The Watergate

by Joseph Rodota

  On February 25, 2004, Chancellor William B. Chandler III, a Yale-trained lawyer serving his second term on the Delaware Court of Chancery, acknowledged the proposed sale of the parking spaces and common areas to Monument was divisive and could “hasten the demise of the famed Watergate Hotel.” But the proposed transaction, he said, did not require approval by 75 percent of the Watergate East membership. The sale needed approval of a super-majority only if it involved “substantially all” of the assets of the association, and 75 parking spaces and a ballroom were at best “an insubstantial portion of Watergate East’s overall assets.” Residents of Watergate East had in fact been misled by their own board not only on the votes needed to approve the sale, but on the necessity of voting at all. No provision of law or the Watergate East’s own governing documents, he concluded, required members of Watergate East to vote on the sale of either the parking spaces or the common areas.

  Chandler expressed grave doubt about the ability of the Watergate East board of directors to evaluate the matter. Members of the board were dug in on opposing sides of the question and, “to be generous, fractious.” Because residents had been led to believe they would be given the opportunity to vote on the sale, he ordered a new vote of the membership, at which a simple majority of those present, or represented by proxy, would be required to approve the sale. The vote was scheduled for April 12, 2004, the next annual meeting of the Watergate East membership.

  A GROUP OF WATERGATE RESIDENTS OPENED ANOTHER front in the war against the conversion of the Watergate Hotel into residences. Calling themselves the Committee to Preserve the Watergate Heritage, they filed an application with the District’s Historic Preservation Office to designate the Watergate a historic landmark.

  Because of its location, adjacent to Rock Creek Park and the Kennedy Center, most changes to the Watergate were subject to review by the Commission of Fine Arts. Designation of the Watergate as a historic landmark would require a second level of review, by the Historic Preservation Review Board. Designation as a federal landmark would also mean the Watergate would qualify for certain tax deductions, and would be eligible for historic preservation grants.

  Whether landmark status would prevent the conversion of the Watergate Hotel to apartments, however, was an open question. The landmark application specifically noted the complex was unique because it included a mix of offices, residences and a hotel. “We don’t designate use,” said a District preservation official. “We try to protect the physical characteristics.”

  The driving force behind this historic designation campaign was Judge Pauline Newman, a resident of Watergate West who had distinguished herself as a patent attorney before Reagan appointed her to the Court of Appeals for the Federal Circuit in 1984. Like many of the Watergate’s early residents, she was a single, professional woman. She did not like to cook and ordered meals sent up from the Watergate Hotel or ate in the hotel’s restaurant whenever she worked late, which was often.

  At the first hearing before the District Historic Preservation Review Board, Watergate South resident Dorothy Olsen testified against the historic designation. She objected to the use of historic designation “to control what an owner does” with his or her property, she said, and “a bungled political robbery” did not merit landmark status. “I’d hope people would be ashamed, not proud,” she said.

  Judge Newman and her committee had hired Emily Eig and her firm Traceries, specialists in architectural history and historic preservation, to help guide them through the designation process. As Eig watched the first hearing of the District Historic Preservation Review Board to consider the Watergate’s application, she detected skepticism. Some board members could not quite wrap their brains around designating the Watergate, which was not even fifty years old, “historic.” Tersh Boasberg, the board’s chair, said he needed more information on Luigi Moretti before he could make an informed judgment. Someone had sent him “Google information” on Moretti, he said, but it was in Italian: “It would be helpful if we had it in English.” The board postponed a decision, pending more documentation on the Watergate’s history and architecture. Boasberg, chairman of the preservation review board, also asked that any reference to hotel conversion be dropped from the landmark application.

  Eig and her team of architectural historians went to work. To be registered as a historic building, it was necessary that the Watergate convince the board that it was an outstanding example of American architecture; a masterwork of its creative team, principally Luigi Moretti and the landscape architect Boris Timchenko; and a site of exceptional national political significance. Eig prepared a detailed, sixty-page application, hitting each of the three points hard, and sent it over to the Watergate West committee for review and comment. A lawyer for the committee called Eig with a suggestion: Would it be possible, he asked, to delete any reference to the break-in at the Democratic National Committee and the fate of Richard Nixon?

  Absolutely not, Eig replied. If the residents wanted the Watergate to be listed as historic, its notorious political history would carry the application across the finish line. Without a mention of the Watergate scandal, the application was doomed to fail. “Leave it in,” the lawyer conceded.

  THE DISTRICT ZONING COMMISSION RECONVENED THE night of March 1 to consider the conversion of the Watergate Hotel to apartments. To accommodate an overflowing crowd, chairs and a television screen were set up in a hallway. “You could feel the angst in the room,” Chairman Carol Mitten later recalled.

  In addition to BRE/Watergate, LLC—the Blackstone entity selling the Watergate Hotel to Monument Realty—a number of groups petitioned to participate in the hearing, including the Committee of Concerned Owners in Watergate East (in support), Watergate East (opposed), Watergate East Committee Against Hotel Conversion to Co-op Apartments (opposed) and a handful of individual residents. The zoning commission accepted the petitions of two groups: the Committee of Concerned Owners in Watergate East and the Watergate East Committee Against the Hotel Conversion to Co-op Apartments.

