198 F.3d 874 (D.C. Cir. 1999)
District In town Properties Limited Partnership, et al.,Appellantsv.District of Columbia, et al.,Appellees
No. 98-7209
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 14, 1999Decided December 17, 1999

[Copyrighted Material Omitted]
Appeal from the United States District Court for the District of Columbia(No. 96cv00569)
Wallace A. Christensen argued the cause for appellants. With him on the briefs was Stacey L. McGraw.
Lutz Alexander Prager, Assistant Deputy Corporation  Counsel, argued the cause for appellees.  With him on the  brief were Jo Anne Robinson, Interim Corporation Counsel,  Charles L. Reischel, Deputy Corporation Counsel, and Melvin  W. Bolden, Jr., Counsel.
John D. Echeverria, Paul W. Edmondson, Elizabeth S.  Merritt, and Laura S. Nelson were on the brief for amicus  curiae The National Trust for Historic Preservation and D.C.  Preservation League.
Before:  Edwards, Chief Judge, Williams and Rogers,  Circuit Judges.
Opinion for the Court filed by Chief Judge Edwards.
Separate opinion filed by Circuit Judge Williams concurring in the judgment.
Edwards, Chief Judge:


1
In 1961, District In town Limited  Properties Partnership ("District Intown") purchased Cathedral Mansions South, an apartment building and landscaped  lawn on Connecticut Avenue across from the National Zoo. District Intown subdivided this property into nine contiguous  lots in 1988.  In March 1989, all nine lots were declared  historic landmarks.  In July 1992, the Mayor of the District  of Columbia denied District Intown's request for construction  permits to build eight townhouses on eight of the nine lots,  finding that the construction was incompatible with the property's landmark status.  Alleging that the District of Columbia's denial constituted a taking, District Intown and its  general partners sued under 42 U.S.C.  1983 (1994) for just  compensation under the Takings Clause of the Fifth Amendment.


2
Upon cross motions for summary judgment, the District  Court granted summary judgment for the District of Columbia.  See District Intown Properties Ltd. Partnership v.  District of Columbia, 23 F. Supp. 2d 30 (D.D.C. 1998).  The  District Court held that the relevant parcel for the purposes  of determining whether a taking had occurred consisted of  the entire property, including the apartment building, not the  eight individual lots that District Intown sought to develop. See id. at 35-36.  The court then analyzed the alleged taking  under the Supreme Court's holdings in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), and Penn Central Transportation Co. v. City of New York, 438 U.S. 104  (1978).  The District Court found that there was no categorical taking under Lucas, because District Intown had not been  deprived of all economic value in the relevant parcel.  The  trial court further held that District Intown could not make  out a claim under Penn Central, because its reasonable  investment-backed expectations had not been disappointed  and it continued to receive economic benefits from the property.


3
We hold that the District Court correctly found that the  relevant parcel for the takings analysis consisted of the entire  property held by District Intown, i.e., the property as it was  originally purchased in 1961 and as it was held for 27 years  prior to the 1988 subdivision.  All relevant objective and  subjective factors support this conclusion.  When the property is viewed as a single parcel, there is no doubt that it has  not been rendered valueless.  Indeed, even if each subdivided  parcel is considered separately, District Intown has not  shown a "total taking" under Lucas.  In addition, the record  here does not show that District Intown's investment-backed  expectations were disappointed.  This is not surprising, because District Intown could not have had any reasonable  investment-backed expectations of development given the  background regulatory structure at the time of subdivision. Accordingly, we hold that District Intown did not present any  genuine issue of material fact in support of a takings claim  under Penn Central or Lucas.  We therefore affirm the  District Court's judgment.

I. Background

4
In 1961, District Intown purchased in fee simple Lot 1 of  Subdivision Square 2106 on Connecticut Avenue, across from  the National Zoo.  The property was known as Cathedral  Mansions South and consisted of an apartment building and  adjacent landscaped lawns.  District Intown made no significant changes to the property until 1988, when it subdivided  Cathedral Mansions South into nine lots, designated as Lots  106 through 114.  The subdivisions were recorded on June 30,  1988.  Lot 106 contains the apartment building, and Lots 107  through 114 are each portions of the landscaped lawn.  The record indicates that District Intown spent $2,819 to survey  the parcel and to record the subdivision.  The record does not  reflect any other expenses.


5
On December 30, 1988, District Intown applied for permits  to build one townhouse on each of the eight landscaped lots. The zoning and structural engineering divisions of the Department of Consumer and Regulatory Affairs approved the  permits on March 7, 1989.  However, because the property is  located across from the National Zoo, the permits were  referred to the Commission on Fine Arts.  See D.C. Code  Ann.  5-410 (1994) ("Ship stead-Luce Act").  The Ship stead Luce Act, in effect since the 1930s, empowers the Commission  on Fine Arts to communicate to the Mayor "recommendations, including such changes, if any, as in its judgment are  necessary to prevent reasonably avoidable impairment of the  public values belonging" to various buildings and parks.  Id.On March 31, 1989, the Commission on Fine Arts recommended against construction.


6
Beginning in 1987, before the property was subdivided, a  movement developed in the Woodley Park community in  support of designating the property a historic landmark. This culminated on March 2, 1989, when the group filed a  landmark designation petition.  This was five days before  District Intown received zoning approval for the construction. The Historic Preservation Review Board ("Review Board")  approved the landmark designation on May 17, 1989.  Because the landmark designation petition was pending when  District Intown's permits were approved for zoning, the permits were referred to the Review Board pursuant to the  District of Columbia's landmark laws, see D.C. Code Ann.   5-1001 et seq. (1994 & Supp. 1999), effective since 1979.  On  July 19, 1989, the Review Board recommended that the  construction permits be denied.  The permit applications  were dismissed without prejudice on December 20, 1991.


7
On January 31, 1992, District Intown filed new permit  applications identical in all respects to those previously dismissed.  The permits were again referred to the Review  Board, which recommended denial because construction on  the lawn would be incompatible with its historic landmark status.  Pursuant to D.C. Code Ann.  5-1007(e), District  Intown requested a hearing before an agent designated by  the Mayor.  The hearing was held on July 22 and 24, 1992.The Mayor's agent agreed with the Review Board, stating  that "any construction destroying the lawn" would be incompatible with its landmark status.  Decision and Order of  Mayor's Agent p 61 n.1, reprinted in Joint Appendix ("J.A.")  368.  In addition, the agent purported to hold that the denial  of the construction permits did not work an economic hardship or constitute a taking, but the District of Columbia Court  of Appeals has since declared that the agent's holding was  outside his jurisdiction.  See District Intown Properties, Ltd.  v. Department of Consumer and Regulatory Affairs, 680 A.2d  1373, 1379 (D.C. 1996) (decision of the Mayor's agent regarding alleged economic hardship would have no preclusive effect  in any future proceeding in which District Intown might claim  an uncompensated taking).


8
Thereafter, on March 22, 1996, District Intown filed this   1983 action.  On cross motions for summary judgment, the  District Court entered summary judgment for the District of  Columbia on September 25, 1998.  See District Intown Properties Ltd. Partnership, 23 F. Supp. 2d at 39.  The court  found that the property (i.e., the "relevant parcel") for the  purposes of assessing whether a taking had occurred consisted of the original Lot 1 prior to its subdivision into nine lots.See id. at 35-36.  Because District Intown continued to  receive significant economic benefits from use of the relevant  parcel, the court found that appellants failed to demonstrate  that their property had been rendered "valueless," and their  claim to a taking under Lucas failed.  See id. at 36-37.  The  court then turned to the ad hoc analysis elucidated by Penn  Central and found that none of the ad hoc factors support  District Intown's takings claim.  See id. at 37-39.  This  appeal followed.

II.  Analysis
A. Standard of Review

9
This court reviews a grant of summary judgment de novo. See Aka v. Washington Hosp. Ctr., 156 F.3d 1284, 1288 (D.C. Cir. 1998) (en banc).  A party is entitled to summary judgment if the record reveals that there is no genuine issue as to  any material fact and that the moving party is entitled to  judgment as a matter of law.  See Fed R. Civ. P. 56(c).  In  deciding whether there is a genuine issue of material fact, the  court must assume the truth of all statements proffered by  the non-movant except for conclusory allegations lacking any  factual basis in the record.  See Greene v. Dalton, 164 F.3d  671, 675 (D.C. Cir. 1999).  Summary judgment may be granted even if the movant has proffered no evidence, so long as  the non-movant "fails to make a showing sufficient to establish the existence of an element essential to that party's case,  and on which that party will bear the burden of proof at  trial."  Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).  As  the "party challenging governmental action as an unconstitutional taking," District Intown bears a "substantial burden."Eastern Enterprises v. Apfel, 524 U.S. 498, 523 (1998).

B. The Takings Analysis

10
The Takings Clause of the Fifth Amendment prohibits the  government from taking "private property ... for public use,  without just compensation."  U.S. Const. amend. V.  In a  regulatory takings case, the principal focus of inquiry is  whether a regulation "reaches a certain magnitude" in depriving an owner of the use of property.  Pennsylvania Coal Co.  v. Mahon, 260 U.S. 393, 413 (1922);  see also id. at 415 (asking  whether the regulation "goes too far").  The Supreme Court  has indicated that most regulatory takings cases should be  considered on an ad hoc basis, with three primary factors  weighing in the balance:  the regulation's economic impact on  the claimant, the regulation's interference with the claimant's  reasonable investment-backed expectations, and the character  of the government action.  See Penn Central Transp. Co., 438  U.S. at 124.


11
The meaning of the three factors identified in Penn Central  has been amplified by the Court, both in Penn Central and in  later cases.  The regulation's economic effect upon the claimant may be measured in several different ways.  See Hodel v.  Irving, 481 U.S. 704, 714 (1987) (looking to the market value of a property);  Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 495-96 (1987) (looking to whether the  regulation makes property owner's coal operation "commercially impracticable");  Andrus v. Allard, 444 U.S. 51, 66  (1979) (looking to the possibility of other economic use besides sale, which was prohibited by the challenged regulation);  Penn Central Transp. Co., 438 U.S. at 136 (focusing on  the ability to earn a reasonable rate of return).  A reasonable  investment-backed expectation "must be more than a 'unilateral expectation or an abstract need.' "  Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005-06 (1984) (quoting Webb's  Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161  (1980)).  Claimants cannot establish a takings claim "simply  by showing that they have been denied the ability to exploit a  property interest that they heretofore had believed was available for development."  Penn Central Transp. Co., 438 U.S.  at 130.  And the character of the governmental action depends both on whether the government has legitimized a  physical occupation of the property, see Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 434-35  (1982), and whether the regulation has a legitimate public  purpose, see Keystone Bituminous Coal Ass'n, 480 U.S. at  485.  Finally, under all three of these factors, the effect of the  regulation must be measured on the "parcel as a whole."  See  Penn Central Transp. Co., 438 U.S. at 130-31.


12
The Supreme Court has indicated that it will find a "categorical" or per se taking in two circumstances.  The first  circumstance includes regulations that result in "permanent  physical occupation of property."  Loretto, 458 U.S. at 434-35.This circumstance is not at issue in this case.  The second  circumstance includes regulations pursuant to which the government denies all economically beneficial or productive use  of property.  See Lucas, 505 U.S. at 1015.  This so-called  "total taking" claim is at the heart of District Intown's  complaint here.  Unfortunately, the facial simplicity of the  "total taking" standard belies the difficulty in its application. As the Court acknowledged in Lucas, its "rhetorical force ...  is greater than its precision, since the rule does not make clear the 'property interest' against which the loss of value is  to be measured."  505 U.S. at 1016 n.7.


13
Under both Lucas and Penn Central, then, we must first  define what constitutes the relevant parcel before we can  evaluate the regulation's effect on that parcel.  In the instant  case the question is:  Does the relevant parcel consist of the  property as a whole or do the eight lots for which construction permits were denied constitute the relevant parcels? This has been referred to as the "denominator problem."E.g., Love ladies Harbor, Inc. v. United States, 28 F.3d 1171,  1179 (Fed. Cir. 1994).  State law may offer some guidance on  how to define the relevant parcel, but, as the Court has noted,  state law is not always determinative.  Compare Lucas, 505  U.S. at 1017 n.7 (suggesting that one may look to the influence of the State's property law--whether and to what extent  the State has recognized and extended legal recognition to  the particular interest alleged to have been deprived of all  economic value--on the claimant's reasonable expectations),  with Keystone Bituminous Coal Ass'n, 480 U.S. at 500 (refusing to treat the support estate as a separate parcel of  property simply because Pennsylvania law recognizes it as  such and noting that "our takings jurisprudence forecloses  reliance on such legalistic distinctions within a bundle of  property rights").

C. The Relevant Parcel

14
The definition of the relevant parcel profoundly influences  the outcome of a takings analysis.  Above all, the parcel  should be functionally coherent.  In other words, more should  unite the property than common ownership by the claimant. Thus, a court must also consider how both the property owner and the government treat (and have treated) the  property.


15
The District Court used several factors to determine the  relevant parcel:  the degree of contiguity, the dates of acquisition, the extent to which the parcel has been treated as a  single unit, and the extent to which the restricted lots benefit  the unregulated lot.  See District Intown, 23 F. Supp. 2d at  35 (citing Ciampitti v. United States, 22 Cl. Ct. 310, 318 (1991)).  An analysis focused on these factors is eminently  sound and it mirrors the approach taken by other courts in  regulatory takings cases.  See Forest Properties, Inc. v.  United States, 177 F.3d 1360, 1365 (Fed. Cir.) (stressing the  owner's treatment of property as a unit from the time of  purchase), cert. denied sub nom. RCK Properties v. United  States, 120 S. Ct. 373 (1999);  K & K Constr. Co. v. Department of Natural Resources, 575 N.W.2d 531, 537 (Mich.)  (stressing contiguity, unity of ownership, and a common  development plan), cert. denied, 119 S. Ct. 60 (1998).


16
Applying these factors, the District Court correctly determined that all nine lots should be treated as one parcel for  the purpose of the court's takings analysis.  The lots are  spatially and functionally contiguous.  District Intown purchased the property as a whole in 1961 and treated it as a  single indivisible property for more than 25 years.  District  Intown presented no evidence that, even after subdivision, it  treated the lawn lots separately from Lot 106, the lot that  contains the apartment building, for the purposes of accounting or management.  The intentional act of subdivision is the  only evidence produced by District Intown that it has treated  the lots as distinct units.  In fact, before the Mayor's agent,  District Intown did not come forward with evidence showing  that it had, for accounting purposes, treated the lawn maintenance fees separately from expenses associated with maintaining the apartment building.  See Decision & Order of  Mayor's Agent p 40, reprinted in J.A. 364. While there is a  dispute as to whether the adjacent landscaped lawn increases  the apartment building's value, this is immaterial.  Even if  Lot 106 were deemed to have the same value with or without  Lots 107 through 114, the application of the other three  factors strongly suggests that Lots 106 through 114 are  functionally part of the same property.


17
Appellants argue that the District Court was wrong to  treat all the lots as a single parcel because it contradicts  Lucas and two Federal Circuit cases.  This argument falls  flat.  District Intown first argues that the Lucas Court  termed "extreme" and "unsupportable" a similar decision by  the state court in Penn Central to treat multiple holdings as a single parcel for takings analysis.  See Brief for Appellants at  15-16.  This dictum, see Lucas, 505 U.S. at 1017 n.7, referred,  however, only to the state court's decision to treat all of Penn  Central's holdings in the vicinity of Grand Central Station as  part of the denominator for the purposes of deciding whether  plaintiffs could receive a reasonable return on their investment in Grand Central.  See Penn Central Transp. Co. v.  New York, 366 N.E.2d 1271, 1278 (N.Y. 1977).  The Penn  Central Court had no need to address this holding.  The  Lucas dictum casts aspersions on the state court's elevation  of one factor, unity of ownership, over other factors in  determining the relevant parcel.  The District Court engaged  in no such "extreme" conduct here;  it did not look to all of  District Intown's holdings in the vicinity of Cathedral Mansions South to evaluate the economic effect of the regulation  at issue here;  it looked to contiguous property that was  purchased and treated as a single unit by appellants.


18
Similarly, the two Federal Circuit cases cited by District  Intown do not undermine the District Court's definition of the  relevant parcel.  See Brief for Appellants at 16 (citing Loveladies Harbor, 28 F.3d at 1171 and Florida Rock Indus., Inc. v.  United States, 791 F.2d 893 (Fed. Cir. 1986)).  Neither of  these cases support appellants' position and, in fact, Loveladies Harbor supports the District Court's decision.  In Florida Rock Industries, the court reviewed the Army Corps of  Engineers' uncompensated rejection of the plaintiff's application to mine limestone on 98 acres of the plaintiff's wetland  property.  See Florida Rock Indus., 791 F.2d at 896.  The  Federal Circuit affirmed the trial court's decision to consider  the 98 acres as the relevant parcel separate from the adjacent  1,462 acres of wetland.  See id. at 904.  The Federal Circuit's  justification for this decision, however, was that all the evidence and the findings indicated that the Army Corps of  Engineers would have rejected mining on all of the property,  so there was no point to including all 1,560 acres in the  relevant parcel.  See id. at 904-05.  Thus, Florida Rock  Industries is not analogous to the instant case;  there is no  indication that the District of Columbia will prevent District Intown from continuing to use its property to obtain income  from its apartment building.


19
Loveladies Harbor lends support to the District Court's  decision to treat Lots 106-114 as one parcel.  The plaintiff in  Loveladies Harbor sought to develop a total of 12.5 acres of  land, consisting of 11.5 acres of wetlands and one acre of filled  upland.  See Loveladies Harbor, 28 F.3d at 1180.  The Army  Corps of Engineers refused to grant the permit required to  fill the wetlands acreage.  See id. at 1174.  In reviewing  whether this denial constituted a taking the Federal Circuit  found that the trial court correctly concluded that the relevant parcel was the entire 12.5 acres, not just the 11.5 acres  to which the permit denial applied.  See id. at 1181.  Thus,  Loveladies Harbor argues against treating the property burdened by the regulation separately from contiguous property.


20
Moreover, the Loveladies Harbor Court emphasized that a  "flexible approach, designed to account for factual nuances,"  guides its analysis of the denominator problem.  Id.  These  factual nuances include "whether there remained substantial  economically viable uses for plaintiff's property after the  regulatory imposition," id. (citing Deltona Corp. v. United  States, 657 F.2d 1184 (Ct. Cl. 1981)), and "the timing of  transfers in light of the developing regulatory environment."Id.  Both of these factors support our conclusion in the  instant case that Cathedral Mansions South as a whole constitutes the relevant parcel.


21
Finally, Penn Central is instructive where, as here, appellants own a single piece of property that is divisible into  several legally recognized entities.  Indeed, the Court was  rather blunt in saying that


22
"[t]aking" jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abro-gated.


23
Penn Central Transp. Co., 438 U.S. at 130.  The Court also  made it clear that a party may not "establish a 'taking' simply  by showing that they have been denied the ability to exploit a property interest they heretofore had believed was available  for development."  Id.  The Court found this suggestion to be  "simply untenable."  Id.


24
On the basis of the foregoing authority, it seems clear here  that we must analyze District Intown's property not as separate, potentially divisible and transferable parcels, but as one  contiguous parcel.  Appellants note that the District of Columbia has taxed Lots 107 through 114 at a higher rate since  subdivision, reflecting the District of Columbia's assessment  that these lots are vacant develop able land.  They contend  that it is inconsistent for the District of Columbia to speak  from both sides of its mouth in this regard, claiming for tax  purposes that the lots are develop able, but refusing to permit  development on the lots.  We simply note that appellants  retain the right to recombine the parcels and treat them as  one property for the purposes of taxation, so no further  disadvantage will befall them on this score.


25
We are perplexed by our concurring colleague's criticism of  our approach to evaluating a takings claim.  As the concurring opinion correctly notes, at bottom, the approach that we  follow and the result that we reach are in accord with  Supreme Court case law.  Unless and until the Court instructs otherwise, we are obliged to judge within the bounds  of established precedent.

D. Analysis Under Lucas

26
Given that Lots 106 through 114 should be treated as a  single parcel, the District Court's denial of summary judgment on District Intown's Lucas claim is unremarkable.  To  come within Lucas, a claimant must show that its property is  rendered "valueless" by a regulation.  Lucas, 505 U.S. at  1009.  District Intown presented no evidence to show that the  regulation deprived the property as a whole of all economically beneficial use.


27
Even were we to view Lot 106 as distinct from Lots 107  through 114, it seems plain that the District Court should  have granted appellees' motion for summary judgment. Drawing all inferences in favor of District Intown, the record does not support the conclusion that Lots 107 through 114 are  rendered "valueless" by the regulation at issue.  The record  contains a finding by the Mayor's agent that any construction  that destroyed the lawn would be incompatible with the  lawn's status as a historic landmark.  See Decision & Order  of Mayor's Agent p 61 n.1, reprinted in J.A. 368.  District  Intown argues from this that its case fell on all fours within  Lucas.  District Intown seeks to extend Lucas beyond its  reach.  The Lucas Court consciously recognized that it was  drawing an arbitrary line between total destruction of economic value and something marginally less than total destruction.  See 505 U.S. at 1019 n.8 (pointing out that while the  line establishing a categorical deprivation as requiring a  complete diminution in value is arbitrary as it relates to  someone who only suffers a 95% deprivation in value, the  person whose deprivation is "one step short of complete" may  still seek compensation under the Penn Central balancing  test).  District Intown propounded no evidence that the  lawns' economic value was totally destroyed as is required by  Lucas, nor did District Intown offer evidence of the plots' fair  market value after its construction permits were denied.  Cf.  Florida Rock Indus., 791 F.2d at 905 (reversing the trial  court's finding that denial of permit constituted an uncompensated taking because the court failed to consider the property's fair market value after regulation).


28
The concurring opinion misconstrues the opinion for the  court when it suggests that, pursuant to our analysis, no  compensable taking could ever be found.  As noted in the  foregoing discussion, we simply intend to highlight the limited  nature of the Lucas inquiry, and note that there would be no  "categorical" taking even were we to view the parcels as  separate under Lucas. We do not pass on how the parcels  would fare separately under Penn Central's ad hoc analysis.

E. Analysis under Penn Central

29
There are three main factors to be considered in Penn  Central's ad hoc inquiry:  the character of the government  action, the regulation's economic effect on the claimant, and  the effect on investment-backed expectations.  District In-town does not appear to argue that the character of the  governmental action counsels finding a taking;  this is not a  permanent invasion, but rather a general regulation with a  legitimate public purpose.  As to the economic effects, District In-town offered no evidence that this regulation rendered  Lots 106-114 unprofitable to maintain;  there is nothing in the  record to suggest that the apartment building does not bring  in a sufficient return for District In-town, and a claimant must  put forth striking evidence of economic effects to prevail even  under the ad hoc inquiry.  See Penn Central Transp. Co., 438  U.S. at 131 (reviewing the Court's decisions upholding regulations despite diminution in a property's value of more than  75%).


