Collingswood's revival spurred profits for some officials

In the late 1990s, Collingswood was a rundown borough at the edge of Camden, distinct for the vacant storefronts that defined its downtown.

Walk down Main Street today and the transformation is, in a word, remarkable. Art galleries, a farmer's market, and chic restaurants have turned Collingswood into one of South Jersey's trendiest zip codes.

The dramatic change in this borough of 14,000 people can be attributed to several factors, including a wider trend of revival in older communities with good housing stock. But perhaps no force had a larger impact, in retrospect, than the involvement of a handful of elected officials who were bent on improving Collingswood and, at the same time, bullishly investing in its real estate.

Within this group, Louis Cappelli Jr. stands out. An up-and-coming politician in the 1990s, Cappelli saw an investment opportunity in a strip of shops next to an abandoned lumberyard that the borough was preparing to seize through eminent domain.

Cappelli, then a borough commissioner and now the Camden County freeholder director, partnered with a high school friend turned real estate developer and bought the property for about $1.3 million in 1999.

Over the next eight years, the borough borrowed millions, passed tax incentives, and employed a take-no-prisoners approach to marketing.

Condominiums financed by Collingswood went up at the lumberyard. Yoga studios opened in storefronts that had long been vacant. Then, in 2007, Cappelli and his partner sold the retail strip for about $2.5 million, almost double what they had paid eight years earlier.

He wasn't the only one. Over the course of Collingswood's storied redevelopment, a process that continues today, a number of elected officials bought and sold numerous properties around town, riding the wave of a booming local real estate market they helped create.

A review of county property records shows that, besides Cappelli, a lawyer and influential Democratic politician in the county, others who invested in the borough include Jim Hatzell, the president of the Collingswood school board, who did legal work for the town, and Joan Leonard, a borough commissioner, and her husband.

Their real estate investments have been known in political circles for more than a decade and have raised little if any criticism. There is nothing illegal or improper in elected officials investing in redevelopment, as long as they abstain from votes directly affecting their properties and are not doing so with information outside the public domain.

A review of borough records shows no evidence that Leonard or Cappelli voted on matters that directly affected their real estate interests. As a member of the school board since 2006, Hatzell did not vote on matters of redevelopment.

Collingswood Mayor Jim Maley, a prominent lawyer and the architect of Collingswood's redevelopment effort, said the commissioners were allowed to vote on the redevelopment zones because they benefited a larger mass of people. That legal reasoning is supported by "some case law," said Matt Weng, a lawyer with the New Jersey League of Municipalities.

But elected officials profiting from the public projects they guide can enter an ethical gray area, said Dave Levinthal of the Center for Responsive Politics.

On one hand, these officials are putting their money where their mouths are, investing personally in the town they were chosen to lead. On the other, as elected officials, they are expected to act in the public good, not their own, and that line can be difficult to draw.

"You can't fault a person for buying property. It's everyone's right to do so," Levinthal said. The critical issue, he said, is whether an official who has invested is using his or her position "to bend the trajectory of a project to their personal benefit."

Ultimately, the judges of this are the constituents, Levinthal said. "If they feel this is fine," he said, "so be it."

In interviews, Cappelli, Leonard, and Hatzell all defended the deals as win-win. The town got investment dollars when it sorely needed them, and the officials made some money on investments that were far from certain at the time.

Not carpetbaggers, these elected officials lived in the town long before the boon. Leonard and her husband, Thomas, moved to Collingswood in the mid-1980s. They bought a former pharmacy in the center of downtown on Haddon Avenue, renovated the property, and moved in with their children.

A graduate of the University of Pennsylvania, Joan Leonard said she had a passion for "historic communities." She fell in love with the architectural styles in Collingswood and soon started offering to help businesses fix up their storefronts.

"Some people go to Habitat for Humanity. I say do it at home first," said Leonard, an occupational therapist first elected borough commissioner in 1997. "At the time, people were moving out for more affluent suburbs. It was a metaphor for what was happening all over the country."

What was a volunteer operation turned into a moneymaking venture in 1998 when Hatzell and Thomas Leonard partnered and started renovating houses. Some were flipped for a profit; others were kept as rentals.

"The motives were twofold: To make some money in the short or long term, and to take the worst house on the block and make it the best house to push up all of our property values," Hatzell said. "I physically scraped and painted and pulled wires."

The pair purchased nine properties over eight years, putting the business on hold when the recession hit.

In 2001, they acquired the former Robertson Business Systems building on Haddon Avenue for $180,000.

Donald Robertson, whose father had started the typewriter-repair business in the 1950s, had tried to sell the building 21/2 years earlier to the Pat's Pizza chain. But his application was rejected by the zoning board, primarily on the ground that there were already too many pizza parlors in Collingswood.

Robertson, who said he had been offered more than $250,000 by Pat's, did not realize until late in the sale that the buyers were Hatzell and Leonard, operating under the name Nittany Quakers L.L.C.

"I was just dumbfounded to know they were the ones that bought the building. Were they trying to set up the sale all along?" he said. "But what was I going to do? I was behind on my property taxes."

Leonard, who as a commissioner had the power to appoint people to the zoning board, said her husband and Hatzell simply purchased a building that had become an eyesore. The building now houses a fitness center.

"They paid fair market value," she said. "You should have seen the place. He should have been kissing their feet for buying it."

There are other instances in which the timing of the purchases was fortuitous.

In 2002, Hatzell and Leonard bought two homes in a neighborhood that would be turned into a redevelopment zone the next year. One was sold in 2004 for $148,000, more than double what they had paid.

And when Cappelli purchased the retail strip in 1999, the town was only a few months way from filing an eminent-domain suit against the lumberyard owner - though the intent was already in the public record via a commission vote from which Cappelli had abstained.

Walter Crossley, the owner of a facility-management company that sold the retail strip to Cappelli, said he had not known the town was developing the lumberyard at the time of the deal. Asked if that would have changed his asking price, he said, "Maybe."

"At the time I was more worried about losing a tenant, so I wanted to off-load the property," he said. "I'm a little guy. I'm not up there with the boys."

The deal on the retail property was disclosed in a lawsuit filed last month against Cappelli and the developer, Stephen Winters of Voorhees. Cappelli and his wife, Jacqueline, are in the midst of a divorce. In the suit, she asserts she did not receive her portion of the proceeds of the 2007 sale to Leomat Inc.

Cappelli declined to discuss the suit, but said he had made two property deals with Winters, who had been in talks to buy the lumberyard before partnering with him.

"Once I had an interest in the property, I had nothing to do with voting on the lumberyard," said Cappelli, 48.

The other property, now a vacant lot, was bought by Cappelli and Winters in 2003 from a publishing company. They sold it in 2010 for $275,000, the price they paid seven years earlier.

The political force behind Collingswood's transformation is Maley, the mayor. When critics deride the high taxes and municipal debt that have come with development, it is Maley they blame.

But the longtime mayor said he has never invested in real estate in Collingswood. Instead, he said, he has focused on his law practice, through which he has offered legal advice on redevelopment to other towns.

"Real estate, that's never been my gig," he said. "I don't want to be bothered."