Quantcast

Norwalk Council members question POKO’s ‘default’

POKO Partners has been given a list of Wall Street Place assets that need to be protected, Norwalk

POKO Partners has been given a list of Wall Street Place assets that need to be protected, Norwalk Redevelopment Agency Executive Director Tim Sheehan said.

NORWALK, Conn. – No one is lined up to take over the construction of Wall Street Place, Norwalk Redevelopment Agency Executive Director Tim Sheehan said last week.

“There is a bunch of information out there, I don’t know what is true, what is not true,” Common Council member Doug Hempstead (R-At Large) said at the Planning Committee meeting, beginning to elicit information from Sheehan. “What does Redevelopment know at this time, besides there’s nobody working on it?”

Sheehan first gave his standard line, “There is a project gap in terms of the total project cost that POKO (Partners) has brought forward to Citibank. Citibank is in the process of reviewing that.”

Sheehan progressed to, “What I can tell you, what I know, is that there is a high degree of uncertainty around the numbers that have been presented to date.”

That was a response to Hempstead’s suggestion that the gap is rumored to be between $4 million and $6 million.

The actual budget gap is proprietary information, a matter between POKO and Citibank, Sheehan said.

POKO did not respond to a Friday email from NancyOnNorwalk.

There’s been little to no construction activity at Wall Street Place for a month, Sheehan said.

Citibank has cost estimators examining the line items POKO has identified as associated with its cost gap; Citibank is not allowing POKO to draw down money, except to fund “asset stabilization,” Sheehan said.

The needed “asset stabilization” was the topic of a Thursday meeting between Citibank, POKO and city officials, Sheehan said.

“When you leave materials exposed like that they have a window where they are no longer useful when they have been exposed to the elements. The framing that is there has got a defined life. (Norwalk Chief Building Official) Bill Ireland put that out there as a specific number of days,” Sheehan said. “That is the ‘asset stabilization.’ In order to protect what is there now and the investment to date these are the things that they need to do in order to ensure that the city is satisfied that the materials are not compromised.”

Ireland did not respond to a Friday email.

“They are shuttering the job for now, basically,” Hempstead said.

“No one has said to me, ‘shuttered the job.’ I believe they are still in negotiation on the gap that is remaining,” Sheehan said.

Hempstead suggested that POKO is in default of the Land Disposition Agreement (LDA) for the property.

“It’s clearly in default,” Sheehan said. “… The city could call for default in a variety of ways and corporation counsel is well aware of that.”

POKO sold tax credits on the project and got state bonding, Hempstead said.

“That’s a whole issue that the Connecticut Housing Financing Authority has been dealing with,” Sheehan said. “Obviously because of the timeline and the delay that has a huge impact on credits. I believe that one unit had to be in place by December, according to the credits and that obviously not going to happen.”

Council member John Igneri (D-District E) asked what the likelihood is of another investor coming in to take over the construction of the project.

“That’s highly speculative at this point and Citibank has made that clear, that everyone should have the firm understanding that POKO still owns the property, POKO still is the borrower of the bank and that the bank is working with POKO relative to the gap,” Sheehan said. “So to speculate that there is other developers coming in to complete the project and things like that, that is speculation at this point because Citibank has not advanced that, to that degree.”

If a new developer did come in, it would have to go through a process if it wanted to change the project, similar to that undertaken by General Growth Properties (GGP) when it bought the West Avenue property that had been approved for a housing project and wanted to build a mall, Sheehan said, answering a question from Council member Shannon O’Toole Giandurco (R-District D).

Hempstead suggested that maybe POKO had mislead the city when it submitted a budget and proof of financing, adding, “that was an underground discussion before this thing got started.”

POKO would then “really be in trouble,” Hempstead said, asking if the city had any recourse.

That’s a question for Corporation Counsel, Sheehan said.

“That’s a tough sell because it involved the competency of the bank, too,” Council member Bruce Kimmel (D-At Large) said.

It’s like telling a bank that it would cost $200,000 to build a house and then when it was half done saying would cost $500,000, Hempstead said.

“Everyone knows how I felt from day one on this but this is the last thing I wanted to happen on any project in Norwalk,” Hempstead said. Years ago, there was a building on Connecticut Avenue, behind Utopia, that had stuff dangling off of it, Hempstead said, explaining that it took a threat of demolition to get it taken care of.

“Nobody wants to see what has happened, happen but at the same token I don’t want to see the city in a position where they got so snookered,” Hempstead said.

