'Superblock' developers demand millions from City Hall

Lexington Square Partners seeks more than $3.3 million after city terminated deal

June 28, 2013|By Luke Broadwater, The Baltimore Sun

The former developer of the long-stalled "Superblock" project has accused the city of improperly terminating its deal for the downtown west-side property — and is demanding millions in compensation.

Lexington Square Partners is seeking to "recover all costs incurred" during the group's six years working on the project plus 10 percent interest, according to a letter from Mark Pollak of the law firm Ballard Spahr LLP, which represents the developer, to city officials.

"Unfortunately, the city's actions leave [the] developer with no recourse other than to enforce its rights," Pollak wrote in a letter to Brenda McKenzie, president of the Baltimore Development Corp., on Friday. According to the letter, the developer has spent more than $3.3 million, not including staffing costs, on the project.

Jerome Hagley, a representative of Lexington Square Partners, said in an interview that the costs were higher.

"We've spent well over $4 million to date," he said. "It's unfortunate it's come to this."

Mayor Stephanie Rawlings-Blake declined this week to grant the developer another extension, putting the plan in jeopardy.

Lexington Square Partners had until week's end to come up with financing for the $152 million project or it would lose its exclusive land-use rights, the mayor said. She said she intends to seek new proposals for the development by the fall.

But Lexington Square Partners made a late effort to save the deal with the city. On Thursday, the company sent documents from M&T Bank indicating the bank's "strong interest in providing the financing" for the first stage of the project, Pollak said. The developers also offered to put $3 million in a bank account to demonstrate that they were ready to settle on the property.

The developers remain committed to the project and are "willing to work with the city," Pollak wrote.

However, city officials said M&T Bank had committed only to a "preliminary discussion" about financing the development and did not satisfy the requirement that the developers provide "satisfactory evidence of the existence of financing."

"The city is disappointed your client was unable to move this project along in accordance with the timetable to which it agreed last December," John P. Machen, special chief solicitor in the city's Law Department, wrote in a letter dated Thursday. He added that city officials hope Lexington Square bids on the project again later this year.

The city entered into a sales agreement with Lexington Square Partners in 2007 after it won a proposal to develop the property several years earlier. Lexington Square Partners agreed to buy the site for $12.2 million, though the developer would receive credits for all but $2.85 million of that price. The developer also needed to secure financing for the first phase of construction.

But the project was slowed by litigation, and it wasn't until December that the development was awarded $22.1 million in tax breaks, which Lexington Square Partners said it needed to secure financing.

"If you look at the five or six years we've had this project under contract, the city has been in a lawsuit for the majority of that time," Hagley said. "We've overcome all that. It was only December of last year that we were able to go out to the financing community and market the financing. The city asked us to deliver on certain items and we did."

In April 2012, the Maryland Court of Appeals cleared the way for the city to move forward with the project by dismissing a lawsuit filed by Orioles owner Peter G. Angelos, who argued that the plan failed to preserve historic buildings.

In December, the city's Board of Estimates approved a six-month extension of the land disposition agreement with Lexington Square Partners. That amendment gave the partnership until June 30 to purchase 3.6 acres from the city for the mixed-use development.

The development would have been bounded roughly by Lexington, Howard and Fayette streets and Park Avenue. Under the plan, it would have had about 300 apartments, more than 200,000 square feet of retail space and a parking garage for 650 vehicles.

Rawlings-Blake said she's considering whether to break up the site — which spans several city blocks — into multiple bids or keep it as one larger plan.



Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.