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.
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: