Updated, 1:42 p.m.: Photo changed.
NORWALK, Conn. – Tim Sheehan is done being grilled by Jason Milligan’s attorney.
Attorney David Rubin queried Sheehan for two days in Stamford Superior Court, seeking to prove that “POKO” cannot be built as designed and to paint the famed Land Disposition Agreement (LDA) as invalid. Judge Charles Lee described the conversation as an “argument.”
Along the way Sheehan characterized Milligan behaviors he thought unscrupulous and immoral, a key component of an unfair trade practices accusation, and said he’s confident construction on POKO will resume within a year, perhaps soon.
Among other nuggets revealed by Sheehan’s tortuous appearance:
- The Redevelopment Agency and the City were in the dark when Ken Olson of POKO Partners got Zoning approval to move parking requirements onto an adjacent parcel (now a major obstacle in restarting construction)
- It isn’t just the parking spaces, two of Milligan’s Isaac Street properties are needed to meet the project’s floor to area ratio (FAR) requirements for Zoning
- The Parking Authority is close to approving a plan to realign Wall Street parking
A primer: the lawsuit
The City of Norwalk and the Norwalk Redevelopment Agency are suing Milligan and Richard Olson of POKO Partners, because Olson on May 31 sold Milligan five Wall Street area properties that were slated to be used for phase II and III of Wall Street Place, known to most laypeople as “POKO.”
Milligan bought the properties under the LLC Wall Street Opportunity Fund; Olson sold them under the LLC ILSR Owners. The plaintiffs contend that Olson did not submit Milligan for Agency approval before selling the properties; the Land Disposition Agreement (LDA), the contract governing the land, specifies that the Agency must give approval for a new redeveloper for the project.
Milligan’s financial arrangements are muddy, as the purchase and sales agreement for the properties – 21, 23 and 31 Isaac St. and 83 and 97 Wall St. – said that a $5.8 million loan issued by CC Rivington would be paid off, but there’s no evidence that it was, according to testimony delivered Tuesday.
CC Rivington assigned the mortgage to a Milligan-controlled LLC, Komi Ventures, and Komi also has a $5.2 million mortgage on the properties, according to court testimony. The properties are appraised by the Norwalk Tax Assessors as being worth $4.2 million.
A “participation agreement” was noted in the documents, Lee said Wednesday.
“It’s … possible there was a deal made with Rivington to participate in a bigger equity reward later. The papers are pretty opaque at this point,” Lee said.
The properties include a former municipal parking lot at 23 Isaac St., transferred by the City to POKO as part of the complicated deal to jumpstart development. Construction on Wall Street Place I stalled in mid-2016, and Citibank foreclosed on the project but declined to buy Olson’s other properties. The project has been sitting there ever since, as the City and the Redevelopment Agency negotiated with Citibank and its preferred developer, JHM Group, with the City pressuring Citibank recently with blight citations and a notice of default.
An arbitration session was held Wednesday. Norwalk Corporation Counsel Mario Coppola declined Friday to reveal if progress had been made, noting that it’s a “confidential process.”
Mayor Harry Rilling will not be releasing any statement regarding Wall Street Place “until the court renders its decision in the pending hearing,” Coppola wrote.
Sheehan, Redevelopment Agency Executive Director, on Tuesday complained that Wall Street Opportunity Fund had in June leased the former parking lot to Komi Ventures for 25 years, then Komi in August leased the lot to Milligan Real Estate.
This would make it difficult to redevelop the area and is in defiance of plans to increase residential housing, Sheehan said.
Before Milligan bought the properties, Citibank already had a “bit of dilemma” for restarting the Wall Street Place phase I construction: the Zoning Commission had allowed Ken Olson of POKO partners to move some of the required parking spaces off of Phase I onto Phase II, Sheehan said.
That became a problem when Olson died and Citibank took Phase I, as the two parcels were in different ownership.
Sheehan said Tuesday that the Redevelopment Agency and the City were unaware that Olson had gone to Zoning to get the parking switched. Citibank found out after taking Phase I through a deed-in-lieu transfer, he said.
Rubin pressed him on these points repeatedly on Friday, pointing out that the LDA wasn’t amended to show the parking changes.
Sheehan commented that Olson had assumed the City would agree to the change in parking, it wasn’t that he was hiding the issue.
But it’s more than the parking: parts of Isaac Street were always going to be abandoned, to connect the two phases of the development, Sheehan said, identifying 23 and 21 Isaac St. as part of that plan. The Isaac St. abandonment would allow the development to meet its floor to area ratio (FAR) requirements, he said.
Why a lawsuit?
The Redevelopment Agency has an history of working with developers through an LDA, with both sides of the equation upholding the agreement, Sheehan said.
“I think this whole issue of how this has been handled completely uproots that and undermines it,” he said.
Rubin asked Sheehan on Friday what he saw as unscrupulous in Milligan’s behavior.
