Upscale project's funding debated Critics charge loan for Baltimore homes not in agency's role

October 11, 1998|By Ivan Penn | Ivan Penn,SUN STAFF

A map with an article in yesterday's editions about townhouses planned for land along Key Highway contained incorrect information. The townhouses will be on the west side of Key Highway. Also, the name of the road that runs along the eastern foot of Federal Hill is Covington Street.

The Sun regrets the errors.

In a move to encourage development in Baltimore, Community Development Financing Corp. is providing a loan for 20 upscale townhouses along the Inner Harbor -- a project that some charge is a departure from the agency's original mission.

The Covington View development, which will be built by Baltimore developer Jay T. French in the 800 block of Key Highway near pricey Federal Hill, will include two- and three-bedroom townhouses costing $225,000 and $235,000, on the waterfront.

FOR THE RECORD - CORRECTION

Construction is expected to begin next month.

This is the second high-end housing development financed by CDFC, a nonprofit agency created by Mayor Kurt L. Schmoke in 1989. The agency uses a combination of private and city money to provide low-interest loans to renovate vacant properties.

While the funding amount was not disclosed, officials stressed that the money will come from private sources.

Still, Anthony J. Ambridge, the city's real estate officer, questioned why CDFC would finance French's project, which is in a desirable location and should have no trouble acquiring funding through commercial banks or mortgage companies.

"I would hope that a developer would have exhausted every other means in the private sector," Ambridge said. "It does seem strange that a developer would have trouble getting financing for a project like this. I don't know why we would need to drain our resources for a project like this."

French and Wayne R. Frazier Jr., CDFC's executive vice president, said commercial banks rejected requests to finance the project. They denied that French received favorable treatment.

French and the CDFC have been under scrutiny in The Sun because of the developer's political connections to the Schmoke administration.

French has contributed $3,500 to Schmoke's campaign coffers since December 1995. The money came from his pocket and his company. The developer has received several low-interest loans through CDFC to restore dilapidated city houses.

Frazier said he does not see the financing of projects such as Covington View and another developer's project -- at North Avenue and Eutaw Street, called Spicer's Run -- as a departure from the organization's mission. He said it's an attempt to fill a void in the city's housing market that commercial banks and mortgage companies decline to fill.

"We didn't cut any special deal," Frazier said. "What we're trying to do is provide the catalyst for potentially successful projects to show other lenders that Baltimore is a good place to invest."

Other questions about the CDFC's deal with French arose last week before the city Board of Estimates approved the Covington View land deal.

Ambridge's office questioned the price of the land -- $114,394. That was $203,000 lower than the city's real estate office appraisal.

Ambridge told Board of Estimates members that the appraisal appears to have been lowered because the city is requiring French to build a brick wall on one side of the property. The developer said he also will have to establish water, sewer and other services for the site.

French also said CDFC is giving him a construction loan at 7.5 percent. That is at least a half a percentage point to a full percentage point lower than commercial lenders would give, according to Jim Joyce, a division president for Ryland Homes.

The developer, under the company name 840 Key Highway Limited Liability Corp., expects to close the deal in the next few weeks.

French said he tried to get financing through some "large banks," but they turned him down.

"We did talk to a couple of national banks. The banks thought that maybe the profit margin was thin.

"We just asked [CDFC officials] if they would be interested," French said. "They weren't doing something for me. I would be flattered if they were."

Pub Date: 10/11/98

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