Building deal draws scrutiny

City gave firm site for free

apartment plan abandoned

Baltimore `screwed up'

Property's sale could bring developer $700,000 profit

August 16, 2004|By Scott Calvert | Scott Calvert,SUN STAFF

A Baltimore developer could reap a six-figure windfall by selling a vacant Mount Vernon building that the city gave her company nine years ago at no cost - even though she never carried out the promised apartment conversion that was a condition of the deal.

Savannah Development Corp. President BettyJean Murphy hopes to get $1.2 million for 10 W. Chase St., a four-story building near Charles Street. Savannah legally must repay only the original $368,000, with no interest, that the city used to buy the building for her in 1995 so she could turn it into affordable apartments.

The rest of the money from such a sale, minus property taxes and any costs for upkeep and similar expenses, would be Savannah's to keep - a sum that could approach $700,000.

Not everyone thinks she will get her asking price, but a recent spike in property values should yield a sizable profit. And though it was not anyone's intent, the $368,000 city grant has turned out to be a no-down-payment, zero-interest, nine-year loan.

"The city screwed up," said Robert C. Embry Jr., a former city housing commissioner and former top housing official in the Carter administration.

"It permitted the developer to enrich themselves with city funds and, at no risk, to speculate with public funds, effectively," said Embry, president of the Abell Foundation.

"It's not only the profit, but the fact that all they're getting back is the original amount of money. They're not getting it back plus interest."

By Embry's estimate, interest would have more than doubled the city's money by now, based on lending rates in the mid-1990s and the effect of compounding.

City officials say current safeguards would prevent this situation from happening today. For example, liens give the city the power to retake properties if projects do not go forward, said Douglass Austin, Mayor Martin O'Malley's deputy housing commissioner for development.

But Charlie Duff, the head of a nonprofit community developer involved in Mount Vernon, said Murphy - whom he says has done much good in the city - should give back any profit she makes on the sale.

"I think BettyJean, in a free-will effort, should give the money to the city," said Duff, executive director of Midtown Development Corp. "The very fact she doesn't have to do it would give her instant credibility as an honorable person."

Murphy suggested, however, that she would pay the city no more than the $368,000 owed.

"Am I liable because the building appreciated?" she said in an interview. "I did nothing to generate what you are perceiving as a huge appreciation."

Murphy said it would be best to wait for the sale to go through before conclusions are drawn about her possible enrichment.

Even then, it would be unclear how much she might have made because she repeatedly declined to say how much money Savannah spent pursuing the apartment conversion. She shelved the plan when she could not round up more public funding.

"You don't know the facts," Murphy told a reporter at one point, and then quickly added: "The facts are none of your business."

She declined to answer other questions, such as why in 1996 she borrowed $50,000 using 10 W. Chase as collateral, according to court records. Because the city did not put a lien on the property, Murphy did not require city approval.

Murphy questioned why the building's status is newsworthy when other developers, from the Rouse Co. to the Hyatt hotel chain, have received favorable deals from the city over the years.

And she said that she and her colleagues put in "a lot and lot and lot of effort, a lot and lot and lot of time" trying to succeed on the Mount Vernon project, which she called Ten West Apartments.

"You have to look at how we work as a company," she said. "We in no way ever give up."

Murphy has done well on other projects. One was the conversion of the former YMCA building at 300 N. Charles St. into 36 market-rate apartment units that have won praise in design circles.

The city gave her help on that deal, as it has for many developers. To make the numbers work on the $7.6 million project, the city contributed $1.1 million to buy the building. Construction was financed through the Community Development Financing Corp., a city-backed loan agency.

Murphy had hoped for similar success when she set her sights in 1995 on 10 W. Chase, once home to the Calvert School. Her plan was to convert it to 17 apartments for college students and young professionals.

Block grant

First she needed to buy the building. That autumn, the city's spending authority, the Board of Estimates, agreed to give Savannah a $368,000 federal community development block grant to pay the $350,000 price and closing costs. The building was put in Savannah's name.

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