Rouse Asks City To Seize Properties

Posted: April 29, 1987

When he walks each morning to his Parthenon Restaurant in the 1600 block of Chestnut Street, Pete Antipas gets a close-up view of how towering One Liberty Place really is.

The heart of the north side of the block has been torn asunder - the buildings that once lined the street have been razed, and what remains is a huge dirt lot where the next phase of Rouse & Associates' $600 million Liberty Place complex is to be built. With the buildings gone, Antipas can clearly see how the 60-story One Liberty Place, now under construction across the lot, has already claimed its place as the tallest building on the city's skyline.

"It's an impressive building, that's for sure, and it's an impressive project," Antipas said recently, as he stood behind the counter of his restaurant dishing out platters of Greek salad and moussaka for the lunch crowd. "But what it's all doing to me is turning everything upside down. I don't know what's going to happen to my place. I'm in limbo."

Antipas owns one of five businesses that continue to operate in buildings on land that Rouse must clear if it wants to start construction of Liberty Place's second phase - a sprawling hotel-and-retail complex and a second office tower - on schedule this July. But an impasse has developed in Rouse's efforts to buy out the property owners and leaseholders.

Now, in an effort to break this impasse, Rouse has asked the city to take the extraordinary step of condemning the properties on behalf of its private project. A bill authorizing such an action was introduced, without much public notice, in City Council on April 9.

"The city is making a judgment that the public benefit involved overrides individual concerns," maintained Barbara J. Kaplan, executive director of the City Planning Commission.

The proposal for the city to use the power of eminent domain for a specific developer's project, while not without precedent, has raised fundamental questions about whether the city should use its condemnation powers at the request of any private developer - even for such a high-profile project as Rouse & Associates' Liberty Place, which has the support of city government, or for the highly visible Willard G. Rouse 3d, the company's principal partner. Recently, he has emerged as a prominent civic leader, most notably as chairman of the agency planning the city's bicentennial celebration of the Constitution.

The condemnation proposal also has drawn angry criticism from the property owners and leaseholders involved. In two of the buildings, the owners have so far spurned Rouse & Associates' offers to buy them out for far more than they paid for the properties; another business that holds a lease in a building already purchased by Rouse has not accepted an offer to buy out its lease.

As for Antipas, he soon may be freed from limbo. Late yesterday, Rouse's project manager, John E. Farrell, said that the developer had reached a settlement with Antipas on buying out his lease for 1633 Chestnut and that the deal would be closed this week. Lewis Kates, the attorney for Antipas, was not available for comment yesterday.

But in an earlier interview, Kates had strongly objected to the city's using its condemnation power to resolve the matter.

"To use the power of eminent domain on behalf of a private individual, that's simply wrong," he said. "I think the city has been called on to do something that is really improper. Why should the city come in and bail a particular developer out and give him the benefit that only the city can give? That's private condemnation, not public condemnation. It's an abuse of an awesome public power."

"One or two people cannot just rape the developer," countered City Councilman John F. Street, who introduced the legislation authorizing condemnation. "We can't just let one or two people hold up the entire project."

Kaplan and other planning and redevelopment officials, who have supported the condemnation proposal, maintain that the action is justified to ensure the completion of a major private venture such as Liberty Place, which will create jobs and bring significant tax revenue to the city.

"We do not take using the power of eminent domain lightly," she said. ''We use the power rarely, because we recognize we are taking somebody's property."

City Councilman David Cohen, chairman of Council's Rules Committee, which will consider the legislation, questioned whether the city was giving preferential treatment to Rouse and was depending too heavily on the developer for major projects. In addition to Liberty Place, Rouse has been designated as developer of a city-owned site at Penn's Landing and is currently seeking a new partner before proceeding with the project.

"I have a lot of questions about Rouse's whole role," Cohen said. "I don't think it's good for the city to put all of its faith and fortune into one developer."

Under the proposal now before Council, the Redevelopment Authority would acquire the properties through condemnation and turn them over to Rouse & Associates, which would reimburse the authority for all costs incurred.

DIFFERENT PROCESS

That is a marked departure from the typical way that the city makes use of eminent domain for private projects. In most cases, the city first determines that an area is in need of redevelopment, then acquires it through condemnation and accepts bids from developers for the site.

For the Rouse company, there are definite advantages to avoiding condemnation by reaching settlements with the remaining property owners and leaseholders. The condemnation process would take at least several months and would delay the start of Liberty Place's next phase. In addition, city involvement would subject Rouse to additional regulations and design controls, which could further delay the project.

"I have no interest in going through condemnation, if we can avoid it," Rouse said in a recent interview. "For us, there's no benefit in condemnation, except you ultimately own the property."

