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Milligan pushes back at perception of attempted ‘POKO’ flip

Real estate broker Jason Milligan, at Tuesday’s Common Council meeting in City Hall.

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.”

 

 

‘Opportunity’

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?”

16 comments

Mitch Adis July 25, 2019 at 6:27 am

If he did buy it to flip, so what? What makes him different from Selligson or any other developer in Norwalk? Only difference I see is he’s not in the inner circle.

Bryan Meek July 25, 2019 at 8:38 am

McClutchy is set to make $6 million off the backs of taxpayers for risking nothing other than a few $10k checks to the political machine that is force feeding us this colossal waste of money.

But, he has issue with Milligan who risked $millions of his own money and would dare to seek a profit or basic amelioration for the snafu created by the very same political machine.

Where is Bob Duff in all of this. Remember the $5 million of our money he put into this 5 years ago now? Poof. Gone. Or maybe Bob could explain when he has some free time from telling us that it is hot out?

Multiply this snafu x 100 going on across the state and you can quickly figure out why the state is circling the drain financially. A few well connected folks donate heavily to the political machine that is all to happy to fleece us.

What do we get? We get to fight for the few spaces left at the beach that aren’t taken up by out of state cars, then enjoy a frosty milk shake with a paper straw in a plastic cup.

Bryan Meek July 25, 2019 at 11:53 am

Who knows, maybe the land is worth $10 million now according to our city.

The city did just increase the assessment on 343 Newtown Ave from 2.2 million to 5.5 million in the reval. This is the Gregory’s plaza in Cranbury.

Tax bill went up 150% from $22,000 to $55,000.

Groceries, Pizza, and Chinese food just got a LOT more expensive.

How’s that for a Trifecta?

Bryan Meek July 25, 2019 at 11:58 am

Excuse me that is the 6 month tax bill comparison. They went from $40k a year to $100k a year.

Rusty Guardrail July 25, 2019 at 1:09 pm

Does anyone reading this know whether the Grand List appeals are still in progress? If the appeals have all been adjudicated, where’s the finalized list?

Jim McGuire July 25, 2019 at 1:37 pm

On a POKO/parking related note: I seem to recall a Nancy on Norwalk article about the automated parking garage mechanism being stored in a warehouse somewhere awaiting installation. If the automated garage is now not part of the plan, where is that expensive asset ? Who owns it ? What happens to it ?

Jim

Jason Milligan July 25, 2019 at 1:49 pm

The automated garage system was a custom built. There is not much salvage value.

The guy that built it never was fully paid.

Sid Welker July 25, 2019 at 3:31 pm

Bryan Bryan Bryan. Most citizens in Norwalk had their property taxes go down along with the mill rate as their assessments went up. Everyone complained about this process when it was announced but did anyone actually breathe a sign a relief when they noticed the tax break? NOPE! People still found a reason to complain. Point in case. In order to do this the City had to go after the deeper pockets which is commercial real estate. All shopping centers, Ct Ave single tenant stores, and apartment buildings across Norwalk took a hit. I mean HUGE HITS! Look it up. Its free and easy to do. http://www.norwalkct.org

Bryan Meek July 25, 2019 at 10:22 pm

@Sid. The assessments are bogus and you know it. Look up any real estate closings this year and you will see the deals are all coming in way, way, way below assessed value. The smoke and mirrors of shifting the tax hit to commercial properties will come back to consumers in price hikes. Econ 101. Next up a crash in the commercial market as these retail outlets will be forced to drastically increase rents, which will in turn force businesses to look to other towns and regions where the local government understands basic economics. Meanwhile our economic engine serves to provide revenues to Hartford who just got a sweetheart deal of 95% construction reimbursement from the state, just after getting a $500 million payout that was funded by diverting money that is supposed to go to the teachers retirement system, and refusing to implement any of the suggestions from the municipal accounting review board. Sorry, some of us are sick of being fleeced and refuse to be lapdogs for the political machine that is driving this state into financial oblivion.

Ron Morris July 26, 2019 at 10:22 pm

Bryan Meek
Please stop making things up as some of the low information voters may actually believe you.

Sid Welker July 29, 2019 at 9:39 am

Exactly Ron. Bryan look at Sundays Hours front page article with the title “Upset property owners go to court to appeal revals”. Please don’t reply with “fake news” or “smoke and mirrors” as this would just further lobby the case that political sides have blinded you from numerical facts that no FOI act is needed.I myself have no political alliance believe it or not (and I know you wont) I just want to make sure all sides and parties see full transparency of people as well as the cold hard facts.

Bryan Meek July 29, 2019 at 4:08 pm

@Sid. Not sure where I ever mentioned FOI or your political alliance. I simply stated the reval was not reflective of market values in many cases. My guess is an inordinate number of cases. You seem to back that up with a reference to multiple lawsuits engaged for the same. Residential property owners were afforded the appeals process. Some worked ok, most did not. All commercial owners have been told to hit the road and use the courts system. That sounds like a productive use of city resources given there are easy comps suggesting the 30 to 40 percent increases may be off the mark. No FOI is needed, these are all public records.

Alan August 2, 2019 at 4:28 pm

It seems to me that this project was approved with adequate parking provided in an automated garage within the building. How is the approved parking garage no longer part of the project? Whomever finishes this project must be required to provide what Norwalk was sold. Has nothing to do with Jason or the Garden Cinema.

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