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Maryland calls halt to plan to move housing agency to Prince George’s County

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Maryland has halted plans to build a housing-agency headquarters in New Carrollton, putting on hold Prince George’s hopes for an urban transit-accessible neighborhood that would attract amenities to the county.

State officials said they were unable to negotiate an acceptable lease and have decided to reopen the search for a suitable site.

“We remain committed to moving the DHCD headquarters to Prince George’s County, a move that will provide significant economic benefits to the surrounding communities,” Lt. Gov. Anthony G. Brown (D) said in a statement, a copy of which was provided by the Maryland Public Policy Institute, a Rockville-based research group that has raised questions about the developer’s finances.

The project, called Grand Central, had fallen months behind schedule as the state-chosen developer struggled to finance the project.

Gov. Martin O’Malley (D) aimed to give a huge boost to Prince George’s in 2010 when he announced that he would relocate the Department of Housing and Community Development and its 330 employees from Crownsville to New Carrollton. The 15-year lease carries an estimated value of $40 million.

Last year, the governor followed through by selecting Grand Central Development, founded by Temple Hills developer Carl S. Williams and Tim Munshell, to bring the project to New Carrollton. It was to be the first state agency to be based in the county, and county officials said it would be a harbinger of economic development once it opened in fall 2013.

Grand Central, working with Baltimore-based Peter Fillat Architects, unveiled plans for a $500 million project with four floors of offices for the housing agency, 440 apartments above and 45,000 square feet of ground-floor shops and restaurants.

At the time, O’Malley said moving the agency to New Carrollton, which offers Metro and MARC access, was a chance “to do the right thing for reducing traffic and sprawl, the right thing for our quality of life, and the right thing for our land, our water and our air.”

For Prince George’s — where land around many Metro stations remains vacant — the project represented a chance to begin a thriving urban community resembling Silver Spring or Clarendon.

Months after O’Malley selected Grand Central, another of the developer’s companies, Carl Williams Group, was ordered in May by a New York state appellate court to pay investment manager UrbanAmerica $9.95 million to resolve a dispute dating to 2008.

UrbanAmerica manages more than 40 million square feet of real estate nationwide. In 2007, it partnered with Carl Williams Group to buy a $106 million New Carrollton office building leased to information-technology giant Computer Sciences Corp. According to court records, the two real estate companies simultaneously discussed buying another 17-acre site nearby, the land that would later be targeted by the state for its housing agency. The two sides failed to reach an agreement, and UrbanAmerica sued Carl Williams Group, alleging that the local firm had defaulted on a loan from Urban America, unfairly breached their agreement and fraudulently stashed securities with another Temple Hills company.

That company, Bexley Place Limited Partnership, which shares the same business address as Carl Williams Group, filed for bankruptcy in April 2008, a move that “prevented plaintiff from foreclosing” on the assets, according to the court ruling. An UrbanAmerica spokeswoman did not return calls for comment.

Williams also has personally been the subject of several tax liens from the Maryland comptroller’s office for failure to pay state withholding taxes for employees at one of his companies, records show.

John Lally, general counsel for Grand Central Development, said Williams had “no legal interest” in the Bexley Place company. He said the $10 million judgment against Carl Williams Group was unrelated to Grand Central’s plan.

“To the overall arch of this deal, it’s irrelevant,” Lally said.

Lally said the county, led by County Executive Rushern L. Baker III (D), had committed to providing $200 million in tax increment financing for Grand Central, whereby the county would issue bonds backed by future tax revenue. But he confirmed that the development team was struggling to get banks to finance the deal, in part because of tighter lending standards that required more cash upfront.

“It’s a very challenging fiscal environment. . . . We’re in serious discussions on financing with a number of financial institutions,” he said in an interview before the state decided to break off negotiations.

Michael Gaines, assistant secretary in the Maryland Department of General Services, did not respond to numerous requests for comment.

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