Bad Moe, Good Moe

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But unforeseen circumstances soured the deal. First, a fire in late 2006 gutted Mohanna's building at 810 K Street. Citing structural damage, the city then demolished the building, as well as K Street properties at 802 and 812, buildings that the redevelopment agency had acquired as an interim step before turning them over to Mohanna.

As a result, Mohanna says, the properties he was to receive no longer represented an equal swap of value. Plus, his banks refused to transfer the mortgages from his current holdings, which held occupied, rented buildings, to properties that now held only vacant land.

Also, shortly before the fire, the city began sending eviction notices to tenants in Mohanna's buildings, even though it had not yet taken possession of those properties. Thus, today those buildings are vacant, although no construction is planned any time soon.

With the change in circumstances, Mohanna balked at the deal he had already signed. The city sued, contending development needed to move forward and the deal should be honored.

City officials say that after years of trying to make something happen on those blocks, they are more than annoyed to have come so close only to be stopped by Mohanna's contention that the land swap was no longer valid. They say they tried to address some of his concerns after the fire, but he declined their offers.

Assistant City Manager John Dangberg says the city would like to resolve the lawsuit and have Mohanna contribute to the development of K Street. "That 700 and 800 block right now is looking pretty bad," Dangberg says. "Once we get those issues resolved with the more recalcitrant owners on K Street, who just don't seem to want to be part of the success of K Street, that's really the last big hurdle that we have."

Fritzsche says the city demolished the buildings because they were structurally unsafe, despite Mohanna's claims that they needed only minor remodeling. She also says the land-swap agreement called for demolishing the buildings anyway, so it really should not have affected his plans.

Fritzsche also says the work was supposed to start immediately, although Mohanna contends he would have had to wait several years until the market could support a major project, and in the meantime he needed to collect rent from occupied properties to generate cash flow.

According to Fritzsche, the city offered Mohanna up to $4 million in loans when his banks refused to transfer the mortgages, but he declined. She also says the city sent eviction notices to tenants because the deal called for the properties to be vacant when the exchange took place.

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