30
Finally, District In-town did not present sufficient evidence  that it had a reasonable investment-backed expectation to  develop the lawns into apartment buildings.  Here, as in  Penn Central, the regulation does not interfere with District  In-town's "primary expectation" concerning the use of the  parcel, because it "not only permits but contemplates that  appellants may continue to use the property precisely as it  has been used" for the past 28 years.  Penn Central Transp.  Co., 438 U.S. at 136.


31
District Intown suggested at oral argument that it has  satisfied the requirement of demonstrating reasonable investment-backed expectations because it purchased property that,  at the time of purchase, was subdividable.  This is not  sufficient to establish the existence of reasonable investmentbacked expectations.  In this case, where the development  District Intown proposes departs from the property's traditional use, and the moment of purchase is so attenuated from  the moment of subdivision, the claimant surely must point to  some action beyond mere purchase to establish the reasonableness of its expectations.


32
Appellants also argue that their expectations of the property's use between the moment of purchase and the moment of  subdivision could have reasonably changed.  This may be, but  when appellants subdivided they surely knew that the legal  regime had changed since they first bought their property.  Moreover, they knew that any subdivided parcel would be  subject to that regime.  Lucas teaches that a buyer's reasonable expectations must be put in the context of the underlying  regulatory regime.  See 505 U.S. at 1030 (stating that the  Takings Clause does not require compensation when the  restriction is proscribed by background state law rules or  understandings).  District Intown purchased and subdivided  its property subject to an existing regulatory regime that  establishes that District Intown could have had no reasonable  expectations of development at the time it made its investments.


33
At the time of purchase, District Intown could have reasonably expected the Ship stead-Luce Act to affect its rights of  development.  For approximately 60 years, the Ship stead Luce Act has restricted development on properties that, like  Cathedral Mansions South, abut or border upon the National  Zoo.  See D.C. Code Ann.  5-410.  Were that not sufficient,  after 1979, D.C.'s historic landmark laws additionally limited  expectations of development.  See id.  5-1001 et seq.  Thus,  at the time District Intown subdivided the property, it knew,  or should have known, that the property was potentially  subject to regulation under the landmark laws.  Cf. Amicus  Curiae Brief at 15 (pointing out that almost the entire length  of Connecticut Avenue from M Street to almost a mile north  of District Intown's property is either landmarked or within a  historic district).  Businesses that operate in an industry with  a history of regulation have no reasonable expectation that  regulation will not be strengthened to achieve established  legislative ends.  See Concrete Pipe & Prods. v. Construction  Laborers Pension Trust, 508 U.S. 602, 645 (1993).  In this  case, District Intown was in the real estate business, with a  history of restriction of development for the purpose of  preserving historic sites.  Similarly, the Supreme Court rejected a company's claim of reasonable expectations that the  Environmental Protection Agency would maintain trade secret confidentiality where the industry had long "been the  focus of great public concern and significant government  regulation" and the "possibility was substantial that the Federal Government ... would find disclosure [of trade secrets] to be in the public interest."  Monsanto Co., 467 U.S. at  1008-09.  Prior to and after subdivision, this particular property was the subject of increasing public activity devoted to  restricting development through landmark designation.  See  Good v. United States, 189 F.3d 1355, 1361-63 (Fed. Cir.  1999) (finding the claimant had no reasonable expectations  where he purchased the land subject to environmental regulation and watched as public concern for the environment  increased and the applicable regulations became more stringent before seeking approval for development).


34
District Intown also argues that the District Court's finding  that the regulation did not have a significant economic impact  was erroneous.  District Intown bases this argument on the  assertion that they presented undisputed evidence that the  lawns, absent development, add nothing to the value of the  apartment building.  See Brief for Appellants at 24-25.  This  argument misunderstands the substantial burden District Intown faced in District Court.  District Intown had to produce  evidence showing that its entire property, including Lot 106,  no longer provided a reasonable rate of return given the D.C.  regulation.  Whether the lawns add value to the apartment  building is irrelevant to whether the property as a whole can  be operated at a sufficient profit even with the regulation.  In  short, none of the Penn Central factors support District  Intown's claim of a compensable deprivation of property.

III. Conclusion

35
For the reasons stated above, we affirm the District  Court's grant of summary judgment in favor of the District of  Columbia.


36
So ordered.


37
Williams, Circuit Judge, concurring in the judgment:


38
The  District of Columbia's Historic Preservation Board imposed  historic landmark status not only on an apartment building  named Cathedral Mansions South but also on a substantial  stretch of adjacent lawn bordering the sidewalks of Connecticut Avenue.  District Intown, the owner of both, claims that  as applied to the lawn the landmarking effects a taking of its  property in violation of the Takings Clause of the Fifth  Amendment.  The majority's disposition is--with one important exception--in general accord with the current opinions of  the Supreme Court.  Those decisions are of course binding. At the same time, however, it is not inappropriate to identify  ways in which the prevailing analysis elevates formal concepts  over economic reality and tends to strip the Clause of its  potential for fulfilling the framers' likely purposes.


39
The economist's justification for the Takings Clause is that  it provides a check on government's likely tendency to waste  resources by treating private property as a free good.  See  Richard A. Posner, Economic Analysis of Law 58 (4th ed.  1992) ("The simplest economic explanation for the requirement of just compensation is that it prevents the government  from overusing the taking power.").  This is just an application of the general principle that if a firm can externalize  costs (e.g., the health costs of polluting the air), it will use  more of the unpriced resource (in this example, air as a waste  sink) than it would if required to pay.  And it will tend to  overproduce the goods or services whose production uses the  superficially "free" good--i.e., it will produce them at a level  where the true value of the extra inputs exceeds the true  value of the extra output.  See generally Robert Cooter &  Thomas Ulen, Law and Economics 45-46 (1988).  As applied  to government regulation, similar oversupply can be expected--here, production of regulations that impose more costs  than they afford benefits, that do more harm than good.


