Housing auction causes concern

D.C. developer outbids local nonprofit groups

Vacant city properties sold

SkyRise Investors says it plans rehabilitation

October 14, 2002|By Laura Vozzella | Laura Vozzella,SUN STAFF

A private developer from Washington snapped up about 120 properties that Baltimore officials had hoped local nonprofits would buy as part of Project 5000, an initiative to take control of vacant and abandoned houses.

City officials and neighborhood groups expressed concern that the properties had been sold to a speculator at a sealed-bid auction last month, when SkyRise Investors outbid a group of community development corporations with a $140,010 offer.

But they say the sale will not be a setback to the ambitious Project 5000 as long as SkyRise is serious about rehabilitating the houses.

Developer Raj Sehgal of SkyRise said he intends to improve the properties.

"The goal is to make them livable, improve the neighborhoods along the way," Sehgal said last week. "The goal is to make these communities better."

The city offered about 1,000 tax-delinquent properties for sale last month in what was seen as a big step forward for Project 5000, Mayor Martin O'Malley's plan to take control of 5,000 of the city's 14,000 abandoned houses by the end of next year.

In a move meant to deter speculators, the city grouped the houses into two "bundles" for the tax sale. One bundle of about 900 properties was made so large and expensive that no one would offer the minimum $6 million bid price. As expected, there were no offers, and the properties reverted to the city, allowing it to begin foreclosure proceedings after a six-month waiting period.

The remaining 120 properties were offered as a second bundle, with several community development groups in mind as potential buyers. The idea was to sell the properties to the groups because they were interested in those houses and had established records in rehabilitation work, city officials said.

But the $110,598 offer from Harlem Park Revitalization Corp., Druid Heights Community Development Corp. and other nonprofits fell short when the sealed bids were opened Sept. 18.

"They were disappointed," said JoAnn Copes, assistant city housing commissioner. "[But] if the person acquires the property and renovates it to a reasonable standard, I think most of the neighborhood groups will be very happy.

"I'm assuming he didn't spend all this money buying certificates."

Bad speculation

She was referring to tax-sale certificates, which the high bidder acquires in such a sale and which allow the holder to foreclose on property. The certificates also entitle the holder to collect the bid price, plus 18 percent annual interest on the tax debt, if the property owner claims the house before foreclosure is final.

That kind of speculation was not expected to be a factor in last month's tax sale because the properties have been abandoned and it is unlikely that any owner will claim them, city officials said.

Some officials have expressed concern, however, that SkyRise, which has never developed property in Baltimore, might have mistakenly believed the houses were good speculation prospects. If that is the case, they said, the company probably is not interested in fixing up the houses.

"My suspicion is, if it's a speculator, he or she didn't do their homework," said Michael Bainum, Project 5000 director for the city's Department of Housing and Community Development.

"I'd like to believe, though I don't know the individual or company at all, that their intention is to rehabilitate these properties and put them back into productive use," he said. "It's fewer foreclosures for me, and it's ultimately money that the city or the nonprofit world isn't spending fixing up properties."

Sehgal said he intends to redevelop the houses, which are scattered across several neighborhoods. The biggest concentration is a group of 21 in the 1800 to 2200 blocks of Druid Hill Ave. The bundle also includes eight properties in the 1600 and 1700 blocks of W. Lafayette Ave., eight in the 2200 and 2300 blocks of Etting St., six in the 200 and 300 blocks of S. Gilmor St. and one in the 100 block of N. Patterson Park Ave.

"I wanted to be part of something that will revitalize these neighborhoods," Sehgal said. "I wanted to be part of something that would bring something back to life."

It will take about a year to foreclose on the properties, he said. No construction work can begin until then, and SkyRise will use that time to make plans for the houses and line up local contractors, he said.

Sehgal said he expects most of the houses to be rehabbed, though some might be torn down. He also said he expects most to remain residences.

Sehgal said he has worked in residential and commercial development for eight years, with projects in 40 states.

He said SkyRise has been around for five years, but declined to identify previous SkyRise projects, saying they are not well known.

Plans to move

He said he intends to move the 10-employee firm to Baltimore eventually because the large number of distressed properties in the city provides many redevelopment opportunities.

"We intend the company to be a player in Baltimore going forward for a long time," Sehgal said. "We're intending to be very, very active throughout Baltimore."

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