Council members question plan to lease tract to Towson Row developer
By By Alison Knezevich and The Baltimore Sun
Dec 15, 2013 at 5:10 PM
County Executive Kevin Kamenetz's administration is asking the County Council to lease a desirable piece of downtown Towson real estate to a high-profile developer without a bid process, drawing questions from some council members and from a businessman who has sought to buy the property for two years.
The county-owned property at 301 Washington Ave. was once an office building for the Department of Recreation and Parks. The county put it up for bid in late 2011, but never sold it to the highest bidder, ROC Realty in Pikesville.
Now, the administration wants to lease it to a company connected to Caves Valley Partners so the developer can use it as part of Towson Row, a $300 million project set to be built in 2015. After completing two years of a 20-year lease agreement, the company would have an option to purchase the site for the appraised-market value at that time. The company would not have to pay property taxes while the land is still owned by the county.
Councilwoman Vicki Almond, a Reisterstown Democrat, questioned why the county put the property up for bid two years ago, but changed its approach now to lease it to Caves Valley.
"Why would you bid it out and then decide to lease it, unless it was benefiting somebody?" she said. She also noted that the proposal has had little public notice; it was first discussed in public last Tuesday and is scheduled for a council vote Monday.
County council members are also questioning the administration's proposal to lease another county-owned parcel in Owings Mills to a company with ties to St. John Properties, also with an option to purchase.
County officials say they are not legally required to put either transaction out to bid. They said the Towson Row lease makes the most sense for the county. Caves Valley wants to use that tract as part of its redevelopment project that will include 1 million square feet of offices, retail, parking and residential units.
"Given the proximity of the building to the Towson Row project, the county believes that it is likely that the property will increase in value over that time and that it is also likely to be utilized for its highest and best use," wrote Don Mohler, Kamenetz's chief of staff, in an email to The Baltimore Sun.
But Roland Campbell, president and CEO of ROC Realty, said Caves Valley is getting a "sweetheart deal" on the Towson property. "It doesn't smell right," he said.
Officials with Caves Valley did not respond to requests for comment.
Under the terms of the lease, Towson Row RP LLC would pay $85,750 a year in rent for the property for an initial 5-year term, after which the county could increase the rate by 10 percent in each subsequent 5-year term.
The company would not have to pay property taxes while the land is owned by the county, and the county would deduct the cost of demolition and environmental remediation from the rent payments. It also would discount the purchase price by the amount of rent paid through the sale closing date.
Campbell offered $462,500, and Mid-Atlantic Properties offered $251,000.
County officials say both the 2011 bids came in under market value.
Two years after the lease starts, the developer will have the option to purchase it at the appraised value. County documents say the property's fair market value is $1.2 million and that demolishing the existing building would cost $325,000.
Not long after the bids were disclosed, Campbell said, county officials told him they were not interested. They returned his nearly $100,000 deposit, plus a $980 administrative fee that he had previously been told was not refundable, he said.
This July, he made another offer — $725,000, according to documents he submitted to the county. He proposed constructing a 7-story building with 55 apartments, first-floor retail, and an above-ground parking garage that would be integrated into the complex.
Campbell estimated it would cost about $650,000 to remove environmental hazards and demolish the building, according to a proposal he submitted to the county. If he had bought it, the county would not have to cover those costs, he said.
"I was told ... they would keep my offer in the file and get back to me once they decided what they were going to do," he wrote in an email to the County Council last week.
At a County Council work session last week, Councilman Kenneth Oliver also questioned why the county would dispose of both properties without competitive bids — particularly because the county just completed a yearlong sealed-bid process to sell three other county properties.
"It's sending two different messages," Oliver, a Randallstown Democrat, said after the work session.
Councilman David Marks, whose district includes Towson, said even after Monday's vote, the property will come before the council during the surplus review process.
"Once that happens, we can stop the sale if it's not in the best interest of the taxpayers," Marks, a Perry Hall Republican, said in a statement.
Council Chairman Tom Quirk said council members were seeking more information from the Kamenetz administration about both proposed lease agreements.
The Owings Mills parcel would be leased by Dellcrest Properties 4 LLC, which is related to St. John Properties. Gerard Wit, a senior vice president with St. John Properties, said the company owns a business park next to the land. The parcel is small and acquiring it would round out the property, he said.
"It's just to make the site planning easier," he said, adding that executing a lease is a faster process than a land sale.
The company would pay $7,200 a year in the initial 5-year term and could exercise an option to purchase after two years. The county bought the land for construction of Dolfield Boulevard, but ultimately didn't need it, officials said.