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POKO extension mulled by Council, Redevelopment members

Ken Olson of POKO Partners pleads his case to a combined meeting of the Norwalk Redevelopment Agency and the Common Council Planning Committee.

NORWALK, Conn. – Questions about the financing of a long-delayed Norwalk Center development, concerns about the city’s own financial obligations in the project and cautions about the consequences of saying “no” marked an unusual government meeting Thursday.

A joint meeting of the Common Council Planning Committee and the Norwalk Redevelopment Agency, held in the Norwalk Public Library, was called to bring everyone involved up to date as they consider whether to grant an extension to Ken Olson of POKO Partners, who now claims to have the financial pieces in place to begin construction of Phase I of Wall Street Place. It featured some moments of heightened drama as Planning Committee Chairman Doug Hempstead (R-At Large) instantly shut down the husband of a jilted investor in a related project, Andy Kydes, when he tried to comment after the public speaking portion of the meeting was over.

“Wait a minute, I am a citizen of Norwalk,” Kydes said.

“No you are not,” Hempstead shouted.

There on time for the public speaking portion was Norwalk Center Task Force member Michael McGuire, who called for transparency from POKO as it seeks to begin a project approved in 2007.

“As a city we have committed $4.4 million in infrastructure improvements in addition to essentially giving the land to POKO,” he said, referring to promised improvements in the area of Isaac and Wall Streets, and the transfer of two city-owned parking lots to POKO for $2. “As a state we have chipped in $5 million,” he said, referring to tax credits. “Aren’t we as taxpayers essentially partners in this deal? If so, let’s find out what our partner is doing,” he said. 

“It’s been a long road. I do believe I have been transparent,” Olson said. “… We were hit very hard by the economy as a developer. Many of our development projects got stuck, not just this one but several others.”

POKO changed the financing structure of the “expensive” project two or three times, he said. “We have a financing model that not only works but the money is available for us,” he said, asserting that Citibank is prepared to loan him more than $13 million for Phase 1.

Phase 1 was originally conceived as rental units mixed with condominiums but is now planned as an apartment complex, with 60 percent affordable housing and the rest market rate. The deadline for completion of Phase 1 is September 2014; Olson is seeking an extension to June 30, 2016. The deadline for the entire development was November 2017. Olson is asking to move that to Nov. 14, 2022.

RDA Executive Director Tim Sheehan outlined a proposed timeline that would go with the extension. In the first 150 days POKO would be required to show it has gotten the permits it needs, a completed Phase 2 environmental assessment of the site and an environmental mitigation plan, as well as evidence of financing. Requirements in 250 days would include finalized, stamped, construction drawings and a signed contract with a contractor. Within a year POKO would have to have begun structural framing.

If those benchmarks were not made, the city could claim POKO to be in default and start a mediation process, Sheehan said.

“If advanced with the thresholds you’re not necessarily dealing with a blanket three-year extension,” he said. “You are requiring the developer to perform under each one of the time components that are referenced. If there is failure in the first 150 days, you move towards default and you say ‘We gave the benefit of the doubt, we did the extension and we are now facing another issue that there’s been failure of performance on the redeveloper side.’ So I wouldn’t look at it as just a blanket extension. Because you have controls throughout the two-year window.”

Councilman Jerry Petrini (R-District D) asked what would happen if the extension isn’t granted.

“Right now, if the request for extension is not acted upon or denied, then once the Sept. 1 2014 date comes then the public bodies will have to make a decision that the redeveloper is in default,” Redevelopment Agency Attorney Marc Grenier said.

That would trigger a lengthy process of appeal, mediation and perhaps arbitration, he said. Citibank would have the right to reentry, too, he said.

“It’s not just you’re dealing with Ken Olson,” Grenier said. “You’re dealing with Ken Olson, the lenders have rights as well, they have significant investment … they certainly want to see their money protected and make sure they get their money back.”

Petrini asked how many years it would take. Grenier said he didn’t have a crystal ball but, “It would be a protracted mediation, arbitration, litigation where you would see nothing other than what you have there right now. If Ken were to go through and knock the buildings down you would have, you know, a couple buildings aren’t there. I don’t know how the lender would be with that. But I think it would be protracted at the end of the day.”

The city might eventually get the parking lots back but they don’t have street frontage and “are of greater value as part of the whole than they ever will be as an isolated element,” Sheehan said.

“Everybody can have an idea as to what to do with somebody else’s property, but we need to be cognizant of the fact that there is a lot of private property that surrounds the asset that the city transferred to the developer,” Sheehan said. “… Even if you went through that whole process, then you’d back to square one of going out with a RFQ (Request for Qualifications) for a new developer and we’d be six years into that process before we saw anything go up.”

“My grandkid would probably be mayor of the city by then,” Petrini said.

