Kelo Remains Under the Microscope

WASHINGTON, DC-Earlier this month when the National Capital Revitalization Corp.’s and Morgan Stanley Real Estate’s MSREF US announced they had entered into a three-year, $150 million-public-private equity partnership to develop properties and assets NCRC owns throughout the District, not everyone in the area was thrilled. Less than a year ago, the NCRC had seized property at Skyland, an 18-acre site in Southeast Washington, citing eminent domain as its rationale with the stated goal of attracting bringing Target or another big-box retailer to the location, according to Deborah Baum, a partner with Pillsbury Winthrop Shaw Pittman LLP’s Washington DC office.

Baum represents one property owner at Skyland who is contesting the action on the grounds that the redevelopment is not a legitimate public purpose. “NCRC’s publicly announced price tag on this project has more than doubled to $115 million since we have been involved,” Baum tells GlobeSt.com The case is now before the District of Columbia Court of Appeals, where it was kicked after the Superior Court ruled that a recent Supreme Court decision permitted such a seizure.

That Supreme Court case was Kelo v. City of New London, a 5-4 decision that clarified governments’ rights of eminent domain for economic development. One year later, the impact of this widely discussed decision is still unfolding. A backlash against it almost immediately formed; within six months or so new legislation was introduced in some 40 states limiting its use. In other cases, state judges began to more narrowly interpret existing laws in favor of property holders.