By Lev D. Zilbermints
The City of Newark is in hot legal waters for allegedly violating agreements that date back to 2008.
The court papers are dated June 25, 2021. Eric T. Kanefsky, of Calcagni & Kanefsky LLP, Newark, NJ, is the attorney representing Fairmount Senior Genesis, Housing Urban Renewal Partnership, LLC, Genesis Fairmount Partners, LLC and Genesis Central Ave Partners, LLC in the lawsuit.
Assessed and appraised values for the properties
Court papers say, “According to the [Newark City Council] Resolution [dated February 18, 2021] the assessed and appraised values for the Central Properties were $2,276,400 and $1,180,000 respectively. Yet the Department of Economic and Housing Development recommended that the City Council sell the Central Properties to Kawaida Towers LP for just $23,847.68, and the City Council approved that absurdly low purchase price.”
Court papers say that “By way of further perspective, the proposed purchase price of $23,847.68 is: (i) approximately $2,252,552 less than the assessed value of the Central Properties; (ii) approximately $1,156,152 less than the appraised value; and (iii) approximately $526, 152.32 less than the 2008 appraisal price used to set the acquisition price to be paid by the Plaintiffs more than 13 years ago.”
Plaintiffs and Defendants
According to court papers, Fairmount Senior Genesis, Housing Urban Renewal Partnership, LLC, Genesis Fairmount Partners, LLC and Genesis Central Ave Partners have filed a lawsuit against City of Newark, a municipal corporation of the State of New Jersey, the City Council of the City of Newark, as redevelopment entity of the City of Newark, Alison Ladd, Community Foundation of New Jersey, Kawaida Towers LP, Omni America LLC, Mid-Atlantic Investment Alliance LLC, NAN Newark Tech World, and ABC Corporate Entity 1-10 and John Doe 1-10.
Three “relevant non-parties” are also named in the lawsuit. These include Julio Colon, the former Director of the City’s Department of Economic and Housing Development; Baye Adolfo-Wilson, a former Deputy Mayor and Director of the City’s Department of Economic and Housing Development; and Carmelo Garcia, a former Director of the City’s Department of Economic and Housing Development and the former Executive Vice President and Chief Real Estate Officer of the City’s Community Economic Development Corporation.
The lawsuit cited a November 19, 2020 report by the United States Attorney’s Office, District of New Jersey, as announcing that Garcia has been charged with conspiracy to commit bribery based on his having “sought and received significant monetary payments and other benefits” between 2017 and 2019 to assist property developers with securing redevelopment agreements with the City and purchasing City-owned properties.”
How the Lawsuit Came About
According to court papers, “the action arises from a classic – and all-too-common – tale of political exploitation, malfeasance, and gamesmanship.”
The whole mess, court papers state, started in 2009, “the City, under the direction of Mayor Cory Booker, engaged plaintiffs to redevelop properties in the West and Central Wards because plaintiffs had proven themselves to be experienced, award-winning redevelopers capable of delivering quality affordable housing that Newark so desperately needs. Specifically, the City awarded Plaintiffs the rights to develop two separate projects – a senior affordable housing project located at the Fairmount Properties in the West Ward, and a more profitable project consisting of market rate rentals and retail outlets located at the Central properties in the Central Ward.”
According to Newark City Council Agenda from March 15, 2022, some of the properties in question are located at 664, 662, 660, 658, 656, 654, 668, 670, all of South 11th Street. This is Block 2617. The respective lot numbers are 69, 71, 72, 73, 74, 75, 85, 86, 88. All of these are Class 15C, with the owner listed as the City of Newark. The properties are located in Newark’s South Ward.
However, in the lawsuit mentioned, other properties are at stake. These are located in the West Ward and Central Ward.
Court papers state, “The first property is in the West Ward and is comprised of 2 sites. The first is located on Fairmount and Twelfth Avenue and identified on the City’s tax maps as Block 259, Lots 21 and 22 and more commonly known as 130 Fairmount Avenue and 124-128 Fairmount Avenue. The second is Block 1826, Lots 35, 36, 38, 39, 40, 41 and 62 and more commonly known as 111 11th Avenue, 113-115 11th Avenue, 117 11th Avenue, 200 South 11th Street, 198 South 11th Street, 196 South 11th Street and 107-109 11th Avenue (together the “Fairmount Properties”).
According to court papers, the second property is in the Central Ward and located on or about Central Avenue and Halsey Street and more specifically identified on the City’s tax maps as Block 20, Lot 1 and more commonly known as 32 Central Avenue (a/k/a 17-21 Halsey Street) (“the Central Properties”)
The Newark City Council is on record as having sold the properties, via private sale, for $167,601.40 to Southside View LLC, based at 1212 Springfield Avenue, Irvington, New Jersey 07111. The purpose is “to develop property into a fifty-two (52) unit, multi-family affordable residential housing.
According to Newark Municipal Council Agenda, the assessed amount is $359,000, with cost basis being $10 per square foot. The sale is “at prices set forth by Ordinance 6S&Fh, adopted on April 7, 2004, establishing the minimum sale of City-owned properties.” The price formula is listed as “Total Square Footage X PSF [per square foot]. This means that 16,760 square feet x $10 = $167,601.40
Politics start. Favoritism alleged.
According to court papers, “since Mayor Ras Baraka took office in 2014, however, the City and the City Council have engaged in a deliberate scheme to deny Plaintiffs’ their clear contractual rights – a scheme marked by lies, self-dealing, and egregious abuse of power and designed to steer the more lucrative Central Properties project to developers that have won favor from Mayor Baraka, certain members of the City Council, and other members of the Baraka administration.”
In other words, the City and its Municipal Council and Mayor are allegedly engaging in favoritism.
Court papers describe how this alleged favoritism came to be.
According to court papers, “the City first forced Plaintiffs to prioritize the completion of the Fairmount Properties project before Plaintiffs could proceed with the Central Properties project despite knowing that the economic viability of the project was dependent upon the development of both projects and the financial benefits that Plaintiffs would receive from redeveloping the Central Properties.”
Simply put, one project was given priority over another. From the description in court papers, the City had a different plan than Fairmount Senior Genesis and their partners.
Next came what reads in court papers as allegation of trickery and unfair play.
“After inducing Plaintiffs to expend millions of dollars pursuing the development of the Fairmount Properties, the City stonewalled Plaintiffs’ efforts to move forward with that project by failing to deliver the essential funding that it had agreed to provide while simultaneously securing and facilitating the same type of financing for numerous other projects throughout Newark.”
Allegations of threatening retaliation.
According to court documents, “The City then attempted to use the agreed-upon financing and unmistakably clear threats of retaliation as leverage to compel Plaintiffs to forfeit their contractual right to redevelop the Central Properties and surrender that lucrative opportunity back to the City. Even worse, the City purported to “terminate” the redevelopment agreement when Plaintiffs justifiable refused to accede to its unreasonable demands.”
Stonewalling. Political Games.
According to court documents, “next, the City convinced Plaintiffs to dismiss the initial litigation filed in 2016 by agreeing to reinstate the redevelopment agreement and pave the way for the development of the Central Properties, only to, once again, stonewall Plaintiffs’ efforts to get that project off the ground. In fact, the City went so fat as to insist that Plaintiffs negotiate the transfer of their rights with respect to the Central Properties to another developer group hand-picked by the Baraka administration, and then refuse to authorize the transfer when Plaintiffs and that chosen third-party reached an agreement.”
Funny business
According to court documents, “Finally, despite the pendency of this action and the Notices of Lis Pendens publicly announcing Plaintiffs’ legal claim to the Central Properties, the City has announced that it has agreed to sell the Central Properties to yet another group of developers loyal to Mayor Baraka and certain members of the City Council – the Developer defendants – and award them a complete windfall. According to a resolution recently passed by the City Council, the City has committed to selling the Central Properties to the Developer Defendants for just $23,847.68 or approximately one per cent of the Properties’ assessed value ($2,276,400) and an even smaller fraction of their fair market value, while also providing the Developer Defendants with millions of dollars in subsidies and tax breaks.”
What injury has been caused?
According to court papers, Fairmount Senior Genesis and other plaintiffs have, “As a result of these and other malicious acts, Plaintiffs have suffered irreparable harm to their reputation and good will, and financial losses well in excess of $10 million.
The purpose of this litigation is to hold the defendants accountable for the substantial damage they have caused, expose their dishonest and unlawful conduct, and prevent the residents of Newark from being further victimized by politicians that continue place their own interests over those of the City and their constituents.”