Although public comment time had passed, Andy Kydes asked if he could speak. Hempstead said no, and John Kydes – a cousin – asked if POKO had ever provided proof of financing. Sheehan explained that first mortgage financing would not come in before the project was on the verge of construction, that Citibank has money invested in the project and will reap gains if it goes ahead.

This led to the attempt to chime in from Andy Kydes, whose wife bought the Globe Theater only to sell it recently at what Kydes has said was a great loss. Hempstead indicated that comment would be inappropriate and Kydes said, “Wait a minute, I am a citizen of Norwalk.”

Hempstead shouted, “No you are not.”

“Yes I am,” Andy Kydes replied.

“No you are not,” Hempstead sharply replied. “I will ask you to leave.”

“Yes I am. What is going on here isn’t right,” Andy Kydes said.

“If you have something to add, have respect for the people up here, have respect for the process. You may submit questions, or something of concern, in writing,” Hempstead said.

“My concern is this is the OPM method – Other People’s Money – and that is the city of Norwalk and I don’t know how he got that project for $2. He financed it through Citibank because he used our property for leverage. He doesn’t have the money. He’s not going to build and this should not be continued,” Kydes said.

He left.

There were other concerns expressed. RDA member Lori Torrano also cast doubts on the certainty of POKO’s financing.

“I was expecting to see a real approval but we are not anywhere near that,” she said, referring to a letter from Citibank that was provided to RDA and council members Thursday afternoon.

The letter states, “Commitment is subject to, among other things, CITI completing due diligence to confirm the representations made by (POKO) and obtaining preliminary and final credit committee approval.”

Sheehan said the commitment from Citibank would need to be finalized within the first 150 days or Olson would be in default. Citibank has much invested in the project and would like a return on its money, he said.

Hempstead asked Sheehan to check with the Department of Public Works to see if the city could meet its obligation to get the infrastructure improvements done in time if the extension were granted, given that utility companies have fewer workers than they did in 2007, and other factors.

Councilwoman Shannon O’Toole-Giandurco (R-District D) asked where the $4.4 million would come from. Sheehan said a bond issuance for $4.4 million had already been authorized by a previous council.

Torrano asked Sheehan to look into possible expiration dates on the tax credits. “The project is very dependent upon all of these pieces falling into place to make it happen. So if one of those plates stop spinning the rest of it is stuck in the mud,” she said.

Sheehan added that to his list of things to do.

A decision needs to be made by September as that is when the current agreement expires, Sheehan said. Hempstead pointed out that, technically speaking, it isn’t an issue until either side declares the other in default.

Redevelopment Agency member Latanya Langley advised a “wait and see approach.”

“I don’t want to grant the whole project extension if we don’t have to,” she said.

O’Toole-Giandurco said she had read something online Thursday that said the project would be in demolition phase within 30 to 45 days.

“I would have some concerns about that timeline,” Sheehan said. “My opinion.”

With the meeting at a close, former Councilman Nick Kydes said he had arrived late and asked for three minutes to speak as a courtesy. Hempstead said no.

The meeting was noticed at 7, he said, and almost everyone else had been there then, he said. He nodded at Olson.

“Mr. Olson, I am sure, would love to say something,” Hempstead said.

Olson smiled and nodded.

The developer declined to comment after the meeting.

Below is the audio exchange between Doug Hempstead and Andy Kydes:

 

 

17 comments

Kathryn Breault June 6, 2014 at 6:46 am

I would like to know if the present day property taxes are paid on these properties.

John Hamlin June 6, 2014 at 7:02 am

This story seems to indicate that there is a good chance that this development will never happen as currently planned. Is there a plan B? It would seem that a back-up contingency plan for some other development would be in order.

Ms Ruby McPherson June 6, 2014 at 7:38 am

Why do the city keep given actual tacpayer’s property away for a $1.00 to these developers who make money and have money? Why not sell it for at least an amount that can be used for taxpayers to benefit on a something? (cleanups) Someone explain please?

One and Done. June 6, 2014 at 10:08 am

Fool me a 10th time and shame on ?
.
Enough with this con artist already. If they are allowed to move forward all we’ll end up with is another huge permanent hole in the ground.
.
Where is Harry, btw. Leading from behind?
.
One and Done.

