80-Year-Old Local Firm Sells Last D.C. Property

Andrew Cohn says he doesn't usually get sentimental about financial assets, but the building he sold last month in D.C. was an exception.

The Huntington Apartments on Connecticut Avenue was developed in the 1960s by his grandfather, J. Gerald Lustine, who founded D.C.-based Lustine Realty Co. in the 1940s. When Cohn was a kid, his mother would take him to the doctor in the basement of the building. 

But Cohn, now the CEO of Lustine Realty and its parent company, Liberty Group Holdings, says he had no choice but to sell the building, which was the firm's last property in its home city after it sold a Southeast building early last year. And given how difficult the sale process was, he says he has no plans to invest in the District again. 

"I didn’t want to sell those buildings," he said. "I felt I was being forced to."

He blames D.C.'s tenant-friendly housing laws, including rent control, eviction protection and the Tenant Opportunity to Purchase Act, for creating an environment that is unprofitable for housing providers. His yearslong process of selling those buildings shows why the District has become a notoriously difficult place for multifamily investment. 

His company still owns properties in Baltimore city and Baltimore County, and he said in those jurisdictions, the process of selling an apartment building can take less than six months. 

"The two properties in D.C. took four years to close," he said. "The market changed drastically in that time, and that affected my sales price and financing for my buyers. There’s too much uncertainty in a market like that, and investors don’t like uncertainty."

The buildings — the 127-unit Huntington at 5220 Connecticut Ave. NW and the 126-unit Hampton East Apartments at 4736 Benning Road SE — had been in his family for more than half a century. 

He ultimately sold The Hampton East Apartments on Feb. 1, 2024, for $9.8M to Salisbury, Maryland-based Mentis Capital Partners, deed records show. The Huntington sold late last month to D.C.-based American Housing for $16.4M. 

The Huntington sale process took four years in part because the first deal fell through, a collapse that cost Cohn more than $10M. A previous buyer had signed a contract to buy the building for $28M.

Cohn and his broker, CBRE senior associate Zach Stone, both blamed D.C.'s tenant-friendly laws for prolonging the first process to the point that the market turned and the deal collapsed. 

"We put the deal under contract in a much different environment in early 2022, and just based on the delays that were incurred because of TOPA, the interest rate environment and the capital markets changed significantly, so there was a major adjustment on price," Stone said. 

Because D.C. law gives tenants a right to renew their lease if they are current on payments, the buyer negotiated a $2M payment to the residents to vacate the property to allow for renovations. The sum was subtracted from the final price, Cohn said. 

Cohn initially decided to sell the properties because they weren't generating enough income to pay for the substantial repairs they needed. Both properties are governed by D.C.'s rent control law, and he blamed the policy for artificially constricting the properties' income. 

D.C.'s rent control policy, which applies to more than 70,000 units built before 1975, caps rent increases at 2% above inflation. A pandemic-era freeze on rent increases went into effect in 2020 and lasted until the start of 2022 — the period when Cohn decided to sell his buildings.

The city's rent control law allows landlords to petition for higher increases if they make capital improvements, but Cohn said the income he could have achieved still wouldn't have been enough to modernize the buildings. 

"The way that D.C. has set up the tenant laws, we’re in adversarial competition with our tenants," he said. "In a free market, we have to put out the best product so people want to live in our building. In a place like D.C., we aren’t incentivized to spend any money on building because we don’t get a return."

Cohn said he didn't see a positive way forward for the buildings other than selling them. 

For each property, the buyers wanted the tenants to vacate so they could launch substantial rehabilitations of the apartments and charge higher rents. D.C.'s laws require landlords to reach agreements with tenants to allow them to vacate, and as part of those agreements, the tenants received a total of $1.8M at Hampton East and $2M at The Huntington. 

Petra Development agreed to pay $28M for the building in early 2022 and reached a deal with the tenants at the Huntington to pay them around $35K per unit to vacate.

Stone said Petra had planned to refill the units with voucher holders, a strategy that led D.C.'s attorney general to sue the company last month for discrimination at other buildings. But changes to the way D.C.'s voucher payments were calculated made Petra's financial projections no longer pencil.

Combined with rising interest rates and a pullback of lenders from commercial real estate, the buyer decided to pull out of the deal.

With the building still in the red and investors generally avoiding D.C. multifamily properties, Cohn agreed to sell The Huntington to American Housing early last year for an $11.6M discount on what Petra initially agreed to pay.

"You’ve got to move quickly with TOPA, because in a three-month process, markets can change and financing can blow up. So when you’re talking 10 to 12 months, you have a lot more opportunity for things to go wrong," Cohn said. 

Eric Rome, who represented The Huntington's tenants in the negotiations, said TOPA often extends the timing of D.C. sales. But in this case, he said it was another of D.C.'s housing laws that was at play.

D.C. is a for-cause eviction city, meaning tenants have a right to stay in their units indefinitely as long as they don't violate their lease, and landlords must come to agreements to get them to vacate, said Rome, an attorney at Eisen and Rome PC.

While separate from TOPA, that layer of eviction protection is somewhat rare — another rule that makes D.C. one of the tenant-friendliest jurisdictions in the country. 

Rome said The Huntington's tenants didn't use TOPA to block the sale to either prospective buyer, and he said Petra initiated the idea to buy out the tenants because of its plans for the building. American Housing decided to stick with the same payout deal Petra had reached with tenants to vacate the building. 

"It was all about the building not being able to be renovated with tenants in it and having to give tenants some consideration for vacating," Rome said. 

Mayor Muriel Bowser is now proposing a series of housing reforms that would effectively weaken its tenant protections by exempting many buildings from TOPA and making the eviction process move faster.

But for Cohn, those proposals are too little, too late. 

"I am grateful to have finally exited the multifamily universe in Washington DC and I can promise the city council and Mayor that after their most recent efforts to weaponize housing I will not invest in this city ever again," he wrote in a LinkedIn post after selling The Huntington. "On to greener pastures!"