THE TROUBLED real-

estate market has taken its toll on the city's noble experiment in public-private housing that made neighbors of rich and poor in East Falls.

Eleven townhouses at Hilltop at Falls Ridge, privately built luxury units adjacent to a subsidized development built by the Philadelphia Housing Authority, are being auctioned next month.

Units that ranged in price from the mid $300,000s to the low $700,000s will be auctioned for minimum bids of $125,000 to $250,000, respectively.

I was saddened when I saw it.

But developer John Westrum and PHA head Carl Greene spoke optimistically about the auction, citing it as an "innovative marketing technique," rather than evidence of failure.

"This is not a fire sale," Westrum said, but a way to motivate fence-sitting buyers to commit.

Greene and Westrum believe the stalled sales are a function of a "shift in real-estate fundamentals" - and not a failure of the effort to market luxury homes adjacent to public housing.

"I remain optimistic about the concept itself," Greene said.

I was less sure - until I spoke with the director of the Penn Institute for Urban Research.

"It's definitely the market," said Dr. Susan Wachter.

The professor of real estate and finance said the juxtaposition of market-rate and affordable housing is working in other cities.

Still, what an unfortunate turn of events for Philadelphia's venture to be stalled, especially because it was hailed as a national model and a tribute to Greene's determination and Westrum's courage.

The last time I was there, I stood on a roof deck of a $700,000 model townhouse with Gov. Rendell, who lives around the corner, as he sang the praises of the development and both men.

On Wednesday, by contrast, an employee appeared at the door of the sales office, shaking her head at a construction worker who was talking with me. She directed me to call the corporate office - and refused to give me the number.

A sign on the office door said "Closed Today."

The PHA Falls Ridge development, with its tranquil winding streets and manicured front lawns, replaced the foreboding and long-vacant high-rise and dilapidated low-rises of the Schuylkill Falls project.

It has 135 subsidized rental townhouses, a senior residence, and 28 townhouses that were sold to moderate-income families.

After a battle with the community that wound up in court, PHA brought in Westrum to develop 128 market-rate units on a 16-acre site on an adjacent piece of land.

It was exciting to see East Falls transformed. The neighborhood, home to Rendell, Sen. Arlen Specter and Chief Justice Ron Castille, was long marginalized by Schuylkill Falls.

I lived in the neighborhood for years and love it.

Westrum has built 30 units, 19 of which have sold.

But none of the five top-priced units, which ranged between $670,000 and $750,000, sold. They're all going to auction.

The development will be completed with redesigned townhouses reflecting buyers' feedback and market conditions, a company spokesperson said.

The most expensive model will be discontinued. New units will have fewer stories and fewer steps, said Leslie Balzer, vice president of marketing.

Westrum said notice of the auction already has had an impact: Three buyers who previously were undecided asked if they could put in an offer before auction.

He was alarmed at the potential "tone" of the column I was going to write, calling me back even after I spoke at length with another official in the company.

"In no way, shape or form is this a negative," he said in a voice mail.

I do wonder - because the most expensive houses didn't sell - whether people will pay top dollar to live next door to subsidized housing.

Still, I suspect the townhouses will go in a heartbeat for much more than the minimum bids. If you're interested in a great neighborhood and a good deal, I urge you to go to the open house this weekend.

But you can't argue with the reality: No developer goes to auction if he doesn't have to. It's certainly not a sign of success.

Tenesa Rivera, for one, isn't worried.

The medical student, who's about to begin her residency at Temple, bought her two-bedroom townhouse at the Hilltop at Falls Ridge last summer, and she loves it.

She isn't troubled by the auction. Indeed, she's in the process of buying another unit.

"I'm here for the long haul," she said, standing on the windy hilltop of the construction site.

"I think it will do well." *

E-mail porterj@phillynews.com or call 215-854-5850. For recent columns:

http://go.philly.com/porter