Estates to sell? He could always find a way Estates to sell? He could find a way to do it

Posted: February 26, 2002

When owners of Chestnut Hill estates had trouble selling their homes in the late 1990s, Richard W. Snowden was there to help.

He helped Ethel Wetherill.

He helped Mary Fisher.

He helped Ernesta Ballard.

He also helped himself.

With the aid of his family's money and the use of deed restrictions to protect historic properties, Snowden found a buyer for each estate.

In these and other transactions, Snowden participated in sophisticated real-estate deals with the city's leading nonprofit preservation organization, the Preservation Alliance for Greater Philadelphia, which he chaired at the time.

In moving these estates, Snowden did more than offer advice as leader of the Alliance. By becoming a player in the transactions, the Snowden family's real-estate partnership benefited handsomely.

The partnership, Bowman Properties, in effect ended up receiving money donated to the Preservation Alliance by Snowden's wealthy relatives - without the money being subject to capital-gains or gift taxes.

And the original donations from the family members were tax-deductible.

In several deals, the Preservation Alliance paid Bowman Properties hundreds of thousands of dollars for deed restrictions to limit development.

In one transaction involving the Preservation Alliance, Bowman Properties bought an estate for $197,500 and resold it for $925,000.

The Alliance says the money paid to Bowman Properties was well spent, saving important properties and open space.

But the benefits to the public are not always apparent.

In one case, the Preservation Alliance paid to protect the historic look of a Chestnut Hill mansion, even though the mansion is set so far back that passersby can barely glimpse it from the public street.

In another, it paid to protect an architecturally distinguished garden out of public view.

In a third, it paid to protect an Erdenheim estate from subdivision even as it left open the possibility that the property could be transformed by, among other things, the construction of a new tennis court, swimming pool, and three-car garage.

Over an eight-month period, Snowden, 44, general partner of Bowman Properties, declined repeated requests from The Inquirer for an on-the-record interview. Family members declined to comment or did not respond to requests for interviews.

The Preservation Alliance and Snowden's attorneys say that lawyers carefully reviewed the deals involving Bowman Properties, and that the transactions saved open space and historic buildings. They say the sums paid to Bowman Properties for giving up development rights were fair amounts determined by appraisals.

Snowden disclosed his role in the transactions and recused himself when votes were taken, they noted.

Marcus S. Owens, a former head of the IRS division overseeing nonprofit organizations, said the transactions, in his opinion, raised the question of whether the Preservation Alliance had provided a benefit to Snowden.

"He's acquiring title to property," Owens said. "That's using the charity's money for his private purpose."

Anthony P. Forte, current chairman of the Preservation Alliance, said the deals involving Snowden provided a benefit for the public.

In the transactions, the Alliance bought preservation easements, which are legally binding restrictions written into deeds to block or limit development.

"The easement transactions brought to us by Mr. Snowden were good for the Alliance, good for preservation, and good for the Philadelphia region," Forte said.

*

As detailed in The Inquirer yesterday, Snowden employed an unusual method of historic preservation.

Family members, especially Snowden's grandmother, 93-year-old Virginia C. Wilmsen, donated hundreds of thousands of dollars to the Chestnut Hill Historical Society, the Philadelphia Historic Preservation Corp., and the Preservation Alliance.

These donations were tax-deductible.

The organizations then used the money to buy preservation easements on real estate in deals involving the Snowden family, particularly Bowman Properties, a partnership that now comprises Snowden, his two sisters, and his mother.

In 1996, Snowden became founding chairman of the Preservation Alliance, the third nonprofit with which he arranged these transactions.

At the Preservation Alliance, he put together a series of transactions with fellow members of the Social Register.

These deals were his most complex yet. The Alliance spent $1.7 million in transactions involving Bowman Properties.

The payments brought to $2.8 million the amount paid over nine years by the three nonprofit groups into deals in which Snowden had a role.

"Richard has helped more women in peril in Chestnut Hill," said Fisher, who sold her historic house to Bowman Properties in 1998. "People with old money and old houses and single women, the older, well-educated women with the right credentials, the old matriarchs."

In structuring these new transactions, Bowman Properties obtained what the real-estate documents called an equitable interest in the estates up for sale.

The partnership's equitable interest amounted to an agreement of sale, in which Snowden promised that his partnership would purchase a property or he would line up another buyer.

That stake put him at the settlement table as a third party, along with the original seller and the final buyer. Though Bowman Properties held the ownership role for only a short time, it could then sell preservation easements to the Preservation Alliance.

The Alliance used the family donations to fund the purchases, just as the other nonprofit groups had financed previous easement buys.

Current and former Preservation Alliance officials, including two former presidents and the organization's lawyer, said the money paid to Bowman Properties came from donations from Snowden's family, especially Snowden's grandmother.

"We knew where the funds were coming from and where they were going," Robert J. Shusterman, the Alliance's attorney, said in an interview.

"We knew that Mrs. Wilmsen was contributing, and we knew the easements were being purchased from Bowman Properties," he said.

"There aren't that many developers who are willing to go around and be on the hook - who also have relatives with lots of money to contribute," Shusterman said.

The Preservation Alliance has a portfolio of more than 160 easements. While Snowden was chairman, his deals were the only ones for which the Alliance paid for an easement; all the rest were donated, qualifying the donors for federal tax deductions.

After completing five deals, Snowden stepped down as chairman of the Preservation Alliance in 1999 amid board concern about whether Snowden's roles posed a conflict of interest.

Lynnewood

In 1997, Ethel "Babby" Nalle Wetherill was ready to sell her estate, Lynnewood, at 185 Bethlehem Pike in Chestnut Hill.

After rearing a large family in the French-style country house on 3 wooded acres, the space seemed too big as her children had grown up and moved on with their lives.

As Wetherill considered moving, a developer expressed interest in buying Lynnewood and building on the estate. A couple, Allison F. Fleitas 2d and his wife, Jeannine T. Cattie, had been eyeing the property for about a year, but Wetherill couldn't get them to commit to buying it, she said.

The developer was offering more money, but Wetherill wanted the property preserved. She sought the advice of Snowden, a longtime family friend and distant relative.

"He said he could help me," said Wetherill, 77, who, like Snowden and Fisher, is a member of the Social Register.

According to Wetherill, Snowden told her, "I can set it up for you with the Preservation Alliance."

And he did. Snowden structured the sale in such a way that Wetherill got $580,000 for her property from Fleitas and Cattie, she and the buyers got tax deductions worth $260,000 - and Bowman Properties received $327,271 in cash.

It unfolded after Bowman Properties struck a deal with Wetherill to buy the property, giving the partnership an equitable interest in the place. Public documents do not show whether Bowman Properties made a payment to obtain that interest.

Two months later, Bowman Properties sold the Preservation Alliance a historic-facade easement for $327,271. Money to pay for the easement was donated to the Alliance by Snowden's family, said William Ward, the Alliance's former controller.

Snowden made sure the sale was attractive to the buyer and seller as well. He arranged for them to donate additional easements to the Preservation Alliance, allowing them to take tax breaks.

Those easements, to protect the grounds surrounding the estate house, produced a tax deduction of $140,000 for the couple and $120,000 for Wetherill, according to Wetherill and the title company that handled the transaction.

"He had the formula for doing it," Wetherill said of Snowden. "I'm happy with it."

Ann F. Arentzen, president of Chestnut Hill Land Transfer, the title company, said the deal was fully disclosed to all participants.

Wetherill "was grateful," Arentzen said. "Plus, she had this tremendous write-off."

Federal laws governing nonprofit groups say the organizations should exist only to achieve their tax-exempt purpose. The groups must not provide any private enrichment for their leaders.

Frederick J. Gerhart, tax counsel for Snowden's family, said the transaction involving Bowman Properties had not provided any gain for the partnership.

Gerhart said Snowden had improved "liquidity," his available cash, but otherwise had given up value in properties in return for a fair payment.

"If you're paying fair value [for an easement], there's no profit," Gerhart said.