Suzanne June 6, 2014 at 12:12 pm

The long and winding road of POKO partners and the City of Norwalk. I feel like we are a landlord to a bad tenant we wish we had never rented to in the first place.
*
Mr. Sheehan has laudably made an effort to put consequences into lack of deadline compliance by POKO to make the development successful but concludes by saying if POKO is noncompliant,
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“…you’d (be)back to square one of going out with a RFQ (Request for Qualifications) for a new developer and we’d be six years into that process before we saw anything go up.”
*
So, basically POKO owns us because of the past actions of a Mayor and Council that gave them all the rights to a POKO vision without consideration for the timeliness of the development that currently deleteriously affects adjacent business owners and the community.
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I have wondered about the veracity of Mr. Olson’s statements but the following makes it clear:
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“Citibank is prepared to loan him more than $13 million for Phase 1.” (per Ken Olson of POKO partners.)
*
Yet the qualifying letter states as read out in this meeting,
“Commitment is subject to, among other things, CITI completing due diligence to confirm the representations made by (POKO) and obtaining preliminary and final credit committee approval” which doesn’t sound like readiness to loan at all. It sounds more like a credit card application: you can get all kinds of money pending credit APPROVAL.
*
Since Mr. Olson has said other projects being developed by his business have been negatively affected, how can we be assured that Citibank is really waiting and ready in the wings to provide the financing Mr. Olson confidently states is available?
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Either way, it seems like the City blew it in so many ways from the outset of this deal. I started to review in my mind twenty year projects I know about internationally and nationally. The ones that come to mind are: developing an entire city, including sky scrapers, housing, infrastructure, etc., twenty five years. Twenty years: developing transportation infrastructure for an entire state region. Twenty years: superimposing road improvements including all amenities and bridges in a large urban area. Twenty years: developing the core light rail system plus underwater extensions for a large urban area.
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Norwalk needs twenty years apparently to develop an apartment building and a few stores. Someone really must rethink this process.

MODERN MAN June 6, 2014 at 12:57 pm

Assuming POKO gets an extension and actually completes the buildings on time, what is the end result?
Norwalk will get an apartment complex with 60% of the units rated as affordable. Is it really worth the effort? Why so high a ratio of affordable units to market rate units? By the 100th anniversary of the great Wall St. flood we’ll be looking for someone to knock this thing down.

anon June 6, 2014 at 1:18 pm

Agree with Michael McQuire, POKO should be more transparent since they’re deflating the value of an entire portion of the city with their delays. Agree with Suzanne, just awful to have Norwalk’s urban core put in this position, a dilapidated under-taxed eyesore for years to come.

EveT June 6, 2014 at 3:33 pm

So, is Andy Kydes a citizen of Norwalk or not? And what is the reason behind Mr. Hempstead’s apparent desire to shut down the Kydes family?

Peter Parker June 6, 2014 at 3:39 pm

Talk about a rock and a hard place.
>
POKO’s actions to date speak for themselves. They can try to place blame on all sorts of circumstances, but it doesn’t fly. POKO’s track record won’t get better, and the facts leave reasonable doubt that anything will change, and might only get worse. i.e. a half built project left in limbo.
>
Although a hard pill to swallow it might be best to bite the bullet now, and let this deal expire, and start from scratch.

Don't Panic June 6, 2014 at 4:42 pm

Here’s an idea. Add a new component to the planning and zoning process. Call it a “project extension application”. If any developer comes and asks for an extension that exceeds 50% of the original project timeline and/or applies for an extension within six months of the first project deadline and does not have financing, they must formally fill out an application and the application fee is two million dollars.

Oldtimer June 6, 2014 at 9:16 pm

Could Olson be delaying until another, better funded. buyer shows up to take the project off his hands, at a modest profit, of course ?

Suzanne June 7, 2014 at 2:12 am

Lily, good point. After portions of the Santa Monica Freeway fell in the Northridge quake, the contractor hired to do the rebuilding work (after the appropriate bids, mind you) was given an incentive: do the work to a specified, retro-fitted to better earthquake standards quality and do the work under deadline and you will earn millions of dollars more. He did and I have never driven over that section of the freeway with any doubts about its structure. Norwalk really needs to take note: doing business the POKO way or the Waypointe Way or the ……. Way, take your pick, is wasteful, bad management, and leads me to repeat over and over, When is this process going to be re-vamped so it actually works? Do these Committees and Councils know that this is not the way to do business both economically or culturally in the community? It is VERY frustrating and qualifies for the well known definition of insanity.

Don't Panic June 7, 2014 at 8:19 am

@oldtimer,
it wouldn’t surprise me. One would hope that Norwalk protected us from that scenario by ensuring that any transfer of the project that includes that $2 property purchase includes first dibs for Norwalk on all of the profit on the transfer up to the market price of the property (whether demolition had taken place or not)

Andrew D. Kydes June 7, 2014 at 12:34 pm

ADK

Would some one tell me if mr .Grenier and mr. Sheehan are employed by Poko mr. Olson ,or the city who payes them to protect our intrest , the city of Norwalk is. not their private bank . Let them give up their property and money to Poko , let’s see if they do . Keep moving foward on this , we the citizens will once and for all have to take charge and make it happen , we all know to we’ll how this nightmare on wall st will end if stay the course .

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