An alley leads to apartment buildings east of Cleveland Street between Jefferson and Court.  Photo: Lance Murphey

Two years ago this month, awed silence greeted real estate developer Tom Marsh as he clicked through slides and walked a neighborhood group through his team’s plan.

That plan was a multimillion-dollar bet on the potential of a large, mixed-use retail center in Midtown Memphis at the site of a blighted, crime-ridden patchwork of run-down homes and apartment buildings.

One slide that particularly pleased the crowd at the Central Gardens Association neighborhood meeting in 2008 showed Canyon Ranch. It was a sprawling beachfront condominium and mixed-use development in Miami Beach, Fla.

And it was the product of WSG Development, the same Florida-based team working with Marsh on the Midtown project. Together, they envisioned a similarly top-notch retail center for a Memphis neighborhood whose residents tire of driving Downtown or farther east for their shopping needs.

“I’d love to do something like this in Memphis,” Marsh said, letting the Canyon Ranch imagery sink in.

Then he slyly added, “But we just couldn’t get that ocean view.”

Fast forward to the same month in 2010.

Today, the once well-received project remains little more than an idea on paper. Its land is home to hazard-prone, graffiti-painted buildings with broken windows and crumbling brickwork.

And one city official has lost patience.

Ernest Dobbins, Memphis’ community enhancement director, earlier this month began talking about possibly using a legal tool to force the property’s new owner to make demolition a priority.

Soon after the Memphis City Council’s capital improvement committee set aside money a few weeks ago to pay for the city tearing down buildings at the site, Dobbins told The Memphis News how he’d like to do it: by filing a lawsuit under a Tennessee statute called the Neighborhood Preservation Act.

Enforcement action

For the past few years, that law has served as the basis for court actions filed on behalf of frustrated tenants and neighborhood residents. They use the suits to force landlords to clean up what in many cases are properties that have fallen into disrepair.

That’s what Memphis homeowner Jan Rowe did in 2008. She lived on the outer edge of Eastview – a dilapidated collection of homes more than 60 years old with trash-strewn, overgrown yards.

Rowe filed a Neighborhood Preservation Act suit in Shelby County Chancery Court against the landlords and out-of-town interests who own Eastview’s homes and duplexes that sit behind East High School.

One of the tenets of the Neighborhood Preservation Act is that if a homeowner’s property loses value because of the blight, they can sue to recover the difference – as well as force the owner to clean up.

Rowe’s property slipped in value after she bought it in 2004, despite making pricey renovations.

The Neighborhood Preservation Act reads, in part: “The owner of residential rental property or an unoccupied residence shall be required to maintain the exterior of such property and the lot on which the residential rental property or unoccupied residence is located at a level which is no less than the community standards of the residential property in the area.”

To the naked eye, the Midtown site – concentrated near the intersection of Poplar Avenue and Cleveland Street – is the epitome of what that legislation was meant to combat.

Along Watkins, the hodgepodge of buildings greets passersby with broken windows, tall grass and “Keep Out” painted on several doors. Boards are scattered haphazardly, some leaning against buildings they presumably came from.

The piles of trash and seemingly bombed-out shells of buildings give the area a seedy vibe. All of that is why Dobbins’ consideration of the Neighborhood Preservation Act as a remedy for conditions at the site shouldn’t come as a surprise.

It’s the latest in a string of setbacks for the project, once rumored to have caught the attention of Target as a potential big-box anchor.

Luck of the draw

Dobbins’ plan is also a dramatic example of the property’s reversal from the site of a wow-inducing real estate deal to one that may require a lawsuit to clean up.

“We can’t wait a few more months,” Dobbins said. “We’ll force them into court and let the courts force their hand.

“I need something on paper, in writing and a timeline of when they’re going to do such-and-such, so we can maybe work together. Every time you look up there’s a fire over there – just problems. They told us they’d demolish the buildings after the foreclosure.”

By foreclosure, he was referring to yet another recent setback for the project. Lehman Brothers Holdings foreclosed on WSG at the end of March, reclaiming the property.

