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2023-06-14 Executive Session MinutesSRA June 14, 2023 Page 1 of 4 City of Salem Massachusetts Executive Session Meeting Minutes Board or Committee: Redevelopment Authority, Executive Session Meeting Date and Time: Wednesday, June 14, 2023 at 8:20 PM Meeting Location: Zoom Virtual Meeting SRA Members Present: Chair Grace Napolitano, David Guarino, Christine Madore, Cynthia Nina-Soto, Dean Rubin SRA Members Absent: None Others Present: Tom Daniel – Director of Planning and Community Development Kathryn Newhall-Smith – Senior Planner Matt Zahler – Development Consultant Recorder: Colleen Brewster Chair Napolitano calls the meeting to order. Roll call was taken. Madore: Motion to begin the executive session for the purpose of considering WinnDevelopment’s request to partner with Urban Smart Growth (USG) for the historic restoration, redevelopment, and reuse of the two court buildings at 32-34 Federal Street. Seconded by: Rubin. Roll Call: Guarino, Madore, Nina-Soto, Rubin, and Napolitano. 5-0 in favor. Chair Napolitano states that the Open Session will reconvene at the conclusion of the Executive Session. Mr. Zahler stated that the high-level overview of his memo is the following: With Park Towers involved, WinnDevelopment noted that Cube3’s expertise was not in adaptive reuse as they initially indicated and there were concerns with their capacity to complete the project that was not as straightforward as they originally thought. Mr. Zahler, Ms. Newhall-Smith, and Mr. Daniel requested that WinnDevelopment seek a new path forward, which led to Lance Robbins’ involvement with Urban Smart Growth (USG.) Larry Curtis (WinnCompanies) guaranteed their original course of action and wanted to introduce their partnership as a joint venture (JV.) Mr. Zahler stated that he reviewed USG’s financials to confirm that if USG were to enter a JV, they could offer the same guarantee as WinnDevelopment. USG provided a balance sheet, and a real estate owns schedule which identifies all the properties they own. Mr. Zahler stated that Mr. Robbins is wealthy and will personally put up a guarantee as a backstop and he has sufficient assets to do so. After his assessment, the SRA should not be concerned with the financial capacity of the newly proposed partner. Mr. Zahler stated that he, Ms. Newhall-Smith, and Mr. Daniel also discussed Mr. Robbin’s ability to perform as an operator. USG has a self-run food and beverage component at their properties and their catering and events do generate an approximate revenue of $4M (gross), and Mr. Daniel conducted a site visit at Hope Artiste Village. Mr. Zahler believed USG can accomplish what they are proposing. The question of longevity was considered given their family operation, and Mr. Robbin’s son, Aaron Iskowitz, would ensure that the operations are functional. Mr. Robbins’s son also works for Toll Brothers, a nationwide development company, to achieve a good understanding of how the business operates and bring that knowledge back to USG. SRA June 14, 2023 Page 2 of 4 Mr. Zahler concluded that they would make a good partner for WinnDevelopemnt, fill the voids, and accelerate the pieces that WinnDevelopment doesn’t have the capacity for at this time. Mr. Zahler noted USG’s connections with the Urban Land Institute and determined that Mr. Robbins has a nationwide reputation. Mr. Robbins has stated that he enjoys and is very involved in this. He’s not seeking institutional type returns on his assets, he is a long-term patient operator, and in this scenario, Mr. Robbins will be part owner. Mr. Daniel stated that he visited Hope Artiste Village in Rhode Island twice in 2022. It is a typical mill to apartment conversion project within a massive complex. He was disappointed to find minimal activity, but it may have been because of the time of day and a lack of programming at the time of his visits, both midday and during the week, although the staff was setting up for an event. As Mr. Robbins stated, his niche is going into communities that haven’t popped, but Salem is different, with smaller and more beautiful buildings than Pawtucket, RI. Mr. Robbins is not the typical developer; he’s seeking to do something that would work for Salem. When the city staff met with him in 2022, he discussed his experience at University of California at Berkely in the 1960’s which was formative for who he is and he still carries those sensibilities. Hope Artiste Village is rough on the outside, while the residences are more pristine, but there was diversity among the businesses within the space. This building is run by USG staff, which is important to note. Mr. Rubin asked if Mr. Zahler had any reservations at all. Mr. Zahler replied that this is typical economic risk and WinnDevelopment wouldn’t take this chance if there wasn’t a high likelihood of success, and they are giving up a lot to make this JV happen and have vetted USG has a partner. He believes it will be the best thing for the project. Chair Napolitano noted that with this being the due diligence period, WinnDevelopment would return to the SRA if they wanted to amend the Purchase and Sale Agreement (PSA). Mr. Daniel replied yes, they are seeking the blessing of the SRA and at the end of this 5-month period, WinnDevelopment may not want to formalize the JV with an agreement with UGS, but hopefully that will not be the case. The SRA should not take that step today if WinnDevelopment does not want to move forward with the partnership. The only action needed tonight is approval for USG to join the team and signaling the SRA is in support of the partnership. The city