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Kinol: Tear ‘POKO’ down

Wall Street Place, as seen in October from the Fairfield County Bank building. (Jason Milligan)

NORWALK, Conn. – Developer Paxton Kinol on Thursday shared some thoughts on “POKO,” the stalled Wall Street development sometimes called “The Tyvek Temple.”

As previously reported, Kinol analyzed the project and called the financials “crazy.” On Thursday, he elaborated on those thoughts, opining that the project should be torn down.

“The Tyvek Temple” is officially called Wall Street Place phase I, planned for ground floor retail and 101 apartments,  36% designated as affordable housing and supported by Low Income Housing Tax Credits, which have expired, and a controversial underground automated parking garage. Construction stalled in mid-2016 due to a budget gap described in a bank document as $9,853,181. Developer Ken Olson of POKO Partners had become ill at the time and has since died. The City and the Norwalk Redevelopment Agency have been working with Citibank to restart the project and are facing roadblocks from real estate broker Jason Milligan.

Kinol on Thursday wrote:

“Two years ago, I received a call from Ken Olson telling me he was dying and asking me to work on POKO with him, which I gladly did for several months. I put the end results in a letter to him which I also shared with the city.

“The key findings were:

  1. “The building design was terrible and the apartments could never reach a full market rent even if the restrictions were lifted.
  2. “The actual total cost was approaching $50 mm which made it about double the value at the end. Thus $25 mm wasted.  This is largely because of the government restrictions on labor rates. The normal Connecticut multifamily subcontractors will not work on the building.
  3. “30% affordability is too high because the other 70% of apartment homes will be negatively impacted and the rent will be 30% below market also.
  4. “The automated parking garage idea was terrible and the actual cost is $5.5 mm, which is more than just building the normal podium garage.
  5. “The deal never made financial sense and should never have started.  It went on to say that many other developers would come work on this development and each would eventually reach the same conclusion and walk away.
  6. “The building should be demolished, and the land made available for development without the 30% affordable requirement.

“I think they have been through five or six.  We reached out to Citibank several times and they refused to engage with us.

“We like POKO phase II but we wanted to purchase one additional parcel to make a better connection to Wall Street or West Avenue. That seller did not live up to the deal so we walked away.

“I think the land and the building skeleton is worth about $3 mm today.  The mechanical garage will always be a drag on building value because of its high operating expenses.”

 

 

NancyOnNorwalk in August attempted to get a copy of Kinol’s letter through a Freedom of Information request to the City but was unsuccessful.

10 comments

Bill Nightingale May 17, 2019 at 8:34 am

This project is just beyond shameful. A huge scar on Norwalk. And the fact that Tim Sheehan and the Redevelopment Agency are allowed to carry on is unfathomable. Please, tear up any and all LDAs and abolish the Redevelopment Agency.

Paul May 17, 2019 at 9:19 am

Excellent points and not surprising. Thank you for sharing. For some suspicious reason the project has resurrected. Hmmm!

EnoPride May 17, 2019 at 10:17 am

And there it is, folks. Unbelievable, but now we have the truth. This was a rotten plan right out of the gates, hidden from taxpayers behind closed doors at City Hall/RDA both then and now. Shame! Nobody in their right mind would greenlight this. Mayor Rilling should not be re-elected on this alone, Mario Coppola should be let go, LDA needs to be torn up and RDA needs to be abolished YESTERDAY. Tim Sheehan truly is public enemy number one. His frivolity with other people’s money is just astounding. 25 million dollars projected as wasted if this nightmare went through? Think about what 25 million dollars could do for our school system, because Tim Sheehan sure as heck doesn’t! When you hear this, you have to wonder how many more of these fortresses all over our city were poorly planned/financed behind Sheehan’s closed door, and what are the REAL numbers on them. How many tens of millions of dollars here and there have slipped through the cracks on those? And why does our leader (?) Mayor Rilling continue to be led by the nose by Mr. Sheehan? Disturbing, and a very good reason for Norwalk residents to be highly concerned.

