Decade-old land deal prompts political backlash, legal fight
In late 2008, with the real estate market in free fall, a land-hungry Delaware Department of Transportation purchased two parcels of rural flatland next to Route 1 south of Dover for nearly $2.8 million.
Ten years later, it sold the parcels for $270,000 to influential lawyer and developer John Paradee. It was a price the state says reflected a DelDOT decree that the land would never gain a direct commercial turn-on or turnoff from the adjacent highway – Delaware's primary north-south artery.
Today, those deals and their multimillion-dollar price discrepancies are attracting controversy, manifested as political assaults on Delaware's Democratic Party establishment just weeks before the November election.
The land sale also sits at the center of an ongoing lawsuit in Delaware's business court over DelDOT's potential granting of accesses from Route 1 to new commercial real estate projects in the Milford-to-Frederica corridor.
The suit is among the latest jockeying between developers seeking to win a race to riches in an area planned as the state's next exurban hotbed, one whose growth may hinge on the success of the nearby taxpayer-subsidized youth sports complex, DE Turf.
At the center of it all is Paradee, who proclaims to be "widely recognized for his ability to secure approval for difficult or controversial projects." In December 2018, he purchased the roughly 11 acres of DelDOT land with a team of investors. At 44%, Paradee's stake is the largest in the partnership.
Combined with adjacent parcels, the land was intended to form the platform on which to build Asbury Square, a hotel, restaurant and retail development. It is one of three ambitiously proposed projects designed to capitalize on government's push to encourage development in the corridor.
With the election approaching, political attacks on Delaware Democrats have come from a Republican activist who says he spent much of the past year investigating the DelDOT land deals.
As part of the effort, Sam Chick, chairman of Delaware's Young Republicans, obtained scores of internal state emails, land deeds and other documents that revealed the prices that DelDOT paid and then received for the land.
In September, Delaware Online/The News Journal requested from the state copies of all documents provided to Chick. It received them on Friday with some emails within the documents redacted.
Days earlier, Chick published a website that turned his investigatory conclusions into a political attack. While noting Paradee's brother is Dover Sen. Trey Paradee and his sister works as legal counsel for Gov. John Carney, Chick claims the deal shows a "political insider" who received "special treatment through a secretive and abnormal sale process."
He also points to recent real estate listings showing Paradee's combined 21 acres as up for sale for $6.5 million, two years after 11 of the acres sold for $270,000.
Chick, who in years past mounted two unsuccessful campaigns for Delaware's House of Representatives, said he began investigating the deals after controversy last year enveloped Asbury Square, which sits across Route 1 from DE Turf.
Two days before John Paradee filed a state permit application for the development in July 2019, Trey Paradee's bill authorizing a hotel tax that would send nearly $1 million annually to DE Turf passed the state Legislature. The measure prompted a backlash and was later repealed.
In response to Chick, DelDOT said the land deals' price discrepancy was a result of the dictates of the law, not of a secret sweetheart deal.
In order to preserve the efficiency of the Route 1 highway corridor, DelDOT bought the land in 2008 to prevent the seller from developing it and building a new commercial turnoff to Route 1, agency spokesman C.R. McLeod said. It then sold the land with a limitation imposed in perpetuity.
Transportation Secretary Jennifer Cohan told Chick in a telephone conversation – which he recorded earlier this year and shared with The News Journal – that DelDOT regularly pays more for land than it receives when subsequently selling it because the state must appraise property it acquires under a standard called "highest and best use."
"It's not abnormal, sadly to say," Cohan said.
Others are piling on to Chick's criticism, in particular executives from New York company TransPerfect, who for years have spent lavishly to criticize Delaware institutions through various advocacy organizations.
Their latest, called Citizens for Transparency and Inclusion, said it is spending $1 million during the current election cycle to oppose Carney. A portion of the spend is funding an ad that claims the DelDOT deal shows Carney's policies not working "for us."
Carney spokesman Jon Starkey said in a statement that the governor was not involved in the land sale to Paradee.
Carney expects his administration to follow state regulations while selling land, Starkey said, and there is no "reason to believe anything different happened in this case."
For his part, Paradee dismissed the attacks, saying they are "obviously politically motivated garbage."
He and his partnering investors purchased property that was "landlocked," he said, an apparent reference to the surrounding parcels being owned by either his team or a neighboring landowner.
"The proper process was followed for lands of 'no independent utility,' as dictated by DelDOT," Paradee said in an email, but he did not note that the land could be used for residential development.
Paradee also pushed back when asked about his combined 21 acres being listed for sale for $6.5 million.
"The suggestion that we are 'selling the property for $6.5M' is recklessly unfounded and false, demonstrating just how dangerous it can be for anyone to swallow whole on baseless rumors spread by naysayers," he said, referencing the recent political attacks.
