Building bought as garage site for sale by city

May purchase raised eyebrows, prompted referral to ethics panel

July 07, 1999|By Kevin McQuaid | Kevin McQuaid,SUN STAFF

Two months after completing a controversial purchase of 117 Water St., the city is quietly trying to sell the downtown office building it bought from a member of the city's Parking Advisory Board to demolish for a garage.

The city's effort to shed the nine-story building is a sign that the building will not be included in plans for a new parking facility.

The $2 million purchase by the Baltimore Development Corp. on May 12 raised questions and concerns from Mayor Kurt L. Schmoke, the city councilman who chairs the council's committee overseeing funding for parking garages and city real estate officer Anthony J. Ambridge.

The transaction between BDC, the city's economic development agency, and parking board member Milton H. "Mickey" Miller Jr. has been referred to the city's ethics commission for review.

Ambridge said in an interview yesterday that he is attempting to sell 117 Water St. because plans to build a garage there aren't firm, and as a result, the city might be forced to repay the $2 million in parking revenue bonds that BDC used to finance the deal. Parking revenue bonds are to be used exclusively to build parking facilities.

The mayor and other officials said they do not know where the city would obtain the money to repay the bonds, and that uncertainty is driving the sales effort.

"I think at this point it would be better to sell it because we may have to repay the money," said Ambridge, whose department is overseeing the building. "But the decision is not completely made."

Under an alternative plan, the 48,000-square-foot building would be spared while a vacant eight-story building at 131 E. Redwood St. once occupied by insurer USF&G Corp. would be acquired and demolished.

"If we can sell [117 Water St.], it would seal the fate of where the garage will go," Ambridge said.

City officials considered razing the former USF&G headquarters for a new parking facility late last year, but reversed course after the plan drew the ire of preservationists. Tenants at 117 Water St., which is about 50 percent occupied, have protested being forcibly relocated for a garage.

Ambridge is offering the building for $2.5 million. The city purchased the building two months ago for $2 million from an investment group that included Miller.

Miller's group,31 Grant Street LLC, bought the building on March 17 for $1.1 million.

Ambridge said the value of the building would increase dramatically if a garage were built next door to 117 Water St., which lacks on-site parking.

But a downtown area commercial real estate participant says 117 Water St. would sell for much less than $2.5 million.

Robert Manekin, president of the commercial real estate firm Casey & Associates Inc., said the building is probably worth between $1.6 million and $1.9 million, although he acknowledges that he lacks detailed information such as exact rental income to fully assess the building's value.

"I don't think it's worth $2.5 million in light of the costs associated with retrofitting and leasing the vacant space there," said Manekin, who sits on BDC's real estate advisory committee. "The location is secondary and possibly tertiary, and if the city moves ahead with a garage there, it'll be next to a construction site for between 12 and 15 months, which also would have an impact on the property."

BDC, which acknowledges that it was unaware of the price the Miller group paid, said it based its purchase on a $2.1 million appraisal it received from a private firm.

The agency contends the purchase of 117 Water St. was "prudent" and justified because the building could be used either for a parking garage, offices for city agencies or rented to the private sector.

"That was the thinking when we bought it," said Andrew Frank, a BDC executive vice president. "We exercised our judgment based on the information that we had. We thought buying the building was the prudent thing to do."

The mayor ordered that the BDC complete its purchase of 117 Water St. in April, saying the building had been "constructively condemned," when, in February, the economic development agency mailed letters to its tenants, telling them the city would be acquiring the property.

Ambridge said yesterday that it makes sense to sell the property now because the city hasn't determined how to use the building.

But the effort to sell the property raises questions of whether BDC should have acquired the building without knowing that it would become the site for a garage, especially in light of the potential mandated repayment of the parking revenue bonds.

City Councilman and mayoral candidate Martin O'Malley, who chairs the council committee overseeing funding of new garages, says any action involving 117 Water St. should wait until the City Council reconvenes after its summer recess.

"I don't think they should put it on the market until they figure out for sure whether it will become a parking garage or not," O'Malley said. "I just wish they would hold off until the council comes back in September."

O'Malley referred the city's purchase and Miller's involvement with 117 Water St. to the city's ethics commission, which is expected to investigate and report to the City Council when it reconvenes.

Ambridge, who objected to the city's purchase of 117 Water St., acknowledges that selling the building is in part an attempt to untangle the city from a thorny situation.

"I don't think we should have been involved with that from the beginning," he said.

Pub Date: 7/07/99

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