News: Building a Compromise

Mayor, city council and developer seem to strike a deal on disputed downtown property

May 21, 2008 at 2:06 pm

Cincinnati officials have reached a tentative compromise about what to do with a long-vacant downtown building after butting heads earlier this spring with a developer and disagreeing about how much the prime piece of real estate is worth.

At the urging of Mayor Mark Mallory, negotiations were held during the past few weeks that involved differing factions on Cincinnati City Council, some City Hall staffers and a development company that wants to buy the city-owned building at the corner of Fourth and Race streets (see "Doing Due Process," issue of April 2).

Earlier this spring some council members proposed selling the property at 33 W. Fourth St. for what critics alleged was a sharply discounted price that would have given the buyer potentially hundreds of thousands of dollars in profit that otherwise would go to the city.

A faction led by Councilman Jeff Berding wanted to sell the building for $250,000 to MMF Realty, the company that currently has a long-term lease to redevelop the site. City Manager Milton Dohoney Jr. and some of his staff opposed the effort because a recent appraisal pegged the property's value at $780,000; they preferred selling the building on the open market to the highest bidder.

Besides Berding, other city council members who supported the original deal with MMF were Chris Bortz, John Cranley and Leslie Ghiz.

Citing scant progress in redeveloping the site after almost four years, Dohoney and his staff began the process to declare MMF in default of its lease so it could be sold. Staffers said the city has received at least three unsolicited offers for the property in recent years, including one from a company that offered nearly $1 million for the site.

MMF was given sufficient notice under the lease to begin redevelopment, Dohoney told council. The firm was first notified in February 2007 to begin a project there or the city would consider other options.

The lease gave the city the right to rescind the agreement if no development occurred after a specific period of time, city staffers noted.

Berding, Bortz and others countered that any default would prompt a lawsuit by MMF that would keep the property in legal battles for years, and no one would benefit while the building sat unused. As a result, Mallory ordered the default proceedings placed on hold last month while all sides tried to hammer together a new deal.

The revised deal calls for the city to sell the building to MMF for $300,000, which includes the $50,000 that the city already has from the firm for a security deposit. If MMF sells the property within three years, the money must be split with the city, but the city's portion is capped at $700,000.

Previously the deal stated that if the property were sold within two years any profit would be split evenly with the city, no matter how large the amount.

Bortz says supporters of the earlier deal probably can tolerate the latest changes.

"It's almost the same deal as we originally received, but the city gets another year to split the cash if it's sold," says Bortz, who heads city council's Economic Development Committee. "That gives some people a little extra reassurance."

MMF Realty is affiliated with Madison Marquette, the company that redeveloped the adjacent McAlpin building into condominiums. Some sources in the business community say sluggish sales of the high-priced McAlpin condos has caused a financial crunch at the firm that makes redeveloping the vacant building more difficult.

An MMF representative couldn't be reached for comment.

"My guess is (MMF) is probably most interested in generating revenue from that site, so I think something will occur there and soon," Bortz says. "They want an income-producing property. I'd be surprised if they sell it right out of the gate."

Cincinnati's charter requires that any proposed sale of city-owned property must first be reviewed and approved by the Planning Commission. Votes by the Planning Commission and Cincinnati City Council haven't yet been scheduled but are likely within the next six weeks.

It requires at least six votes on the nine-member Cincinnati City Council — a super-majority — to undo any Planning Commission recommendation.

Caleb Faux, a Planning Commission member, hadn't yet seen the revised proposal when contacted by CityBeat. His preliminary opinion, based on a reporter's description, was somewhat skeptical.

"It creates an incentive for MMF to hold the building for three years no matter what," Faux says. "The potential also exists that the $700,000 cap could well result in the city receiving substantially less than 50/50 in the end, so I don't see much advantage to the city. Either way that deal works to the advantage of MMF. It creates very little incentive to move the project forward quickly.

"The argument a few weeks ago was that if the lease was terminated MMF would sue. But you can't be intimidated by every threat to sue. The real question is the likelihood of prevailing and, as I understand it, the city is in a strong position on this."

Some city staffers privately share Faux's concerns. They say they've been cut out of the negotiations and aren't pleased with the deal that's emerged, believing the city hasn't gotten enough in return for its concessions. ©