The impending auction of the property for the final, unfinished part of the bankrupt, mixed-income housing project, Pond View Village, will leave intact the lien and lawsuits against the nonprofit developer, an official of the foreclosing lead lender said yesterday.
Sandra Blackman, a vice president of Massachusetts Housing Investment Corp., said the lender, which has announced losses of nearly $10 million in financing the redevelopment of the former LePage's property, would not seek to sell the common land, pond and small building on which contractor's claims of more than $1 million against Cape Ann Housing Opportunity are based.
"For now," Blackman said, "we'll leave that alone. That's where the liens and lawsuits are."
The auction by Paul E. Saperstein Co. at the side of the former warehouse, behind the completed rental and condo buildings, was postponed minutes after it began July 22 and rescheduled for Aug. 19. The Pond View Village project was intended to showcase the merits of using state and local subsidies to create affordable community housing.
Massachusetts Housing Investment Corp. ordered the liquidation auction after Cape Ann Housing Opportunity defaulted on $1.4 million in loans to construct the final phase of the project, which was to have produced the back-end cash flow needed to make the project viable, according to the investment corporation's president, Joseph Flatley.
He described the losses in West Gloucester as the first suffered by the for-profit corporation that was created in 1990 to find worthwhile affordable housing investments for the consortium headed by Bank of America.
According to its annual report, the investment corporation made $92 million in loans in Massachusetts in 2006.
Even as it tries to recoup its investment on behalf of the consortium, Blackman said the investment corporation has agreed to pay for the completion of Cape Ann Housing Opportunity's delinquent 2006 financial filing to the state and the entirety of the also delinquent 2007 filing.
She said it was not possible to calculate the cost of assembling the audit-like reports which in lieu of tax returns are required of all charitable, non-profit 501(c)(3) corporations such as Cape Ann Housing Opportunity, which was created and headed by Nancy Schwoyer, the retired executive director of Wellspring House, in 2002.
According to the public charities division of the attorney general's office, Cape Ann Housing Opportunity was "out of compliance" for 2006 and '07.
Last month, Schwoyer and Housing Opportunity officers declined comment about the default and foreclosure, referring questions to the nonprofit's attorney, Leslie Varghese, whose secretary said Varghese would have no comment.
Yesterday, the Times received an unsigned letter to the editor, dated last Thursday, from Cape Ann Housing Opportunity's "directors."
The letter recalled that the organization's board is comprised "entirely" of uncompensated volunteers, who neither sought nor received any gain from the development, which was given more than $500,000 in city grants and $5.1 million from the state Department of Housing and Community Development.
The letter also recalled that the confluence of forces that put the project into its tailspin — namely "the downturn in the housing market and global escalation of construction costs" — and reiterated that "our counsel" had advised against commenting while contractor claims are in litigation.
The largest of these, for more than $1 million, is from Worcester-based Cutler Associates, which was hired after the first general contractor hired by Cape Ann Housing Opportunity, acting as developer, withdrew.
The letter concluded by conceding that the nonprofit had not filed financial statements for 2006 and 2007, but the directors wrote that Cape Ann Housing Opportunity no longer was able to afford the audits.
"We have been working cooperatively with MHIC ... to rectify the situation."
"We're attempting to be helpful," said Blackman. "We don't know how much will be needed."
The reconciliation of Cape Ann Housing Opportunity's books takes on greater import in light of the suits and liens against the non-profit and the intended dissolution of the company, which Massachusetts Housing Investment Corp.'s Flatley has said was the aim of Schwoyer and her directors.
Emily Lagrassa, director of communications for state Attorney General Martha Coakley, said nonprofits may petition to be relieved of the obligation to submit financial reports, but said the issue is complicated when litigation is involved.
She said the office has not been contacted by Cape Ann Housing Opportunity.
Richard Gaines can be reached at rgaines@gloucestertimes.com.
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