40
The framers, though not articulating the purpose of the  Clause in economic terms, evidently did view it as aimed at  correcting the incentives of the political branches.  There is  evidence, for example, that James Madison saw electoral  power slipping into the hands of a non-landholding majority,  which in a "leveling" mode could be expected to invade landowners' rights.  See William Michael Treanor, The Original Understanding of the Takings Clause and the Political  Process, 95 Colum. L. Rev. 782, 849 (1995).  Late twentieth  century America, of course, displays a far greater range of  purposes than "leveling" for reallocation of rights.  While the  resulting proposals are naturally advanced in the name of the  public good, many are surely driven by interest-group purposes, commonly known as "rent-seeking."  Among these  proposals, at least some inflict aggregate costs considerably  outweighing their aggregate benefits, paralleling the wasteful  production associated with private firms' externalization of  costs.  The Takings Clause serves to curb such inefficiencies.See, e.g., Richard A. Epstein, Takings:  Private Property and  the Power of Eminent Domain 281 (1985) ("[T]he Takings  Clause is designed to control rent seeking and political faction.  It is those practices, and only those practices, that it  reaches.").


41
A Takings Clause construction that was dedicated without  qualification to preventing such government externalization  would require compensation whenever regulation reduced the  value of anyone's property, however slightly.  Balanced  against that goal is an array of considerations.  Most obvious  is the cost of calculating and administering compensation,  which would tend to sink many a beneficent statute.  "Government hardly could go on if to some extent values incident  to property could not be diminished without paying for every  such change in the general law."  Lucas v. South Carolina  Coastal Council, 505 U.S. 1003, 1018 (1992) (quoting Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922)).  (The  compensation cost itself would be only a weak countervailing  factor, for most beneficent regulation would presumably generate gains large enough to pay the losers if identification and  calculation were costless.)  My goal here is not to pinpoint  the appropriate balance between these competing considerations, much less to suggest that the correct reading is one  under which all regulation materially adversely affecting a  property's value would be compensable.  Rather, it is simply  to note the ways in which modern interpretation of the Takings Clause, as exemplified in today's decision, impairs its  role as a disincentive to wasteful government activities.


42
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43
The majority applies an apparent presumption that contiguous parcels under common ownership should be treated as  one parcel for purposes of the takings analysis.  This presumption tends to reduce the likelihood that courts will order  compensation.  The larger the parcel, the greater the chance  that the regulated land will retain an economically viable use.Where no such use remains, there is a "total taking" and the  government can "resist compensation only if the logically  antecedent inquiry into the nature of the owner's estate  shows that the proscribed use interests were not part of his  title to begin with," Lucas, 505 U.S. at 1027;  where an  economically viable use survives regulation, the best the  owner can hope for is "partial" takings analysis.  Under the  latter courts will determine whether to award compensation  by looking to "the economic impact of the regulation, its  interference with reasonable investment backed expectations,  and the character of the governmental action," Kaiser Aetna  v. United States, 444 U.S. 164, 175 (1979);  see also Eastern  Enters. v. Apfel, 118 S. Ct. 2131, 2146 (1998);  Lucas, 505 U.S.  at 1019 n.8, and will generally deny compensation so long as  the restriction "substantially advance[s] legitimate state interests," Agins v. City of Tiburon, 447 U.S. 255, 260 (1980);  see  also Dolan v. City of Tigard, 512 U.S. 374, 385 (1994).  Few  regulations will flunk this nearly vacuous test.  In fact, the  Supreme Court has only once found a partial taking to be  compensable, and even then only a plurality applied the  partial takings analysis.  See Eastern Enters., 118 S. Ct. at  2149;  see also id. at 2154-60 (Kennedy, J.) (rejecting the  plurality's takings analysis and finding invalidity on other  grounds).


44
The Supreme Court has offered several justifications for  this distinction between partial and total takings.  See, e.g.,  Lucas, 505 U.S. at 1017-18 (suggesting that "from the landowner's  perspective," a total taking is tantamount to a physical taking, and that from the government's perspective the concern that  an obligation to compensate for any incidental value diminution would impede effective functioning cannot apply in the  "relatively rare situations" of total takings).  From the perspective of ensuring that the government not engage in  wasteful behavior, however, the focus on the uses of the land  that remain is misplaced:  "[W]hat is decisive is that which is  taken, not that which is retained."  Epstein, Takings, supra,  at 58.  Whether the landowner is left with a limited use of the  land or none at all is hardly relevant to that issue.  And as  the regulating government delineates the scope of regulation,  the opportunity for strategic behavior is obvious.


45
The majority's cursory application of the Penn Central  factors further broadens the gap between the two modes of  analysis, reinforcing the seemingly predetermined conclusion: in partial takings cases, the government wins.  The majority  states that District Intown has not shown the land "unprofitable to maintain," Maj. Op. at 14;  it is unimaginable, however, absent an extraordinary tax liability, that a parcel could  retain an economically viable use yet have a net negative  value.  The majority goes on to say that District Intown has  failed to show that the land does not "bring in a sufficient  return," id., but does not answer the all-important question: a return on what?  on out-of-pocket costs?  on initial purchase price?  on fair market value?  Moreover, the majority  provides no guidance as to how "sufficient" the return must  be, except to cite Penn Central, in which the Court found that  a 75% diminution in value did not constitute a compensable  taking.  See id.


46
Similarly, in its consideration of District Intown's "reasonable investment-backed expectations," the majority's analysis  begs the question whether any landowner, in a world where  zoning regulations are prevalent, could ever argue that a  particular regulation was "unexpected."  The presumption is  insurmountable:  "Businesses that operate in an industry with  a history of regulation have no reasonable expectation that  regulation will not be strengthened to achieve established  legislative needs."  Maj. Op. at 15.  Although the 1931  Ship stead-Luce Act might have put District Intown on notice that some regulation of architectural design might be expected, it is farfetched to conclude that District Intown, merely  because of its proximity to the zoo, should reasonably have  anticipated an absolute ban on construction;  the city's counsel, under questioning at oral argument, failed to identify any  uses, or even attempted uses, of the Shipstead-Luce Act to  support a complete construction veto.  Although the Takings  Clause is meant to curb inefficient takings, such a notion of  "reasonable investment-backed expectations" strips it of any  constraining sense:  except for a regulation of almost unimaginable abruptness, all regulation will build on prior regulation  and hence be said to defeat any expectations.  Thus regulation begets regulation.


