Judge: Developer owes $1M for stalled Washington Hill project 

Posted: 7:53 pm Fri, March 5, 2010
By Robbie Whelan
Daily Record Business Writer

A U.S. District Court Judge has ruled that Baltimore developer David Holmes must pay back a $1 million deposit laid out by a Dallas-based firm in connection with The Gateway at Washington Hill, a stalled residential and retail project near Johns Hopkins Hospital.

Holmes has had trouble finding financing for the project, and said Friday that he is focusing on other efforts in Baltimore.

The proposed $230 million development would have brought 450 luxury apartments and a 30,000-square-foot upscale grocery to a prime lot just south of Johns Hopkins Hospital and just north of Fells Point. The 3-acre parcel is bounded by East Fayette Street, East Baltimore Street, North Wolfe Street and North Washington Street.

In a ruling in favor of JLB Partners LP, Judge Benson E. Legg wrote that the “case arises from a real estate deal gone sour,” and said that because JLB had not breached contract in any way, Holmes’ company, Capital Development LLC, must repay $1 million in earnest money that JLB committed to the  deal.

Holmes has had a planned unit development agreement, a zoning bill approved by the city, on the property since 2004, and in 2007 he began marketing the site for sale through commercial broker CB Richard Ellis. Holmes said Friday that the site was never actually for sale — he was just looking for a joint venture partner to help him find financing.

In June 2008, according to court documents, JLB entered into a $20.4 million contract with Holmes’ company to buy two parcels of city-owned land on the Washington Hill site, but soon after, JLB found that the parcels were subject to a city land disposition agreement requiring that a builder could only have 30 dwelling units per acre — and that 6 percent of those had to be affordable housing.

JLB objected to these limitations, according to court documents, and wanted to build a denser project, with 60 units per acre. Its sale contract stipulated that if Homes didn’t remove the limitations from the contract, JLB could walk away from the deal within 45 days. Holmes was unable to get out of his requirements to the city, the court order says, so JLB pulled out.

“It’s a great project, a great site. It’s just we got caught in the downturn at JLB and we had to cancel the project from our point of view,” said Graham Brock, a regional director with JLB. “It’s just not possible to have a successful project there today. It’s not possibly to have a bank loan of that size.”

Holmes gave a similar account of the history of the deal Friday, saying that JLB was primarily an investment partner, but that the firm was hit hard by the economic downturn and couldn’t afford to invest in the project.

“They were a development partner that couldn’t get financing. It was really that simple,” Holmes said. “The market collapsed and we went our separate ways.”

In the meantime, Holmes said, he has been focusing on the Marketplace at Fells Point, a $52 million retail and residential project in the 600 block of South Broadway. That project recently received $8 million in federal stimulus bond funds.

“[Washington Hill] was a parcel that was always going to be developed later on. We went through a legislative process and then put it on the back burner,” Holmes said. “We haven’t really been focusing on it. It’s still an important site, and it’s important to get it developed. I do plan on reaching back out to a development partner, to bring a developer on board.”

He added that he plans to appeal Thursday’s judgment ordering him to pay the $1 million to JLB.

Brock, of JLB, said it was unlikely that his company would partner with Holmes again on the project. The recession has since forced his company to pull out of several other projects, he said, including a $45 million apartment project in the 1900 block of South Charles Street in Federal Hill, and JLB does not have any active investments in the Baltimore area.

Plus, he said, working with Holmes again would just be awkward.

“I view it just as a disagreement between two developers. It happens all the time,” he said. “But usually when you sue somebody, you don’t get back in bed with them that quickly.”