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A matter of speculation: Investors eye land as other wonder if East Liberty will finally rebound

A Story of Renewal: Fifth of five parts

Friday, May 26, 2000

By Dan Fitzpatrick, Post-Gazette Staff Writer

Real estate investor Ward Olander likes to go window shopping in East Liberty.

  This is East Liberty as it looks today. Even as real estate speculators rediscover the flat, well-positioned East End neighborhood, many properties still sit vacant and neglected. Is East Liberty ready for a recovery? (Annie O’Neill, Post-Gazette)

He is not after clothes, though. Olander, 71, prefers buildings. "You can still get bargains," he said. "It is still a good place for speculators."

Walking through the neighborhood dressed in boots, jeans, denim jacket and black beret, Olander describes how he became one of East Liberty's largest property owners -- on less than $2 million. Olander points first to the old Mansmann's Department Store, a Penn Avenue property he purchased for $50,000. Finding the building empty in 1982, he persuaded the seller to knock $450,000 off the asking price.

A few years later, Olander paid $30,000 for a building at the busy corner of Penn and Whitfield Street. He also put down $1.1 million for a half-empty, eight-story medical complex. The bank that owned it lent him $1 million to buy it.

"They just wanted to get rid of it," Olander said.

East Liberty's decline of the 1960s and 1970s created a big buying opportunity for Olander, who accumulated five neighborhood buildings in two decades. Now, he is negotiating for a sixth building, on Penn Circle South, and waiting for the neighborhood to recover from a history of misguided planning, neglect and bad PR.

"We wanted to make a statement that East Liberty is not dead," Olander said. "It is down but not out. We wanted to help bring it back."

More and more investors are following Olander into the wide streets and empty lots of East Liberty, drawn by the new Home Depot store on Highland Avenue, Kmart's intent to buy property along Penn Circle West, and a developer's plan to anchor a block-long retail development on Centre Avenue with organic grocer Whole Foods Market.

    A Story of Renewal

Previous installments:

Part 4: East Liberty's dangerous reputation is major obstacle to development

Part 3: The land that retail forgot

Part 2: East Liberty Then - Initial makeover had dismal results

Part 1: The story of urban renewal

Online mao: Who owns East Liberty?

Slowly, prices for neighborhood buildings are rising, "for sale" signs are more plentiful and sellers are holding out for more money, confident of the neighborhood's recovery.

Still, something is wrong.

In the years since Olander began his buying spree, the condition of East Liberty's real estate has changed little.

Many properties remain empty, abandoned or in disrepair. Some owners, relying on government funding and social service organizations to fill vacancies, are keeping rents artificially high and deterring small, fledgling retailers from taking space in the neighborhood. Some don't have money to fix their properties. Others are leaving their buildings to rot.

Together, it amounts to a problem in image and reality, said Rob Stephany, director of real estate development for East Liberty Development Inc., a nonprofit that owns four properties and is negotiating for a fifth on Penn Circle South. "A vacant building casts a shadow of blight on a neighborhood."

Land of speculators

It wasn't always this way.

A century ago, East Liberty was one of the hottest and most valuable real estate markets in Pittsburgh. Millionaires Andrew Carnegie, Henry Clay Frick, George Westinghouse and Henry Heinz all lived on the fringes of the neighborhood, driving up the demand for new homes, storefronts and office space. Near the turn of the century, 23 firms had real estate offices in East Liberty. Speculation along Penn and Highland avenues got so feverish that one corner sold three times in three months for $75,000, $100,000 and $115,000.

Riding the crest of that boom was Thomas Mellon.

An Irish immigrant, Mellon used East Liberty's real estate as the foundation for his family fortune. After marrying into a family that owned more than 3,000 acres in the East End, Mellon split his land into parcels, sold the lots to home buyers, provided mortgages and foreclosed on those who could not pay their debts.

Through his wife, Sarah Jane Negley, Mellon also had a connection to one of East Liberty's first speculators -- Jacob Negley.

A civil engineer, Negley developed East Liberty's first buildings, designed its first roads and gave the neighborhood its name. When the Pittsburgh-Greensburg Turnpike came through East Liberty in the early 1800s, turning the area into the first stop for horses east of Pittsburgh, the limestone-and-gravel road passed through Negley's property.

Mellon learned from Negley.

Half a century after Negley persuaded officials to run a major road through his property, Mellon lobbied successfully for two new horse-car connections to Downtown. The paths through Lawrenceville and Oakland became electric trolley lines in the 1890s, establishing East Liberty as the transportation nexus of the East End.

