION, RESPONDENT, AND COMMITTEE OF 100 ON THE FEDERAL CITY, INTERVENOR.



Petition for Review of a Decision of the Mayor's Agent for Historic Preservation (No. 06-171).

The opinion of the court was delivered by: Ruiz, Associate Judge

Argued March 27, 2007

Before RUIZ and REID, Associate Judges, and KERN, Senior Judge.

This case arises out of a plan to convert, by partially demolishing and adding new construction to, the former Italian Embassy ("the property"), which is owned by petitioner, Embassy Real Estate Holdings, LLC, into condominium residences. After petitioner's construction team had applied for pre-construction and construction permits, the Historic Preservation Office ("HPO") applied to designate the property an historic landmark under the Historic Landmark and Historic Protection Act of 1978 ("the Act"). See D.C. Code § 6-1101 et seq. (2001). The Department of Consumer and Regulatory Affairs ("DCRA") issued some of the requested permits before the Historic Preservation Review Board ("HPRB") completed its review of the designation application, which ultimately resulted in designation of the property as an historic landmark. As a result, the HPRB determined, the construction permits had been issued in error by DCRA, because the development that petitioner proposed for the property was inconsistent with the purposes of the Act. Petitioner appealed to the Mayor's Agent for Historic Preservation ("Mayor's Agent"), who affirmed HPRB's determination that issuance of the permits was inconsistent with the property's designation as an historic landmark.

Before this court, petitioner challenges the decision of the Mayor's Agent on various grounds: that the permit applications are not subject to review under the Act because they were filed before the landmark designation, and, therefore, HPRB and the Mayor's Agent acted without jurisdiction; that the doctrines of estoppel and laches preclude application of the Act to the permit applications; that, even assuming that the Act applies, the Mayor's Agent acted arbitrarily and without substantial evidence in determining that the permits did not meet the Act's requirement that they be "necessary in the public interest;" and that the Mayor's Agent applied the wrong standard and ignored undisputed evidence in determining that denial of the permits did not constitute "unreasonable economic hardship" amounting to an unconstitutional taking. We disagree with petitioner's contentions and affirm the decision of the Mayor's Agent as consistent with applicable legal principles and supported by substantial evidence of record.

I. BACKGROUND

The property is a free-standing urban mansion, located at 2700 16th Street and 1651 Fuller Street, N.W., which consists of a main building containing the former Italian ambassador's residence, a chancery wing, and a courtyard. It is designed in Italian Renaissance Revival Style and "is a primary and integral component of the boulevard of distinguished buildings that line 16th Street on Meridian Hill." The buildings and grounds are described in the HPRB's landmark designation:

The three-story hip-roofed main block contains the original ambassador's residence, with one-story flat-roofed wings enclosing three sides of an open-air courtyard at the rear. The fourth side of the court is formed by the side of the original chancery wing, originally a long two-story hip-roofed block with its short end facing onto Fuller Street. A circa 1930s addition extends the original chancery in a similar two-story configuration along Fuller Street, creating an L-Shaped footprint overall. The embassy is faced in limestone with a terra cotta tile roof and sculptural embellishment concentrated at window and door surrounds; the simpler chancery is stucco with limestone trim and tile roofs.

In 2001, Bruce Bradley purchased the property, planning to either sell it for continued use as an embassy or develop it as a residential property. He sought the advice of an architectural design team, Shalom Baranes and Patrick Burkhart. Mr. Baranes advised that, although the property was not in an historic district or designated as an historic landmark, it was "clearly eligible for 4 designation," and that, "should anyone file a designation application, it was our opinion that application would succeed."

To address this possibility, Mr. Baranes presented Mr. Bradley with two options. Under one option, Mr. Bradley would apply for the designation landmark and "then subject the whole property to the normal HPRB review," a course that would definitively establish whether the property would be designated an historic landmark and its development subject to review and, possibly, restrictions under the Act. The other option -- which Mr. Baranes told Mr. Bradley would involve "some risk" -- consisted of negotiating a private agreement with members of the preservation community most likely to file an application to designate the property as historic. Under such an agreement, the property owner typically offers certain concessions in the development plan in exchange for a promise not to file for historic designation of the property. Mr. Baranes explained that this option would be successful in "a situation where there was no other interested party in proceeding with a designation."*fn1

Mr. Bradley's design team members testified that they first met with State [i.e., D.C.]

Historic Preservation Officer*fn2 David Maloney to discuss the project in the fall of 2001. At the time, the plan for the property was to construct high-end condominium units in rooftop additions to the existing buildings. Mr. Maloney testified that, although he could not recall this meeting or design plan, the discussion might have been "tacked onto" an October 2001 meeting regarding a different project.