Paradee backtracked when shown a listing of the sale on a commercial real estate website. He said it was apparently posted by his broker Jim Tancredi, but "honestly, this is the first time I’ve ever seen that listing."
The property also was listed as for sale Thursday on another real estate site for $5 million.
Earlier this year, Paradee decided to sell the Asbury Square land, before changing his mind in July or August, he said.
"It does not reflect our present plan, which is to develop and lease pad sites rather than sell the entire property," he said.
Other controversial development:How a fight over high-end development could cost Delaware more than $10 million
A history of controversial land deals
The uproar over the land sale follows years of controversies over development of Delaware's once-rural tracts.
Past controversies included chummy relationships between bankers and developers that led to the downfall of Delaware's once-iconic Wilmington Trust. There was a legal tug-of-war between the state and a secretive developer over Millsboro waterfront that led to a more than decadelong lawsuit.
And, there were controversial DelDOT land deals that drew the suspicions of the FBI and tainted the legacy of former Gov. Ruth Ann Minner.
DelDOT's 2008 purchase of the Frederica land occurred toward the end of a handful of such deals.
It also occurred just after Paradee purchased an adjacent property and launched his plans for the development he would later call Asbury Square.
DelDOT purchased the larger of the two parcels in October 2008 for $2.1 million. The smaller one was $670,000. The price tag was determined based upon a "highest and best use" appraisal conducted by Wilmington's Integra Realty Resources.
McLeod, the agency spokesman, said the acquisitions were to further two separate state programs; one to preserve the efficiency of Route 1, the other to build an interchange south of Frederica.
"Basically, we denied a proposed development request as we did not want additional access points to Route 1 from this parcel, and knowing that we would likely need some of this property for the future project, DelDOT purchased the parcels to prevent that development from happening," McLeod said.
Before the purchase, the larger, pricier parcel had been held by an entity called Jordan Enterprises 2005 LLC.
COMPETING DEVELOPMENT:Water park, luxury cabins part of newly proposed development to support DE Turf
While the company's true owner is difficult to determine, the sales deed lists Rodney Mitchell Jr. as the firm's manager.
Mitchell, a now deceased Dover developer, and John Paradee had a business relationship. When the Delaware Supreme Court ruled in Mitchell’s favor in a regulatory dispute in 2010, Paradee was his lawyer.
On its 2008 sales deed, Jordan Enterprises also lists its address at 1164 Apple Grove School Road in Camden-Wyoming. In 2008, that property was owned by a Teresa Mitchell, Rodney Mitchell's wife.
According to Delaware business records, Jordan Enterprises previously had been called QWERTYUIOP ASDFGHJKL ZXCVBNM LLC. That company, whose name follows the order of letters on a keyboard, held the parcel prior to the name change.
The company took ownership of the parcel in May 2005 with a transfer from the previous owners, Neil and Edna Dunn, for a nominal price of $10. A realty transfer tax of $12,300 was paid as part of the deal.
Three years earlier, Mitchell and an associate paid off a $230,000 mortgage on a separate parcel of land, money that had been lent by the Dunns.
Neil Dunn died in 2010. His obituary called him a civil engineer who had worked “for the State Highway Department" and taught at area colleges. An official with the Delaware Department of Human Resources said no records exist of Dunn working for DelDOT between 2001 and 2009.
A call to a phone number linked to Edna Dunn was not returned.
DelDOT purchased the smaller parcel also in October 2008 from Robert I. Thomas, described on the deed as the liquidating trustee for Mitchell and Lloyd F. Arnold.
Birth of DE Turf
In the years after DelDOT's 2008 land purchase, a group of Kent County power brokers, including Paradee, began to push the state for approvals in the construction of a youth sports complex on parcels of land just south of Frederica.
They also wanted a new interchange over Route 1 that would connect to the facility.
DEVELOPERS GET HELP: Interchange would benefit backers of sports complex
The youth travel sports industry had been booming, valued then at about $10 billion annually, money derived mostly from parents paying for tournaments, hotels and food at complexes throughout the country.
But DelDOT's then-Secretary Shailen Bhatt was wary to rush planned highway expansions, wanting not to repeat the agency’s handling of highway land deals in the past. In 2014, he left the agency.
In subsequent years came additional debate, official reviews and a new DelDOT secretary. In 2017, DE Turf officially opened and construction on the adjacent $18 million Route 1 interchange construction project was progressing.
In July of the following year, Paradee sent an email to DelDOT, with a petition to purchase the 11 acres of property directly across the highway from DE Turf.
The agency initially rebuffed the offer, with DelDOT's Land Services Manager Beth Rosebrooks stating in an email that the "excess land" could not be sold for another year or more because it was still part of the then-uncompleted interchange project.
In an email, Paradee said, “I’m not willing to accept this answer” and insisted he meet with officials to discuss the sale of one parcel that he said “has absolutely zero to do with the interchange.”
