The developer who bought a former hospital from the city of Bath in April is now trying to sell the property for more than twice what he paid.
Critics who argue that city officials should have sought competing bids for the property said Friday that the higher asking price validates their concerns.
But city officials said the new listing price is meaningless unless a buyer agrees to pay that much.
The city’s sale of the former Mid Coast Hospital has generated controversy, prompting the Bath City Council to hire retired Superior Court Justice Robert Crowley as an independent investigator to look into whether the city acted properly.
There is no set deadline for Crowley to produce his report, but there is a budget limit of $7,500.
Bath officials sold the property, valued at $6.5 million by the city assessor’s office, for $799,000 after receiving an offer from a Phippsburg-based developer, Robert Smith. The property was neither appraised nor listed for sale by the city.
Six months later, Smith’s real estate broker, Edward Herczeg of KW Commercial, has listed the property for sale on Maine’s multiple listing service for $1.65 million.
Critics of the sale, including Bath residents Michael Wischkaemper and Larry Scott, have said since April that the property, now an office building called the Mid Coast Center, was worth at least $1 million.
Wischkaemper said purchase documents released by the city prove that the property was worth at least 20 percent more than what Smith paid.
He noted that Smith was able to get a real estate loan for $794,000, nearly the entire sale price. Most lenders require a buyer to have at least 20 percent equity in a financed property, Wischkaemper said.
Smith could not be reached for comment but has said in media reports that he decided to sell the property sooner than he had planned because of the negative attention it has generated.
Scott said the much higher list price is a sign that Bath’s taxpayers did not get what they deserved for the property.
“It would seem that a potential profit of $851,000 … should give you pause to rethink your earlier evaluations,” Scott said Thursday in an email to city officials.
In an interview Friday, Scott said the fact that Smith had the property appraised before setting a price shows that he has a better idea than the city did of what the Mid Coast Center is actually worth.
City Assessor Paul Mateosian disagreed.
“It’s a free country. A person can ask anything they want for anything they own,” Mateosian said. “To me, it’s a total nonissue that a person has listed a certain property at a certain price.”
Mateosian said the city was in a hurry to sell the Mid Coast Center because a number of tenants had announced their intention to move to the Brunswick Landing development at the former Brunswick Naval Air Station.
“The city was a motivated seller, because we were faced with a lack of commitment on the part of tenants,” he said.
Mateosian said the city opted not to appraise the property before selling it to Smith because it was “in flux” with the pending departure of tenants, making an accurate appraisal difficult.
He said Bath officials considered selling at prices ranging from $700,000 to $1.1 million and opted for about $800,000 out of a desire to sell quickly.
Mateosian said the aftermath of the sale has been frustrating for city officials and especially the city councilors, who he said “acted very prudently and very wisely.”
As for Smith’s asking price of $1.65 million, Mateosian said it likely means the property will remain on the market for a long time.
“I am quite confident that that property will not sell at that price,” Mateosian said. “But you never know. Stranger things have happened.”
City Councilor Carolyn Lockwood agreed that a listing is not the same as a sale, and that what matters is how much Smith actually gets for the property.
“I could put my house on the market for a million bucks,” she said.
Lockwood said the council will keep a close eye on the listing to see what the sale price will be. Still, she said, the council believed it was doing the right thing for the city when it agreed unanimously to sell the property.
“It’s very easy to have 20/20 hindsight,” she said.
According to documents obtained by the Portland Press Herald through a Freedom of Access Act request, Bath officials hired Don Spann, a Topsham-based commercial real estate broker, on April 3 to act as Bath’s broker for the property at 9 Park St.
The contract said the property’s list price would be $799,999 and Spann would receive a commission of 7 percent.
According to the contract, Spann’s agreement to act as broker was not to begin until April 10. Smith signed a contract that day to buy the property for $799,000 — about $1,000 less than the price in Spann’s broker agreement.
That day, Spann signed a waiver with the Maine Listings multiple listing service stating that he did not want the property listed for sale.
According to the Maine Listings waiver, listing a property with the service tends to bring a higher sale price because more than 670 agencies and 4,100 agents and brokers in the state get access to the listing.
Wischkaemper, Scott and others have questioned why Spann did not list the property on the multiple listing service or give other potential buyers a chance to beat Smith’s offer.
They say the timing of the sale gives the appearance that Smith had advance knowledge that the property was to be sold and was working directly with Spann.
Wischkaemper said it’s unlikely that Smith could have done all the necessary due diligence to buy a large commercial property in the five business days from April 3 to April 10.
Sue Spann, the wife of Don Spann and a co-owner of Re/Max Riverside real estate brokerage, said her husband is prohibited from talking to the media because of a confidentiality agreement with the city.
However, she said her husband did not tell Smith that the former hospital was for sale, suggesting instead that it might have been a city employee who told him.
She said the city could have priced the property for as much as $1.2 million but it likely would have sat on the market much longer.
“The city knew it was the prime time to sell that property” because of the departing tenants, she said.
Sue Spann also noted that it was the city’s decision, not her husband’s, to accept Smith’s offer without listing the property.
When city officials announced the sale, they noted that Smith has a record of buying older properties and improving them. However, the listing for the Mid Coast Center does not mention any improvements made since he purchased it.
In September, the city released a document to the public showing that the Mid Coast Center’s four largest tenants were paying a total of $456,000 a year in rent.
At first, the city attempted to withhold the document, saying it was drafted in preparation for a closed, executive session by the City Council. However, the council voted Sept. 18 to “waive” the executive session, giving the city permission to publish the memo.
Scott, Wischkaemper and others launched a recall effort in August against some city councilors, based largely on the city’s refusal to release documents related to the executive session.
The recall effort was suspended after the council reconsidered that decision.
J. Craig Anderson can be contacted at 719-6390 or at: