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How did nonprofit CASA's $755,000 property sale become a quick $1.3 million flip?

 
James Landers’ firm will turn this former CASA shelter in St. Petersburg’s Old Northeast neighborhood into townhomes.
James Landers’ firm will turn this former CASA shelter in St. Petersburg’s Old Northeast neighborhood into townhomes.
Published Nov. 6, 2015

ST. PETERSBURG — In September, Diane Cardin-Kamleiter got tired of seeing knee-high weeds at the empty house across the street — a shelter, until recently, for victims of domestic violence.

So she emailed Joseph Emerson, who had bought the house from the nonprofit Community Action to Stop Abuse — better known as CASA — and had won city approval to build eight luxury townhomes in its place.

"Please mow the grass!'' Cardin-Kamleiter implored. She was surprised by Emerson's response:

"Please be advised that I am no longer involved in this property.''

That's not what Emerson said a few weeks later as the real estate community buzzed over the discovery of a surprising transaction: One day after buying the CASA property in August for $755,000, Emerson had sold it for $1.324 million. CASA officials said they were "blindsided'' by the news.

In an interview with the Tampa Bay Times on Oct. 21, Emerson made it sound as if he was still involved in the townhome project in St. Petersburg's highly sought-after Old Northeast.

Emerson said he had sold the CASA property to a "builder partner'' in an "internal transaction.'' He described the $569,000 one-day price jump as "just an internal valuation transaction'' reflecting what he said were the high costs of readying the site for redevelopment including "changing the zoning."

Records, though, confirm what Emerson told Cardin-Kamleiter in September. He no longer has anything to do with the project and isn't a partner in it. He had sold the CASA shelter on a desirable double lot to Michael Hambleton's Rembrandt Development LLC.

Hambleton, a certified general contractor, said Thursday that he bought the property after friend and developer James Landers told him Emerson was interested in selling.

"I like the way it was prepackaged, you don't get that opportunity very often,'' said Hambleton, who has hired Landers' firm to build the townhouses.

Despite their surprise about the flip, CASA officials say they feel they received a fair price from Emerson based on real estate values at the time they contracted with him a year ago. There is no indication that anything improper occurred.

"There is nothing inherently criminal or unethical about a flip of property,'' said Tampa attorney Robert Stern, an expert in real estate law. "If you are a wise and astute buyer you certainly have the right to resell for a higher number.''

But there's no question that the quick flip raised eyebrows, partly because CASA never saw it coming and partly because Emerson benefited from how property prices "skyrocketed,'' as one Realtor put it, after CASA was locked into a contract.

Here is what transpired:

Founded in 1977, St. Petersburg-based CASA annually helps hundreds of women, children and men who are victims of domestic violence. The nonprofit gets high marks from charity watchdog groups and operates a wide range of programs with relatively lean finances — total revenues in its 2013 fiscal year were just $3.3 million.

Two years ago, CASA announced plans for a new $12 million, 100-bed shelter. It would replace the big two-story home in the Old Northeast that had served as a shelter for years.

The nonprofit was somewhat hamstrung in marketing the property for sale. It couldn't publicly disclose the location while clients continued to stay there during construction of the new shelter, which was not set to open until July 2015.

So instead of putting the house on the widely viewed Multiple Listing Service, CASA's board asked several local Realtors to try to find a buyer. Among them was agent David Wing.

"It was no secret that the site was best suited for a developer; that building was over 100 years old,'' Wing said. "I got on the phone with every developer in town.''

Wing submitted an offer from Emerson and George Quay, executives of Weller Residential, which owns or manages several Florida apartment complexes. CASA's board considered their offer and a few others but decided to give a commercial broker with Smith & Associates 60 days to see if he could come up with something better.

He couldn't.

The board decided to accept the Weller offer and signed a contract in December. CASA's executive director at the time, Linda Osmundson, also authorized Weller and its affiliates to act as the nonprofit's agent in dealing with city officials although there were no references to CASA in any public documents or plans filed with the city.

