By Lev D. Zilbermints
As was reported in the June 8, June 1, May 11, April 20, 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, the sixth full part of the article, “Local Talk” sheds more light on what happened.
Lawsuit initiated by Developer
According to court papers, “On July 14, 2020 Plaintiffs initiated this action [lawsuit] by filing a Complaint against Defendants City of Newark, City Council of the City of Newark, Colon, Adolfo-Wilson, Garcia, Ladd, Animal Shelter, NCC, ABC Corporate Entity 1-10, and John Doe 1-10.
At or about the same time, counsel for Plaintiffs (the Developer) also filed Notices of Lis Pendens for the Central and Fairmount Properties, thereby giving public notice to all of the filing this action and Plaintiffs’ rights, claims, and interests pertaining to those Properties. Those Notices of Lis Pendens were recorded in the Essex County Register of Deeds & Mortgages Office on August 11, 2020.”
Translated into everyday English from legalese, the abovementioned quotes mean that the developer has lost patience and is using the courts to get justice.
According to Investopedia.com, Lis Pendens is an official notice to the public that a lawsuit involving a claim on a property has been filed. Lis pendens is connected to the concept that a property buyer must assume any litigation that that exists pertaining to the property. That is, the new owner assumes all the litigation and debts on the property that were incurred by the previous owner. In this case, the developer is laying legal claim to both Central and Fairmount Properties.
Unanswered is the question as to why the developer waited so long. Perhaps the developer thought that the City of Newark and its officials would do the right thing and act honorably. If Cory Booker was still mayor, and the previous City Council still in power, that might have indeed been the case. It is a fact that when Booker and the previous council were in power, things went smoothly. But after they left, things took a turn for the worse.
Developer states facts relevant to nine counts in the lawsuit
Before listing the nine counts of which the City of Newark is allegedly guilty, the developer states the “facts relevant to counts seven through nine.” After stating these for the record, the developer states what the court should do.
According to court papers, “Recent events confirm that Mayor Baraka and his administration never had and intention of honoring Plaintiffs’ rights to redevelop the Central Properties or to facilitate the transfer of Plaintiffs’ redevelopment rights to the Proposed Replacement Redeveloper, and have instead been plotting to steer that lucrative project to the Developer Defendants, who have long supported the political endeavors of Mayor Baraka and certain members of the City Council, and earned their allegiance and favoritism.”
This means that the developer has finally realized that the Mayor and City Council were playing games. Instead of cooperating with the developer, Mayor Baraka and the City Council are allegedly trying to steer a lucrative project to their business and political allies. The Developer Defendants, as the lawsuit calls them, are the political and business allies of Mayor Baraka and the City Council.
According to court papers, “Notwithstanding Plaintiffs’ clear contractual rights to develop the Central Properties, the Notices of Lis Pendens on record with the Essex County Clerk’s Office publicly announcing Plaintiffs’ legal stake in the Central Properties, and the pendency of this litigation, the City Council passed a resolution on February 21, 2021, which authorized Mayor Ras Baraka, or his designee(s) to enter into an agreement for the sale and redevelopment of the Central Properties to Kawaida Towers LP (the Resolution). …”
Per the Resolution, the City sought and received numerous proposals from developers to “partner with the City in the development of an affordable housing project known as Kawaida Towers” and determined that Omni and Mid-Atlantic possessed the proper qualities, resources, and capacities to finally fulfill the vision of Mayor Baraka’s father and achieve an objective high on the mayor’s personal agenda. As for the developer’s (aka Plaintiff’s) rights, these were blatantly ignored.
Indeed, as Mayor Baraka has publicly made clear: “If there is one thing I can do before I get out of this place – is to make sure that Kawaida Towers is alive and well in this community.”
From reading the court papers, it really sounds as if the Mayor and City Council ignored the developer’s legal rights to Central and Fairmount Properties because they were outsiders. Instead, the City Council authorized the Mayor to negotiate with developers that were political and business favorites of the politicians.
Both Mayor Baraka and the City Council were more interested in bringing back Kawaida Towers than honoring the rights of the developer.