Owens, the former IRS official, had a different view.

That Snowden had received payment only for lost value, he said, "ignores the sale of the stock and the capital gains, the involvement of family members."

Owens referred to the donations from Snowden's family, which often were in stock. In the Lynnewood transaction and others, the nonprofits cashed out the securities at full value and used the money to buy easements from Bowman Properties.

This avoided the capital-gains and gift taxes that would have been due if the family members had sold the stocks themselves and given the money directly to the partners of Bowman Properties.

Buttonwood Farm

In the spring of 1998, Snowden created a deal that set up friends with a rambling 18th-century farmhouse for their growing family, a barn they would sell at a profit, and a hefty tax break.

It was a deal that shows how a property owner can get a tax break for an easement and still have lots of freedom to transform the property. It also raises the question of how much an easement truly diminishes the worth of a property.

Snowden's friends, Timothy and Margaret Sager, agreed to forever bar the subdivision of their property, a 3-acre estate in Erdenheim called Buttonwood Farm.

They made that agreement by donating an open-space easement to the Preservation Alliance. In exchange, they got a tax break - big enough, Timothy Sager, 44, said, to allow them to afford the house.

"My wife and I aren't wildly wealthy. . . . We could afford it because we were able to take a tax deduction," he said while giving a tour of the property.

The Sagers, who have been active in preservation causes in Chestnut Hill, say they viewed their purchase as an opportunity to protect a valuable historic asset.

As permitted by federal preservation rules, the easement stipulates that the public has no general right to enter the estate. The Sagers said that if more people understood this, they might be willing to donate easements.

"Perhaps our experience will even help debunk the apparently widely held misconception that by giving an easement to a preservation or historic group one somehow converts one's property into a public picnic area!" the couple wrote to The Inquirer, following up on an interview.

The easement does not prevent the Sagers or future owners from building a mix of modern recreational amenities on the property.

The easement deed expressly permits a swimming pool, a tennis court (no lights allowed), and a gazebo, as well as a three-car garage and new driveway.

In addition, the easement allowed the historic barn, which sits on a 1-acre section of Buttonwood Farm, to be sold for conversion to a single-family residence.

Last fall, that's exactly what the Sagers did, selling it for $245,000, recouping 40 percent of what they paid for the entire property.

The Buttonwood Farm transaction began on May 9, 1998, when Snowden, on behalf of Bowman Properties, came up with the winning number at an auction, outbidding two housing developers.

He made a down payment and had 60 days to come up with the rest of the money. During that time, he set up the easements and persuaded the Sagers to buy the property for $607,464, about the amount Snowden had committed to pay at the auction.

As part of the sale, the Preservation Alliance paid $305,000 into the deal for an easement on the facade of the main house and barn, public real-estate records show.

That money came from Snowden's family.

Was the money from the Preservation Alliance ultimately paid to Bowman Properties, as happened in the Lynnewood deal?

"That's the question you have to ask Richard," Margaret Sager, 41, said. "It has nothing to do with our side of the transaction."

Neither Snowden nor his lawyers would answer the question.

Timothy Sager, in a separate interview, said of Snowden: "He had three goals - help us, make a profit, preserve the property."

"We benefited and he benefited," Sager said. "He took some money out of the deal."

Norwood Avenue

Later that year, in October, Bowman Properties, in a deal that included a big easement purchase by the Preservation Alliance, bought Snowden's next-door neighbor's stately converted barn on Chestnut Hill's quiet Norwood Avenue.

The Alliance paid $562,500 to buy a preservation easement. Because of that payment, Bowman Properties had to come up with only $197,500 for the 2 1/2-acre estate.

Bowman Properties kept this property for 2 1/2 years, making a number of repairs during that time. The city work permit for repairing the roof estimated that job's cost at $49,400.

Last April, Bowman Properties sold the property for $925,000.

Snowden lives at 8849 Norwood Ave. Bowman Properties bought the converted barn at 8863 Norwood Ave., next door, from his neighbor, Mary Fisher, now 47. Fisher said she had thought about subdividing the property - zoning would have permitted two new homes - but instead turned to Snowden.

