Commercial foreclosures threaten Prince George’s tax base
By Ovetta Wiggins,
When University Town Center sprang out of the ground in Hyattsville five years ago, the sleek mixed-use development was touted as one of the most vibrant new neighborhoods in Prince George’s County.
But recent commercial foreclosures there and elsewhere in Prince George’s are threatening efforts to reduce the county’s reliance on property tax revenue from homeowners. The county already has the state’s highest number of residential properties in foreclosure. Prince George’s collects about 75 percent of its property tax revenue from homeowners, and increasing commercial development would help shift the ratio.
The $1.2 billion University Town Center brought shops, restaurants, swanky condos, a multiplex and office buildings within walking distance of the Prince George’s Plaza Metro station at a time when the county has been working to stimulate development around transit stations.
But the 56-acre development has struggled. Apartments have sat empty. Restaurants have closed their doors.
Last week, several properties in the development, including the 14-screen movie theater, 55,000 square feet of office space, 122,000 square feet of retail space, 5.5 acres of land, hundreds of parking stalls and dozens of residential units were sold at auction. On Wednesday, an office building in the complex is scheduled to go up for sale.
M. Scott DeCain, a consultant for Herschel Blumberg, the developer of University Town Center, said the foreclosed properties represent just 10 percent of the development. The project has 1 million square feet of office space, 360,000 square feet of retail and 1,760 residential units, including student housing. But the foreclosures are worrisome for the county.
“This is an unfortunate circumstance,” said Aubrey D. Thagard, a county assistant deputy chief administrative officer for economic development and public infrastructure. “It’s a collision between the downturn of the economy and the developer overextending themselves to make the project move forward.”
Thagard said the concept of University Town Center “was not a bad one . . . the economy played a role in doing it in.”
The auction of the properties at University Town Center, which was one of three bidders in Prince George’s when the Department of Health and Human Resources was considering relocating to the county, comes two years after the developer of Westphalia Town Center, a massive mixed-use project in central Prince George’s County, defaulted on his loan. The Westphalia property was sold last year to its lender, Wells Fargo Bank. The property was set to be developed by Daniel Colton, who recently pleaded guilty to conspiracy to commit extortion in a sweeping corruption scandal involving former county executive Jack B. Johnson.
Last week, Wells Fargo also purchased the University Town Center properties. The bank bought the properties for $25.1 million.
A Wells Fargo spokesman said it is too soon to say what the bank has in store for the properties.
“Wells Fargo is going to thoughtfully assess all near-term and long-term options for the property,” said Shelley Beason, a Wells Fargo spokeswoman. Beason said after the auction, Foulger Pratt was appointed by the court to act as a receiver during the 60-day ratification process.
University Town Center and Westphalia Town Center — which was set to be the anchor of a larger effort by about a half-dozen developers to transform the rural area of Westphalia into a mini-city of houses, stores, offices and hotels — are just two of many commercial projects in Prince George’s County that are in default or have been sold at auction, according to developers and sources tied to the county’s real estate industry.
The county Department of Environmental Resources, which keeps a database of commercial foreclosures, would not release any information about projects that are in foreclosure, saying the records are confidential and can’t be released until new deeds are recorded.
‘Back to stable footing’
According to state figures, the county has been hit hard on the residential side. The second quarter of 2011 illustrates the scope of the problem: One out of every three foreclosures in Maryland occurred in Prince George’s County. There were nearly 1,500 foreclosures in the county during that period, and Prince George’s County residents received 361 notices of sale, which was a 26.3 percent increase over the first three months of the year.
“Prince George’s has had a worst real estate market than most places around [the District],” said Robert Van Order, a finance and real estate professor at George Washington University’s School of Business. “D.C. hasn’t been as bad as the nation as a whole. And it’s fairly typical of downturns that the further-out places have more volatile situations.”
Developer John Pyles agreed that Prince George’s appears to be one of the worst hit in the region “whether it’s commercial, retail or residential.”
Pyles said he attended the auction of one of his properties last week.
The project, known as Hunter Ridge, was a $40 million subdivision in central Prince George’s where more than 300 townhouses were scheduled to be built. Pyles defaulted on the loan and the property sold for $4 million, he said.
Pyles said he doesn’t know what will ultimately become of the project.
Meanwhile, DeCain, the consultant for the developer of University Town Center, said the auctions should not be viewed as the end of the project.
“This is a positive step for us, believe it or not,” he said. “It is part of the process of getting University Town Center back to stable footing. It’s one step in a lengthy process.”