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How a profitable Point Breeze property flip raises questions about Philadelphia land policy, 'councilmanic prerogative'

In a gentrifying South Philadelphia neighborhood, religious group Chosen 300 Ministries and Councilman Kenyatta Johnson pushed for low-income housing but owners flipped the property for a big gain.

Councilman Kenyatta Johnson, a Democrat from South Philadelphia,  supported a plan to build low-income housing in a gentrifying block in his district.  That plan didn’t work out.
Councilman Kenyatta Johnson, a Democrat from South Philadelphia, supported a plan to build low-income housing in a gentrifying block in his district. That plan didn’t work out.Read moreDAVID SWANSON

When first floated four years ago, the proposal seemed a do-gooder's dream.

To help South Philadelphia residents cope with gentrification, the city sold two empty lots in Point Breeze for about $7,500 each to a religious nonprofit so it could create a community garden and, later, low-income housing.

Today a for-profit developer is months away from erecting four high-end townhouses there. Their price —$500,000 each.

That hardly qualifies as affordable housing.

"It's possible that is affordable in San Francisco," said city housing official Paul Chrystie. "That's certainly not affordable for Point Breeze."

City Councilman Kenyatta Johnson, the South Philadelphia Democrat who backed the 2014 sale, now has accused the religious group of improperly flipping the properties.  He argues that city-imposed deed restrictions on the two bargain-priced parcels could give City Hall the power to take the properties back.

"The city cannot universally prevent bad actors from attempting to game the system, but we can hold them accountable," he said.

The city says it has no legal authority to do that.  While the deed says the city can take back properties that are not improved as promised within one year of a sale, officials say that restriction does not have force in this case — because the church group flipped the lots in less than a year.

The story of how this well-intentioned deal went bust reveals much about Philadelphia's weak oversight of what happens to its properties — and the difficulties of actually building homes for the less wealthy in "hot" neighborhoods.

It raises more questions, too, about City Council's much-derided policy known as the "councilmanic prerogative," which arms members with veto power when the city sells off real estate it has acquired from tax deadbeats and through urban renewal.

Invoking this authority, Johnson wrote city housing officials to urge them to sell two lots to Chosen 300 Ministries, a nonprofit organization mainly known in the region for its programs to feed the homeless. Two years later, though, he also endorsed the newer plan for the properties on Bouvier Street, between Dickinson and Tasker Streets, to be developed for the $500,000 townhouses.

Johnson declined to be interviewed. In a statement Friday, he said he affirmed the new project because it had the support of the neighborhood's community organization. "Clearly, as the properties were sold and resold over time, the original intent was lost," he stated.

Johnson has styled himself as a supporter of efforts to protect neighborhoods against gentrification. His critics, though, say he abused his power.  A civil jury last year awarded $34,000 to a developer who had accused Johnson of invoking the council prerogative to torpedo his projects in Point Breeze.

The councilman is now facing a new lawsuit brought by the same developer, Ori Feibush. This suit, filed this past summer, contends Johnson used his clout to cut Feibush, a political opponent, out of another land sale.

In 2014, the city sold the two lots to the religious outfit for $15,374 not long after Johnson wrote: "I understand that Chosen 300 will clean the properties and temporarily establish a community garden. In the future, Chosen 300 plans to develop low-income housing on the properties."

Chosen 300 already owned a third plot between the two city parcels, donated to it by its South Jersey owner.

The organization held on to them for just seven months.  Then a dizzying pattern of sales took place, reflecting the booming value of land in Point Breeze.

In the fall of 2014, Chosen 300 sold its three properties to a for-profit developer for $120,000, making an eightfold increase on its investment.

The buyer was first listed as a firm of suburban businessman Mark Quigley, who is also a volunteer director of Chosen 300's fund-raising, records indicate. Then a "corrective" deed was filed saying the actual buyer was a firm of David Clark,  Quigley's son-in law, the records indicate.

"During the process of this purchase, the buyer changed and unfortunately when recording this deed, I accidentally used the name of the previous buyer,"  a settlement firm staffer wrote the city in a letter attached to the new deed.  The city accepted the correction and there was no additional level of $4,800 in transfer taxes.

Neither Quigley nor Clark returned repeated calls. Chosen 300 insisted the sale was not an insider transaction and said it took the higher among two bid for the lots.

Two years later, the three properties, plus a fourth nearby, were sold again.  This time, they went for a total of $448,000.

The buyer was Innova, a firm that has already built other homes on the rapidly changing block of Bouvier. It is moving forward to build four townhouses that would sell for $500,000 apiece. That price would net the firm a $90,000 profit per house, according to construction cost estimates filed with the city.

Last year, the firm obtained the last-needed variance to exceed zoning limits on the size of the townhouses. It hopes to have the buildings up for sale in six months.

Councilman Johnson wrote to zoning officials in 2016 backing the new plan for luxury homes, too. He noted that the local Newbold Neighbors' Association had supported it.

Jeffrey Allegretti, Innova's president, has given the councilman $7,000 in campaign contributions since 2013, a fraction of the more than  $1.7 million raised by Johnson over that period.  Allegretti said that his giving reflected support for Johnson's housing policies and that his projects in Johnson's district are a small part of Innova's business.

In an interview, Brian Jenkins, a pastor and executive director of Chosen 300, said his group had to abandon its Bouvier Street plans in 2014 when the organization ran into a money crunch. "We had to make a very hard decision, so we had to actually sell the properties," he said.

Jenkins bridled when asked why his group should have made a quick $100,000 return on its purchase.

"We didn't profit," he said. "That money went into providing services for the community that are desperately needed."

Mary Chicorelli, a civic activist who lives around the corner from the Bouvier  properties, said she regretted that Chosen 300 had flipped its real estate.

"I don't think they should be doing that," she said. "The church should have followed through on the promise that they made."

She said the city had to find ways to help longtime residents who were being priced out by gentrification.

"It's our duty to the people who have been there, who have lived there that long," she said. "Do we want to turn into San Francisco, where the only people who live downtown are millionaires?"

Johnson released a statement recently, contending the city could invoke the language about improvements in the 2014 deed of sale to reclaim the lots.

"My support for this project was explicitly conditioned on the use of the 1532 and 1536 Bouvier Street lots for the development of affordable housing. Accordingly, title was transferred with deed restrictions to ensure compliance," Johnson said. "Chosen 300, a community organization well known for serving the poor in Philadelphia, nevertheless flipped the properties six months later, with the aid of a title company that circumvented the deed restriction."

However, Chrystie, a spokesman for the city's housing agencies, said that rule didn't apply.  He also noted that when the city transfers properties at less than market prices, it imposes even tougher "no-flipping"  restrictions.

The spokesman said that didn't apply to the Bouvier properties because the low-income housing plan was only tentative and the sale price was in line with recent sales.

While the city sold the properties for about $7,500 each, a check of city records for 2014 shows that vacant lots in the neighborhood were selling on average for about $35,000 that year.

Chrystie didn't dispute that the religious group had enjoyed a quick, handsome return. "Clearly the church did well," he said.

Staff writers Dylan Purcell and Michele Tranquilli contributed to this article.