A foreclosure auction of the last, unbuilt piece of Pond View Village — aimed at giving the chief lender a saleable title free of more than $1.5 million owed to contractors for the state and defaulting non-profit developer — was postponed yesterday almost before it began.
But the move has sparked new questions regarding the status of the developing agency, Cape Ann Housing Opportunity, that grew out of Wellspring House in 2002 as a means of creating more affordable housing in the region.
Standing inside a chain-link fence around the warehouse where LePage's once stored the glue it made at the Essex Avenue site, auctioneer Paul Saperstein opened the advertised event only to announce the auction was being pushed back to Aug. 18.
The only potential bidder represented at the heavily subsidized, two-thirds finished community housing development was the lead investor, the Massachusetts Housing Investment Corp., which was created by a consortium of banks 18 years ago to channel funds into the best opportunities for affordable housing.
Massachusetts Housing Investment Corp. CEO Joseph Flatley said the auction was postponed in the hope that a buyer other than his corporation would appear to bid on the property, a mix of three parcels totaling less than one acre on which the project permits have expired.
"Our first choice is to be fully repaid," said Flatley, explaining the move to go to auction.
"MHIC is owed a pile of money," said Fran Hogan, an attorney representing the investment corporation. She described the auction as a legal maneuver to remove the liens. "The auction wipes out everybody behind you (in line for repayment)," Hogan said.
Massachusetts Housing Investment Corp. last year took over ownership of 33 unsold Pond View condominum units when the developer — Cape Ann Housing Opportunity — ran into a crumbling condo market and was unable to repay $8.57 million of $9.2 million in loans from the corporation's big bank investment pool. The corporation then ordered the auction when Cape Ann Housing Opportunity defaulted on another $1.4 million in loans. Cape Ann Housing Opportunity was to use its funding to complete the project by replacing the warehouse with a four-story, high-rise building with 40 apartments.
The auction would rub from the deed the claims of the general contractor, Worcester-based Cutler Associates, which is owed slightly more than $1 million, and those of a number of subcontractors who sued Culter and Cape Ann Housing Opportunity after it stopped paying Cutler in the project's final days last year, when the glut of housing and the disappearance of easy credit brought a decade-long housing boom to an end across the region.
Also to be negated by the auction, according to Flatley, is a loan of between $300,000 and $500,000 from the Community Economic Development Assistance Corp., a lender from the state Executive Office of Housing and Community Development.
Joining the Massachusetts Housing Investment Corp. team at the auction site was one subcontractor. Peter Grammas Jr., president of North Shore Construction, which installed the sewage system for the entire project and sued Cape Ann Housing Opportunity and Cutler for about $100,000, said the auction gambit to clear his and other liens from the title as it transfers from Cape Ann Housing Opportunity to Massachusetts Housing Investment Corp. was a sign of "dishonest people." Grammas said his company's work was essential to the success of the first two phases — 43 subsidized affordable rental units and 41 condos — including the 33 that the investment corporation took title to last year and has been selling slowly at heavily discounted prices.
Grammas said he was looking at the auction as the act of eliminating him from any chance of being paid.
"I had to take out a second mortgage on my house," Grammas said, "but everybody (working for him, material suppliers and subcontractors) was paid. We got screwed."
The Massachusetts Housing Investment Corp. has "been hurt, too," said Hogan.
A spokesman for the executive office of Housing and Community Development said the state agency altogether loaned Cape Ann Housing Opportunity $5.1 million for the project including $1.9 million for the condos. The status of those loans and the welter of crisis-driven financial and legal acts that rippled through the arrangements as the project careened toward insolvency last year could not be determined yesterday.
Cape Ann Housing Opportunity President Nancy Schwoyer and treasurer Robert Gillis declined comment, referring questions to Leslie Varghese, the organization's attorney at Nixon Peabody in Boston. Through her secretary, Varghese said she would have no comment on the matter, either.
The structure of the project — with a for-profit corporation established to conduct business for each of the three phases of the project that was undertaken in 2002 by Cape Ann Housing Opportunity, itself an outgrowth of Wellspring House — makes tracking the transactions difficult.
Cape Ann Housing Opportunity and all 501(c)(3)s are required to file annual financial reports to the attorney general's office. But Jill Butterworth, a spokeswoman for state Attorney General Matha Coakley, said yesterday that the nonprofit has not filed a required financial report with the public charities division since 2005.
The nonprofit has been "out of compliance" for two years, Butterworth said. She added that the office was working to bring Cape Ann Housing Opportunity in line with the regulations.
The swift decline of the project is suggested in the 2005 report.
Cape Ann Housing Opportunity — which, according to Massachusetts Housing Investment Corp. President Flatley, is now in the process of "dissolving itself" — was in 2005 building to achieve Schwoyer's entrepreneurial dream of affordable community housing with contributions of $860,781, gross revenues of $1,061,392, and a bank account at the end of the year of $676,364.
These figures were in the last financial report Cape Ann Housing Opportunity made to the attorney general's charities division. It covered 2005, and was signed by Schwoyer on March 19, 2007.
The "crown jewel" of Pond View Village — as Christine Cousineau, Cape Ann Housing Opportunity's former executive director, described the high rise — was to have included mostly market-priced units with views of the Annisquam River estuary. That portion of the project was designed to produce a back-end cash flow that the business plan depended on to pay off lenders and contractors and make the project whole.
Richard Gaines can be reached at rgaines@gloucestertimes.com
