Real Estate Scandals

At least two BOG members have been involved in shady real estate dealings.

Harry Smith and ECU Apartment Steering

In 2016 Harry Smith explored a possible housing deal for new campus apartments with business partners that relied on ECU making a policy change to help fill them.

Smith claimed that he wanted the university to take advantage of a foreclosed apartment complex located by the school’s sports fields. However, Smith himself acknowledged that if the deal had proceeded he would have been a part of the group that purchased the building and ultimately benefitted from the project.

Specifically, a chancellor for ECU wrote in an email to Chancellor Cecil Staton in September 2016, “He was thinking that, if he could get it at a steal and have a contract with ECU to fill the beds, he would split the profits with us.” In other words, Smith’s group would own the building and lease beds back to ECU, who would then rent to students. However, in order for there to be enough demand to make the deal work, ECU would have had to change a policy and require that sophomores live on campus. Smith said the Preiss Company, the same company cited in whistleblower lawsuit involving an apartment deal at NC Central, approached him about the deal. ECU officials opposed it and declared the project a “disaster.” Smith, under fire, responded that all of his apartment investments are off-campus housing and that he has “never owned an asset that had ANY support or relationship with any university. Just all stand alone private housing.” Smith acknowledged the optics were bad. While he admitted no wrongdoing, he did admit “it has perception issues for sure. Lesson learned, but zero maliciousness in it.”

Kieran Shanahan, chairman of the ECU Board of Trustees who later accused Harry Smith and BOG of meddling micro-management, said the proposal did not make good business sense.


(WRAL,
5/2/18)

In 2019, Smith was accused by fellow Board Member Steve Long and Kieran Shanahan of conspiring with interim UNC System President Bill Roper to force out ECU Chancellor Bill Staton after only three years on the job and then lying about his motivations. Long went as far to say of Smith: “He should be removed as chair of the Board of Governors.” When Staton began his tenure as chancellor, he rejected Harry Smith’s proposal to develop a housing complex in Greenville N.C., according to Long.

J. Alex Mitchell and 751 South

J. Alex Mitchell is a real estate developer who was voted onto the UNC BOG in 2015, the year Tim Moore became Speaker of the House. Mitchell, a “friend and supporter” of Moore, chairs the BOG’s Strategic Initiatives committee. Notably, Mitchell is the president of Southern Durham Development, the developer behind the controversial 751 South luxury community built on land Mitchell bought from his cousin. In 2013 the project almost failed due to conflict with the city of Durham over water and sewer services, but Rep. Tim Moore saved Mitchell’s project as then-chairman of the House Rules Committee in a maneuver that forced the city to comply with the developer’s demands.

751 South was controversial from its genesis. Mitchell bought the land in south Durham that would become 751 South, which Mitchell likened “a village” similar to Raleigh’s North Hills, from his cousin. He then tried to annex the land into Durham city limits due to the development’s size and proximity to Jordan Lake. Yet the plan quickly became the subject of lawsuits, hearings, surveys, and petitions. Mitchell refused to budge. Thanks to the Citizens United verdict, Southern Durham Development could fund a local Super PAC, Durham Partnership for Progress. Mitchell put $54,000 into a PAC in Durham County for a Commissioner primary race in 2012 and engaged in behind-the-scenes talks with Mayor Bill Bell about the future of the project. To gain support, Mitchell sent a letter to residents in a South Durham neighborhood claiming that living near a mixed-use development would boost their property values. When that didn’t work, Mitchell and fellow developer Tyler Morris sought legislative intervention to bar the Durham City Council from denying water and sewer hookups. Without those hookups, the project would have been forced them to downsize.

In 2012 Rep. Moore intervened. In a typical legislative sleight-of-hand, Moore introduced an amendment to a bill that originally dealt with the design of a new Durham police station to force Durham to accept Mitchell’s request for water and sewer. Ten citizens spoke out against the development while Mitchell spoke in favor, pleading “I’m not a monster.” One Senator objected to a developer coming to the NCGA and “meddling with city affairs.” Mitchell, however, got his way and said he was “extremely humbled by the overwhelming bipartisan support that I received,” and that he felt “very fortunate that both parties agreed that North Carolina must stand behind the small business owner.” Moore’s maneuver represented a rare example of state lawmakers getting involved into local land use matters. The legislation passed in 2013.

Mitchell and his wife, Drewry Mitchell, have contributed a total $30,300 to Moore since 2013, both contributing $12,600 to Moore between 2013 and 2016. Mitchell contributed a total of $30,400 to state House and Senate leaders including Moore, Phil Berger, John Bell, and David Lewis, with most contributions falling in 2016 and 2017. Not surprisingly, he’s also contributed $9,000 to Durham-specific candidates and groups including Farad Ali, The Durham Committee on the Affairs of Black People, and Sen. Floyd McKissick. Mitchell’s pattern of opportunistic political giving extends back to years of Democratic control and includes contributions to Bev Perdue and Marc Basnight that match his voting history. Mitchell is registered unaffiliated and voted in Democratic primaries until 2010. 

Image result for 751 south

751 South, image credit News & Observer. 

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