By Lev D. Zilbermints
As was reported in the April 14 and March 23, 2023 issues of “Local Talk”: the City of Newark, its Municipal Council and certain other parties were sued by the developer, Fairmount Senior Genesis, Housing Urban Renewal Partnership, LLC, Genesis Fairmount Partners, LLC and Genesis Central Ave Partners. The cause of the lawsuit was that the City and its Municipal Council allegedly failed to live up to their side of the agreement and were engaged in unfair play and political shenanigans.
In this, Part III a of the article, “Local Talk” sheds more light on what happened.
Reneging on Funding
According to court papers, the City of Newark started using all kinds of tricks to wiggle out of their agreed-upon responsibilities with the developer.
“In or about January 2015, Plaintiffs met with Julio Colon, Newark’s Director of Housing Assistance. At this meeting, it was made clear that the City no longer intended to honor its Agreements. Mr. Colon stated that the City would consider providing the necessary funding for affordable housing at the Fairmount Properties and would support the Fairmount development, but that the City wanted Plaintiffs to forfeit their rights to develop Central Properties,” state court papers.
The court papers, for their dry language, convey disbelief, shock and betrayal felt by the Plaintiffs, the developer, towards the City of Newark.
“In disbelief, Plaintiffs explained that they had worked in good faith and spent significant time and money in an effort to develop the Properties and would not forfeit any of those rights”, state court papers.
The question arises, why should the developer forfeit their rights? In this episode, court papers make it look as if the developer acted honorably. The City, on the other hand, seems otherwise.
“Colon then ended the meeting saying he had to discuss that response with his superiors and would get back to Plaintiff.”
Translated into English from legalese, this means that the City is no longer interested in the Central Properties. Evidently Newark officials thought that the developer would quickly fold and leave, with Newark winning easily. Not so fast, said the developer.
True intent of the City
According to court papers, “This bold demand uncovered the true intention of the City which was that it no longer wanted Genesis to develop the Central Properties. Upon information and belief, while under contract with Plaintiff, Defendant had promised/conveyed these properties to third parties and have taken all these actions to undermine Plaintiffs’ attempt to develop these Properties in the face of Plaintiffs’ best efforts to secure the development.
Further, the financing that the City had agreed to be provided for the Fairmount Properties was now being used as a bargaining chip to force Plaintiff to acquiesce to the demand of the City.
City has Developer in a vise grip. Refuses to work cooperatively
“The City had put Plaintiffs in a vice grip. Plaintiffs had already invested so much time and money in Fairmount Properties that they would never opt to forfeit that development and so Defendants conspired to leverage Plaintiffs’ vulnerable position to force them to surrender the more lucrative deal back to the City.”
“When Plaintiffs responded that they would not agree to give up the Central Properties, Colon responded that he would get back to the Defendants after he discussed with his superiors.
After that meeting the City never again worked cooperatively with Plaintiff to develop the Properties,” court papers state.
Meetings with City do not make progress. City violates Agreements.
Between March and June 2015, the developer met numerous times with City representatives, trying to make progress in developing Central Properties. However, the City kept stalling. Indeed, City representatives went so far as to breach the agreement with the developer and retain a different, city-connected, developer.
According to court papers, “Plaintiffs met with City representatives (either the Deputy Mayor or the Director of Housing Assistance) in March, April, May and June of 2015, to secure various items required to move the Fairmount Properties project forward, and to inquire about the items required from the City to begin the development of the Central Properties.
In or about April 2015, Plaintiffs met with Carmelo Garcia, from Newark CEDC, and it was indicated to Plaintiffs that the City was advertising the Central Properties site to developers.”
“In a separate meeting with Newark CEDC, Attorney Elnardo Webster, Esq., representing Plaintiff Genesis on another project, was told that the City intended to breach the RDA with Plaintiffs concerning the Central Properties, and retain another developer.
On May 19, 2015, Plaintiffs requested a letter from Defendant City in conjunction with their New Jersey Housing and Mortgage Finance Agency (“NJHMFA”) financing application.
On May 19, 2015, Defendant City responded that it needed to meet to discuss the project.
On or about May 21, 2015, the City verbally advised Plaintiff Fairmount that it might not be able to provide the $1,875,000 in funding contemplated for the Fairmount Properties redevelopment under the HOME Agreement.”
Per court papers cited at length above, it can be seen that the City of Newark is violating the agreements that were signed with the developer. Questions arise about how the City can go around “advertising Central Properties to developers” when it already has a developer handling these properties?
Another question is how can the City of Newark say that it “might not be able to provide the $1,875,000 in funding” when all the relevant issues had already been agreed upon? From what is cited in the court papers, it sounds like the City of Newark is trying to walk away from agreements.
Financing. City knew about the proposal and did not cooperate with developer.
According to court papers, the City of Newark knew about the proposal made by the developer. Instead of cooperating with the developer, the City put them in an impossible fiscal situation. The developer lost millions of dollars, time, effort and energy while trying to get the City of Newark to live up to their end of the bargain.
According to court papers, “Plaintiff Fairmount was, by July of 2015, ready to submit their application to the NJHNFA for Low Income Tax Credits (“LIHTC”) in the next NJHMFA available funding round, which required tax credit applications to be submitted on or before Friday, July 24, 2015.
LIHTC applications take months to prepare, are hundreds of pages in length, and may only be submitted once per year on an ultra-competitive basis.
For the LIHTC application for the Fairmount Properties, Plaintiffs were required to provide all these aforementioned documents as well as secure monetary and other resolutions of financial support and need from the City. The need to provide financial support for LIHTC projects was well-known to the City. …
As evidence of their qualifications, Plaintiffs secured full equity and debt commitments from PNC Bank to fund the project with the understanding that the City would fulfill its commitment to provide financial support.”
From reading court papers, it appears that the developer is acting very honorably and decently in carrying out its obligations. Securing funding, filing very complex paperwork, obtaining resolutions from the Municipal Council, getting term sheet and commitments from PNC Bank all indicate how serious the developer is. On the other hand, the City appears to wiggle like an eel, in and out of various obligations and agreements. The question is, why? The answer, as usual, is found elsewhere in court papers.
According to court papers, “Genesis submitted LIHTC applications for the Fairmount Properties to the State of New Jersey in 2011, 2012, twice in 2013 and attempted to submit again in 2015 (there was no financing round in 2014). In fact, until 2015, Genesis and the City were working well and City was committed to the development of the project. …
In 2013, the City reaffirmed its 2011 resolution of need, which was the last time an application could be submitted before 2015.” …
Next week: Part III-b
