Weinberg Foundation sues over building sale, citing concern for reputation

Weinberg Foundation sues over building sale, citing concern for reputation

The Harry and Jeannette Weinberg Foundation is battling the leader of a Baltimore nonprofit and a New York investor over the sale of a west side building the foundation helped to renovate.

In a lawsuit, the Weinberg Foundation calls the sale of the building by Communities Organized to Improve Life a "sweetheart" deal that violated conditions it imposed on the nonprofit in the 1990s when it helped pay for the renovation.

COIL initially used the handsome brick building with big windows at 1200 W. Baltimore St. to house an adult literacy center and other programs.

Facing financial difficulty in 2013, the nonprofit sold the property for $1 million to St. Marks Avenue LLC. It then leased back the space, where its leader, Stacy A. Smith, launched a for-profit business incubator.

In its lawsuit, filed in federal court in November, the Weinberg foundation says the terms of its $675,000 donation required that the building be used for adult education. The foundation says the agreement also required its consent for any sale, and limited the proceeds to charitable purposes.

The foundation says the loss of control over the use of its name on the building hurt its reputation, according to the suit. It's asking a judge to order an accounting of the sale, to invalidate it and to award damages.

It also wants its name removed.

In a statement, the foundation described the lawsuit as a last resort, said took "no pleasure" in the action.

Attorney Anthony Ashton, a partner at DLA Piper, said the foundation's goal is to figure out what happened to the sale money. He declined to say if there was any particular reason Weinberg was worried about its reputation in this case.

"The foundation has been part of the community for a long time and it wants to make sure that people know that when … it donates money for a particular purpose that it sees it through," he said.

In court filings, Smith and St. Marks said they were unaware of the Weinberg agreement, which was not entered into state land records.

Smith and attorney William A. Sherwood argue that the agreement allowed COIL to do more than offer adult education services.

Sherwood declined to comment on ongoing litigation.

St. Marks contends that permanent restrictions on an owner's ability to sell property are illegal. The firm cited a 1929 lawsuit decided against a Baltimore developer who tried to use a deed covenant to prevent a homeowner in his Ashburton neighborhood from selling to an Italian American.

Ashton referred questions about the legality of the sale restrictions to court filings, in which the foundation argues its agreement is legal because it concerns a charitable trust.

In the meantime, the closing of the 28,600-square-foot building has drawn questions from people who are concerned about another setback in a part of town that has been hoping to see benefits from nearby developments, including the University of Maryland BioPark.

"The Southwest Partnership is concerned that whatever issues arose have created another unoccupied property on Baltimore Street," said Michael Siepp, executive director of the organization. "We would like to see that building occupied as soon as possible."

Smith is a board member of the partnership, which has held committee meetings in the building.

The building was a hive of activity last year on a struggling commercial street, with people popping in for job training and comfort food from a cafe hosted by Smith's incubator. Today the doors are locked, the lights dark and the Weinberg name scrubbed away.

St. Marks removed the name last month after it evicted the business incubator in May. The developer cited more than $106,000 in unpaid rent.

COIL has faced difficulties for some time.

As funding sources started to dry up, revenue fell from $1.6 million at the end of June 2006, to $490,000 at the end of June 2010, while its employment dropped from 29 to seven, according to tax filings.

COIL suffered another blow in 2010 when prosecutors alleged that it was being used as a front by members of the notorious Black Guerrilla Family gang. Smith told The Sun at the time that she was "blindsided" by the allegations.

To raise funds, Smith hired Donnell Spivey, a prominent real estate agent, to sell the building. He eventually found a buyer in St. Marks, owned by his brother, with the $1 million deal closing in April 2013.

St. Marks actually paid less than $1 million. The price was reduced in part by COIL's lease-back deal.

Smith launched the Urban Business Center incubator in the space, hoping to foster small businesses in the neighborhood.

"May it be a great success to the community," the City Council proclaimed in 2014, when the incubator opened.

The Weinberg Foundation started asking questions about the sale in September 2013. After the Urban Business Center opened, the foundation wrote that it wanted to cut ties with COIL — and threatened litigation if its name was not removed from the property.

When the letters did not produce results, the foundation filed suit.

In a counter-claim against St. Marks, Smith contends that the landlord never fully paid for the property and "would consistently exhibit questionable behavior," such as turning on air conditioning during the winter.

On Facebook, the Urban Business Center wrote that it had been "forced out of its own building as a result of underhanded development tactics."

Spivey, the real estate agent and resident agent for St. Marks, said he had fully disclosed his family relationship to Smith and there was nothing underhanded about the sale, which occurred after other offers fell through. The firm denies many of the behaviors alleged by Smith.

"I do not have control when someone has nonpayment of rent," Spivey said. He added that St. Marks wanted — and continues to want — to see the building get community use.

St. Marks, which Spivey said recognized the value of the Weinberg name, removed it last month after winning control of the property through the eviction, according to attorney Jonathan Azrael. It has since placed the building on the market.

"My client wants to start realizing income from the property," Azrael said. "It hasn't been vacant very long, so we're hoping that we can put it to productive use again."

Michael Dannenberg, a former COIL board member who resigned when Smith became executive director, compared the current situation to a "Greek tragedy." He said the Weinberg lawsuit shows the difficulty of holding nonprofits accountable.

"It's the pathos of the struggling neighborhood trying to improve itself and getting bogged down," he said.

nsherman@baltsun.com

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