47
Although the presumption in favor of looking at the parcel  as a whole, and in turn the increased reliance on the partial  takings mode of analysis, is at odds with the underlying  principle of the Takings Clause, it is perhaps the best construction of the Supreme Court's limited guidance.  The  Court has never squarely addressed the question of how  courts should define the relevant geographic parcel of land,  also known as "horizontal severance."  Marc R. Lisker, Regulatory Takings and the Denominator Problem, 27 Rutgers  L.J. 663, 705 (1996).  In Nectow v. City of Cambridge, 277  U.S. 183 (1928), the Court considered whether the city council  had effectuated a taking of plaintiff's land by zoning as  "residential" a 100-foot strip on plaintiff's 140,000 square foot  parcel.  Although the Court appeared to treat the relevant  parcel as encompassing only the fractional strip, this was in  no respect relevant to the Court's decision.  In Penn Central  Transportation Co. v. New York City, 438 U.S. 104 (1978), the  Court applied a very weak form of horizontal severance,  focusing exclusively on the landmarked building itself without  treating the owner's neighboring--but not adjacent--property as part of the greater parcel, as had the New York Court  of Appeals.  See Penn Central Transportation Co. v. New  York City, 366 N.E.2d 1271, 1276-77 (N.Y. 1977).  But Penn  Central tells little, as the properties were not all contiguous,  had been put to different uses, and had never been treated as  a unified whole by the owners or the City.


48
Penn Central's handling of "vertical severance," however, is  informative, if only by analogy.  Using language seemingly  broad enough to encompass horizontal severance, the Court  made clear that it would not consider the air rights above  Grand Central separately from the land rights:  " 'Taking'  jurisprudence does not divide a single parcel into discrete  segments and attempt to determine whether rights in a  particular segment have been entirely abrogated."  Penn  Central, 438 U.S. at 130;  see also Keystone Bituminous Coal  Ass'n v. DeBenedictis, 480 U.S. 470, 496-502 (1987) (refusing  to regard either coal that statute required miners to leave in  place (about 2% of total coal), or the "support estate," as  distinct property for ascertaining whether statute denied  owners all economically viable uses).


49
The Court has expressed similar reluctance to engage in  "conceptual severance" more generally (i.e., the treatment of  any specific property right as a single unit).  In Andrus v.  Allard, 444 U.S. 51 (1979), the Court refused to treat extinction of the right to sell any part of a lawfully killed bald eagle  as a total taking.  See id. at 65-66 ("At least where an owner  possesses a full 'bundle' of property rights, the destruction of  one 'strand' of the bundle is not a taking, because the  aggregate must be viewed in its entirety.").  The Court  arguably evidenced a retreat from this strong position in  Hodel v. Irving, 481 U.S. 704, 717-18 (1987), in which it found  a taking in legislation that "completely abolished" certain  landowners' rights to dispose of their property by descent or  devise, even though they retained complete rights to possess  and to make inter vivos transfers.  The Court has not,  however, reached agreement on the scope of this retreat.Compare id. at 719 (Scalia, J., concurring) (saying the decision "effectively limits Allard to its facts"), with id. at 718  (Brennan, J., concurring) (saying that the case was "unusual"  and thus had no impact on Allard).  Overall, I think the  majority is correct in its implicit understanding that the  Supreme Court is reluctant to carve a landowner's parcel into  smaller units for which compensation might be more likely.


50
But the factors that the majority applies in making the  decision, drawn from decisions of the Federal Circuit and Claims Court and characterized by the majority as "eminently sound," Maj. Op. at 9, strike me as uninformative and  largely irrelevant.  The factors considered are:  (1) whether  the neighboring parcels are contiguous, (2) whether they were  acquired simultaneously, (3) whether they have been treated  as a single unit, and (4) the extent to which the restricted lot  benefits the neighboring lot.  Maj. Op. at 8-9.


51
The first factor, contiguity, is clearly necessary but in no  way sufficient.  The next two factors--simultaneity of acquisition and unity of use--are more troublesome.  Both elevate  history--either the historical purchase or the historical use-over the real-world present relationship between the tracts. Compare Laura M. Schleich, Takings:  The Fifth Amendment, Government Regulation, and the Problem of the Relevant Parcel, 8 J. Land Use & Envtl. L. 381 (1993) (proposing  that courts look to the "moment of regulation" when defining  the relevant parcel).  The majority's focus on the property's  use prior to regulation tells us nothing about the value producing opportunities foreclosed at the time of regulation."It is, of course, irrelevant that [the government] interfered  with or destroyed property rights that [plaintiff] had not yet  physically used.  The Fifth Amendment must be applied with  'reference to the uses for which the property is suitable,  having regard to the existing business or wants of the community, or such as may be reasonably expected in the immediate future.' "  Penn Central, 438 U.S. at 143 n.6 (Rehnquist, J., dissenting, quoting Boom v. Patterson, 98 U.S. 403,  408 (1879)).


52
The majority mentions but brushes aside a fourth factor-the extent to which the regulated parcel benefits the neighboring lot.  Maj. Op. at 9.  Yet this appears the most  relevant.  The more a burdened tract in its regulated use  benefits contiguous property, the less likely that the regulation has a net negative impact.  In the extreme case a  property interest may be worthless except in conjunction with  another.  Thus in Keystone Bituminous Coal Ass'n, the  Court pointed out that the "support estate" had "value only  insofar as it protects or enhances the value of the estate with  which it is associated [i.e, the mineral estate]," 480 U.S. at 501, and therefore refused to treat the "support estate" as a  separate interest at all.  Similarly, small parcels of land,  either in the interior or around the edges of greater parcels,  commonly are valuable only when they combine with the  greater parcel to create a more valuable whole;  for regulation  of the exterior (such as setback requirements), then, it makes  sense to measure the impact in conjunction with the "primary" parcel.  Looking to the property owner's benefit from  these internal synergies parallels use of "average reciprocity  of advantage," Pennsylvania Coal Co. v. Mahon, 260 U.S.  393, 415 (1922), which considers the benefit that each burdened owner--as in ordinary zoning or historic districting-receives from the similar restriction of his neighbors.