The discussions that I have had with Citibank, there has been a degree of commitment on part of bank that project will be completed,” Sheehan said.

Back to the default: the city would have to invoke default and give notice, Sheehan said.

“The city has not provided notice to my knowledge,” Sheehan said. “…. The city invoking a default versus allowing Citibank the time to work with the developer to figure out how Citibank, who is the larger investor into the project and the principal note carrier, to understand how they are going to deal with it, is the preferable path.”

“Sometimes the threat of default sometimes motivates lenders to salvage what they have got and move forward. Doesn’t always work the other way. Sometimes it becomes more a motivation and a subject of negotiation to move things along. It could work the other way,” Hempstead said.

“It could also scare away a potential investor that might come in,” Igneri said.

Sheehan suggested that Council members talk to Corporation Counsel Mario Coppola in an executive session.

Sheehan also said that the Department of Public Works has removed barricades on Isaac Place, opening it to two-way traffic.

20 comments

Tony P September 6, 2016 at 7:01 am

Big surprise – POKO has been a mess from day one. I hope the city smartens up this time and puts the screws to this developer. Silver lining – default, sale of site, better developer/development, add 5 years to the eyesore of this site.

Notaffiliated September 6, 2016 at 7:23 am

Unbelievable. Imagine being any of the businesses in the area. Wall Street continues to be a mess. Bad name for a company…..POKO.

Lisa Thomson September 6, 2016 at 7:40 am

Thanks Common Council. This project brought to you by the same folks who torpedoed District A resident and city center task force member, James Cahn for P&Z.

Christine M. September 6, 2016 at 9:20 am

ugh….This project took away the extra parking for the Garden Cinema, turned Isaacs Street into a one-way and took away critical sidewalk space. Now it’s on hold indefinitely? Really?

Jlightfield September 6, 2016 at 10:13 am

This project has been mismanaged by the Norwalk Redevelopment Agency from day one. No parking plan during construction, a rush to give away city property “to make the deal happen” and delayed construction. But let’s not sop here. Five years and counting on the Ganga Duleep property, her second building falling apart as well. Long term commercial vacancies, an abandoned office building on Belden, Smith street closed for over 10 years on another sweetheart deal to “make a deal happen.” And most recently the move by Redevelopment to give away Webster Lot for an “infill housing project” and of course the Main/HIgh street parking lot.

Development for Norwalk. Is a good thing, but outside of the redevelopment area, we don’t get “monster-sized” projects that delay, change the character of neighborhoods, and otherwise produce less property taxes than promised. Development off Main Street, Ferry Ave, West Main St., Glover ave, Connecticut Ave, and Westport Ave, are the signs of the market working as it should.

The Redevelopment Agency is capable of good work, just apparently not redevelopment of multi-family areas that currently occupy commercial districts. They have no staff to project manage these multi-layered projects, no staff to devote to the economic development issues, no staff to work with existing businesses that are affected by their unilateral decisions.

We have had over 12 years of the Common Council planning committee vetting and approving each and every plan or concept that the Redevelopment Agency has put forth. They have said no only once, and that was to the funding of the an Economic Development Corporation, that would have allowed the City of Norwalk to qualify for more grants and development projects outside the redevelopment plan area.

The City will find, once again, that is has little recourse to move forward on the POKO project, because the underlying contract was created to facilitate development. The Redevelopment Agency was either negligent, or told to structure the contracts that way.

In either case, how we got to this point is almost irrelevant. There is a great disservice being done to the businesses in the Wall Street area. A path forward must include a change in how development projects are managed both by the various City officials, and by the engaged developers. Before spending time on new projects, perhaps the focus can be on what can be done on completing the current projects successfully, and that means hitting a target of 90% leased of new and existing buildings.

Bill NIghtingale Jr September 6, 2016 at 10:32 am

Sorry Tim Sheehan. Not to be personal. But this has to be the final straw. Time to move on.

You put it all on the line supporting this project despite myself and others pointing out its obvious flaws over many years. Now we are proven right. Norwalk simply can not afford any more debacles like this. It is time for you step aside.

Adolph Neaderland September 6, 2016 at 10:57 am

Jlightfield is on target except for one point – it is germane as to how we got to this point.
Unless we learn from experience, we will surly repeat our mistakes.
Urban planning requires total coordination of city agencies based on a current master plan, with adequate controls that protect the city.
This requires planning review and oversight by a qualified City Planner, our missing link.