After three rounds of a bidding war on the Shelby County Courthouse steps, Lehman took back the collection of residential and commercial parcels comprising about five city blocks for $3.15 million.

A fire inspector watched the auction unfold. So did a few area residents like John Buffaloe, eager to see someone turn a page on the development and finally make something happen.

Mark Adams, an inspector from the Fire Prevention Bureau in the city’s Fire Services Division, recently issued a citation to WSG for code violations at the site. After the foreclosure, he mailed Lehman’s local representative, Glankler Brown attorney Randall Womack, a copy of the inspection report with a court date for earlier this month.

Around the same time, Adams e-mailed a few officials in the community enhancement division: “Representatives from Lehman Brothers Holdings Inc. are to visit Memphis in the near future, and Mr. Womack will arrange for me to meet with them. It is also their intention to meet with other city officials while they are here.”

At press time, there was still no indication when that meeting would happen. And for now, the project is more or less on life support.

WSG is out of the picture, apparently a result of Lehman exerting pressure on WSG elsewhere in the country.

As Lehman’s remaining corporate entity works to shrink and ultimately get rid of assets in the company’s giant loan book, some borrowers are effectively being told time has run out for their projects.

Lehman has filed several foreclosure actions against WSG in multiple states.

Lehman itself filed for Chapter 11 bankruptcy protection in September 2008. That one act was responsible for a panic that exploded through world markets and arguably worsened what already was a painful recession.

And it happened only four months after Marsh walked the Central Gardens residents through his slide presentation.

At that point, the Midtown Memphis Planned Development had already been years in the making. Land assembly had been under way for about four years.

WSG bought most of its parcels, all of which are south of Poplar and on both sides of Watkins, in May 2007 in an $11.6 million deal that comprised several transactions.

A few months before the Central Gardens meeting, the developers filed an official plan for the project that showed small and large retail shops, restaurants and medical offices.

They wanted approval to permit apartments or condominiums above the retail stores.

Area residents probed Marsh for details. He was as specific as he could be in describing what the tenant mix at the finished retail center might look like.

“Go out to the Wolfchase mall and look across the street at the shopping center that has Best Buy and some other major tenants," he told the crowd, referring to the Wolf Creek retail center that includes Sports Authority and Target, among other retailers. "Some of those will be here."

Marsh said he expected the development to have an economic impact on the area of about $150 million.

A lot, of course, has happened since then.

The state and local economies are only now recovering from a recession that was still months away from hitting its peak when the Central Gardens residents got a taste of what was supposedly on the way to Midtown.

In the recent past, Target cut its new store openings by as much as 70 percent, said Danny Buring, a partner at The Shopping Center Group.

Credit dried up. Commercial real estate became the hot potato no bank wanted to be stuck holding.

Lehman was already stuck with plenty of it. A loan portfolio stuffed to the gills with real estate debt – much of which probably shouldn’t have been originated in the first place – had a hand in sinking the company.

All of those factors added up to transform any tailwinds behind the Midtown project into stiff, paralyzing headwinds. The kind that make it seem almost impossible to take a step forward.

Midtown resident and real estate agent Joe Spake said his biggest disappointment about the project is the same one bugging Dobbins – that the land still has not been cleared.

“I think a cleared and grassy site would be more aesthetically pleasing, and much more attractive to potential developers and/or buyers, than the current blighted mess,” Spake said. “To me, dealing with blight issues in general is more important to Midtown than having a big box department store.”

Shawn Massey, also a partner at The Shopping Center Group, said the typical rent paid in the Midtown area will make it hard to justify new construction for a while. And he said whoever ultimately develops the site needs to “understand the real demographics of the area” for any project to work.

One of the most relevant symbols of the Midtown project’s history can be found in the form of an advertisement posted along Cleveland near a convenience store where a crowd of people loitered during a recent afternoon.

The sign stands a few yards away from the blight where a development team once saw dollar signs and a bankrupt lender now holds the keys to the future.

It’s an advertisement promoting the Tennessee lottery.

That sign’s theme, of course, is luck – the one thing that’s eluded the project until now, and the thing it needs most of all to survive.