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POKO’s default clock ticking away

NORWALK, Conn. — Expect a battle should POKO Partners not provide evidence of a construction loan for its Wall Street Place project to Norwalk by April 2, according to former Zoning Commission Chairwoman and current Norwalk Center Task Force Chairwoman Jackie Lightfield.

That might involve a tussle over the parking lots the city sold to POKO for a dollar more than 10 years ago.

Norwalk Corporation Counsel Mario Coppola and Norwalk Redevelopment Agency Attorney Marc Grenier on Feb. 19 sent POKO a letter notifying it that it is in default of the Land Disposition Agreement (LDA) for the Wall Street Redevelopment Project parcels 2a and 3 because it had not closed on its construction loan with Citibank by Jan. 30.

“In the event that POKO fails to cure the default, be advised that the CITY and AGENCY intend to exercise all of their rights and remedies as set forth in Article XIX Section 19.4 of the LDA,” the letter states.

Grenier declined on Saturday to say what will happen if POKO does not cure its default within 30 business days of Feb. 19.

POKO has not replied to the letter, Grenier said. “Until we hear from them it just wouldn’t be fair to comment,” he said.

Coppola did not reply to an email on the topic.

“Assuming that POKO stays in default of the LDA, the unraveling of the project will likely be heavily litigated,” Lightfield said in a Monday email.

The LDA is on the city’s website. Section 19.4e deals with the time POKO has to cure its default, specifying that POKO will have an additional 60 days to cure the default from the date of the letter, but only if it could not reasonably be done within the initial 30 days:

The default by the Redeveloper of any other material provision of this Agreement and the failure by the Redeveloper to cure such default within thirty (30) Business Days after notice thereof by the City or Agency to the Redeveloper, provided that if such default cannot reasonably be cured within such thirty (30) Business Day time period, then the Redeveloper shall have an additional sixty (60) Business Day period to cure such failure and no Redeveloper Default shall be deemed to exist hereunder so long as the Redeveloper commences such cure within the initial thirty (30) Business Day period and diligently and in good faith pursues such cure to completion within sixty (60) Business Days after expiration of such thirty (30) Business Day period.

Section 19.4 says that the city can retake the Isaacs Street municipal parking lot and the Leonard Street municipal parking lot and seek damages. The relevant passage:

Section 19.4 Remedies for Redeveloper Default. Subject to the terms and conditions of Section 604 of Part II hereof, during the existence of any Redeveloper Default, the City and/or Agency may pursue any of the following remedies:

With respect to any Redeveloper Default described in Section 19.3 (B), the City and/or the Agency shall be entitled to recover from the Redeveloper any and all actual damages, including reasonable attorney’s fees incurred by the City and Agency, arising out of or resulting from such default.

With respect to a Redeveloper Default described in Section 19.3(A), (C), (D), and (E), the City and/or Agency may pursue any one or more of the following remedies, it being the intent hereof that none of such remedies shall be to the exclusion of any other; provided, however, that any such right shall not apply to individual parts or parcels of the Project Property or any other Project Property (or, in the case of parts or Project Property leased, to the leasehold interests) for which a Certificate of Completion has been issued as provided in this Agreement:

(i) If the applicable Project Property was acquired from the City or Agency, terminate the estate held by the Redeveloper in the applicable Project Property by exercising the Agency’s Right of Re-Entry in accordance with Section 19.10 hereof;

(ii) Pursue an action for specific performance of the Redeveloper’s obligations under this Agreement;

(iii) Pursue an action for any and all actual damages incurred by or asserted against the City or Agency as a result of the Redeveloper Default; and

(iv) Terminate the City’s and Agency’s obligations under this Agreement. In the event of the exercise of the Agency’s Right of Re-Entry, the parties agree to cooperate with each other in good faith to release and/or modify any easement that is no longer applicable (in the context of the rights exercised by the Agency, the rights of any Mortgagee and the development and continued operation of the Project Property and any Improvements located or to be located thereon).

Commenters on this website have said that POKO used the parking lots for collateral for its initial loan with Citibank. City officials are mum.

“Regardless of the disposition of the parking lots, POKO did just demolish two properties that he owns,” Lightfield wrote. “If those properties were mortgaged, that would be an interesting issue for the mortgage holder to answer.”

POKO’s LDA problems are on the agenda of Thursday’s Planning Committee meeting.

Ken Olson of POKO Partners has not responded to emails asking for comment.

5 comments

EveT March 3, 2015 at 9:13 am

So, the POKO folks know they have lots of time to cure the default and they will run out the clock and then keep on using every delay tactic in the book. Why did the city ever agree to such a contract, one that leaves the city powerless?

Oldtimer March 3, 2015 at 10:56 am

Let’s all hope POKO solve their default problem and gets moving on construction with no further ado.

Rowayton March 3, 2015 at 2:51 pm

No lender wants to fund that automated garage project because the #s don’t work . I bet they get another six months out of us while they re submit a normal garage plan. I’m hoping Mr Farriker will realize there won’t be any parking for the Theater anytime soon and takes this whole project over.

Summer's Eve March 3, 2015 at 3:10 pm

Eve, I couldn’t agree more with you.

It will be summer before we see one shovel full of dirt moved on that project.

Michael McGuire March 3, 2015 at 3:45 pm

Oldtimer – I wouldn’t hold your breath on that happening. The project is viable with a revamped parking plan and/or scaling back the social do good from 30+ percent to the standard 10 percent.

New data out (4th Q 2014) shows that apartment development in Stamford having topped out and we are now moving into the “Hyper Supply” phase (overbuilt). The large number of units being built or planned in Norwalk would suggest the same Hyper Supply issue here as well.

So what can we do? Either we fast-tract this development and remove the economic issues that are holding it back. Or, the project will “fail” and we will then need to wait another full cycle (a decade?) to revive.

Since the later is the worst case, I would urge RDA and CC to see if removing the excess social do good makes the project viable with the garage as is (That would take all of a week by a competent analyst). If YES, then revamp the social do good to the standard 10 percent and bring in some outside funding since POKO likely does not have the balance sheet to make this work on their own.

If NO, then take the next step and see what it would cost to revamp the parking to make it feasible. My gut tells me simply removing the excess social do good should make this project feasible (since much of the land was had for $1.00), therefore doable.

This all must be done quickly as the development window is now starting to close.

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