Bill NIghtingale Jr September 6, 2016 at 11:21 am

Nor should government be involved in development. Setting the policies and parameters for development yes. But doing deals and hiring developers is not the place or role for government. Redevelopment Agency needs to be totally rebooted – hopefully shut down.

James Cahn September 6, 2016 at 11:56 am

These issues stem directly from the political class of Norwalk having neither the ability to execute nor be effective. As a result, they also lack the professional ability to be able to judge the effectiveness of outside organizations. Just two weeks ago, we were assured that everyone was “confident” about the project and that “people (were) doing little things everyday. Today, we’re told, “Well, really, nobody knows what, exactly, is going on.”

On one hand, I feel for the mayor’s office and the Common Council because they’re well out of their depth and it’s got to be tough to feel like you’re foundering while still trying to maintain the appearance that you know what’s going on and are demonstrating leadership and creative, immediate action.

On the other hand, though, I become less and less interested in continuing to be a sponsor of the “Norwalk Experimental School of Local Government.”

I will add, as a side note, that the suggestion (by certain of our council members) that Citibank may have misjudged the valuation and subsequent collateralization by over 10% of the TOTAL deal size is chuckle worthy and reveals a distinct lack of knowledge on how a ticket like this is put together.

Some numbers for those interested: This was a $46MM project. $23.7MM of that was going to be privately funded. The other half was more or less “free” money and even included $4.4MM from you and me (which we probably won’t see again.) Let’s call the “gap” $5MM for ease of use. That’s almost 20% of the private debt number. There can be any number of things that are going on here. Citibank’s risk department misjudging this deal by 20% isn’t one of them.

Do you own a home or property in District A, near the Wall Street DMZ? This property is partially responsible for your property value not accelerating on pace with neighboring cities and towns. That’s value lost to incompetence and lack of financial expertise.

Do you have kids who go to Norwalk Public Schools? As long as this project remains unfinished, it remains a liability rather than an asset to the grand list. Your child’s education and competitive edge is being sacrificed to incompetence and lack of financial expertise.

Do you own a business near this area? You’re losing customers and foot traffic to the fact that potential clients have no place to park and don’t want to conduct business in an area that looks derelict. Incompetence and lack of financial expertise is diminishing your asset’s income producing ability.

The stakes are higher than, “We don’t really know. We’re getting a lot of conflicting information. It will probably all work out. It’s complicated.” Stop explaining how “complicated” it is. Stop saying that “there was an ‘underground meeting” and you were mislead.

I question if our political class COMMITTED to addressing issues like these or only vaguely interested? There’s a vast difference.

Once again, my expectation is that someone stand up, demonstrate some leadership and accountability and commit to, “I don’t know but I will find out. My near term action plan on this is the following and I will be reaching out directly to this list of people. I will have it done by next Tuesday and will let you know my results at that time.”

Michael McGuire September 6, 2016 at 12:13 pm

Very easy to be critical here so I won’t be. Instead I’d like to offer a real solution that would have a positive and lasting impact on the Wall Street area and put Norwalk on the map as a tech hub.

It’s simple, straight forward and, for the most part, does not require significant outside development such as bonus units to make it profitable. It’s a TOD (transit oriented development) dream. And doing this one thing would have developers flocking to take over the POKO project.

The Solution – Reactivate the Wall Street Railroad station. Where a train station goes so go the jobs.

Why – A tech oriented live work neighborhood will likely be established in the Westchester/Southwest Fairfield County area in the next 4-8 years, the market demands it. The question is where.

The goal would be to establish this live-work, small-business tech hub now so that it does not take root in Dobbs Ferry-Irvington, Yonkers, New Rochelle, or Larchmont. Of all these locations downtown Norwalk has the best attributes.

Downtown Stamford is a possibility particularly with UCONN having a DMD (Digital Media Design) program there. However, Stamford’s lack of a concentrated historic small business downtown coupled with its high rental costs, both residentially and commercially, do not bode well for a live-work small business tech community taking root here. Instead Stamford is more attractive to larger more established Tech companies. In essences, it’s a bit to corporate.

SoNo is not well sited to host this either – its office space is a bit too far from the train station, and the competing interests a bit to entrenched. Overall, to correct this SoNo needs more than a decade of work, and millions of dollars to create the access, flow, and community attributes that are present today in the Wall/Main area of Norwalk.

East Norwalk is too residential to be attractive to these types of companies.

