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Bank files to foreclose on Deming property downtown

August 06, 2009|By ERIN JULIUS and ANDREW SCHOTZ

HAGERSTOWN -- A bank on Thursday filed to foreclose on 28 S. Potomac St., which houses a restaurant, a nightclub and office space in Hagerstown's downtown Arts and Entertainment District.

In papers filed in Washington County Circuit Court, The First National Bank of Mercersburg in Pennsylvania says borrowers Richard M. Deming and Clyde F. Deming III owe more than $3 million on two notes on the property.

"We're in negotiations with the bank to work through it. I believe we will be able to work it out," Richard M. Deming, who is known as Mike, said Thursday in a telephone interview.

The Demings borrowed $2,808,000 on Jan. 25, 2006, and $337,500 on Oct. 27, 2006, for a total of $3,145,500, according to court records.

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As of July 1, 2009, the Demings owed a combined $3,140,517, including principal, interest and late fees, court papers say.

The bank also seeks nearly $100,000 in attorney fees.

On May 20, a lawyer representing the bank sent Mike Deming a notice of intention to foreclose. The notice said the notes were "in serious default" and gave the Demings a July 1 deadline to fully pay them.

Under the name 28 South Potomac St. LLC, Demcore Development purchased the building in April 2005 for $905,000.

The company renovated the building and opened Duffy's on Potomac, a restaurant, and AVA's, a basement nightclub.

In 2006, as he prepared to renovate the building, Mike Deming, the president of Demcore Development, said it would have almost 15,000 square feet of office space for lease on the second, third and fourth floors.

A building permit estimated the renovation cost at $2.3 million, but Deming said at the time he expected the cost would be higher.

In August 2005, the project was awarded a $540,000 Maryland Heritage Preservation Tax Credit.

The nearly 100-year-old building at 28 S. Potomac St., across from The Maryland Theatre, used to be known as the Schindel-Rohrer building.

Deming said Thursday he renovated the building to have office tenants, but only recently has had success in signing leases.

For a while, he hoped one large tenant would fill the entire space. Because that didn't happen, he pursued smaller tenants.

Three businesses have signed leases and two other leases are pending, Deming said. Two technology firms, a professional firm and an artist are among the businesses that either signed leases or have leases pending, he said.

His company has submitted building plans to begin construction on offices for the new tenants, he said.

"The building is starting to come alive," Deming said.

Demcore Development has been a prominent catalyst in recent years in reshaping Hagerstown's downtown.

The company has purchased and worked to rehabilitate several buildings for commercial, office and residential uses.

Deming blamed the economy for the difficulty he's had in filling office space. Businesses aren't looking to expand, which has hurt his effort, he said.

Several Demcore properties in the downtown area were in danger of being sold at a June 30 Washington County tax auction, but the bills were paid before the deadline.

Property tax payments for 28 S. Potomac St. -- which would not have been sold in the auction -- are up to date, County Treasurer Todd Hershey said Thursday.

Mayor Robert E. Bruchey II said he thinks Demcore will continue its work downtown.

"I still believe that Mr. Deming will be able to weather this storm that 90 percent of this country is facing," Bruchey said Thursday in a telephone interview. "He is diligently addressing his issues."

Deming said that, in the end, he believes he will be able to hold on to the property at 28 S. Potomac St.

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