$1.2 MILLION CONTRACT AWARDED TO DEMOLISH RIVERDALE VILLAGE IN ESSEX, MD

Washington, D.C. -- HUD Secretary Andrew Cuomo announced today that a $1.2 million contract had been awarded to demolish Riverdale Village Apartments in Essex, Maryland, a 542-unit formerly HUD-coinsured property. Riverdale Village owner Richard Schlesinger of Palm Beach, FL, allowed the property to deteriorate and become a blight on the community before defaulting on his loan repayments. A HUD investigation alleges that he also fraudulently diverted thousands of dollars of project funds that should have been used to maintain the property in good condition.

When HUD took control of Riverdale in 1995, it was poorly managed and in such bad condition that the few remaining residents had to be helped to move to better housing. Once residents were relocated, the property was boarded up, secured and has been vacant since last fall. HUD found that Schlesinger had allowed the property to deteriorate beyond rehabilitation . Demolition is now scheduled to take place at noon on April 14th.

"This action at Riverdale marks an important milestone in the Department's efforts to ensure that Federal housing programs truly benefit the members of our community they were created to serve," said Secretary Cuomo. "The owners of FHA-insured properties must abide by their obligations to keep the properties in a safe and decent condition. If they fail to do so, we will not hesitate to act decisively to eliminate threats to the health and safety of the residents. The Department will aggressively pursue landlords who continue to siphon off monies intended for the payment of the mortgages and maintenance of the properties."

"Today's announcement by HUD to provide funds for the demolition of these unsafe buildings is welcome news for the community and Baltimore County and will lead to a rebirth and revitalization of this area," said U.S. Senator Paul Sarbanes.

"When I asked the Inspector General to investigate the Riverdale Village in December 1995, I knew there was more than financial difficulties at the housing complex. There was a community in trouble," said Senator Barbara Mikulski. "The misuse of funds at Riverdale Village hit taxpayers twice. They paid the rent and then got stuck paying a $5.4 million bill for the defaulted mortgage. I am proud to have led the call for an investigation at Riverdale and to be a part of the new beginning for the Middle River community."

"The demolition of Riverdale Village is a great step in providing revitalization to a portion of our county that desperately needs it. I'm very happy that HUD is taking this step, and despite our differences on other issues, I wholeheartedly support HUD's move," said U.S. Rep. Robert L. Ehrlich, Jr. who represents the Second District of Maryland.

"We are very pleased HUD is moving forward with demolition of its portion of Riverdale," said Baltimore County Executive C. A. Dutch Ruppersberger. "Clearing the site is an important step in the revitalization process. We will continue to work with the community, HUD and the private sector in exploring long-term options for this land, which has the potential to provide great benefits to surrounding neighborhoods."

Located in the Middle River area of Baltimore County, Riverdale Village was originally built in the 1940's to house World War II aircraft workers. It was refinanced by Schlesinger in 1986 with a $5.7 million loan coinsured by HUD and underwritten by a private lender. The owner ultimately defaulted on the loan causing HUD to pay in excess of $6.6 million in mortgage insurance claims. The mortgage insurance loss and the cost of demolition are being paid by the FHA multifamily mortgage insurance fund which is supported by mortgage insurance fees paid by the developers of FHA-insured apartments, not by the taxpayers.

The demolition contract has been awarded to the P&J Contracting Co. of Baltimore, MD which was selected through a competitive process administered by the Small Business Administration.

Cuomo said that HUD will convey the property to Baltimore County within the next few months. Future redevelopment plans for the Riverdale site are undetermined. The housing will not be rebuilt because of an ample existing supply of rental apartments in the Essex area.