By Ron Leir
Observer Correspondent
EAST NEWARK –
Since its courtship and conditional designation in May 2007 as the redeveloper of the old Clark Thread mill property, East Newark Towne Center has seemingly played the part of the reluctant bride.
Instead of uniting on a common path forward, the Long Island City, N.Y., real estate firm, headed by Efstathios Valiotis, and the borough have drifted further apart since the parties entered into negotiations on a redevelopment agreement.
Bad feelings between the two sides intensified after the borough hauled ENTC into Municipal Court over alleged fire and property code violations at the 12.5- acre site at 900 Passaic Ave. culminating in ENTC agreeing to pay a $100,000 fine.
But now, it looks as if the fragile partnership could be severed altogether, with ENTC having filed a breach of contract lawsuit against the borough, on Jan. 29, in Hudson County Superior Court.
The complaint, brought by attorney Thomas Scrivo of the Newark law firm McElroy, Deutsch, Mulvaney & Carpenter, alleges that the borough’s representatives – and “in particular Mayor Joseph Smith” – engaged in “bad faith” negotiations, with a view toward scuttling the deal.
Smith says the borough has simply been trying to protect the interests of its taxpayers by getting the best deal possible without being potentially overwhelmed in providing municipal and educational services for the hundreds of new residents who would live at the redeveloped site.
ENTC’s complaint alleges that in April 2009, a month after it submitted a plan calling for construction of 800 residential units “at about 1,000 square feet per unit” subject to a proposed PILOT (Payment in Lieu of Taxes) agreement, the borough “unreasonably, arbitrarily and capriciously required further changes to the redevelopment agreement.”
Further, the complaint claims, the borough “has engaged in a pattern of delay and bad faith to thwart all development and financially enrich its professionals” whom ENTC agreed to pay for accounting, planning and engineering services sought by the borough in connection with the negotiations on the redevelopment plan.
After paying “in excess of $500,000” to those professionals, the borough asked for an additional $140,000 in April 2009, and, on top of that, the complaint adds, the borough suddenly asked ENTC to build a school for more than 300 children on the project site – a proposal it later amended by asking the company to adapt one of the existing buildings on the site as a school annex.
In November 2010, the complaint says, the borough proposed a “lesser density” among the number of residential units planned.
After ENTC agreed to set up an “interim escrow account” in April 2011 for the deposit of funds for professional services while continuing negotiations about disputed billings for those services through mid- June 2011, the complaint says that the borough in October 2013 billed the company for $70,000 “to replenish the escrow account.”
In a narrative it enclosed with its response to the borough’s Request for Proposals in March 2007, ENTC outlined a “project vision” that called for two options involving demolition of some of the existing buildings and conversion of others for residential development, one assuming a residential component of 613 apartments and the other, 767 apartments, both in a combination of one- and two-bedrooms, each one generating more than 1,000 individual residents, including 114 to 127 school-age children.
Also proposed were scenarios for varying amounts of retail space fronting the project’s Central Ave. side and varying amounts of office space along Grant Ave., along with a community center and green space courtyard. There would be a combination of deck and surface parking for about 1,300 vehicles.
Total development cost was pegged at between $190 million and $198 million, depending on which development scenario was chosen. Under a PILOT plan, the borough would receive between $1.7 million and $1.95 million in annual in lieu of tax revenues.
ENTC projected that the project would account for 700 construction jobs and 135 permanent jobs.