Description of Kawaida Towers
According to court papers, “The Resolution was accompanied by a redevelopment agreement between the City and Kawaida Towers LP (“the Kawaida Towers Agreement”). A true copy of the Kawaida Towers Agreement obtained from the Office of the City Clerk is attached as Exhibit Z.
According to the Project Summary, which is Attachment A to the Kawaida Towers Agreement, Kawaida Towers will be a single 15-story building with approximately 66 residential units and retail space, “a community facility space” and amenities on the first two floors.
Among these amenities is a “permanent exhibition space illustrating the history of the Kawaida Towers project,” and presumably paying homage to the late Amiri Baraka.”
What needs to be understood is that the City of Newark has made an agreement with Kawaida Towers LP, and intends to honor it. Meanwhile, the agreements made with the developer have been ignored and effectively made null and void. After all, it was Mayor Cory Booker and the previous City Council who initiated these agreements. The current Mayor, Ras Baraka, and the new City Council do not want these Booker-era agreements with the developer.
Kawaida Towers is a personal project of Mayor Baraka. From what court papers say, the mayor wants to succeed where his late father could not.
Meaning of the Resolution and the Kawaida Towers Agreement. Plaintiff has no rights. Million-dollar property sold for a pittance.
Court papers state that both the Resolution and Kawaida Towers Agreement are notable in several critical respects.
“First, the Resolution purports to “supersede any previous Agreement(s) or conditions related to the redevelopment of the (Central Properties)” including the City’s existing agreement with Plaintiffs.
Second, despite the pendency of this action and the Notices of Lis Pendens, the City has affirmatively represented and warranted in the Kawaida Towers Agreement that: (i) [t] here is no action, proceeding, or investigation now pending nor any basis therefor, known or believed to exist which questions the validity of this Agreement or any action or act to be taken by the City pursuant to this Agreement;” and (ii) there is no pending litigation which would affect the City’s ability to convey the Central Properties to Kawaida LP.”
Third, the Kawaida Towers Agreement confirms that the development of Kawaida Towers will be supported by millions of dollars in tax breaks and subsidies, including tax-exempt bonds from the NHMFA, “subordinate financing from the City of Newark, and LIHTC tax credit equity.
Fourth, and most notably, in addition to the millions in tax breaks and subsidies, the City has purportedly agreed to sell the Central Properties to the Developer Defendants for roughly one percent of their appraised value, and an even smaller fraction of their fair market value.
According to the Resolution, 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 low purchase price.
A footnote in the court papers gives crucial financial information about the actual value of the properties being sold.
“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.”
Voting by the City Council members. Their conflict of interest.
According to court papers, “Voting with respect to the Kawaida Towers Project is also rather telling. The Resolution was sponsored by Council Member LaMonica R. McIver and seconded by Member Mildred Crump.
Public records from the New Jersey Election Law Enforcement Commission confirm that both McIver and Crump received $2,600 contributions from Omni in May 2018.
Council Member McCallum, who was hit with federal criminal charges based on allegations of having received bribes and kickbacks from developers, also voted in favor of the Resolution.
Meanwhile, other City Council members, who abstained from voting on the Resolution, have subsequently explained precisely why they have chosen not to support the project.
For example, two City Council members who have abstained have commented in the press about the “inordinate amount of money” being contributed to the Kawaida Towers project by the City in comparison the “very minimal investment on (the developers’) part.”
Council Member Anibal Ramos has specifically remarked that: (i) “[t]he subsidies being provided here for development – and I’m not trying to say that (66) units of affordable housing is not important – but considering you are looking on the financing side to provide $5 million in CDBG subsidy (and a) tax abatement – the developers, when they did the presentation, basically acknowledged they have a very minimal investment on their part;” and (ii) “I would hope that the Department of Economic Development is able to work on a better deal for the city as it relates to this project.”
Council Member Carlos Gomez has likewise stated: “If the project included some significant contributions by the developers, I would be a sponsor of it. What I am objecting to is the city’s contributing an ordinate amount of money to the project.”
Only two Council Members opposed the project. Everyone else approved it. This says much about the cooperation of Mayor Baraka and the City Council at that time.
Next: The $10,000,000 Charges By the Developer Against Newark
