Finances of landlord in question Owner gets subsidies despite default on federal mortgage

Essex complex is run down

HUD wants an audit

county wants to demolish buildings

November 23, 1995|By Larry Carson and Joe Nawrozki | Larry Carson and Joe Nawrozki,SUN STAFF

The owner of Riverdale Village, a rundown Essex-Middle River apartment complex, is collecting thousands of dollars in federal rent subsidies, even though he has not made a payment on his federally insured mortage for nearly three years, and faces foreclosure, records show.

A dozen subsidized tenants are living in the portion of the complex that was backed by the government, Baltimore County housing records show. They provide $39,660 a year to Riverdale Village, which is owned by New York-based developer Richard Schlesinger, said county housing Administrator Lois Cramer.

Ten other subsidized tenants live in the other half of the complex -- property that does not have a federally insured mortgage -- and generate $29,940 a year. Mr. Schlesinger also receives income from unsubsidized tenants, who pay from $250 to $400 in monthly rent, and from stores in a shopping center on the property.

The U.S. Department of Housing and Urban Development paid off the $5.4 million mortgage on half of the complex in June, after Mr. Schlesinger had failed to make any mortgage payments since January 1993. Now, officials are trying to foreclose on that property and demolish the 50-year-old buildings.

County officials see Riverdale Village as a major obstacle in their plan to fight urban blight by reducing the number of cheap, rundown -- and often vacant -- apartments in the area.

The complex has become a marketplace for crack cocaine dealers, county police say, and prostitutes often ply their trade in and around Riverdale Village.

HUD officials said Tuesday that they have requested an audit to determine whether Mr. Schlesinger has profited from Riverdale Village while leaving the government to pay off the mortgage.

They said he has failed to submit audited financial statements to HUD since 1991, and hasn't replied to letters requesting them.

Mr. Schlesinger, of Freeport, N.Y., controls the firm that has owned the 1,200-unit apartment complex on Eastern Boulevard since the late 1970s.

HUD assumed the mortgage under a now-defunct loan program called "co-insurance," which was a factor in $1 billion worth of defaulted mortgages, the federal housing scandals of the late 1980s revealed.

The program, halted in 1990, allowed private lenders to earn fees by making mortgage loans for the rehabilitation of moderately priced apartments.

The loans were government-insured, but HUD had no oversight over the transactions, and many loans turned out to be for amounts higher than the properties' worth.

Mr. Schlesinger's firm obtained a $5.4 million government-backed refinancing loan in 1985 from DRG Funding, former Washington lender that was involved in many of the defaults.

Mr. Schlesinger said Tuesday that most of his tenants have left and that he is not making a profit on Riverdale Village. He said he can't even afford an independent auditor to handle the federally required financial statements.

Mr. Schlesinger, who also has offices in Stamford, Conn., and West Palm Beach, Fla., painted himself as the innocent victim of market and government forces. He was especially critical of HUD's refusal in 1992 to lend him $44.7 million more for renovations.

He did not return phone calls requesting comment yesterday.

HUD officials say that the rehab plan was rejected because there was little demand for apartments in Riverdale Village, and the complex was old and obsolete.

After the loan rejection, federal and county officials say, maintenance virtually ceased on the HUD-insured side of the complex, and the apartments began emptying at an even faster rate. County officials say that about 85 percent of the 543 apartments on that side are vacant.

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