Contrary to what Emerson told the Times, the townhome project did not require a zoning change. The main thing he needed was city approval of the redevelopment plan and setback variances.

On May 6, Emerson appeared before the city's Development Review Commission. Then-Commissioner David Punzak, an attorney who represented CASA in the financing of its new shelter, recused himself and left the room.

Emerson told the remaining commissioners that he had held several meetings with neighbors to show them the plans. "Those are the people we walk our dogs with, that our kids play with,'' he said, emphasizing that he, too, lives in the Old Northeast.

A few neighbors sent emails, mostly in favor of the project. The only one who attended the meeting was Cardin-Kamleiter, who lives across the street from the shelter on 11th Avenue NE. She complained that the eight townhomes would increase density and pollution in the area and result in the removal of what she called a "majestic'' oak tree.

Nonetheless, commissioners unanimously approved Emerson's redevelopment application with one praising it as "an enormous improvement over what's there now.''

It is not known if Emerson already was in negotiations to sell the CASA property at the time he went before the panel. (He did not respond to requests for comment.) Landers, the developer who also lives in the Old Northeast, said he approached Emerson several months ago about buying the shelter in conjunction with some investors.

"These guys (Emerson and his partner) focus more on apartment conversions whereas I do in-fill urban development,'' said Landers, whose resume includes many residential and commercial projects in the Tampa Bay area. "It appeared they were debating whether to develop the property themselves or take offers to purchase the property. Over the course of a few months we negotiated a purchase price.''

Hambleton, who lives in the Old Northeast and has previously worked with Landers, said he signed on to the townhome project "late in the game."

"It's a great location,'' Hambleton said, and it "looked like it will sell and improve conditions'' in the neighborhood.

Emerson's deal with CASA closed Aug. 17 for $755,000. He sold the property to Hambleton's Rembrandt Development the next day for $1.324 million.

In the past year, Hambleton has bought several properties in St. Petersburg and South Pasadena and put up new homes and townhomes. In June, his Long Drive Properties LLC paid nearly $2 million for a large Old Northeast waterfront lot owned by C1 Bank president Trevor Burgess and his husband, Smith & Associates Realtor Gary Hess.

Hambleton said the townhomes — now called the Sanderlings after a small shorebird — could be "done inside a year.'' The two-story homes with craftsman-style details will be priced in the high $500,000s and formally "launched'' Nov. 16 at the Smith & Associates' office on Beach Drive. Hess and another agent will handle sales.

Even at $1.324 million — a 75 percent increase over what Emerson paid — Hambleton and Landers think the CASA property was a good deal given that Emerson already had the architectural and engineering plans drawn up and the project approved by the city.

"He went through quite a bit of effort to get that done,'' Landers said. "We looked at it as we got a great piece of property fully entitled that we can execute quickly for a world-class project in the heart of the Old Northeast.''

But Stern, the real estate lawyer, questions whether Emerson spent anywhere near the "several hundred thousands of dollars'' he told the Times he had.

"On a project that size I couldn't see it costing more than $100,000 in soft costs,'' said Stern, who has represented other townhome developers.

Hambleton estimated Emerson might have spent $200,000.

Mickey Jacob, a Tampa architect who is not connected to the project, said there are "many variables'' but that professional services typically run between 8 and 10 percent of total construction costs. According to permit applications, the eight townhomes are expected to cost a total of $1.4 million to build. If the professional costs were 10 percent of that, or $140,000, Emerson could have made a profit of as much as $429,000 on the flip.

Wing, the Realtor who submitted Emerson's $755,000 offer to CASA's board in summer 2014, thinks it was a fair price at the time because it was still a "raw piece of land (and) not a shovel-ready project.'' But he also thinks time worked in Emerson's favor.

He "benefited twofold,'' Wing said. "One, because CASA wanted (the shelter) under contract and they needed it well before the new shelter was finished. (He) also benefited from 12 months of price appreciation in the Old Northeast. Prices skyrocketed.''

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.