Entrepreneur's career shows possibilities and drawbacks of city loans FLIP SIDE OF BALTIMORE RENAISSANCE

August 02, 1992|By Joan Jacobson | Joan Jacobson,Staff Writer Staff writer Sandy Banisky contributed to this article.

Bill Struever believes that Baltimore can generate economic momentum only if City Hall keeps coaxing developers into partnerships with the government. And he is one of the city's most enthusiastic partners.

Over the past 18 years, Mr. Struever's company has been one of Baltimore's busiest developers, building such ventures as a Charles Street arcade, Canton waterfront apartments and an East Baltimore shopping center.

With 14 city-financed projects, his firm is among the leaders in attracting government aid. But even his prosperous company hasn't repaid some of the city loans that made that development possible.

Mr. Struever's successes show the benefits of public-private partnerships. But his experiences also illustrate the difficulties of trying to launch new projects in a precarious city economy.

Mr. Struever's company, which has put about $10 million of its own equity in various city-aided projects, is making little money on them, he says. Over the long term, he expects the investments to pay off and enable the firm to repay its city loans.

But loan repayments aren't the city's first priority, Mr. Struever believes. His projects and others financed with city help have created jobs, opened new stores, spurred nearby development, stabilized neighborhoods and boosted property taxes.

"The real upside is the city's getting the project built, the taxes, the jobs created, the benefits to the neighborhood in terms of revitalization," Mr. Struever said. "That's 90 percent of the benefit to the city."

Government loans are critical to help compensate for the city's disadvantages, Mr. Struever said in an interview in the Charles Street offices of Struever Bros. Eccles & Rouse.

Urban property owners face constant turnover of commercial tenants and high security and sanitation costs, he says. His company has tried to overcome those problems by pumping extra money into several projects and persuading new tenants to move into empty buildings.

Many developers would rather build in the suburbs, where the problems are fewer. But Mr. Struever, 40, has made his name in the city.

A Rochester, N.Y., native, he moved to Baltimore with his brother and roommate in a pickup truck in 1974 after hearing that the city, in a bid to lure back the middle class, was selling run-down houses for $1 each.

The new developers began by joining in the gentrification of Federal Hill, renovating rowhouses and commercial buildings. By the '80s they moved uptown and became well-known at William Donald Schaefer's City Hall, where the company won $12.5 million in government loans.

Mr. Struever says his company's city-financed projects have created 1,078 jobs and brought the city $1.6 million in property taxes this year.

Nevertheless, city records show that his company has had its share of troubles with the city loan bank.

* Earlier this year, Struever Bros. and partners were $33,000 behind on payments for a $600,000 loan on the Charles Plaza shops downtown when the city agreed to reduce monthly payments for 10 months. The developers have had trouble keeping merchants in the stores.

* In East Baltimore, Struever Bros. and partners were $54,351 behind on payments on $1 million in loans for a shopping center near Johns Hopkins Hospital when the city agreed in March to delay payments for two years. Mr. Struever said the shopping center has been expensive to keep clean and secure. The developers have also had difficulty keeping merchants from moving out.

* The Struever company and its partners have never made a payment on a $4.5 million federal loan for the waterfront Tindeco Wharf, a former Canton factory building converted to luxury apartments. The pricey residences are fully occupied.

Loan payments are required only if the owners have extra "cash flow" after paying all their other loans and taxes and taking a management fee. Otherwise, the city can't collect its money -- or interest -- until 2005. The developers say the project has no cash flow to share because the property taxes of $335,000 a year are so high.

Robert Giloth, director of the Southeast Community Organization, a coalition of community groups near the Canton waterfront, had hoped to persuade the city to use Tindeco loan repayments for affordable housing in nearby working-class neighborhoods. So he was dismayed to learn that the Tindeco Wharf owners have made no loan payments.

"It's a galling story," he complains. "Politically well-connected developers get tax dollars to develop the waterfront." He said the new projects have done little for the neighborhood but raise the property taxes for rowhouse owners.

But Mr. Struever says the benefits of developments such as Tindeco are real.

The city is pulling in money from taxes on property that used to generate only $25,000. And there are intangible payoffs, the developers add.

"It's created tremendous image and goodwill for the city and spinoff development, and I think [the city's] going to get [its] money back in 20 years," Mr. Struever said.

Tindeco's developers say they hope to begin making interest payments on the loan soon. Meanwhile, that some loans remain unpaid does not discredit the city's financing programs, Mr. Struever said. They remain crucial to enticing developers into a troubled city, he believes.

"You want neighborhoods revitalized, you want housing, you want shopping centers, you want waterfront . . . you want to create jobs?" said Mr. Struever. "You need incentives, or business ain't going to come here."

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