A deal that's a real sweetheart

Three years ago, Phil Cowherd had his eye on three pieces of city-owned property in Orlando's oldest and poorest neighborhood.

Cowherd was familiar with the Parramore area -- he'd collected rent on apartments there since he was a kid -- and he knew he could resell the parcels of vacant residential land to Carolina-Florida Properties, which was stockpiling land in the area.

So Cowherd wrote the city's Real Estate Department asking to buy the property. The city said no. The assumption at the time was that it would be required for a long-discussed Interstate 4 project. "Right of way will be needed for reconstruction of I-4/E-W Expressway Interchange!" Doug Pleasant, bureau chief of Transportation Planning, scrawled on a city memo sent to Cowherd.

Cowherd wouldn't give up. He continued to send letters until city officials wrote back saying, essentially, don't send any more letters. The real-estate department would contact him when the land became available.

Earlier this year, it did. But it wasn't Cowherd they called. In fact, the city didn't offer the land to anybody. Rather than pursue a potential profit, the city swapped the property for land owned by Carolina-Florida -- a company with a history of broken promises in Parramore -- in what amounts to a giveaway worth more than $1.4 million to the new owner.

That swap gives Orlando two parcels, the largest of which will be used as green space for a retention pond near the highway interchange. And the land Orlando gave up for next-to-nothing? It will become part of a multimillion-dollar "urban village."

The deal dates back to Al French, a former flea-market manager who began buying Parramore land in 1996 on behalf of Carolina-Florida.

At the time, French was shooting off his mouth in the media about his goal to acquire property in Parramore so Carolina-Florida could build a retail and entertainment complex. That was all the information Cowherd and other real-estate investors needed to run ahead of French, buying the land cheaply and "flipping" it to Carolina-Florida for a substantial markup.

Even so, Carolina-Florida eventually acquired a combined 11.6 acres on the west side of I-4 opposite Church Street Station, on land bordered by West Church Street, Division Avenue, Hughey Avenue and Hughey Place. Only one thing stood in the way of completing its "assemblage," as such acquisitions are known: Carolina-Florida needed those three city-owned lots, located at Bryan Avenue and Hughey Place.

Knowing this, a private owner might have jacked up the price for what otherwise was cheap residential property. For example, in the early 1990s, First Union Bank needed a last piece of land to complete its assemblage for an office tower at Marks Street and Orange Avenue. The bank paid a premium -- $144 per square foot for its land.

The city, by contrast, will collect just $2 per square foot for its three parcels. But the deal is questionable for reasons that extend beyond mere economics.

Carolina-Florida asked the city last fall to rezone its 11.6 acres from residential and office use. The approved change to "planned development" means Carolina-Florida can build almost anything it wants, and the company has announced plans to build an urban village of offices, stores, restaurants and 350 apartments in a complex to be called Church Street Square.

More to the point, that zoning change caused the value of the city-owned parcels to skyrocket. Forget $2 per square foot; Carolina-Florida currently is offering similarly zoned property across the street from its Church Street Square holdings for $54 per square foot.

Another curiosity: Carolina-Florida included the city's three parcels in its rezoning petition, even though the company did not yet own them -- a procedural error Cowherd didn't fail to notice. "I can't apply to rezone your house, can I?" he asks rhetorically.

But the real reason Carolina-Florida's latest acquisition is so valuable is this: Carolina-Florida now controls both sides of Bryan Avenue. And according to state law, they now can close the street to build on it. In other words, acquiring one key piece of property on Hughey Place and Bryan Avenue allowed Carolina-Florida to claim a quarter of an acre of public land free of charge. Indeed, the company already has submitted plans that show the street will be turned into office space.

Additionally, the deal gives Carolina-Florida the rights to half of Hughey Place -- an additional quarter acre -- because owning the city's three lots makes Carolina-Florida the owner of that entire block as well. Given the square-footage values of their other property, Bryan Avenue and half of Hughey Place are worth $1.29 million to the company.

So what did city residents get from Carolina-Florida in return?

They received two parcels, one containing a boarded-up duplex on the south side of Hughey Place. Unlike the three parcels, that land probably will be needed for the I-4 interchange. Plans for the property -- along with all lots on the south side of Hughey Place -- show that it will be turned into a retention pond.

The other piece of property is on Division Street and, at 4,000 square feet, too small on which to build anything. Tom Kohler, director of the Downtown Development Board, says it likely will be used for a park.

Kohler was among three executives who made the deal for the city. Chief administrative officer Richard Levey and city attorney Jean Roush-Burnett were the others.

They say the deal, which the council approved May 8, was good because the appraised value of the duplex and the Division Street lot ($23,000, including the duplex) was twice that of the city's three lots ($11,500). "We got two for one," Kohler says. "We got our value."

But Kohler's assessment overlooks another fact. The city paid $10,000 to appraise all the parcels involved in the swap -- meaning that, with the expense deducted, the city made just $2,000 on land that Cowherd, a licensed real-estate broker, says was easily worth $100,000.

Moreover, the appraisal failed to account for several key items that would have greatly increased the value of the city's property.

For one thing, the appraiser, Primis Inc., based the appraisal upon eight locations in Parramore that it claimed were comparable in value to the city's three parcels. All eight were located outside Carolina-Florida's assembled property. Why? Because Carolina-Florida had overpaid for all its property; the company was paying $14 per square foot for vacant lots and abandoned homes. Including that property in the appraisal would have increased the value of the city's property from $2 to at least $14 per square foot. Had that been the case, the city's property would be too valuable to swap with Carolina-Florida's two parcels.

Primis executives did not return phone calls or a faxed request for an interview. But three appraisers contacted by Orlando Weekly said the same thing: Property inside the assembled area should have been used to appraise the value of the city's land.

Additionally, the appraisal concludes the city's property will be developed for "low-intensity" residential use, even though Kohler told Primis it would be rezoned to accomodate the more ambitious project. According to Primis' own reports, the parcels should have been classified for the more valuable planned-development use.

It's understandable that city officials have been under pressure to do something, anything, to jump-start Parramore development, and have worried that Carolina-Florida would fail to redevelop the 73 properties it has amassed in the neighborhood since 1996.

And some observers note that even if Carolina-Florida does build on the west side of I-4, it will have the same trouble finding tenants as those on the east side.

David Jones is an attorney who has sat on the Municipal Planning Board for seven years. He noted at the board's Dec. 21 meeting that Church Street Square might be a waste given the number of vacant spaces already located downtown.

"It's just a couple of blocks from the Jaymont building, which continues to look like a nice breeding ground for our winter visitors who are panhandling on our streets," said Jones, referring to the empty structure at Orange Avenue and Church Street. "I'm wondering why we're going westward when we can't take care of the heart of the traditional downtown."

It's a wonder, too, why the city is giving away three parcels to a company that has never delivered on its promises to help turn Parramore around. After all, the city code contains a clause that says Orlando's property will be sold in a method "most advantageous" to the city. That certainly was not the case here.


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