NORWALK, Conn. – Jason Milligan insisted Wednesday that he did not buy the former Norwalk municipal parking lot on Isaac Street so he could flip it.
Look at the title of the LLC he formed to buy it, “Wall Street Opportunity Fund,” he said. It’s the first Norwalk use of the federal Opportunity Zone and the intent is to tie the money up for 10 years, he asserted.
On Tuesday, John McClutchy slammed Milligan as having sought to sell the lot for $8 million or $10 million. He also recounted Milligan’s early negotiations, when he sought $3.75 million.
The lot is at issue because its parking spaces were slated to be used for “POKO,” officially referred to as Wall Street Place, a mixed use development on Wall Street. McClutchy is working with Citibank and City officials to restart construction of the project. The plan is to demolish the Garden Cinemas to provide the parking that would have been on that lot.
Here’s where it gets murky: the lot was originally slated for parking on “POKO” phase II, and McClutchy is working to get approvals for POKO Phase I. Phase II and III are not part of the plan and are likely never to be built.
The late Ken Olson of POKO Partners, in a move Milligan calls “sneaky,” in 2016 quietly went to the Zoning Commission and got the phase I parking moved onto phase II.
Then-Redevelopment Agency Executive Director Tim Sheehan testified in Court early this year that Olson’s move amounted to “cheating the public out of parking.”
Construction on Wall Street Place subsequently halted, in June 2016, due to a $9 million budget gap and Citibank took possession through a deed-in-lieu transfer. This meant that the phase I owner did not have control over the property slated to be used for additional, required, phase I parking. That situation intensified when Milligan bought in May 2018 the parking lot and other “POKO” Wall Street area properties slated for the development.
Milligan maintains that the need to demolish the Garden Cinemas is due to the “sneaky” move by Olson and the quiet Zoning Commission approval, rather than his purchase of the former Leonard Street lot.
The “narrative that I somehow messed up the parking” is “total spin,” Milligan wrote Wednesday. “The alleged zoning changes for parking were ‘significant’ and should have required a zoning hearing and approval from the council. The public was never made aware of the alleged zoning changes and even Tim Sheehan claims he was unaware.”
Milligan said he didn’t know the phase I parking was on the land he bought because it wasn’t on the land records. He called the arrangement “illegal.”
‘A grand bargain’
“It is not my desire to sell any property,” Milligan wrote. “My overarching desire is to materially improve the Wall Street area. This administration is dead set on Citibank and McClutchy doing a deal. They are fighting me with everything they have. The Garden Cinemas is at risk of becoming unnecessary collateral damage.”
McClutchy on Tuesday said that Milligan initially sought $3.7 million for the parking lot, then abruptly demanded $3.75 million plus $25,000 a month, and an end to the lawsuit the City and Redevelopment Agency had filed against him, challenging his purchase of the properties.
“For 30 days after my purchase I offered to sell the parking lot and 21 Isaac’s at cost. They wanted a bunch of free time to kick the tires. I moved on and invested significant money into my properties,” Milligan wrote.
McClutchy on Tuesday said that the demand to end the lawsuit ended the negotiations, but Milligan came back later and told Todd McClutchy that he’d sell the lot for $10 million.
“That went on for a little while, then several weeks later he came back and told Todd he’d sell the property for $8 million. So, we have no clue. I know it’s not worth $10 million, I know it’s not worth $8 million. I know it’s not worth $5 million,” McClutchy said.
“When I met with Todd we brainstormed several scenarios,” Milligan wrote Wednesday. “With the timing scenarios and other contingencies he would have wanted I told him $10 million. Under other scenarios we discussed $8 million.”
“I am happy to brainstorm. There are many things to consider. Value is derived in many ways. Time is money and I value speed very highly. … it is a year later. I have spend close to 500k in combined legal fees. I have put over a million into my properties. And I don’t really want to sell. I would rather find ways that don’t include selling.”
What contingencies would be worth $10 million?
“There’s a grand bargain that I would like to make,” he said, listing the “four litigations that are underway,” the value of time, costs and a desire to “solve all the problems in one.”
“I would love nothing more than the freedom to operate and do the things I like to do with the rules that are in place,” he said. “So it’s a fair question. And I don’t mind telling you but it’s so complicated.”