Consider the following downtown Norwalk attributes (downtown bounded by Rt1 to the north, I-95 to the south, Rt7 to the west and the Norwalk River/Knight Street to the east):

• Over 600,000 square feet of class B and C small office space has the capacity to supports around 5,000 jobs. That’s the equivalent of 2 Merritt 7 office buildings in size.

• Over 1,500 new housing units are being added to this Downtown Norwalk market.

• The lowest rents on the I-95 corridor west of Bridgeport.

• All in a walkable historic downtown with a River running through it!

• This would alleviate the workforce who will occupy the 1,500 new units the need to drive too, and park at the SoNo station which is already overcrowded.

• Summing up the above, with a train station Wall Street and the downtown area become a small-tech company’s dream location. Low rents, quality housing, cool historic neighborhood, access to NYC and attractive to the most important asset – skilled labor.

The Big Hurdle – If DOT or MTA are the ultimate arbiters of whether this station is re-activated or not, I’m concerned that the bigger-picture of establishing a viable, durable, job-creating, small-business, live-work tech hub in the Stamford-Norwalk corridor would be lost. Remember – Where a train station goes so go the jobs. Therefore to do this we, the people, will need to be vocal and demanding of real performance from our elected leaders and State and Local municipal staff.

Finally – doing this will result in a significant increase in the Grand List with an additional $1,750,000 in property tax revenues being generated per year from the Wall Street area alone. I’d be happy to share the facts and figures with the Common Council.

In my 35 years as a commercial real estate consultant and valuation expert I’ve rarely seen all the “stars align” anywhere as they are now for downtown Norwalk. It just needs a train station. Re-activate it and let the private sector do the rest.

Lisa Thomson September 6, 2016 at 12:53 pm

Michael McGuire – Great Idea! Given all the chaos with DOT MTA and the Walk bridge replacement – wouldn’t it be nice if our state and local politicians went to bat for Norwalk and established a quid pro quo and we cleaned up Wall Street?

EveT September 6, 2016 at 1:37 pm

@James, I like your turn of phrase “Wall Street DMZ.”
It has become pretty clear over the years that the way the POKO deal was structured was precarious from Day One. There are probably convoluted legal reasons why the city could not have insisted on more favorable terms to cut off the project in case of nonfeasance and have the property revert to the city. Going forward, does the city have the legal power to put in such terms and enforce them?
Once again it comes down to P&Z vs Redevelopment. Can it be that Zoning Chair Adam Blank still insists Norwalk’s zoning regulations are just fine, no changes needed?

Michael McGuire September 6, 2016 at 1:43 pm

For those that do not know this the Wall Street railroad station existed until is burnt down sometime prior to WWII I believe. It was then mothballed for lack of use.

Physically it was located as an extension off of the south side of the railroad tunnel that traverses Wall Street. Access to that station was from Wall Street and I believe Commerce Street at well.

Duleep’s building would make a great station (ticketing, waiting area, platform access) as it provides access to the location of the former station.

A station would certainly help out the NPA (parking authority) as demand for spaces in the Yankee Doodle would swell (now operating at 25% capacity not including long term car dealership storage).

And it would reduce the pressure for parking spaces at the SoNo Station, particularly when the 1,500 units in downtown fully come on line.

The demand for office and local retail space would increase markedly. Raising rents would bolster the Grand List.

What’s not to like? I think the question is – Why is this not being pursued?

Leslie R Krupel September 6, 2016 at 4:11 pm

Just pathetic. The property sat there for so long and then they started to work and no ran out of money. Just pathetic.

Jeanne Hard September 6, 2016 at 8:36 pm

Another big problem is the Walk Bridge! Tomorrow-Wednesday morning (9/7) at 10 am is a rally and press conference at AJ Penna’s yard at Goldstein Place on the East Norwalk side of the river. After turning a junk yard into an attractive work place, they are now facing eminent domain because the land is needed as a work area for the bridge. Not fair!

Marybeth Sullivan September 7, 2016 at 9:06 am

Michael McGuire….What a wonderful idea…How does this great idea get to the powers that be and not take a a lifetime to review and implement?

Michael McGuire September 7, 2016 at 5:17 pm

Marybeth – How to move this forward? An organized movement of citizens large enough to get the attention of City Hall, Bob Duff, Chris Murphy and CT DOT.

I’ve run this past a lot of folks down here on Wall Street with unanimous support. I’m in the early stages of formally reaching out to most of the building owners.

I could really use help from anyone interested in pushing something like this forward – let me know. My e-mail address is [email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *

*

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>