Tubman's tangled tale: The story behind CHA's failed attempts to sell the public housing site

Tubman's tangled tale: The story behind CHA's failed attempts to sell the public housing site

January 26th, 2014 by Joy Lukachick Smith and Ellis Smith in Local Regional News

The former Harriet Tubman Homes site in East Chattanooga, seen here from Missionary Ridge, was built in 1953.

Photo by John Rawlston /Times Free Press.


* Tadese Tewelde: $1.5 million, November 2012

* Geoffrey Singer: $1 million, November 2012

* Outpost Centers International: $4 million, January 2013

* Bluestar Properties: $800,000, April 2013

* Lakewood Realty: $2.85 million, May 2013

* City of Chattanooga: $1 million, July 2013

* Cassara Consulting: $2.9 million, October 2013


1953: First phase of Harriett Tubman completed

1963: Expansion grows size of complex

2005: Chattanooga Housing Authority demolishes 10 buildings

2011: CHA informs residents that they will be evicted and buildings will be sold, rather than pay $33 million repair bill

November 2012: Taddese Tewelde bids $1.5 million for complex; Geoffrey Singer bids $1 million

December 2012: Ed Rohn makes initial inquiry into Tubman

January 2013: Outpost Centers International bids $4 million for Tubman

April 2013: Mayor Andy Berke inaugurated; meets with CHA officials. Bluestar bids $800,000

May 2013: Lakewood Realty makes blind bid of $2.85 million, having never been to the site

June 2013: Five buyers have expressed interest in Tubman

July 2013: Berke bids $1 million for Tubman

August 2013: City Council approves $3 million for Berke to buy and demolish Tubman. Only Lakewood and Chattanooga remain as bidders.

October 2013: Berke withdraws city's Tubman offer, Lakewood awarded contract to purchase Tubman; Ed Rohn bids $2.9 million

November 2013: Lakewood and CHA sign 60-day extension to allow Lakewood to secure funding.

December 2013: Barbara Szymanska, agent for Lakewood, leaves for Poland as CHA officials grow uneasy

January 2014: Lakewood unable to close on property; CHA board severs ties with Lakewood

Political delays, a confused vision and repeated inaction were behind a fruitless two-year attempt to sell the Harriet Tubman public housing complex, documents and interviews suggest.

The Chattanooga Housing Authority ignored the highest bids, required exhaustive documentation from some buyers but not others, and ultimately failed to sell the complex to any of the half-dozen interested parties, all while its executive director said publicly there were no solid offers.

CHA has left millions of dollars sitting on the table after spurning buyers ranging from a Florida ophthalmologist to a Seventh-day Adventist charity in Apison, while continuing to pay $300,000 per year to maintain the derelict site.

"There was too much discussion," said Eddie Holmes, chairman of CHA's board. "Here we are going into two years. It shouldn't take that long."

One real estate broker who represented an interested potential buyer for the site faulted CHA.

"There was no spirit of negotiation," said Jason Farmer, a broker and owner of RE/MAX Renaissance.

CHA officials defended the agency's actions, saying the public nonprofit corporation must tread a fine line when selling such a high-profile property. Tubman had housed hundreds of the city's poorest for decades, and the site's 36.5 acres is the largest single contiguous parcel of land with favorable rail and road access and proximity to other unused sites in Chattanooga.

The housing authority must vet each bidder, bearing the community's best interest in mind while adhering to federal guidelines, which stipulate the property must go for at least $2.46 million. Though buyers may have questions or complaints about the process, it's not accurate to say it was confusing or politically charged, said Naveed Minhas, CHA's vice president of development.

"It's unfair to categorize it as that," Minhas said. "We had seven interested parties. We asked each one of them to come and meet with us, to visit the site and share with us what your vision is. We met with all but one."

In interviews with multiple Chattanooga Times Free Press reporters through 2013, CHA Executive Director Betsy McCright downplayed offers the agency had received. McCright told reporters that the agency had received no bids, contracts or letters of intent. She called them "inquiries," noting that the agency was still in "information-gathering mode."

But real estate officials contradict McCright's narrative, and copies of offers to buy the Harriet Tubman complex obtained by the Times Free Press also throw doubt on McCright's public statements.

All the proposals are clearly labeled as letters of intent, offers to purchase real estate and purchase agreements, and are drawn up as contracts with room for signatures at the bottom. Emails obtained by the Times Free Press between McCright and others refer repeatedly to "offers" made by prospective buyers, even as McCright publicly denied the existence of any concrete bids.

"She's right, they weren't letters of intent," said Craig Harding, vice president at Apison-based Outpost Centers International [OCI], which bid $4 million for the property. "That was a full-blown legal contract drawn up by [Chattanooga law firm] Chambliss Bahner and Stophel."

Two visions

The Chattanooga Housing Authority's conflicted stance toward selling Tubman may have been due partly to the two separate visions guiding the agency.

City officials, including the mayor, who appoints CHA's board, wanted to see Tubman become an industrial complex that would bring jobs to the neighborhood. But that conflicts with CHA's mission of providing housing for the less fortunate -- a job that CHA wanted to pass off to private developers while still retaining some control over the process, Harding said.