The money the Preservation Alliance paid into the deal was intended to compensate Fisher for lost property value due to the easement, which forbids subdivision of the property or changes to the home's exterior.

The price of the easement was set by the Preservation Alliance, based on an appraisal.

According to Owens, the former IRS official, the subsequent resale price suggested that the easement had been overpriced.

"The valuation is clearly suspect," Owens said.

"The easement price is being used to reduce the dollar outlay," he said, "as much as could be done with a straight face."

Forte, the Preservation Alliance chairman, said the easement valuation was appropriate. He said the big resale price reflected a hot Chestnut Hill real-estate market.

Moreover, Forte said, on occasion, a new buyer will pay heavily for a property under an easement because the purchaser "does not think the property is less valuable due to the easement."

Eventually, however, Forte said, the easement may indeed cut into the sale price of the property.

Crefeld Street

On the same day that Bowman Properties bought Fisher's house, Fisher purchased 9120 Crefeld St., home of Ernesta Ballard, a well-known civic activist.

The Preservation Alliance entered the picture on this transaction as well. It paid Ballard $115,000 to forever protect the house's garden. The garden is behind the house, and the public cannot see it.

Forte said the garden had "a long and interesting history," and that the easement ensured that it would "always be maintained according to appropriate standards."

The money for the easement came as a surprise to Ballard, who had been trying to sell her house for months.

" 'Who's going to pay for that?' " Ballard, now 81, recalled asking Snowden. "He said, 'A member of my family.' "

This easement payment ultimately benefited Snowden, settlement sheets show.

The $115,000 easement payment is listed on the settlement sheets for the Norwood Avenue sale as "credit towards Crefeld."

In effect, the $115,000 payment to Ballard lowered the amount Fisher had to pay for the Crefeld house. Therefore, Fisher was able to charge Bowman Properties less for her Norwood Avenue home.

Boxley

Before he resigned from the Preservation Alliance in 1999, Snowden completed one last Chestnut Hill transaction.

This time, the estate was an elegant Georgian Revival mansion called Boxley. It sat at the end of a long driveway winding through a 7-acre property near St. Martins and Gravers Lanes.

The Alliance paid $355,000 into the April 1999 deal to purchase an open-space easement - money that went, once again, to Bowman Properties, which had obtained an equitable interest in the estate.

The Alliance's payment headed off a fairly modest threat of development. Zoning would permit only one house to be built on the property.

The appraisal shows that the Boxley deal included a tax break for the buyers, in return for a pledge to protect the facade of their home. That facade is hardly visible from the public road, though it can be viewed from Fairmount Park hiking trails.

The tax deduction for the buyers, Alan and Catherine Grant, was valued at $163,500.

The figure was based, in part, on an Alliance requirement that the Grants spend $70,000 to restore the rear facade.

An expert asked by the Alliance to estimate repairs to the facade said he became incensed that the Alliance would involve itself with the estate.

Myles Pettengill, who has been honored by the Alliance for his historic renovation work, said he was disturbed when he visited Boxley to inspect the main house and saw that it was nearly 200 yards from St. Martins Lane.

"I saw it as private property that the public would be able to see only if they were hikers in the Wissahickon," Pettengill said. "The whole estate was remote."

The Preservation Alliance's Forte said that Boxley was listed as a "significant" building in the Chestnut Hill Historic District and that the IRS did not require complete public visibility.

Boxley was built in 1903 as the grand home of Frederick W. Taylor, the father of scientific management. It was designed by the prominent architect Fielding Mantle Jr.

Pettengill, a board member of the Germantown Historical Society, said his visit to the estate left him confounded as to why the Alliance had involved itself with Boxley "when so many other properties that I know of would have been better candidates."

"I was just surprised that this project was being a candidate for such a thing," he said. "I didn't understand what the value to the public would be."

Craig R. McCoy's e-mail address is cmccoy@phillynews.com. He can be reached at 215-854-4821. Linda K. Harris' e-mail address is lharris@phillynews.com. She can be reached at 215-854-4417.

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