He argued the land was purchased in 2008 as part of the state's Corridor Capacity Preservation Program, intended to preserve the efficiency of the state highway corridor, not part of the interchange project. He would also state in a later email that he had no intention of "requesting access from the parcels in question to SR 1.”
McLeod in his statement last week said this acquisition was in connection with both the Corridor Capacity Preservation Program and the South Frederica Interchange project.
Nevertheless, the state ultimately capitulated, and in August 2018 Cohan directed her agency to expedite Paradee's request, according to the internal emails.
First, DelDOT would need to show the purchase proposal to adjacent landowners to offer them a chance to bid on the property.
In an August email to Paradee, Rosebrooks suggested that if an adjacent landowner could be taken "out of the picture, we may be able to negotiate a purchase without having an appraisal done."
In her understanding of the law, she said, avoiding an appraisal would “shave off some serious time and avoid the 85% of appraised value," referencing a law preventing the state from selling property at less than 85% of its appraisal price.
Paradee agreed and said that an appraisal could "grossly overstate" the true value of the property.
While a neighboring landowner did ultimately waive his right to bid on the property, an appraisal occurred in September and valued it between $379,000 and $442,000 – a price based on a full denial of access to Route 1.
Days before the appraisal, Paradee said in an email to DelDOT that the parcels, stripped of their access to the highway, are worthless..
"If my partners and I do not buy them, no one else will, and DelDOT will continue to own two worthless parcels of vacant, land-locked, unusable ground," he said.
By October, Paradee offered the state $100,000 for the two parcels.
Weeks later, Cohan and Paradee were "in a heated text battle” over the price. The next day, Cohan emailed Rosebrooks to say, “I have (Paradee) at $275,000.”
The sale finalized the following December with Paradee acknowledging that Asbury Square would not be granted the valuable turnoff from Route 1.
Instead drivers would use a web of access roads that would be built linking new area developments to the new highway interchange.
Nearly 19 months after his land purchase, Paradee filed a lawsuit against Delaware after DelDOT denied concept plans his project submitted, which included a turnoff from Route 1.
In the denial, DelDOT attorney Brad Eaby reiterated that the low price Paradee paid for the land “was commensurate to a pre-existing denial of access.”
Paradee's lawsuit demands now that DelDOT similarly not grant a new or expanded Route 1 commercial accessway to a competing development, south of Paradee's land, and controlled by the owners of Meding's Seafood. The company currently owns a right-in, right-out access from its property to Route 1.
The Meding family also owns land adjacent to its seafood business and in 2012 secured a commercial rezoning of 20 acres there.
NORTHERN DELAWARE PROJECT:Developer to build shopping center near historic Glasgow house
Paradee in court documents said Asbury Square has been "unable to secure" land leases or sales to a convenience store or gas station that would anchor the site's finances.
He said investors are waiting on the sidelines to see which developments in the area offer the best access for drivers, and a turnoff from Route 1 could become the asset that tips the balance.
"No lending institution will commit to finance construction of the core infrastructure required for the (Asbury Square) project unless and until the petitioner is able to secure a pre-lease or pre-sale of the convenience/gas pad site proposed," Paradee said in court documents.
As his lawsuit proceeds, other area developers have pushed forward with commercial plans.
In June, Steven Martin submitted plans to the state to build a water park, luxury cabins, as well as strip malls with a gas station and convenience store on a largely rural stretch just north of Milford. A proposed service road would cut through his properties, leading to Route 1.
In August, Paradee sent a letter to a nearby landowner, urging him to oppose permitting the competing developments by fighting the service road that would offer quick access to Martin's property for vehicles to and from Route 1.
"It is important for you to recognize that DelDOT's proposed service road will dramatically impact the access, use, and value of your property – all in negative ways," Paradee said. "The only way to stop the proposed service road is to oppose development."
A month later, Paradee spoke in opposition to Martin's development during a Kent County Regional Planning Commission meeting. He told the commission he was speaking on behalf of 50 property owners who opposed Martin's development.
As part owner of Asbury Square, he also was among the 50, he said. He said he had pursued development "the right way."
"It is simply not fair to allow other property owners or developers to pursue the same sort of approvals without abiding by the same rules and standards," Paradee said.
The county commission recommended that Martin's request for a rezoning of parcels from agriculture residential to business be denied, a decision likely helped by dozens of farmers and other longtime residents who opposed his development.
Whether in alliance with Paradee or not, they are a likely powerful voice in a changing area whose policymakers cling to its rural roots.
A.J. Jester was one of those residents who attended the recent Kent County planning meeting to oppose the development. He said it will split up farmers' lands.
"I'm just not big on the out-of-staters trying to come in," Jester said, referencing Martin's New Jersey roots. "I'm basically looking out for the farmer. This is their livelihood."
Contact Karl Baker at email@example.com or (302) 324-2329. Follow him on Twitter @kbaker6.