"If we have to go to condemnation, it would obviously delay the whole project," he added. "Our preference all along has been to acquire the properties privately, and it still is."

Rouse company officials said if they can obtain the remaining properties, which are located on Chestnut Street and on 17th Street, they would proceed in July with the start of the second phase of Liberty Place. Although the $400 million in financing needed for the next phase has not yet been obtained, Farrell said Rouse was "in the process of arranging for financing now. We may be in a position to announce something soon."

Occupancy of One Liberty Place, the building that shattered the city's unofficial height limit, is scheduled for August, when Conrail begins to move into the five floors it has leased. Only 15 percent of the space in One Liberty Place has been leased, but Rouse officials say they are meeting projections for the building, which did not call for full occupancy until 1989.

PRICES WOULD BE SET

As for the negotiations concerning the site of the project's next phase, Rouse & Associates is continuing to talk with the remaining two property owners and with the other leaseholder that has not yet accepted a buy-out offer, the Lodge clothing store. If settlements are not reached and condemnation proceedings are initiated, prices for the properties would be set by the city Board of Viewers and could ultimately be decided in the courts.

The two owners involved - George Athanasiadis, who owns the building at 29 S. 17th St. that houses his Steak City hoagie shop, and Theodora Tsiouris, who owns the building at 41 S. 17th St. that houses a print shop and a maternity clothing store - referred all questions to their attorney, Mervin J. Hartman, who declined to comment. Stephen Salk, vice president of the Lodge, the Boston-based clothing chain, declined comment on negotiations concerning his store's lease of 1637 Chestnut St.

While the negotiations continue, the legislation that would empower the Redevelopment Authority to initiate condemnation proceedings remains before Council's Rules Committee, which has not yet scheduled the required public hearings.

The propriety of using the power of eminent domain at the request of a private developer is an issue that has been widely debated by urban planners. Some cities, such as Boston and San Francisco, have routinely rejected requests to initiate condemnation proceedings for projects of specific developers; others, including Minneapolis and Chicago, have used condemnation for projects deemed to have significant public benefits.

Anthony Downs, a senior fellow at the Brookings Institution who specializes in urban affairs, said the issue of using condemnation powers for a private project was "a troubling question that a lot of cities have wrestled with."

Downs said he did not believe that a developer "has the right to go in and have the city use condemnation powers for him right from the start" of a project. But he said the use of such powers had to be "an option of last resort." Otherwise, he added, "in assembling a large parcel, one property owner can hold up an entire project by holding out for some unbelievable price."

TWO CASES

Senior development officials in Philadelphia said they could recall only two cases in the last 20 years in which the city invoked the power of eminent domain for a project proposed by an individual developer - in 1969, when the city condemned a site at 15th and Market Streets for developer Jack Wolgin's Centre Square building; and in 1973, when the area now known as Franklin Town was acquired through eminent domain for the Franklin Town Corp.

Kaplan said the city would not have considered Rouse's proposal if he had not acquired nearly the entire site of the second phase of Liberty Place with the exception of the two unpurchased properties and the two unresolved leases. She noted that Rouse had already bought or reached agreement to buy more than 20 properties on the site, which is bounded by Chestnut, Ludlow, 16th and 17th Streets.

"We always say to developers who make this kind of request, 'You assemble the property. If there's one or two you can't get, then we'll consider it,' " Kaplan said.

Street said that the city, which approved Rouse's plan to break the unofficial height barrier with Liberty Place, should be "committed to doing whatever we have to do to allow the project to be completed."

"My feeling is Willard Rouse has bent over backwards to acquire the properties," Street said. "I will insist, as best I can, that he make a fair and reasonable offer" to the remaining property owners.

Kates, the attorney for Antipas and the Parthenon Restaurant, complained that the possibility of condemnation by the city gave the Rouse company a ''bargaining tool" in its negotiations with Antipas for a buy-out of the remaining six years of the restaurateur's 13-year lease.

"Condemnation is unfair, and, in this case, it's unnecessary," Kates said in an interview last month. "We've been talking with Rouse. . . . The city should just let the market forces work. Everybody has his price."

The prices being sought by the property owners and leaseholders who have not yet reached agreement with Rouse are quite substantial. According to sources involved in the negotiations, Rouse had offered more than $800,000 to Antipas as a buy-out for his lease.

But George Athanasiadis, owner of Steak City, contended that the fate of his hoagie shop involved more than money.

"I don't think it's fair for the city to get involved in this," remarked Athanasiadis, who said it would be difficult for him to find a comparable Center City location for his shop regardless of the amount of the settlement he received from Rouse or the city.

"I didn't buy this property for Rouse, and I didn't buy it for the City of Philadelphia," he said. "I bought it for myself, my wife, and my children . . . I bought it to operate my business, not to sell it. I bought it to stay here."

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