Outpost Centers International's bid was the highest offer, part of a proposal to renovate many of the buildings and re-establish housing onsite. Harding expected to close the deal quickly.

But that didn't happen -- not with any of the site's potential buyers.

In Harding's case, the housing agency required him to create a "white paper" outlining his intentions for the site, including an extensive plan detailing how OCI would remodel the units. In effect, the sale became contingent on the amount of remodeling and redesign that OCI was willing to do, he said, rather than the sale price.

"I'm thinking, OK, this doesn't really make sense," he said. "But that was fine with me. I'm happy to come back and spend more money on the building remodeling and pay less for the property -- fine with me. So we went back and put forward a white paper with that being in mind, and a more extensive remodeling."

After that bid, which he reduced to $1.2 million in exchange for the lower density and more extensive remodeling requested by agency officials, he heard nothing more from CHA. The next time he heard anything about Tubman was when he read in the newspaper that the city was preparing to buy the complex for $1 million -- far below his original $4 million bid.

"We sent them the proposal, we sent a signed contract, we asked for a response, and they said it's going to be a while, thanks for your stuff," he said. "There were a lot of things I'd like to have explained about the process of working with CHA."

OCI later spent its $4 million elsewhere and isn't interested in spending months working out another deal with CHA.

Minhas said CHA's silence in response to OCI's bid was part of a strategy.

"In real estate, it is a message to the potential buyer that your offer is not good enough," he said. "They know if the response isn't coming, we're not jumping at the number."

But that's not the way real estate transactions work, argued Farmer, who has worked in real estate for years.

"In the real estate world I live in, you make offers and make counteroffers and you accept, reject, counter, and there's a spirit of negotiation in every offer," Farmer said.

Due diligence

While CHA made some potential buyers jump through hoops, it didn't do the same due diligence with Lakewood Realty.

Toward the end of 2013, the agency zeroed in on Lakewood, a firm based in a small Chicago storefront sandwiched between a State Farm office and a Polish restaurant. Unlike the other half-dozen bidders, which were asked to submit timelines, white papers and renovation plans, Barbara Szymanska -- the point of contact for Lakewood -- had trouble even answering emails.

In a response to CHA's questions about whether she had established a business entity in Tennessee or drawn up plans to visit Tubman and secure the buildings, Szymanska dashed off a note on Dec. 4 from her iPhone to Dennis Harris, a Kirkwood Co. real estate agent for CHA:

"HI DENNIS, I had to go to Poland on business be back in 12 days, talk to you shortly, we have our closings the end of December so we are fine all the best," she wrote.

In another note, she wrote, "Hi Denis[sic] Iam[sic] back just few hours ago, I will call you later. Everything is fine I am going to meet with my partners this evening give the update, all the best for you Barbara."

Harris apologetically forwarded Szymanska's correspondence to his employers.

"Not too much clarity in her response below, nor did she answer the questions, but a response nonetheless," Harris wrote.

The original closing date was scheduled for late December, but Lakewood requested and was granted an extension to Jan. 15.

Minhas began to express his doubts about Lakewood's viability as a buyer, even as Harris promised to keep working to get some basic information from Szymanska.

"Lakewood is beginning to bother me," Minhas wrote to Harris on Dec. 22. "The corporation is not registered; no property protection measures have been taken; communication from there[sic] side is zero to nil."

Katherine Currin, an official with a local nonprofit called Glass House Collective, dedicated to rehabilitating the area around Tubman, had begun earlier to question why CHA picked Lakewood.

Currin and her colleagues researched the company and couldn't find information on any previous projects. Currin said she sent numerous emails to Szymanska and tried to call but the voice mailbox was always full. The one time Currin actually spoke to Szymanska, the Chicago broker said she couldn't talk.

"My reaching out to her was, first of all, to get more information for the community and really talk about partnering with her," Currin said. "[But] how can you support something you know nothing about?"

Still, Lakewood had told CHA it was willing to pay cash. And in real estate, cash is king.

Through two postponements of the closing as well as long periods of silence, officials continued to work on sealing a deal with Lakewood. However, as 11th-hour negotiations dragged on, it became apparent that Szymanska had only part of the money. She promised $500,000 at the Jan. 15 closing, with the rest later. Minhas called an emergency board meeting that day to determine whether to delay the closing again.

"We still are short $378,900," Szymanska wrote to Minhas at 4 p.m. on the scheduled closing day. "Could we at least extend [the deadline] 'till Monday 3 p.m. with additional ampount[sic]?"

A CHA staffer invited Chattanooga City Council Chairman Yusuf Hakeem to attend that emergency meeting. Rising to address CHA's board, Hakeem pleaded with the handful of officials not to accept the Lakewood deal.

Not only had Lakewood been nonresponsive, but the last thing East Chattanooga needed was another sprawling, high-crime residential complex, Hakeem said. He, Mayor Andy Berke and the Chattanooga Area Chamber of Commerce all favored an industrial complex on the site, not low-income housing.

