The Harp administration’s efforts to get a long-troubled West River property known as “The Cage” into the hands of a rebuilder ran into a snag, amid questions from city lawmakers.
The questions arose at a hearing Wednesday night of the Board of Alders Community Development Committee.
Erik Johnson, head of City Hall’s neighborhoods anti-blight agency, the Livable City Initiative (LCI), spent most of evening trying to win lawmakers’ support for a plan to sell the city’s right to the “The Cage”—aka 76 Sherman Ave., which is valued at about $600,000—for $25,000.
Johnson urged alders to nullify a city government land disposition agreement (LDA) on 76 Sherman Ave. dating from 1970. The LDA gives the city the right of first refusal in the event of a sale on the 22-unit property, a longtime neighborhood eyesore currently 60 percent occupied and in foreclosure.
Alders balked and questioned the long-term prospects of affordable housing at the property amid potential gentrification. The committee voted to table the item, with urgings that the proposal be renegotiated.
Old LDA Stands In Way
Deutsche Bank, the current mortgage holder on the property, is looking to sell the building, which earned its “Cage” nickname for its rundown condition and reputation for crime. Before it sells the 76 Sherman, the bank wants to nullify the LDA, so that a future developer can renovate the property unencumbered by a four-decade old agreement.
Developer Shmully Hecht, looking to buy the property, discovered the old LDA when he pulled the land records. Hecht, who runs Pike International, has previously said he wants to invest hundreds of thousands of dollars into building improvements, to turn the building into “upscale” but affordable housing for working people. Hecht said he doesn’t want to buy the property with the “outdated and arcane” agreement attached to it. Should he ever want to sell it, he could lose his investment if the city steps in and buys it from him for a mere $7,150, he noted.
According to the LDA, signed on July 22, 1970, the city is allowed to buy back 76 Sherman for $325 per unit, a mere total of $7,150.
But there’s a problem. Even if the city took advantage of this deal, the property, valued at $600,000, still has a $1.2 million mortgage attached to it. The city would inherit that mortgage. Selling the Sherman Avenue site at market value would result in a loss. What’s more, the property has a tax debt of $147,000.
After taking into account inflation rates over the past 20 years, Johnson (at left in photo) said, the best solution is to sell the city’s right to the bank for $25,000. In turn, the bank would absorb all the debt owed on the property and look for potential buyers.
Currently the bank does not have contracts for buyers. If the request to nullify the LDA is approved, Johnson said, it will search for a buyer.
The proposed agreement between the city and the bank includes a renewal of an affordable housing initiative at 76 Sherman once the closing is complete. West River Alder Tyisha Walker, who ward includes the Cage, was the first to weigh in on this clause at Wednesday night’s hearing.
According to the proposed settlement agreement, 50 percent of the units must be used for affordable housing for a period of 15 years. Walker said her main concern lay with her constituents.
“What’s going to happen after the 15 years?” asked Walker, who said no one from the bank or city ever contacted her about these decisions. “Do they get 30 days to move out because they no longer meet the criteria?”
“What’s going to happen to the people living in the units for the next 15 years with this affordability clause? When 15 years come, that affordability clause is up. ...Why isn’t [the city] looking to continue that until the end of time?” she asked.
In response, Deutche Bank attorney Jim Segaloff stressed that drafting this agreement involved striking a balance. “An important factor is to try preserving some sort of affordability concept for people who want to rent these premises. And what we really did was negotiate,” he said. The alternative “is to keep it in foreclosure, take over the property and the city has to come up with $1 million to buy it. But now, there’s no affordable housing aspect. So, it wasn’t a take-it-or-leave-it. It was a negotiation.”
Johnson said he would try negotiating for more affordable housing provisions if requested. “If the city and the counsels direct me to try to negotiate for more, I will try to do that. But this is the deal we’ve been able to broker,” he said.
Beaver Hills Alder Brian Wingate shared Walker’s worries about the affordability agreement and asked that both sides be considered.
“We understand what the bank troubles are, but we have some troubles on this [constituent] side that we want to deal with as well. ... We want more time directed to affordable housing. The 15 years would be more appealing if it was longer.”
The committee subsequently tabled the issue of 76 Sherman until more information could be provided to the alders regarding affordable housing in the area.
Farm, Housing, School Projects Advance
Other items on Wednesday night’s agenda included additional orders by LCI to approve the acquisitions of 613 Ferry St. for $50,000 for a garden or farm for educational purposes, 494-536 Quinnipiac Ave. for $400,000 to construct single-family waterfront properties, 3 and 5 Runo Terrace for a total of $150,000 for public safety improvement redesigns near the Quinnipiac School, and a five-foot easement over the northerly portion of 551-553 Winchester Ave.
The committee were voted to send all these matters to the full Board of Alders. The matter of 3 and 5 Runo Terrace will be pushed to the top of the agenda for fast-track unanimous-consent approval.