One of his grandsons, Gulf Oil chief William Larimer Mellon, built the first company-owned drive-in gas station at Baum Boulevard and St. Clair Street in 1913. One of his sons, Richard Beatty Mellon, paid for the construction of the East Liberty Presbyterian Church, the neighborhood's tallest building.

R.B. Mellon died in 1933, and the church was dedicated in 1935, its Gothic spire visible for miles around.

Buying low

Today, Mellon's church is still the tallest building in East Liberty. But, "It sits in the middle of a sea of blight," said Maelene Myers, executive director of East Liberty Development.

Trash and debris are everywhere.

On Penn Circle, an old gas station lies amid weeds, graffiti and brick piles. The only word left on the building's marquee is "Service." On Broad Street, abandoned buildings lie next to railroad tracks.

"This is a hopeless block," said Stephen Chatman, a business development coordinator who works for East Liberty Development.

Pointing to trash collecting at the door of an empty Bell-Stern Furniture building on Broad Street, Chatman said, "You see what I mean? Is this disgusting? Does this make you think you want to do any development back here?"

Elsewhere, the empty buildings are hard to miss.

One is the Hotel Governor on Whitfield Street. Many of its windows are without glass. The owner is Edward Lesoon, one of the biggest property owners in East Liberty.

Olander said, "I think he probably wishes he never bought it."

But Lesoon believes he did the neighborhood a favor. Before he bought the six-story hotel in the mid-1980s, it was used by prostitutes. "We shut it down," he said.

Despite opportunities to lease it, Lesoon let it sit empty. He repaired the roof and drainage system, but he did not want to spend $1 million on a larger renovation. "Our philosophy is to leave it empty until we find qualified tenants," he said.

A "for sale" sign is now out front.

Lesoon, the 64-year-old owner of a carpet and drapery dealership on Baum Boulevard, owns several buildings on Penn, Highland and Broad. Like Olander, he began buying East Liberty real estate in the early 1980s, when he could get it cheap. Between 1983 and 1986, according to property records, he picked up six buildings for $328,990. To some, Lesoon is what East Liberty needs. But others said Lasoon hurts the neighborhood by keeping key spaces vacant and renting to an array of social service agencies. At 200 N. Highland, a building Lesoon purchased for $35,490, the first-floor storefront space is empty. But the second floor is home to the Allegheny Reproductive Health Center, an abortion clinic that attracts anti-abortion protesters.

"Every Tuesday and Saturday, they come and they boycott here," Chatman said. "It's driving everybody crazy."

Why are social service agencies a problem? Some use county, state or federal funds to subsidize their leases, said Rick Swartz, an East End community development activist. That inflates rents and dissuades small retailers from taking a chance on East Liberty. Some spaces in the neighborhood, Swartz said, rent for as much as $18 per square foot -- the price a retailer would pay on Liberty Avenue in Bloomfield.

"It has created a landlord's market," he said.

Olander rents to social service agencies, too. But he defends his choices, saying he keeps rents below $10 per square foot. "We will take anything we can get," he said. "It is really difficult to get a high-end user in here."

In most of his buildings, Olander has vacancy rates of 25 percent to 30 percent. Because he keeps rents low, it is difficult to turn a profit.

"I would definitely not say it is a landlord's market," said Lars Olander, 35, who helps his father manage the East Liberty properties.

Empty spaces, places

The biggest vacancy sign in East Liberty belongs to the Highland Building.

A 13-story office tower built by Henry Clay Frick in 1910, the Highland once had a sign on its roof that read, "Shop In East Liberty -- It Pays." Now, the building is empty from top to bottom. Blinds hang crookedly from the same windows that once advertised doctors, lawyers and dentists.

The city seized Highland about five years ago from Barney Guttman, a Downtown investor who spent his childhood in East Liberty. Wanting to help the neighborhood recover from its decline, Guttman proposed a $10 million conversion of the Highland to low-income senior housing. More than 50 small business owners in East Liberty opposed the plan. A lawyer said the proposal "would put the final nail in the coffin of the East Liberty business district."

After five years of delays, Guttman's lender walked away from the project, and the city took back the building for nonpayment of taxes.

"It has been vacant ever since," Guttman said.

Two years ago, a nonprofit arm of the Urban Redevelopment Authority said it wanted to remake Highland into an incubator for technology companies. The Pittsburgh Economic and Industrial Development Corp. now is raising money from foundations, the state, the URA and private sources. Director David Thomas declined to say how much money he needs. He predicts renovations will start this year, and the building will reopen in 2002.

