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Demcore's 'ripple effect'

October 03, 2009|By ANDREW SCHOTZ

HAGERSTOWN -- Sept. 25 was an up-and-down day for Hagerstown's downtown.

The city launched a comprehensive marketing and economic development program called Hagerstown Advance.

The same day, Sovereign Bank filed to collect more than $2.7 million from two loans to Demcore Development President Mike Deming and his father, Clyde F. Deming III.

Seven weeks earlier, The First National Bank of Mercersburg filed to foreclose on 28 S. Potomac St. The bank said the Demings owed more than $3 million on two notes.

With Demcore owning a chunk of the city's core, "I think it's going to hurt the progress of the redevelopment of downtown," Councilman William M. Breichner said last week. "It has to have a ripple effect."

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As Mike Deming works to overcome financial trouble, the city is trying to attract new businesses and investment. Hagerstown Advance is seen as a concerted way to work with prospective developers.

One outside factor looms: "The economy has just hit everyone," said Deborah Everhart, the city's economic development director.

Last month, Citibank representatives filed to foreclose on four apartment buildings near Public Square: 32-34 and 36 E. Washington St. and 38 and 44-44 1/2-46 E. Franklin St.

As of Aug. 31, the owners owed about $991,000 in principal and other costs on a 2007 note, according to court papers.

Jason Goldberg, who is part of the limited liability companies that own the buildings, said Friday he's working with the bank to renegotiate the loan.

A foreclosure wouldn't force tenants to leave, he said.

Breichner said banks would be wise to work with developers, not take properties and try to sell them in a depressed market.

Demcore bought 2 Public Square in 2002. It added 6-16 W. Washington St., where its office is, in 2004, and 28 S. Potomac St., the Schindel-Rohrer building, in 2005.

In 2006, Demcore acquired more than a half-dozen downtown properties, including: 1 N. Potomac St., which housed Rocky's University New York Pizza; 13-15-17 S. Potomac St., which housed the Maryland Symphony Orchestra's office; and 43-45 S. Potomac St., where Deming opened 43 South Ristorante and Flo Lounge, but closed them after two years.

Several Demcore Development properties were to be auctioned in June, until the company paid about $133,000 in back taxes.

Mike Deming said in a voice-mail message Friday that he expects to have an agreement for a new restaurant to replace Duffy's -- which closed at 28 S. Potomac St. in August -- this week. Other leases for the building are in the works, which is significant for Demcore's recovery, he said.

"We're fighting through it every day, and we're starting to get through it," Deming said in his message.

"These individuals really took big risks and, unfortunately, it didn't pay off," Councilwoman Ashley C. Haywood said, cautioning against the city putting too much stock in any one developer.

At the same time, Deming and Goldberg are smart and good bets to recover, she said.

Everhart said Deming deserves credit for investing deeply in the downtown, inspiring others.

Another early believer in downtown, Bowman Development Corp. bought three adjoining parcels on South Potomac Street and built a mixed-use center that includes Bulls & Bears Restaurant.

The year-old restaurant is doing well, said Matthew C. Donegan, the manager of new business development for The Bowman Group, which includes Bowman Development Corp.

Even in a tough economy, businesses are opening and growing downtown, Everhart said. The county's new arts school is open and the library is on the verge of expanding.

Bowman expects to lease the second and third floors above the restaurant to at least four tenants in the coming months, Donegan said.

Donegan praised the city's efforts that help developers, including the new Partners in Economic Progress program, which he said makes "a big difference" for Bowman.

The PEP program, approved a month ago, offers incentives such as grants, waived fees and fast-track approval for property owners who make improvements.

Donegan said the city and downtown property owners are invested in each other's success.

"We're all in this together," he said.

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