has pushed WinnDevelopment hard over the past year on the crescent lot and the courthouses and the city staff wanted the SRA to meet Mr. Robbins and have Mr. Zahler evaluate USG’s capacity. The SRA taking that vote doesn’t change anything contractually, that would occur when the developer returns in 5 months. Mr. Zahler referred to concerns with Park Towers and how the condo agreement would be structured. Ms. Nina-Soto noted that after some investigation she came across articles on Mr. Robbins being labeled as a slumlord in Los Angeles and having OSHA violations. She asked if Mr. Zahler can across the same articles. Mr. Zahler replied that he wasn’t aware if it was the same Mr. Robbins, however; tenants can “go off script” and both sides of the story need to be considered and Mr. Robbins side of the story is unknown, if those articles are in fact about the same Lance Robbins. He noted that WinnDevelopment is involved, and they are one of the best in the state and possibly the country regarding tenant relations. They were on the eviction board for the state of Massachusetts during the COVID-19, so WinnDevelopment carries the day as a landlord. While Mr. Rubin respected the need for the trial period, he noted that the need for a new potential partner at the end of the trial period would cause further delays. He suggested the SRA seek ways to help their partnership succeed in the trial period, but he was not sure of what the SRA could offer to help. Mr. SRA June 14, 2023 Page 3 of 4 Zahler replied that Ms. Newhall-Smith and Mr. Daniel provided names of whom to contact, information about Salem, and ensuring that a commitment is in the works. This due diligence period is standard practice in any real estate deal, although slightly longer than normal, but everyone is trying to figure it out. Mr. Rubin encouraged the SRA to ask if their assistance is needed and encourage meetings. Mr. Daniel noted that DCAMM agreed to provide more access. Mr. Zahler noted that it will de-risk the project for zoning and historic issues. Mr. Daniel stated that they have been collaborating on accruing resources, so the $600,000 UPP grant from 2022 for pre-development and there is huge demand for that program in 2023. They are teeing up items to help eliminate some of the risk. Mr. Rubin was pleased to hear that some of the groundwork had been done. Ms. Madore noted that the staff update memo noted the number of new funding commitments for the project. While she has no concerns with the partnership between WinnDevelopment and USG, she noted that the additional resources feel like gap funding that could signal that the project was financially unstable and at risk. She also asked if a 50/50 JV was typical, she raised concerns with the Pro Forma, and the state of WinnDevelopment. Mr. Zahler replied that a 50/50 JV is typical, and he guessed that it was tied to real estate, since the decision-making piece hasn’t yet to be seen. He assumed it would be 50/50 regarding control as well, which is the core of any business arrangement. As it relates to the numbers, he doesn’t see a lot of give up because it is a tough building to finance and many details to determine. This project may or may not have low-income housing credits, it will have historic tax credits, and it will need gap financing due to rehabilitation expenses. All aspects of this JV are good, and the partnership is happening for a reason, to meet capacity and for financial wherewithal to help move the investment in the building forward, for a $30M renovation with only 20+ units and the remainder as programmed space. Having USG as a partner will help solidify the financing for WinnDevelopment. Ms. Madore asked if USG may also take over the residential component. Mr. Zahler predicted that WinnDevelopment will take over the residential and USG will take over the commercial/mixed-use component, allowing both companies to do what their companies do best. Ms. Madore noted that USG has small scale residential in their portfolio. Mr. Zahler replied that USG’s residential component is not affordable housing and what’s proposed in Salem is work-force housing, mixed-income housing and WinnDevelopment will remain involved in that, so the SRA shouldn’t be concerned. WinnDevelopment’s expertise will leverage the residential over to the commercial uses, with subsidy. Madore: Motion to approve WinnDevelopment’s request to partner with Urban Smart Growth (USG) for the historic restoration, redevelopment, and reuse of the two court buildings at 32-34 Federal Street. Seconded by: Guarino. Roll Call: Guarino, Madore, Nina-Soto, Rubin, and Napolitano. 5-0 in favor. The Board thanked Mr. Zahler for his assistance. Mr. Zahler noted that he was happy to remain involved and he is optimistic about the partnership and that construction will begin soon. He noted the work that Ms. Newhall-Smith and Mr. Daniel have done as well. VOTE: Rubin made a motion to end the executive session and return to the general session with Chair Napolitano sharing the decision. Seconded by: Guarino. Roll Call: Guarino, Madore, Nina-Soto, Rubin, and Napolitano. 5-0 in favor. SRA June 14, 2023 Page 4 of 4 The general meeting reconvened at 8:33PM. Chair Napolitano announced that in the SRA executive session the Board voted unanimously to approve WinnDevelopment’s request to partner with Urban Smart Growth (USG). Ms. Newhall-Smith noted that she will follow up regarding what time would be best to meet Mr. Robbins and tour the courthouses on June 21, 2023. VOTE: Rubin made a motion to adjourn. Roll Call: Guarino, Madore, Nina-Soto, Rubin, and Napolitano. 5-0 in favor. Meeting adjourned at 8:40PM