NORWALK, Conn. — John and Todd McClutchy publicly pitched their plan to finish a stalled apartment building at Wall and Isaac Streets.
The 100% affordable housing-plan to restart construction on Wall Street Place, commonly referred to as “POKO,” includes keeping Isaac Street in a one-way configuration, Todd McClutchy said Thursday to the Common Council Planning Committee. Retail space was removed from the Isaac Street side of the building to provide “desperately” needed parking spaces, and loans from two state agencies are part of the funding stack.
As previously reported, the Garden Cinemas would be demolished to build a two-story parking garage and the 101 apartments over ground floor retail will cost a total of $80 million, a sum that includes what McClutchy called $19 million in “sunk costs” for Citibank.
Video of entire meeting, by Harold Cobin, at end of story
“It’s a tremendous sum and what Citibank’s mission here is that … the new money has to be something that is viable, something that is sustainable, so that they are putting good money into the development,” McClutchy said.
Citibank had no representatives at the meeting. The bank, which controls the Tyvek-wrapped monolith through a deed-in-lieu of foreclosure, plans to issue a $35 million construction loan to finance the project. It will buy $25 to $30 million in 4% Low Income Housing Tax Credits at a higher than market rate to provide equity for the project, McClutchy said.
“Citibank is going to take a loss on this deal no matter what happens. They are willing to stick with it and provide the financing going forward because they don’t want to leave the City of Norwalk with a hole,” McClutchy said.
The plan now under consideration publicly was developed through two years of negotiations, in which both sides made significant concessions, Norwalk Redevelopment Agency Executive Director Tim Sheehan said, explaining that the Council presentation is just the start of the process as it will, if moved along by the Council, need approval by the Zoning Commission and the Redevelopment Agency.
“This isn’t done in the dark of night, this is the first of many meetings,” Attorney William Hennessey said, representing the McClutchys and their JHM Group.
Five of the six Council Planning Committee members seemed amenable to the plan. Council President Tom Livingston (D-District E) asked many sharp questions, called the parking garage “horrendous,” and then voted against sending the proposal to public hearing. It passed on a 5-1-0 vote and is planned for July 18.
Wall Street Place has its origins in a 2004 Wall Street redevelopment plan. The planned three-phase project is governed by a Land Disposition Agreement signed in 2007; it gained initial Zoning approval in 2008. POKO Partners then obtained extensions on its LDA deadlines, finally beginning construction in 2015 after receiving its final extension under Mayor Harry Rilling.
Construction on “POKO” then halted in June 2016 due to a $9 million budget shortfall. A parking shortfall then developed: The Zoning Commission had allowed some of the needed parking spaces to be moved onto phase II of the project, which became an issue when Citibank took over phase I as Citibank does not own phase II. Real estate broker Jason Milligan bought the phase II parcel, the former Leonard Street municipal parking lot, in May 2018, further complicating the situation.
The City and the Norwalk Redevelopment Agency have sued Milligan and Richard Olson of POKO Partners over this transaction, seeking to regain control over the property.
The project was approved for 36% affordable housing in 2015. The LDA actually calls for a minimum of 20% affordable housing, Sheehan said Thursday.
High affordable component?
“We hold most every project we ever developed,” John McClutchy said, addressing concerns from some that the developer will take its development fee and then sell the completed project.
The father-son pair touted their accomplishments in building The Heights, a Darien affordable housing project, as evidence of their ability to restart Wall Street Place. Neighbors said their homes would be devalued but instead the values have increased, and the project is a “huge success” with a constant waiting list of people looking to move in, John McClutchy said.
The elder McClutchy said the company has been in housing for 50 years, has built 55,000 units of housing and 5.5 million square feet of retail/commercial space throughout the country. JHM is partnering with The Richman Group on Wall Street Place, continuing a partnership that has created 150,000 units of housing.
“I believe, personally, that the development we have come up with fits the profile of the city,” John McClutchy said. “I believe that the people who will live there will reflect the character and the income streams within the city because it’s not one low-income stream, it’s several. And it’s in different categories.”
Some have said that Wall Street Place will be unsustainable, destined to fall into disrepair due to its affordable housing status.
That happens to developments that are over-leveraged, resulting in rents that don’t go up as much as expenses do, McClutchy said.
“I have built under every program that HUD (United States Department of Housing and Urban Development) has had since the early 70s,” he said. “The Low Income Housing Tax Credit program, which is the result of Tax Reform Act of 1986, is the most successful of all of them because what it did is it provided a way to subsidize rents by providing enough capital to offset your costs, make sure that you have true sustainability in these deals.”
Citibank is “paying 10 to 15% more than the current market typically generates,” Todd McClutchy said. “That allows for nearly $28 million to be generated.”