“Here’s the real reality,” he said. “I’m not looking to sell. I’m entertaining selling because of how hard they are fighting me. They are hell bent on pushing this bad deal.”
Milligan in May 2018 bought:
- 23 Isaac St., the Leonard Street lot
- 21 Isaac St.
- 31 Isaac St.
- 83 Wall St.
- 97 Wall St.
All were slated to be used for the latter phases of Wall Street Place, and Milligan’s purchase is said by the City to be a violation of the Land Disposition Agreement governing them. Milligan paid $5.2 million. To determine the value of each individual property, Milligan divided up the purchase’s total square footage by the square footage of the individual property, then used the figure to determine a percentage of the whole. The Leonard Street lot was thus assigned a nearly $3.2 million figure although the City appraises it at $1,874,390.
Again, no intention to flip the properties, he said.
“I bought the 5 properties as a long term hold,” Milligan wrote Wednesday. “I used 10 year money.”
There are tax advantages to an opportunity fund, but you have to hold the properties for 10 years to maximize the benefits, he said. “Selling prior to 10 years comes with penalties. If I bought the properties with the intention of flipping them I would not have set up an Opportunity Fund!!”
Citibank: ‘Good faith not reciprocated’
Milligan provided emails from May and June of 2018, which show him negotiating with the McClutchys and Citibank, not just for the Leonard Street lot but also for 21 Isaac St., a neighboring property.
The $25,000 a month was “monthly burn rate/opportunity cost of keeping buildings vacant,” he wrote, calling the $3.75 million asking price a “break even” deal.
Milligan stipulated that he’d expect McClutchy support on his neighboring projects. He planned to build micro-apartments over the Fairfield County Bank and had requested Zoning changes he said, suggesting that JHM join him in trying to get the tax incentives that the City was considering offering, to “keep taxes at 50% of full value for a number of years.”
He asked that his bank apartment tenants be given access to the expected Wall Street Place roof terrace and requested that the alleyway behind the bank be enlarged. He also asked that Millligan Realty be considered to be POKO’s rental agent.
He listed two options.
- The “McClutchy preferred option” would feature a $3.75 million purchase price for 21 & 23 Isaac St., “and/or sell a 6 month option for $150,000, with some reasonable extensions thereafter.” There was also mention of the underground parking garage.
- The “Milligan & Neighborhood stakeholders preferred option” would be for McClutchy to finish just the 70 apartments that were framed out, with just the 10% affordable housing required by state statute, to “strip away” the tax credits. The deck would be removed and the plans for an “enormous lobby” and two retail spaces would be scrapped to provide 50 parking spaces in a surface lot. Milligan would sell parking rights in his newly-acquired former city lot for $30,000 a space for “some period.” McClutchy could purchase at least 20 spaces for $600,000 to provide at least one dedicated space for each of the 70 apartments. If McClutchy wanted to buy more, the price would go up. He’d leave the lot open to the public for an extended period but would want the option to build later.
Citibank administrator Steven Hall replied that Citi would not finance Milligan’s preferred option and quoted Todd McClutchy as saying that the fixed infrastructure development costs need to be spread across more than 70 apartments.
Milligan on June 29, 2018, said he wanted the legal threat off the table. After he’d been served, he said the terms of the deal would change with just one court appearance.
John McClutchy on July 5, 2018, agreed to pay $3.75 million and the requested fees. Milligan wanted the $25,000 a month backdated to June and the lawsuit withdrawn.
Negotiations broke down on July 9, 2018, with Jeremy Johnson of Citibank writing to Milligan, “There’s likely no reason whatsoever for us to waste time on a call. I don’t see us being able to negotiate anything. We (Citi) are trying to negotiate in good faith, but that is not being reciprocated by you. You continue to move the target with each conversation.”
‘How am I going to sell at cost?’
“The lawsuit was bulls—t,” Milligan said Wednesday night. “If they had this under contract, you don’t think they could have said, ‘Mario, drop the g–damn lawsuit’?”
“They chose to not pay me the money. They chose to move slowly,” he said. “And they chose to say we’re not going to get rid of the lawsuit. How am I going to sell at costs When I know that I have a big wide-open legal defense I have to pay for?”