Sheehan described a May 31 conversation in the Mayor’s office, in which Milligan said he wouldn’t be closing on the properties the next day, when in fact the transfer of the properties had already been recorded in the Town Clerk’s office.
Milligan had said he wanted to be the redeveloper but “then within days” was trying to sell the properties at a profit, and that “reflects insincerity relative to the intent to be the redeveloper,” Sheehan said. He went on to say that Milligan has no plan for the properties.
Rubin asked if there was any conduct by “the Milligan defendants” that predated the transfer that was immoral, unethical or unscrupulous.
“For me, one of the larger issues is that if Wall Street Opportunity Fund wanted to acquire the property and they had understood the requirements under the LDA, which they obviously did…what was the hesitation on the part of ILSR and Wall Street Opportunity Fund in disclosing that to the Redevelopment Agency and seeking approval?” Sheehan said. “It’s the secret nature of what was being contemplated between ILSR and Wall Street Opportunity Fund and the shadow that they cast that deal under.”
Rubin pointed out that an unauthorized transfer was contemplated in the LDA and questioned how it could be “unfair, immoral and unscrupulous if it actually happens.”
“You tricked me,” Lee said to Rubin. “I misunderstood what you said in our initial hearing when you said there are rights to an unapproved sale. But, yeah, these things happen, so do breaches of contract and all these other things. There are remedies, it doesn’t mean they’re allowed. I think, you really mentioned, the key to this whole case is why not follow the procedure? That’s what I haven’t heard anything about. Now hopefully Mr. Milligan can take the stand and explain, why not just do what you are supposed to do? Why do all this?”
“Is not following the procedure unethical, unscrupulous and immoral?” Rubin asked Lee.
“You’ll have to ask (Sheehan),” Lee replied. “I’ll tell you later.”
Rubin later pressed Sheehan on Wall Street-area blight, asking why the Agency objects to Milligan renting out storefronts and adding life to the street.
“The bottom line with this is the redeveloper shouldn’t be out leasing the existing space, they should be out trying to purchase the properties to effectuate the development,” Sheehan said.
“This is a blighted area for the last 14 years, where nothing has gotten done and you have somebody that is putting in vibrant tenants into a neighborhood, that can coexist at the same time, while it is pursuing redevelopment status,” Rubin replied.
Sheehan’s testimony began Wednesday with Rubin pressuring him to explain New Street, a pedestrian plaza shown on the plans as going through existing buildings next to POKO, at one point suggesting that the City would have to take those buildings to create the street.
“Is it fair to say that there is a road that needs to be constructed in connection with phase I in order to complete phase I?” Rubin asked.
“New Street is considered a phase I construction improvement, infrastructure improvement, under the LDA,” Sheehan replied.
“So the answer is yes?” Rubin replied.
“Can you repeat your question?” Sheehan shot back.
“Is it fair to say, is it correct, to say the New Street needs to be completed as part of phase I?”
Redevelopment Agency Attorney Joe Williams objected, calling that ambiguous as the question did not identify who would be responsible for building New street, and the Sheehan/Rubin duo was off to the legal races, with Rubin asking, “The construction of the new street under exhibit the LDA… is part of phase I, correct?” and Sheehan replying, “It’s a phase I infrastructure improvement and in the LDA itself there is a lot of flexibility given with regards to public infrastructure related to the project.”
“Does the new street need to be completed in order for them to be a certificate of completion issued in connection with phase I?” Rubin persisted.
“My answer to that would be no,” Sheehan replied.
Rubin continued trying to get Sheehan to say that the project can’t get a certificate of completion or a certificate of occupancy as-is, pressing on details such as utilities and Wall Street parking.
A plan developed by POKO to realign the parking on Wall Street is in a “final review” by the Parking Authority and its consultant “before implementation,” Sheehan revealed. He surprised Rubin by telling him that some infrastructure improvements had been completed.
Traffic signalization work had been done, Sheehan said.
After nearly two hours of Sheehan’s laborious testimony, Rubin got the answer he was looking for.
“My question is subject to a yes or no, really,” Rubin said. “Can a CO be issued for phase I based on the properties currently controlled by the phase I owner under the existing plan?”
Williams objected, stating that the question had been asked and answered. Lee stepped in and listed issues Sheehan had identified, reasons why the certificate would not be issued.
Sheehan agreed the list was accurate.
“The answer is no, then,” Rubin said.
“It is no, right?” Lee said.
“The answer would be no,” Sheehan said.
“There we go,” Lee said.
So, no, if the construction on Phase I were completed in accordance to the plan the construction began under, the project would not be given its certificate of completion.
The day had begun with Sheehan announcing that there’s probably 14 months of construction left on Phase I.
He said, “I think public parties are very focused on moving this project forward and would do anything they could to expedite any changes that they needed to do that the public parties are in agreement with.”