“As part of the underwriting process (with Citibank)… there are adequate operating and replacement reserves to instill that the long-term sustainability of the project is viable,” he said, adding that JHM’s “concentration of developments in Connecticut” allows it to get “better bang” for its buck.
The Connecticut Department of Economic and Community Development (DECD) is planning to fund the project with a $5 million loan and the Connecticut Department of Housing (DOH) will award a $3.5 million loan, Todd McClutchy said.
Livingston pushed back, asking if the project was using municipal borrowing capabilities.
The tax-exempt bonds are “sponsored by a local agency and then those are issued by the state,” McClutchy said, and Sheehan chimed in, “the local agency could be the Redevelopment Agency” or CHFA (Connecticut Housing Finance Authority). The Norwalk Housing Authority could sponsor the bonds or the City could, McClutchy interjected.
It won’t affect the City’s or the Redevelopment Agency’s credit rating, as, “These have to be supported by the income from the project itself,” John McClutchy said.
The project failed under POKO, with its 36% affordable housing, Sheehan pointed out.
“The people that the mall is going to employ would be able to live in that district and hopefully be able to walk to work,” he said.
Criticisms and replies
Other Council commentary referred to the Wall Street historic district, the area’s artistic spirit and the $4.4 million in City infrastructure costs.
The LDA calls for the latter, for all three phases; that could be available to phase I, Sheehan said, calling it “up to the city to make the determination.”
“The developer is paying for the public infrastructure cost and then being reimbursed after its completed,” Corporation Counsel Mario Coppola said.
There are historic properties in the district, but Wall Street Place is not one of them, Sheehan and Director of Community Development Planning Tami Strauss said, in response to Livingston.
Public criticism came before the McClutchys and their team spoke.
The Wall Street Neighborhood Association has a vision for the Garden Cinemas, as it expected that the Cinemas would be purchased and donated to the Association, becoming the centerpiece of an annual film festival and a community hub, Marc Alan said, voicing hope for wiggle room on the parking garage planned to replace the theater.
Tod Bryant produced a 15-year-old Wall Street Place rendering and said it was virtually the same as the new rendering, an update from what was approved in 2015.
That new rendering is a “stock design,” that will “destroy the street,” Bryant said. “This is a statement building. This is what people are going to remember Norwalk for, there’s SoNo, there’s the mall and this building.”
Milligan said that the plan to keep Isaac Street one-way would result in “no legal viable exit.” Attorney Daniel Benjamin, who represents John Dias in his “POKO”-related lawsuit against the City and Redevelopment Agency, pointed out that the only exit drivers will have from the one-way-Isaac will be Milligan’s lot, the former Leonard Street municipal parking lot,
“How many cars are going to go there, day and night? Is there a potential danger there by exiting through the parking lot?” he asked.
Unaffiliated Mayoral candidate Lisa Brinton assailed the tax break JHM will get, reduced property taxes for 15 years, by asserting that Norwalkers are fed up with their steadily increasing tax bills and asking, “Why do they get a deal that the rest of us don’t get?”
Replies came as the meeting wore on: the tax deal is already part of the LDA, which calls for the property’s owner to pay 7.5 % of the residential gross income for 15 years, the LIHTC period, Coppola said.
It had been proposed as $215,000 a year to Norwalk but is now projected at $195,000 a year, Todd McClutchy explained.
JHM and Citibank tried to change the tax agreement but the City stood firm, Coppola said, calling it not an abatement but more of a tax fixing agreement and pointing out that Trinity Financial has a similar deal for Soundview Landing, the replacement for Washington Village, and other Fairfield County towns do similar things.
Isaac Street is one-way now, Todd McClutchy said; that situation dates to when POKO owned the Leonard Street lot, and Milligan is allowing traffic to move through there now.
McClutchy suggested that other options could be looked at, possibly to create a turn around. Mayor Harry Rilling said the City is prepared to make Isaac Street a two-way street.
JHM proposes removing 1,000 square feet of retail to provide parking spaces, McClutchy said, suggesting that arts businesses could go into the remaining retail.
Council member Barbara Smyth (D-At Large) asked if there could be an arts installation in the parking garage.
“That’s an interesting idea,” Hennessy said. “Frankly, it hadn’t occurred to us and it should have. We will think about it.”
Former Mayor Bill Collins asked if the City could have worked toward foreclosing on the property. Eventually, that might have worked out, but it would have taken years, Coppola said.
As for the look, architect Michael Weissbrod explained that JHM is proposing mostly the same mix of materials planned in 2015, brick veneer, fiber cement siding and panels, and some aluminum siding on the top.
Todd McClutchy said changes were made to the materials to “freshen it up” and other changes planned to give the building depth, with architectural features to soften the building.
“It’s so imposing right now because it’s all one color and there’s no push and pull of materials,” Weissbrod said. “…This project, at least for me, is creating a sense of space. We feel this project has the potential to be a very vibrant hub for downtown Norwalk.”