  The Committee of Concerned Owners in Watergate East was organized by Bill Wolf, who had earlier negotiated the $4.25 million deal with Michael Darby. A lawyer, Wolf had lived in the Watergate since the 1960s; after he and Audrey married in 1980, they combined two duplexes on the seventh floor of the building, leaving in place the two original staircases. At the top of one staircase, Audrey kept an office; at the top of the staircase at the other end of their apartment, Bill kept a study. The couple enjoyed having a hotel in the complex, because they could order food and have it sent up. “Not that we did it very often,” Audrey recalled. “But it was an option.” They had deep concerns about living next door to a condominium, but when Darby agreed to sell his new units as cooperative apartments, they decided to support the hotel conversion.

  Jack Olender represented the Watergate East Committee Against Hotel Conversion to Co-op Apartments. As a young man, he turned down Harvard Law School to attend the University of Pittsburgh so he could help his father, a Jewish refugee from Russia, manage the family’s fruit and vegetable store in McKeesport, Pennsylvania. In his last year at law school, he met a man who changed the course of his life: Melvin Belli, the renowned plaintiffs’ lawyer known as the King of Torts. After graduation, Jack moved to Washington and took a teaching fellowship at George Washington University Law School, at the suggestion of one of his favorite professors, to learn more about the field of personal injury law. He started his own firm, specializing in medical malpractice, and was the first lawyer to win more than $1 million in a settlement for brain damage at birth.

  When Jack and his wife, Lovell, decided it was time to buy an apartment, in the early 1980s, Jack had one requirement: The apartment needed to be within walking distance of his office, which was near GWU, because walking was good for his health, and long drives from the Washington suburbs were a waste of valuable time. Their first apartment, in Watergate West, was “fine, but a little cramped.” When their neighbors moved out and
offered to sell their water-facing apartment, Jack and Lovell leaped at the opportunity to expand. Two members of the Watergate West board of directors, however, for reasons Jack never quite figured out, opposed the sale and lined up votes on the board against it. “I thought they were insane,” Jack recalled. “And I said, ‘to Hell with that.’” They sold their Watergate West apartment and bought a three-bedroom apartment with a den—formerly owned by Kathy and Maurice Stans—on the twelfth floor of Watergate East.

  When news of the proposed hotel conversion first surfaced, Jack’s neighbors recruited him to lead the opposition. He was reluctant to get involved at first. He had avoided serving on the Watergate East board, but had served on a number of building committees, which he found to be “generally dysfunctional.” Residents seemed to like chairing committees in order to appear important to their neighbors, he observed, but did not accomplish much. He also noted something disturbing about the building’s governance, at all levels: Watergate East residents seem to have divided themselves into factions. But Lovell kept badgering her husband to step up. She was confined to a wheelchair and used the Watergate Hotel indoor swimming pool regularly. She wanted to keep using it.

  “It was as though it was his pool,” Darby recalled with irritation years later.

  Darby and his team met with Olender to hear him out and attempt to resolve the impasse. Darby explained that Monument was expecting to replace the pool, and that Watergate residents would be able to purchase memberships. “It didn’t matter to him,” Darby recalled.

  What finally tipped the scales against the conversion, Jack said, was his sense of “social justice.” Watergate East was the oldest building in the complex. If a wave of residents dumped their apartments and moved across the way into a new building, they would never look back. Their replacements would be unlikely to support needed investments in Watergate East going forward and the community would unravel. We would be abandoned, he thought. He agreed to manage the fight to save the Watergate Hotel.

  Every two weeks, the residents committed to saving the hotel gathered in Jack’s wood-paneled study—the same “Africana” room which had formerly displayed Maurice Stans’s collection of safari souvenirs. The key members of the group included retired Virginia judge Lester E. Schlitz; Ellen Cooper, a businesswoman from New York; Carol Radin, an artist with a rooftop studio and another regular in the Watergate Hotel swimming pool; and a doctor whom Olender recalled years later was a former Israeli soldier and, therefore, someone who “wasn’t afraid of anything.”

  Just before the zoning commission hearing, the land-use attorney they had hired suddenly backed out. Jack was a malpractice lawyer. He knew he was in over his head, but there was no one else who could take the case.

  Olender asked the zoning commission for a postponement until after the April 12 vote of the Watergate East owners. Norman Glasgow, a lawyer representing the Blackstone team, objected. The hotel conversion, he said, had been under discussion since November 2003. An “unbelievable number” of community meetings had been held. “Anyone that could take the position that they have not had an opportunity to be involved in this,” he added, has “been out of the country for the last six months.” Richard Aguglia, representing Watergate West, said he was “sympathetic” to Olender’s circumstances, but was ready to proceed. Chairman Mitten suggested a compromise: The hearing would be split over two days, with the first day dedicated to the proponents and the second day dedicated to the opposition, in order to give opponents time to collect themselves and collaborate on an effective presentation.

