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Inside City Hall: An inconvenient truth about Superblock

The project aimed at revitalizing the Westside rests on uncertain financial footing.

Above: Mayoral aide Andrew Smullian and Superblock lobbyist Sean Malone attend the Council hearing.

Sometimes a moment of clarity comes out of a City Council hearing.

Yesterday it came through a series of questions about the “real” state of Superblock, that perennially-delayed Westside retail-apartment scheme now seeking $22 million in tax breaks from the city.

A hearing by the Council’s Committee on Taxation, Finance and Economic Development revealed that Superblock’s out-of-town developers have not yet lined up private financing for the project, had no solid commitments from potential leasers and, finally, were asking the Rawlings-Blake administration for another – their fifth – extension to get their act together.

In other words, construction won’t get started until 2014 at the earliest, if it ever gets built by the present developers.

The “if ever” was the elephant in the room that lingered after the hearing was recessed, punctuated by a barbed comment by Councilman James B. Kraft observing that while the project was important to the city, “I’m not sure it’s important to have this company do it.”

Pushing for a Tax Break

That wasn’t how things were supposed to go at the hearing as city officials and lobbyists assembled at the Council chambers yesterday afternoon.

Their intent was to get the committee to approve a PILOT (payment in lieu of taxes) tax break now estimated to be worth $22.1 million to the developer. (The projected amount of tax savings, like the project’s chances of success, has been open to conflicting estimates.)

Huddled with the Andrew Smullian, the mayor’s senior policy advisor, were officials from the housing department and Baltimore Development Corporation (BDC), lobbyists Sean R. Malone and Lisa Harris Jones (representing Superblock), and attorney Mark Pollak, also representing the developer.

Lisa Harris Jones listens to the testimony. (Photo by Mark Reutter)

Lisa Harris Jones listens to the testimony. (Photo by Mark Reutter)

Filling out the entourage were Harold Dawson and Bailey Pope, the public face of the otherwise secretive development group.

The Four Families

Dawson described the main Superblock developers as “The Four Families from New York,” a phrase that literally raised the eyebrows of City Councilman Bill Henry, who wondered if the group really wanted to be referred to in this manner.

Oh, yes, Dawson answered, saying his company constituted the fifth family – from Atlanta in this case. He said a shared entrepreneurial spirit linked the five families.

(Formally, the group calls itself Lexington Square Partners. The Goldman, Chera and Feil families are active in Brooklyn and Manhattan real estate. The Nakash family owns Jordache, the clothes company. The four families own 80% of the partnership, with Dawson owning the remaining 20%.)

Housing and BDC officials hailed the “Economic Inclusion Plan” signed by the developers, which calls for 50% of new hires for Superblock construction to be Baltimore residents, while Councilman Henry fretted over a potential loophole.

If a contractor had his own employees and did not need to hire new people, then the city hire requirement drops to 20%.

Exempt from Inclusionary Housing

The BDC’s Kimberly Clark defended the plan, saying a committee of community groups would review hiring every six months and assess its effectiveness. Among those on the committee would be demolition contractor Pless Jones and avid Superblock supporter Rev. Alvin C. Hathaway.

Peter Engel of the housing department submitted data that the Lexington Square group was exempt from the city’s inclusionary (read: low-income) housing law because it would add a burden of $9,449,059 to the cost of the project.

The city is now paying $349,000 for a temporary roof on the ex-Read's Drug Store at Howard and Lexington streets. Lexington Square Partners says it will rehab the building as part of their $150 million plan for Superblock. (Photo by Mark Reutter)

The city is now paying $349,000 for a temporary roof on the ex-Read’s Drug Store at Howard and Lexington streets. The developers say they will use the space for their $150 million project. (Photo by Mark Reutter)

Instead, the developers have voluntarily agreed to include 12 units of affordable housing out of 296 proposed units.

Breaking the Spell

This concession was greeted with lavish praise by Councilman Henry and broad smiles by administration officials.

The smiles quickly turned to frowns as Councilman Kraft broke the spell and pressed Dawson and Clark to address the finances of the project.

Dawson said the developers had not gotten private financing and wouldn’t seek a $100 million construction loan until after the city approved the PILOT tax break. Nearly $16 million in federal and historic tax credits also had not yet been secured, Dawson said.

He soft-pedaled the lack of hard money – as well as the absence of lease commitments for 214,000 square feet of proposed retailing – by saying his company had a stellar reputation.

The group still planned to put $35 million of “cash equity” into the project, he said, adding, “I don’t believe there’s a problem at all.”

Councilman Kraft did not agree.

After pressing Clark to acknowledge that the current December 31 deadline set for selling the city-owned parcel to the developers will not be met, Kraft asked, “Is there going to be a drop dead date” for the project?

After several non sequiturs, Clark answered: “Yes, there will be a drop-dead date.”

Arrested Development

Kraft then abruptly ended his line of questioning, to the obvious relief of the mayor’s representatives and lobbyists Malone and Harris.

(It should be noted that Malone was a top lieutenant to then-Mayor Martin O’Malley when O’Malley handed Lexington Partners exclusive rights to develop the Superblock property in December 2006.)

Announcing that the panel still needed information about a proposed profit-sharing plan, Chairman Carl Stokes recessed the hearing.

The Superblock entourage left the Council chambers without a committee vote on the PILOT tax break – and with questions about the project’s financial resources left dangling.

Stokes said the committee would revisit the project next month, thus insuring that this convoluted saga of arrested development continues.

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