Vote Lisa. She understands how school budget is negatively impacted by wasteful city land development expenditure. Have faith that Lisa, with her business background, will get to the bottom of all this when she gets into City Hall and will reallocate our money where it belongs. Norwalk could really use her help and expertise right about now! Go Lisa! You got this!

Jason Milligan May 17, 2019 at 1:18 pm

Chapter 130 Sec. 8-136. Modification of redevelopment plan. A redevelopment plan may be modified at any time by the redevelopment agency, provided, if modified after the lease or SALE of real property in the redevelopment project area, the modification must be consented to by the redeveloper or redevelopers of such real property or his SUCCESSOR or their successors in interest affected by the proposed modification. Where the proposed modification will substantially change the redevelopment plan as previously approved by the legislative body, the modification must similarly be approved by the legislative body.

Jason Milligan May 17, 2019 at 1:37 pm

Mario & Tim both argued passionately in court that I am a successor and that I am bound by the terms of the LDA, and that they can enforce any and all rights and remedies against me.

Nothing can be done to any Phase of POKO without an amendment to the LDA. Team McClutchy could not even build the original plan if it were realistic or feasible with out at least adjusting the timelines. All deadlines in the LDA were hilariously “Time of the Essence”.

Let’s review some of the more ironic absurdities about the POKO trainwreck:

1. I am a party / Successor to the LDA. Therefore nothing can be done with POKO without amending the LDA which requires my written consent (Ha!)

2. Phase I cannot practically be built without significant changes to the LDA and or ripping down the existing structure and starting over.

3. I am 100% in compliance with my responsibilities of the LDA. I have not breached any portion of the agreement, and there have been no defaults against me. Since POKO was a “Phased” project that means that NONE of my responsibilities that start at Phase II are ripe until or unless Phase I is completed and issued a certificate of occupancy.

4. Citibank has breached, has defaulted and there is an “Event of Default” against them.

5. Olson likely breached the agreement. He was not issued a Notice of Default. “No Event of Default” ever occurred.

6. Redevelopment & the City have racked up $500,000 in legal expense trying to get a temporary injunction against me to try to stop me from improving my buildings among other things. They have not been successful and on Wednesday there will be testimony from my expert witness as the judge decides on our motion to dismiss the entire lawsuit.

7. All of the secret discussions are an enormous waste of time and they continue to erode what little trust remains with the citizens of Norwalk, and they are meaningless since any POKO plan requires my written consent.

Jason Milligan May 17, 2019 at 1:42 pm

There is plenty more, but let’s digest all of that 1st.

I am happy to hear anyone try to refute any of my statements above.

Of course I have several elegant solutions that are well thought out and take into account all sides, but I need a willing dance partner effectuate any of the plans.

Unfortunately the more Mario & Co. try to ignore me and force enormous legal fees on everyone it becomes harder and more expensive to resolve.

If I don’t get an audience soon then I will begin to publish some of my ideas and plans. We’ll see.

Jason Milligan May 17, 2019 at 1:55 pm

I am arguing in court that the LDA and all the amendments are invalid & unenforceable. If I am proven correct than the POKO disaster is over, period.

The City/RDA also have the right/remedy to terminate the LDA because Citibank has created an “Event of Default”.

For the City/RDA to terminate the LDA it would require my written consent. I would not unreasonably withhold that consent, and I think this is one of the best courses of action.

It would not prevent the City from negotiating a new & different POKO project with Citibank, but it would also release them from its responsibilities including spending $4.3 million in bonded and allocated infrastructure spending. It would be nice for the city to immediately reclaim that $4.3 million. In the secret negotiations that money no doubt gets absorbed by Team McClutchy…

Jason Milligan May 17, 2019 at 2:00 pm

From: Jason Milligan
Sent: Tuesday, April 30, 2019 9:03 PM
To: Jeremy Johnson; John Heppolette ; Steven Hall
Cc: Todd McClutchy
Subject: Wall St area Miscalculations

Eager Beavers,

I am beginning to uncover the circumstances under which you plan to resurrect the lifeless POKO project.

