Two city-owned parcels of prime downtown Baltimore real estate were sold for more than $2 million below their appraised market values, according to recently released documents.
The properties bookend a block of Washington Boulevard, with one across the street from Oriole Park at Camden Yards and the other next to the proposed site of a publicly financed convention center hotel.
The Baltimore Development Corp., the city's economic development agency that is proposing the hotel, brokered both deals and had the support of Mayor Martin O'Malley and the city's spending board despite appraisals at higher figures.
City Councilman Robert W. Curran, who has been looking into the deals for weeks, said his judiciary and legislative investigations committee will hold a hearing Sept. 12 to publicly demand answers from BDC and city real estate officials.
"I have a problem when developers wag the tail of the BDC" at the expense of taxpayers, Curran said. The BDC is a nonprofit corporation created in 1991, overseeing the development of downtown projects, city-owned businesses and industrial parks.
BDC President M.J. "Jay" Brodie and city Comptroller Joan M. Pratt said the two lots required special consideration to spur their development because of construction difficulties at the sites.
Curran said he does not assume any wrongdoing but wants answers to deals he finds questionable: "The comptroller's office is supposed to be the watchdog. They were silent."
Pratt said the city came up with the best possible prices considering the site limitations.
In January the city agreed to sell a third of an acre at the northeast corner of Greene Street and Washington Boulevard for $609,000 to a group that includes Next Realty Mid-Atlantic of Alexandria, Va., and Duane Taylor, a Baltimore developer. The group plans an eight-story, 126-room hotel called the Inn at Camden Yards.
Taylor, formerly of Struever Bros., Eccles & Rouse Inc., had been leasing a portion of the property since December 1999 with an option to buy, operating a parking lot there.
The sale requires Taylor to pay the city $53,000 in unpaid rent and $83,612 in back taxes, penalties and interest, Pratt said. City officials have said they never sent tax bills because of a record-keeping glitch.
The sale price of $609,000 is far less than the $1.29 million appraisal performed in March 2002 at the request of the BDC by Gilbert Advising & Appraising LLC. But the final price was more than a second, $500,000 appraisal that Colliers Pinkard determined for Taylor's team on April 17, 2003.
A critical difference between the two appraisals appears to involve control of an alley that bisects the property - Gilbert's assumed control; Colliers Pinkard's did not.
Brodie said control of the alley would not make a $790,000 difference in value for the 11,230-square-foot property. He said the Gilbert appraisal was too high and did not consider the plot's awkward triangular shape and city utilities beneath.
"The $1.2 million price worked out to $115 per square foot, which doesn't stack up in that area," Brodie said. "The $500,000 is $46 per square foot, which is more consistent" with other deals in that area.
But in a May 2003 letter to Taylor, Brodie wrote that the Colliers Pinkard appraisal used "[out]dated land sales" and "the sale of smaller, mid-block lots that are significantly inferior to this ... site."
He also wrote that BDC did "not accept the appraiser's conclusion that the estimated market value requires" a discount because of the lack of control over the alley.
Nevertheless, Brodie concluded in the letter that "in the interest of the development moving forward ... we propose to accept" a value of $500,000. ($109,000 was added based on another, adjacent portion.)
Taylor could not be reached for comment yesterday.
Real estate experts said governments often sell property below market values to encourage development. But they questioned using dated appraisals.
"They were really stale appraisals on the properties," said Joseph T. "Jody" Landers III, executive vice president of the Greater Baltimore Board of Realtors. "I think for commercial property downtown - particularly in the vicinity of the two stadiums and the University of Maryland - I think they need to let the market work and do a better job at getting competitive offers and make sure they're looking at current appraisals."
John Hentschel, president of Hentschel Real Estate Services and a former real estate officer for the city, agreed.
"The fact that the alley is there or not there is critical to the determination of value," said Hentschel, who is also an appraiser. "It can influence value."
A 30,536-square-foot vacant property used as a parking lot just a block away from Taylor's site was purchased by the University of Maryland Medical System Corp. in May for $4 million, which equals $131 per square foot, according to land records. That's almost triple the $46 per square foot that Brodie said was fair for Taylor's site.