A $100 million offer for shuttered Phila. schools?

A Washington real estate investment firm recently made an extraordinary offer to the School District of Philadelphia: $100 million to buy more than 30 shuttered school buildings.

City Council President Darrell L. Clarke told The Inquirer he personally delivered the proposal, but believed the district, which is facing a $304 million deficit, didn't take it seriously enough.

Clarke, frustrated with years of raising taxes to bail out the schools, said the district needed to explore these types of creative ways of balancing its books.

School officials said Friday they did weigh the $100 million offer, but weren't comfortable with selling to one buyer and cutting out public input over the fate of the buildings, many of which are landmarks in their neighborhoods.

Then, in a meeting this week with Clarke, Mayor Nutter learned about the offer.

The mayor said Clarke didn't tell him the name of the would-be buyer, so Nutter's staff asked around - and discovered the bid came from Municipal Acquisitions in the nation's capital.

Nutter said he looked up the company online and called its chief executive, Jon Kling. They're now trying to set up a meeting in person, sometime next week.

The mayor said he was willing to "look under the hood and kick the tires," though he thought a $100 million offer, sight unseen, was "highly unusual."

"It sounds a little too good to be true," Nutter said Friday in an interview. "But stranger things have happened."

There's no doubt the schools need the money, but the offer lands in the midst of a long-running political dispute over the district's deficit - and now becomes the latest wrinkle in that debate.

Nutter and Clarke were already at odds over where to find the $50 million the city promised the district in September. Nutter wants to borrow the money; Clarke wants to give the district cash for closed buildings that could be sold to pay back the city.

Council unanimously passed a bill last week to transfer the $50 million in exchange for the buildings. But even if Nutter signs the bill, he's not obligated to give the money to the district. Meanwhile, his borrowing plan is going nowhere in Council - and the school district needs the money by December or January.

Clarke has said for months that there was sufficient buyer interest in the buildings to ensure the city would get its money back quickly.

He said Council members had received letters from nine parties asking about seven shuttered schools. Topping the list are University City High, a huge site near Drexel University's campus, and William Penn High on North Broad Street near Temple.

Nutter said he knew the universities were interested in those buildings, but he and his aides have complained that Clarke wouldn't share the letters and discuss the potential buyers.

"Having that kind of information would really speed up this process," the mayor said. "I am fully in favor of selling these buildings as expeditiously as possible at the highest price possible."

Clarke called Nutter's complaints disingenuous.

"He knows the two most lucrative deals are Temple and Drexel. Let's stop playing games," Clarke said. "Say you're prepared to do the deal, and let's move on."

Nutter, for his part, questioned whether such deals would conflict with the idea of selling the whole portfolio to Municipal Acquisitions. He also wondered how the company arrived at the $100 million price without appraising the properties.

The company's website says it specializes in real estate occupied by public-sector tenants. It owns three properties at Rowan University in South Jersey.

Kling, the CEO, was traveling Friday evening back to Washington from Miami and could not be reached for comment.

Clarke said he has pushed for the district to look at selling the buildings quickly - along with its headquarters at 440 N. Broad. The district is heavily in debt on the underutilized headquarters, he said, and should explore selling it and leasing back the necessary space.

He said that the district had not been responsive to these ideas and that he believed officials there were not equipped to handle such real estate transactions.

Clark said it was after learning the district had "walked away" from the $100 million bid that he sponsored a resolution this month calling for a hearing on the district's financial stewardship.

He said he wanted to find out what was being done "to stabilize the finances of the school district, other than asking the legislature both at the state and local levels to raise taxes."

District spokesman Fernando Gallard disputed the notion that officials there had walked away from the $100 million offer because they weren't equipped to handle it.

"We did a tremendous amount of due diligence," he said Friday. "We absolutely have the capacity."

The deal as presented didn't work, Gallard said, because it bypassed the public. A School Reform Commission policy for selling closed buildings required citizen input and was designed in part to ensure that no backdoor deals happen.

"We need a vetting process that is public, transparent, and invites other individuals to the table to bid on the properties," Gallard said. "That's the best way to do it."

As for selling the district's underused headquarters: Gallard said it was not clear whether the SRC could do so. "The property was built with the use of special financing bonds," he said. "It requires us to do much more due diligence to see whether it's possible at all to sell it. We're still looking at that."

Nutter - who lately has found little common ground with Clarke on school financing - said that he did think a sale-leaseback of 440 N. Broad was worth exploring and that the $100 million bid was an "idea that clearly needs to be fleshed out."

"I'm at least interested, and I think we have to avail ourselves of future discussions," he said. "I'm trying to do everything I can from a couple different angles to engage in a process that is forthright, that is real."

Source:  Philly.com