According to Mr. Baranes, Mr. Maloney told the design team that the HPO had "no intent at the time" to file an application to designate the property as an historic landmark, but the team did not ask for an "absolute assurance that [the HPO] would never file a designation application;" Mr. Burkhart testified that he left this meeting with the understanding that, although Mr. Maloney did not intend to file a landmark application on behalf of the HPO, some community groups might do so, and that they should contact these groups. While Mr. Maloney agreed that he likely told the design team to contact community organizations, he testified that he was "100 percent certain" that he had not suggested that they enter into private agreements with these groups in an effort to bypass formal HPRB review under the Act.

In the economic aftermath of September 11, 2001, plans to renovate the property were put on hold. In the spring of 2004, Mr. Bradley brought new investors into the project and created the petitioner, Embassy Real Estate Holdings, LLC. In August 2004, the design team met again with Mr. Maloney of the HPO, to discuss a different plan to renovate the property. This time, Mr. Maloney raised concerns about the negative impact that the new design, which included a ninety-foot tower, would have on existing views and the courtyard, as well as the significant demolition required for its construction. Mr. Burkhart testified that, notwithstanding these concerns, he left that meeting as well with the understanding that the "HPO had no plans to designate the building."

Petitioner had no further contact with the HPO regarding the project. On January 24, 2006, petitioner entered into an agreement with the D.C. Preservation League ("DCPL"), a private group dedicated to preserving and enhancing historic properties in the District of Columbia, in which certain changes were made to the design of the proposed renovation, and petitioner agreed to preserve some of the historic interior features of the property -- the latter being matters beyond the protection of the Act. In exchange, DCPL agreed not to file for a landmark designation.*fn3 Petitioner's negotiations also resulted in an April 26, 2006 resolution by the Advisory Neighborhood Commission IC ("ANC IC") supporting the project.

On January 26, 2005, petitioner applied for a permit to subdivide the property for sale as seventy-nine condominium units. The permit was issued, with the approval of the HPRB, on July 26, 2005. On September 14, 2005, petitioner filed applications with the D.C. Department of Regulatory and Consumer Affairs ("DCRA") for permits to prepare the site for construction (including construction staging, excavation, sheeting, and shoring), to alter and renovate the existing buildings, and to build new structures.*fn4 The permit for construction staging and sidewalk usage was issued on December 12, 2005. The HPO filed an application for historic landmark designation on January 6, 2006 -- after the permit for construction staging and sidewalk usage was issued, but while the permits for excavation, sheeting, shoring, alteration/renovation and new construction were still pending. After the application for landmark designation was filed, the DCRA was notified immediately and petitioner was notified a few days later. Despite having been given notice of the landmark application in early January, the DCRA issued permits for excavation, sheeting and shoring on February 1 and for new construction on February 8, 2006. At a hearing held by the HPRB on February 2, 2006, on the application for landmark designation, petitioner "[did] not question the historic merit of the building," but complained about the timing of the landmark application. On February 23, 2006, the HPRB voted to designate the property an historic landmark and further recommended its nomination to the National Register of Historic Places.*fn5 On March 1, 2006, the DCRA was notified of the landmark designation and was asked by the HPO to void the two permits (for excavation, sheeting and shoring, and for construction) that had been issued after the application for landmark designation was filed. Petitioner received notification, dated March 6, 2006, that the HPRB had designated the property an historic landmark.

Specifically, the HPRB determined that petitioner's construction permits had been issued in error by the DCRA due to the HPRB's designation of the property as an historic landmark, and should be voided, noting that: "permit applications related to this property cannot be issued without historic preservation review pursuant to D.C. Official Code § 6-1104 through 6-1108. That is the basis for this request for revocation." The HPRB also recommended that the petitioner's proposed development for the property was inconsistent with the purposes of the Act, and, therefore, the permits should not be issued.

Petitioner requested a hearing before the Mayor's Agent to reject the HPRB's recommendation and uphold the validity of the permits that had been issued by DCRA. Intervenor, Committee of 100 of the Federal City, opposed the project; the DCPL and ANC IC, supported it. After the hearing, the Mayor's Agent, agreeing with the HPRB's recommendation, voided the permits that had been issued by DCRA after the landmark designation application had been filed, finding that:

The project as submitted requires the demolition of significant exterior historic features, including the chimneys and major portions of the building that are visible from the courtyard, all of which are otherwise protected by the Act. Such a demolition would hardly be contributory to efforts to retain or enhance the landmark, despite [petitioner's] assertion that its proposal would encourage the adaptation of the property for current use. HPRB, in adopting the staff [HPO] report, specifically found that, "[c]construction [sic] of the tower would require demolition of significant parts of the embassy and ...


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