  Michael Darby stepped up to the microphone. “When the current owners of the Watergate Hotel announced that the hotel was for sale and I first toured it last March,” he began, “I immediately thought: ‘Wouldn’t this be great—if we can convert the hotel to high-quality residences.’ With the Watergate’s name, 654 high-quality residences already are here and those wonderful views up and down the Potomac River, these new units would be some of the finest in the city.”

  Darby walked the zoning commission through his key arguments for closing the hotel and converting the building to apartments. Demand for residential housing in the District of Columbia had picked up. Each year, more than 7,500 high-income households in the Washington metropolitan area looked for new homes, but only six new urban luxury projects—representing just 284 units—had been constructed the previous year to meet this demand. He described protections in place that would prevent GWU students from renting apartments. He agreed to make the renovated health club available to residents of Watergate West, Watergate East and Watergate South, and give residents of each of the three existing buildings access to “community rooms” adjacent to the new restaurant area and overlooking the outdoor pool. To address concerns of Watergate West over a parking shortage, Darby would provide 146 new parking spaces for residents, nearly double the original plan.

  Finally, to address some residents’ concerns about Monument’s ability to finance the conversion, Darby provided a letter of support from his investment partner: the real estate arm of Lehman Brothers.

  Darby raised the possibility that the hotel might continue to deteriorate and fall into the hands of a “low-quality hotel operator.” Bill Stein, representing Blackstone, explained that the hotel, despite more than $13 million in renovations, had “not met our expectations.” Two different management companies had been unable to improve the hotel’s performance. Stein expected some residents to come forward and say they used the existing Watergate Hotel services. “I wish that was the case,” he said, “but unfortunately it’s not.” In 2003, only about $150,000, amounting to less than 1 percent of the total revenues of the Watergate Hotel, came from residents of the Watergate complex.

  The final presentation in support of Monument’s plan came from economist Jim Prost, who walked the commissioners through an economic and fiscal impact analysis that showed a net positive economic impact of $6 million, additional sales tax revenues to the District totaling about $460,000, and a 30 percent increase in direct and indirect jobs compared to the existing use of the property as a hotel.

  “The simple fact is the hotel is more valuable as residential units,” Darby concluded.

  “Why do you still have opposition?” zoning commissioner Anthony J. Hood asked Darby.

  “Unfortunately you can’t please everybody,” Darby replied.

  Daniel Sheehan, a resident of Watergate East, followed the Monument team and endorsed the conversion as an alternative to seeing the hotel continue to decline and perhaps turn into “Motel 6 at the Watergate.” Barbara Spillinger, a resident of Watergate West, endorsed the conversion on behalf of the Foggy Bottom Association, which supported it. “Those of us who live in the Watergate complex do not live on an island,” testified William Dakin, a resident of Watergate East. “When you go beyond our little complex into the larger community,” he continued, conversion of the hotel expanded the property tax base for the city and pushed back against the encroachment of GWU, which threatened to turn all of Foggy Bottom into a “vast dormitory.”

  Outside the hearing room, supporters of the hotel conversion hinted Secretary of State Condoleezza Rice, a resident of Watergate South, agreed with them, but her spokesman swatted down the idea, telling a reporter who asked for comment, “I don’t think we’re going to have anything on this one.” A spokesman for another Watergate South resident, Supreme Court Justice Ruth Bader Ginsburg, also declined to comment.

  After a short break, the meeting resumed at 8:46 P.M., and Jack Olender, representing the committee of Watergate East owners opposed to the conversion, stepped forward. He decided not to focus on the merits of the conversion, but on the credibility of Monument Realty and its president, Michael Darby.

  “How many projects do you have going at this time with Monument Residential LLC?” Olender asked.

  “I don’t know exactly,” Darby replied.

  “Do you have any?”

  “Different projects have different entiti
es. I don’t understand the question.”

  “Mr. Olender, what’s the relevance of this?” asked Carol Mitten, the zoning commission chair.

  “I’ll show this in a few minutes, Your Honor,” Olender replied.

  Mitten pressed him. “I want you to tell me—”

  “Can I approach the bench?” Olender interrupted.

  “No,” she replied, “you have to tell me now in front of everyone.”

  “The thing is, Your Honor—”

  “And I’m not ‘Your Honor.’ This is not a court and so we’re a little less formal, but still respectful. So I appreciate your deference, but I just want to keep it in perspective.”

  Olender paused and smiled. He reminded Mitten he was a malpractice lawyer, not a zoning lawyer. “I’m doing the best I can.”

  He turned back to Darby.

  “Why did you finance the lawsuit against Watergate East?” Olender asked. Monument Realty had underwritten the challenge supporters of the hotel conversion had filed with the Delaware Court of Chancery.

  “I object,” interrupted Norman Glasgow, Darby’s attorney.

  Mitten turned to Olender. “I would ask you again, what’s the relevance of that?”

  “The relevance, Your Honor,” Olender explained, “is they are so desperate to get this land that Watergate East has, and that they need for their project, that they have gone to the extent of ripping asunder the residents of Watergate East!”

  The audience erupted in cheers and boos.