53
Of course there will be some synergy between almost any  two neighboring parcels under common ownership, since unified ownership creates options for the sole owner that multiple landowners could achieve only by contracting.  But synergy is a matter of degree, and mere contiguity should not be  enough.  One commentator proposes a rather demanding  synergy test, arguing that the regulated tract should be  considered as its own parcel so long as not all of its value  derives from synergies with neighboring land;  in such cases,  the parcel would have an independent economically viable  use, which if destroyed by regulation would be compensable  under Lucas.  See John E. Fee, Comment, Unearthing the  Denominator in Regulatory Taking Claims, 61 U. Chi. L.  Rev. 1535, 1557-58 (1994).  One need not go so far to see the  skimpiness of the synergy here.


54
To be sure, Cathedral Mansions is more than several  contiguous parcels.  According to the decision of the Historic  Preservation Review Board, "The buildings are sited imaginatively to provide the greatest possible integration of living  space with well-landscaped open space."  Joint Appendix  ("J.A.") 320.  (Passers by who observe the rather bare lawn  will have to reach their own judgments on the adjective "welll and scaped.")  Integration there doubtless is--almost any  lawn around a building will manifest a degree of integration. But there is no explicit showing that these synergies depend  on the entire lawn remaining undeveloped.  The proposed townhouses would cover only the portion of the lawn abutting  Connecticut Avenue, still leaving the interior portion, approximately half the lawn, undeveloped.  Common sense would  suggest that at some distance from the building marginal  synergies created by extra lawn space become slight, and  thus that the part of the lawn beyond that line should be  treated as its own parcel for takings purposes.  Further,  although District rent-control law evidently allows the owner  to earn a return on the tax-assessed value of land in a single  tract with a rent-controlled building (here the owner could  apparently recover that status by undoing the formalities of  subdivision), that value is likely to be only a tiny fraction of  the value absent the historic landmarking.


55
In fact, it may well be completely different synergies--ones  between the lawn and adjacent Connecticut Avenue--that  have driven the landmarking decision.  The Board observed  that the lawn "contributes significantly to the unique open  space character of Connecticut Avenue."  J.A. 320.  A cynic  might suspect that the alleged relationship between the lawn  and the Cathedral Mansions apartments is little more than a  cloak by which the citizens of Upper Northwest Washington  have secured some parkland on the cheap.  Parks are good,  but the Fifth Amendment says that taking them is not.


56
Of course, there is another synergy between the two parcels and adjacent Connecticut Avenue, namely the historical  value that inheres in the preservation of a building as it was  initially constructed (i.e., with an expansive lawn beside it).Uncompensated landmark preservation seems to rest on this  synergy.  The Court in Penn Central embraced the view that  "the preservation of landmarks benefits all New York citizens  and all structures, both economically and by improving the  quality of life in the city as a whole."  438 U.S. at 134.  This  broad language seems to redefine "reciprocity of advantage"  in such a way that no government act could ever require  compensation, as the afflicted owner would be a member of  the taking polity and thus in receipt of offsetting advantages,  artificially presumed to be adequate.


57
Apart from obliterating takings law, such a view has peculiarly perverse effects in the realm of historic preservation. Although such laws try to preserve for society the positive  externalities created by buildings like Cathedral Mansions,  inflicting the entire cost on the creator of the landmark (or  his successor in interest) is bound to discourage investment in  first-class design.  Moreover, while insurance markets can  achieve the risk-spreading (or anti-"demoralization") goals  that some attribute to the Takings Clause, compare Posner,  Economic Analysis of Law, supra, at 58, they cannot offset  non-compensation's disincentive to good design.  Historic  landmark preservation, after all, is imposed selectively on  those who went out of their way to secure architectural  distinction.  The higher the quality, the higher the premium  for takings insurance;  the disincentive is inescapable.


58
Having found that the lawn and apartment parcels should  be treated as a unit, the majority nevertheless considers  whether compensation would be due even if the lawn were  analyzed separately;  in doing so, it gratuitously takes an even  harsher stance against compensation than does present law. The majority finds that District Intown has failed to offer  evidence that the regulation denies it "economically viable use  of [the] land," Lucas, 505 U.S. at 1016, even though the  Mayor's own agent found that "any construction that destroyed the lawn would be incompatible with the lawn's status  as an historic landmark."  Maj. Op. at 13.  Thus, so long as  the lawn is untouched, "economically viable" uses are permissible.  It is hard to imagine what "economically viable" use  that constraint leaves, unless the majority means that the  very barest thread of value, yielded by some thoroughly  bucolic use, is enough to defeat a total takings claim.  By this  standard, no regulation can ever effect a total taking, and at  best will be tested only under the far weaker partial takings  rubric.


59
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60
The prevailing Federal Circuit-Claims Court method of  defining the relevant parcel, followed by the panel here, focuses on marginal issues and largely overlooks the more  critical concern of synergies;  the focus on the landowner's  historical, rather than proposed, use further skews the analysis.  But the Supreme Court's general approach seems to  militate in favor of looking to the parcel as a whole.  Similarly, although resting uncompensated landmark preservation on  the idea of reciprocal advantage stretches the concept into  meaninglessness, and the denial of compensation discourages  ex ante what it hopes to foster ex post, the current cases give  these arguments little purchase.  Accordingly, I concur in the  majority's decision to affirm.