"Given the complexity of this project, it is natural for it to take this amount of time," Thomas said. "We are as anxious to see this happen as the community is."

The Highland Building is not the only East Liberty property high on the community's list of anxieties.

Another is the old YMCA, which faces the East Liberty Presbyterian Church on South Whitfield Street. Since the 1980s, Carnegie Mellon University professor Dwight Baumann has been trying to remake the YMCA into a home for the Center for Entrepreneurial Development, an agency that helps people start businesses and study economic development.

Instead, "It's an eyesore," said East Liberty Development planner Whitney Finnstrom.

Baumann would not say how many people now work in the building or how much of its space is occupied. But Baumann said he wanted to help East Liberty and that he was preparing a new proposal.

But, "We can't talk about it presently," he said.

More frustrating for East Liberty development officials is the six-story Liberty Building, on Penn Avenue. One of the few properties remaining from the late 1800s, Liberty is owned by the city and is 100 percent empty. Chicken wire covers some of the windows, which overlook Penn. The roof leaks water and pigeon droppings.

Artists and Cities Inc., a nonprofit group that develops loft apartments, offered to buy the building a few years ago, but the city turned it down. Last October, East Liberty Development asked the URA for a $117,000 loan to improve the Liberty Building's condition.

It never got an answer, Stephany said.

While they wait on a Liberty Building renovation, community officials also are waiting to see what happens to three low-income high-rises that tower over East Liberty's commercial district.

Some people want to tear them down. "They make East Liberty look like slum city," Olander said.

The Community Builders Inc., a Boston nonprofit that is redeveloping East Liberty's troubled Pennley Park Apartments into mixed-income housing, is negotiating to buy the towers from Federal American Properties, a Fort Lauderdale, Fla.-based company that purchased them in the early 1970s.

What would happen to the buildings?

The Community Builders could not be reached for comment, but in a East Liberty Development Inc. plan released last year, the high rises are gone and replaced by new stores and low-rise housing.

Any new plan would have to make room for the current tenants. More than 1,000 people live in the towers' 640 units, most of which are subsidized by the U.S. Department of Housing and Urban Development. For years, tenants have complained about the condition of the properties, citing leaky roofs, leaky windows, inadequate maintenance and lax security.

Some of the units rent for as high as $700 a month.

Under a new HUD program, Federal American Properties could be forced to lower rents and improve the buildings. As part of a nationwide analysis of all federally subsidized property, HUD is searching for cases of mismanagement, maintenance problems or inflated rents.

Federal American Properties stands by its record in East Liberty.

David Oyer, president of the company, said he has made $3 million in upgrades to the properties in the last seven years. Two of the towers are 99 percent occupied. The local HUD office, he said, does an annual review of the buildings. "In the nine years I have been associated with those properties, they have all rated satisfactory or better," he said.

As to the possibility of mismanagement, Oyer said, "It is not true. Does that mean that every day everything is functioning properly? No."

Different this time?

Even as East Liberty rebounds, there are doubts about its recovery.

"There has been a lot of favorable publicity about East Liberty, and I don't want to shoot down any balloons," said Swartz."But our view is that there is a long way to go yet in the core of the business district. There is still much to be done."

As in the past, many improvements are now only a step away.

The Regent Theater, which needs $1.3 million to reopen on Penn Avenue, is $150,000 away from its fundraising goal. "We are in the home stretch," said Stephanie Flom, who is raising the money.

Kmart is close to a deal for a new store at the heart of East Liberty's business district.

East Liberty Development is negotiating for the empty Bell-Atlantic building on Penn Circle South, with plans for a high-technology incubator and a new restaurant.

Whole Foods Market, the organic grocer, is expected to sign a lease shortly for a warehouse on Centre Avenue. The city also is committed to making Penn Circle South a two-way street, allowing drivers to cross from Shadyside and turn left to the new Whole Foods.

Developers Steve Mosites and Molly Blasier are negotiating with other property owners along Centre, with plans to create 70,000 square feet of new retail stretching from Whole Foods to the Highland Avenue bridge.

The resurrection of East Liberty has been forecast many times in the past.

In 1976, the Post-Gazette ran a story titled "East Liberty Is Back ... All the Way." In 1983, The Pittsburgh Press ran a story with the headline, "Never-Say-Die East Liberty Fights Back." In 1996, the Post-Gazette ran a story titled "Hope in East Liberty."

And hope is increasing again, this time, perhaps, with more confidence added into the mix.

"There is a lot of land over there and a lot of potential," Mosites said. "I think this time it will be done right."

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