I notice a lack of attention to detail that may lead to failure and embarrassment, and I offer an opportunity to collaborate. I also want to alert you that I plan to restore certain rights of my that are currently being violated by you.

As a favor I have copied & attached several highlighted sections of the infamous LDA. There is a list of improvements that Citibank is required to be completed if the LDA is valid. The LDA also lists city infrastructure responsibilities like constructing New St #1 as part of the phase I improvements.

Phase II construction only starts after Phase I is completely done including a parking garage with 100 parking spaces, New Street #1, and every last detail of the Phase I improvements listed in the LDA.

The provisions of the LDA shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. I am a successor!

Section 27.6 This LDA may be amended only by a written document, duly executed by the parties hereto, evidencing the mutual agreement of the parties hereto to such amendment. (Amending the LDA in even the most minor way could affect the rights of parties to the LDA and therefore the approval of all parties is required to make amendments)

Section 27.8 The terms and conditions of the LDA, including the exhibits hereto, shall constitute all of the terms and conditions that shall be required by the Parties of one another.

19.10 Revesting Title in Agency Upon Happening of Event Subsequent to Conveyance to Redeveloper. (Right to ReEntry is not so straight forward.)

A. …prior to the completion of the Improvements on such parcel(s) as certified by the Agency, the Redeveloper (or successor in interest) shall cause or permit an Event of Default to occur, then the Agency shall have the right to re-enter and take possession of the Isaacs Street Municipal Parking Lot and/or the Leonard Street Municipal Lot.

The previous owner may have breached the LDA. An Event of Default can only exist after a breach/default occurs, a Notice of Default is sent, a right to cure period is provided, right to mediation period, and right to arbitration period. All parties to the agreement including Lenders have the right to notice and to cure breaches/defaults.

I am a successor. I have never committed a breach of a default. If the LDA is valid then I MAY be bound by the terms of the agreement, but none of the construction requirements for Phase II are ripe until the Phase I C of O is issued including the public parking garage etc. Further there are at least 3 Phase II properties that are not owned by me, the City of Norwalk or the Redevelopment Agency. They are owned by private parties.

The main point is there is a very good chance that the LDA is completely invalid. If it is valid it is unenforceable for a variety of reasons. The original contemplated project phases are literally impossible to build without significant changes. Changes that are only possible with all public & private parties’ approval, including ME!!

Ignoring me and trying to force a project through the dysfunctional City of Norwalk is a bad idea especially when anything you try to do will affect my property rights. It would behoove you to reach out to discuss your plans and ambitions prior to getting too much further along. Cooperation is always the easier path, and you should know that a representative of the city said that they would be happy to support a plan that we collaborated on.

Jason Milligan

Michael McGuire May 17, 2019 at 3:17 pm

The City’s best course of action – tear up the LDA and stop the bleeding.

This will force Citibank to sell at a market clearing price. Then allow the market to bring forth the best idea for the redevelopment of this site.

To “compensate” for the lost land (the lost parking lots) the City can stipulate that any developer of this site be required to build a train station at Wall Street. The cost to build this is not much but it enhances the value of POKO by making its rental stream a bit higher and much more durable. In effect, it would be well worth it to the developer of POKO to build the train station.

Working out a deal with MTA and Conn DOT will be the City’s responsibility but I believe our City leadership (without RDA interference), has the capabilities to make this a reality.

In this process the City gets the following benefits

1. Immediate recoup of the $4.3 million

2. An end to the now multiple law suits which cost the taxpayer dearly

3. A market derived development (always better than having a few people decide) that gets done in the very near future (Citibank will move to sell this REO property quickly).

4. A train station.

5. A downtown that is thriving, vital and one we can be proud of.

6. A significant increase in the Grand List due to increasing market values in the Wall/Main/West area.

Ask your CC member why they are not pursuing this option. The following is the e-mail address which sends your comment to every CC member

[email protected]

Many good things are happening on Wall Street – Be part of the change

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