Germantown Settlement's troubles persist

When the 90-year-old Germantown YWCA building went up for sale in 2006, there was one buyer willing to pay more than anyone else.

That was Germantown Settlement, a sprawling nonprofit that made the purchase with nearly every dime financed through a $1.3 million loan from the city Redevelopment Authority (RDA).

But little has happened since - if you don't count the city's boarding-up of the YWCA two weeks ago because of reports of vagrants inside - and next month, the RDA will decide whether to pry the building away from Germantown Settlement for good.

The possible loss of the YWCA building, 5820 Germantown Ave., is just one example of the deep troubles facing the high-profile nonprofit, which until recently was one of the city's longest-operating social-services providers.

In June, a charter school run by Germantown Settlement, which oversees at least 19 smaller organizations, was ordered closed because of spending irregularities that are being investigated by federal authorities.

Then, 21/2 months ago, the city ended contracts with Germantown Settlement valued at $1 million after the nonprofit failed to submit long-overdue audits. As of last week, the city still had not received those audits, for 2006, 2007, and 2008, despite the agency's promises otherwise.

In addition, public records suggest Germantown Settlement has made little progress in eradicating nearly $1.7 million worth of federal and state tax liens, all filed since May 2008.

Emanuel V. Freeman, the nonprofit's president and chief executive officer, said in an e-mail last week that the liens were getting untangled, the audits were well under way - they were slowed by a recent office electrical fire - and the renovation of the YWCA was indeed on track.

"We still expect to get the project completed and we are hopeful that the progress we have made will satisfy the RDA," Freeman wrote.

But it is unclear whether Freeman has a financing team in place for the YWCA project, and even Germantown Settlement's biggest champion in City Hall has doubts.

"At some point, something has to give. You either have to move forward or you can't," said Councilwoman Donna Reed Miller, a member of the nonprofit's board for nearly 20 years until her 1996 election to Council.

When the RDA approved the loan in 2006, with Miller's blessing, she said, "I was trying to be optimistic and was really hoping that this was something that was doable. . . . I'm not as optimistic today."

At the time, Germantown Settlement hoped to use the building as its headquarters, possibly open a culinary school and banquet hall, and renovate the gymnasium and swimming pool, according to a property-appraisal report completed for the RDA as part of the loan-approval process.

With backing from Miller and Mayor John F. Street, "I knew they had a very good chance of getting the deal done at the end of the day," said John O'Connell, a real estate agent who handled the sale and who is also leader of nearby Chestnut Hill's Ninth Ward.

"I remember they wanted to pay full price," added O'Connell, noting the building attracted several nonprofit and for-profit developers. But none offered as much money, he said.

Miller's and Street's support was evident as the RDA loan was approved - using $1.3 million in bond proceeds from Street's anti-blight Neighborhood Transformation Initiative. The transaction is the largest single expenditure of NTI funds spent to acquire property, according to a recent report by the City Controller's Office.

Former RDA executive director Herb Wetzel, a longtime Germantown Settlement board member until 1993, wrote at the time of the loan that the agency's purchase of the YWCA would enable it to "provide the community an opportunity to access the various social service programs . . . while also preserving the programs and services being offered by the YWCA."

It is unclear how much was known then about the extent of Germantown Settlement's financial problems, but RDA documents show that the nonprofit was facing at least a $62,000 federal tax lien at the time. As a condition of the loan, the lien was paid within 90 days.

Separately, another loan condition required the nonprofit, also within 90 days, to secure financing to renovate the building. Germantown Settlement found a lender, Corban Capital Partners of Washington, to provide $2.75 million, but the deal fell apart by early 2007.

In the two-plus years since, the building has fallen into further disrepair, and Germantown Settlement's financial problems have escalated.

Finally, in July, the RDA filed a lawsuit in Common Pleas Court arguing that the nonprofit was in default of the mortgage, partly because of the accumulated liens and also that the property had become "vacant, deserted or unguarded."

The RDA board voted to take back the building deed; it had been placed in escrow to secure the loan. However, subsequently the authority agreed to give Germantown Settlement more time - until December - to find a new financing partner.

Freeman confirmed that his agency was working with Philadelphia-based NAI BlueStone Real Estate Capital to raise the necessary dollars, along with Mosaic Development Partners, also of Philadelphia, to identify potential uses for the building.

But while a principal for Mosaic, Greg Reaves, said his company would have a proposal for Germantown Settlement and the RDA to review by the end of the year, NAI BlueStone appears to no longer be involved.

"There were initial discussions months ago, but I don't think they've heard anything from them since September," BlueStone spokeswoman Rebecca Devine said. "So to my knowledge, I don't think they are working together anymore."

Current RDA executive director Terry Gillen said, "If they haven't moved the project along substantially by December, we'll have to decide what we'll do." That likely would include proceeding with the lawsuit, reclaiming the deed, and issuing a new request for proposals to sell the YWCA.

"We have to balance the need to get money for taxpayers for Philadelphia with the need to eliminate blight," she said.