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Developers say RDA crackdown hurting projects

For more than two decades, the owner of two prime acres on Vine Street had big plans for turning a parking lot, stretching from 17th to 18th, into high-end housing.

Mormon Temple in NYC.
Mormon Temple in NYC.Read more

For more than two decades, the owner of two prime acres on Vine Street had big plans for turning a parking lot, stretching from 17th to 18th, into high-end housing.

Developer Stephen Klein tried six times to launch a project, and six times failed.

His seventh attempt - arguably the highest-end housing of them all - appeared to work.

On Aug. 10, he signed an agreement to sell the land for an undisclosed sum to the Church of Jesus Christ of Latter-day Saints, which announced plans to build a $68 million Mormon temple.

Church officials met with Mayor Nutter and City Council members. They reached out to Logan Square neighbors, including Cardinal Justin Rigali at the Cathedral Basilica of SS. Peter and Paul.

But the future of the Mormon temple now is jeopardized by a battle between Klein and the city's Redevelopment Authority (RDA), which sold him the land for $3.7 million in 1986. Contending that he let it sit fallow too long, the agency has moved to reclaim the parcel.

In filings in Common Pleas Court, attorneys for the developer said the dispute with the RDA had "created a cloud" over the Mormon deal.

The legal dustup rising from the Vine Street lot is only part of a citywide RDA campaign to wrest back idle land from slow-moving developers. When they buy property from the agency, developers must promise to make improvements in a specific amount of time. Klein, for instance, had five years to build something on the Vine Street parcel.

But while explicit on paper, such agreements rarely have been enforced by the RDA.

Until now.

Under Nutter, who is the RDA's chairman, the agency has been far more assertive in holding developers accountable.

Two years ago, the staff of the RDA - a state-sanctioned authority mandated to redevelop land in the city - went on "an archaeological dig" of records, looking for developers who weren't meeting their obligations, RDA executive director Terry Gillen said.

Beginning in September 2008, the agency sent out more than 50 warning letters, notifying property owners that they were in default and had six months to begin the promised work. Otherwise, the RDA would seize the land, paying fair market value, and return it to the public domain. The agency then could sell it to someone else.

Among the recipients of those notices were prominent names in Philadelphia real estate.

Universal Community Homes, a nonprofit developer affiliated with music mogul Kenny Gamble, got a notice about several parcels in Southwest Center City. It returned undeveloped tracts near 17th and Carpenter Streets to the RDA, and got an extension on another lot at 23d Street and Grays Ferry Avenue.

The Parkway Corp., the parking lot empire of Joseph Zuritsky, also negotiated an extension for a lot at 12th and Arch Streets that was to have been developed by now.

"If no development is occurring, that's a legitimate concern, and the RDA wants to then seek out new development opportunities," said Doug Oliver, a spokesman for Nutter. "The ultimate goal here is to ensure that these properties are redeveloped - strengthening the tax base, creating jobs, and improving communities."

But the clampdown has incensed some in city government.

Councilwoman Jannie Blackwell was outraged when she learned that the RDA was trying to seize two parcels from the University City Science Center in West Philadelphia. Currently parking lots, they comprise most of the south side of the 3800 block of Market Street - in her district.

"How dare they!" said Blackwell, who plans a hearing Monday on RDA defaults. "We're not talking about some fly-by-night slumlord. Everything has to be tempered with common sense."

The Science Center, a business incubator for researchers in medicine, science, and technology, sued the RDA last Friday in Common Pleas Court.

Some real estate experts have criticized the timing of the RDA's hard tack, which kicked in just as the economy went into a death spiral.

Klein, who builds mostly apartment houses in the Philadelphia suburbs and Florida, got the RDA's default notice on the Vine Street tract Sept. 15, 2008 - the day the Lehman Bros. investment firm filed for bankruptcy, sending the stock market plunging.

Klein, through his Logan Place Associates, replied that he was working on a plan for a 24-story apartment house with retail space. That project, however, went out the window with the collapse of the real estate market.

By coincidence, Mormon officials were combing the city for a site for a temple, the first for the Pennsylvania-New Jersey-Delaware region. The church had bought a lot on North Broad Street in 2008, only to find out it was contaminated.

In May 2009, church officials contacted Klein about his land on the north side of Vine, east of Family Court. By August, a deal was reached.

That month, however, the RDA board voted to begin legal action to seize Klein's land. The agency sued in Common Pleas Court last December.

Gillen, the RDA director, declined to comment because of the pending litigation.

Michael Sklaroff, an attorney for Klein, said the temple would be "a wonderful unexpected benefit to the city" that would generate jobs, attract visitors, and "energize this portion of the city."

Sklaroff declined to comment further on the dispute. But a local Mormon official, Robert Smith, said he was optimistic the developer and RDA "will come to a quick resolution."

The two sides have met to negotiate a settlement, Smith said. If that happens, design work could begin on the 50,000-square-foot temple, with an adjacent building.

Smith, a member of the church's council of religious leaders for this area, said the construction would create about 300 jobs, with the temple employing 50 people full time.

"We sure hope we have a building ready to go by 2013," he said. "We have all the funds necessary to construct the temple."

The real estate community is closely tracking the dispute.

Noel Eisenstat, executive director of the RDA during the Rendell administration in the 1990s, said he "commended" Gillen for her "broad-brushed efforts" to hold developers accountable.

But, he added, "when you have a unique situation of bringing tens of millions of dollars of new construction to the city, for a project that doesn't need to be here, you may need to do this with a little more finesse."