"We would not be here if there was not an interest, a desire to see what we perceive to be a higher use for that property," Hakeem said.

That was good enough for the board, which voted to cut ties immediately with Lakewood if it couldn't pay by midnight.

Hakeem canceled a scheduled meeting with a reporter Tuesday and didn't return multiple calls seeking comment.

It isn't clear why CHA pursued the $2.85 million offer from Chicago-based Lakewood instead of the Apison charity with $4 million ready to spend, though a chain of emails exchanged around the time of Berke's April inauguration shed some light on the decision-making process.

Reaching out to Berke

Minhas on April 9 updated McCright and CHA board member Jim Sattler on the remaining offers from OCI and a group headed by investors Robert Johnson and Marcus Lyons. This was before Lakewood made its offer in May or the city entered its bid in July.

Sattler, who also served on the Chamber of Commerce in a role in which he helped locate promising industrial tracts, wrote back that he wasn't sure how large an "appetite" for development there was in the incoming Berke administration.

"No one seems to be jumping up to push [development] of this property by either the city or the chamber or county," he wrote.

On April 30, McCright asked Minhas to set up a meeting with the mayor and City Council to "get our ducks in a row on [the] message we want to send."

On May 2, Minhas and McCright met with Berke for the first time since he was elected to outline the projects in which CHA was involved. During the meeting, Minhas said, officials talked with Berke about the Tubman sale and the mayor talked about his vision for affordable housing within the city.

At the end of the conversation, Minhas said, Berke told him to take some time before moving forward on any current projects: "Give me some time to settle down," Minhas recalls Berke saying.

"We'll see how your plans with CHA and how our plans would blend."

The next day, Minhas sent an update to CHA's real estate agent, Kirkwood Co., about the most recent offer with OCI.

"More discussion will need to happen, and as such, CHA will not be able to respond to OCI's offer by May 7, 2013, as stipulated in the offer," he wrote to Harris.

CHA never formally responded to any of the offers, McCright said.

The city's bid

Two months later, Berke publicly announced his intent to purchase the site for $1 million and tear down the buildings at a cost of $2 million to make way for an industrial site. The announcement was a major part of the new mayor's economic strategy for creating jobs and prosperity in the depressed East Chattanooga area.

Berke says he believed that he was the only valid bidder remaining when he submitted his $1 million offer.

"There were lots of letters of intent, but it wasn't clear the people remained interested," Berke said on Wednesday.

Though the city's bid was the lowest at the time, Berke said he was willing to spend more and to offer land to get closer to HUD's $2.46 million minimum bid requirement -- though he never offered enough to meet HUD's requirements, and ultimately retracted the deal when CHA balked at the lowball offer.

Berke's offer wasn't a spur-of-the-moment decision. The Chattanooga Chamber of Commerce, City Council members and Berke -- who appoints the board of CHA -- were familiar with the site, Sattler said.

One of the plans, the existence of which was confirmed by Sattler and Chattanooga Area Chamber of Commerce President Ron Harr, was to buy the Tubman site for industrial use, then combine it with nearby properties -- including those owned by Hamilton County and Berke's father and uncle -- for an even more attractive parcel.

Top Berke staff members on multiple occasions have denied that the city plans to purchase his family's nearby property for any industrial project. Berke spokeswoman Lacie Stone confirmed that again Saturday.

In response to a reporter's question about combining the Hamilton County and Berke family property with Tubman, Sattler said that he has "gone on record that doing something over there was a good entry, and potentially taking in some other properties would make better sense just because of the location."

"All of that would be better served if we don't throw more density back in there and have a lot of additional issues," he said.

Councilman Moses Freeman, whose district includes Tubman, said no one should be surprised at the city's interest in tearing the complex down and using it for industrial purposes. In fact, it was one of Freeman's campaign promises.

"As far as I was concerned, it was my plan, not the mayor's plan," Freeman said. "It shouldn't have been a surprise to anyone. I was talking about it to everyone who would listen."

Community view

As developers and city officials worked to untangle their Tubman strategy, community members seethed at being left out of the discussion.

Unlike the city, the community wants to retain public housing onsite, according to Avondale Neighborhood Association President John Lewis, who has said he has been kept in the dark about CHA's plan. Hakeem and Freeman have publicly pushed for the mayor's plan, but Lewis said that a factory isn't what the neighborhood wants.

Lewis said he wasn't invited to the Jan. 15 emergency CHA board meeting, though several business leaders and council members who have supported the mayor's plan were asked to attend.

"It seems like it's playing politics," Lewis said.

With Lakewood out of the picture, some sort of deal could still happen, as CHA has now opened bidding up for an additional 30 days.

It's possible that the city, a private developer or both could re-enter the fray, officials say. But in the end, the property belongs to the federal government and must be sold according to its guidelines, said the chairman of CHA's board.

"It's not our property," Holmes said. "It's HUD's property."

Staff writer Yolanda Putman contributed to this report.

Contact staff writer Ellis Smith at esmith@timesfreepress.com or 423-757-6315.

Contact staff writer Joy Lukachick at jlukachick@timesfreepress.com or 423-757- 6659.