Superior Court of Massachusetts, Suffolk, Business Litigation Session
Caption Date: October 30, 2017
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTSâ
MOTION TO DISMISS PLAINTIFFSâ SECOND SUBSTITUTE
P. Leibensperger, Justice
POAH-MPTTA Joint Venture, LLC (Joint Venture) and Mass. Pike
Towers Tenants Association, Inc. (MPTTA), filed this action
for declaratory judgment against defendants, New Mass. Pike
Towers Limited Partnership, Trinity Financial, Inc., and
Trinity Mass. Pike Towers, Inc (referred to collectively as
" Trinity"). Trinity moves to dismiss plaintiffsâ
" Second Substitute Complaint" (Complaint) for lack
of jurisdiction under Mass.R.Civ.P. 12(b)(1), failure to
state a claim under Mass.R.Civ.P. 12(b)(6), and for failure
to add indispensable parties under Mass.R.Civ.P. 12(b)(7) and
Mass.R.Civ.P. 19. Count I is brought solely by the Joint
Venture, and Count II is brought solely by MPTTA. In both
counts, plaintiffs seek declaratory judgment relating to the
potential purchase and sale of Mass. Pike Towers. For the
reasons stated below, Trinityâs motion to dismiss is allowed.
facts as revealed by the Complaint are as follows.
Pike Towers is a two-hundred-unit subsidized housing complex
in the Chinatown section of Boston, Massachusetts. Plaintiff
MPTTA is a 501(c)(3) charitable association of the tenants of
Mass. Pike Towers. Plaintiff Joint Venture is a Massachusetts
limited liability company, consisting of MPTTA and
Preservation of Affordable Housing, Inc.
(POAH). In this action, the Joint Venture
seeks a declaration for specific enforcement of an option it
allegedly received from the City of Boston to purchase Mass.
Pike Towers. As an alternative ground for relief, MPTTA
asserts in Count II that there is an actual controversy
between the parties as to whether MPTTA should be allowed to
exercise the option on its own behalf. Plaintiffs request
that the court issue a declaration of their rights.
1999, defendant, Trinity Financial, Inc., a local for-profit
development company, submitted proposals seeking approval and
support from the City of Boston, the Boston Redevelopment
Authority, the Massachusetts Housing Finance Agency, the U.S.
Department of Housing and Urban Development, and the
Massachusetts Department of Housing and Community Development
to purchase Mass. Pike Towers. Trinity proposed to purchase
Mass. Pike Towers for a below-market price of $6.1 million.
The appraised value of the property was $7.8 million. Trinity
proposed to purchase Mass. Pike Towers without contributing
any cash itself. Trinity also proposed to receive a
developerâs fee of $3.4 million. Public resources were to
finance the entire purchase price and the cost of
rehabilitating Mass. Pike Towers. Trinity proposed that
MassHousing provide a $10.3 million low-interest loan
financed through private activity " volume cap"
tax-exempt bonds. This tax-exempt financing was to include an
allocation of $4.5 million in Low Income Housing Tax Credits
under the Internal Revenue Code, 26 U.S.C. Â§ 42. The Low
Income Housing Tax Credit provides a subsidy through the
federal tax code to private developers who develop affordable
housing. Trinityâs proposal also required a $500, 000 loan
from the City of Boston and another $500, 000 loan from state
effort to win approval of its proposal, Trinity proposed to
include South Cove Nursing Facilities Foundation, Inc. (South
Cove), a non-profit organization in Chinatown, in the
transaction. In its application to the City in April 1999,
Trinity noted that South Cove " has a long and deep
history in Chinatown ... and will hold a Right of First
Refusal for any future sale of the property anticipated at
the end of the 15-year tax compliance period ..."
Complaint, Â¶ 13. South Cove issued a letter of support of
Trinityâs proposal and indicated its intention to become the
eventual permanent owner of the property. POAH is the
successor to South Cove in connection with the plaintiffsâ
attempt now to purchase Mass. Pike Towers.
March 29, 2000, the parties signed the Purchase Option and
Right of Refusal Agreement. Trinity agreed to a use
restriction that gave MPTTA, the City, and South Cove an
option to purchase or a right of first refusal, " to be
exercised seriatim if the superior entity failed to exercise
its right to an option." Complaint, Â¶ 17. The Purchase
Option Agreement, which is attached to the Complaint as
Exhibit 1, provides that at the end of the initial
fifteen-year tax credit compliance period, the option holders
could exercise their options. Plaintiffs allege in
their Complaint that all parties agreed that, ultimately, the
proposal would eventually result in a non-profit entity
purchasing Mass. Pike Towers for the benefit of the City and
its low-income residents in Chinatown.
3(b) of the Purchase Option Agreement provides that
determination of the purchase price upon exercise of the
purchase option will be determined based on " One
hundred percent (100%) of the fair market value of the
Property, appraised as low-income housing to the extent
continuation of such use is required under the Use
Restrictions, taking into account all relevant factors
including without limitation the terms of this Agreement, any
such appraisal to be made by an independent appraiser."
To exercise the option, the party must give written notice of
its intent to the Owner and comply with the closing
requirements of Section 8 of the Purchase Option Agreement.
The party exercising the option " shall specify a
closing date within one hundred twenty (120) days immediately
following the date of exercise." Purchase Option
Agreement, Section 4.
addition, the parties entered into other agreements relating
to use restriction issues. More specifically, the owner of
Mass. Pike Towers is required to maintain, for seventy years,
190 units as affordable to households with incomes no higher
than sixty percent of the areaâs median income. The agreement
also " required the owner to renew the existing Section
8 Project-Based subsidy contract for 40 units throughout the
70-year restriction, for so long as renewals or extensions
were available, and required the owner throughout the 70-year
period to retain the entire premises as âaffordable rental
housing for occupancy by low income and homeless households.â
" Complaint, Â¶ 20.
and MPTTA also entered into a Memorandum of Understanding
(MOU) dated March 23, 2000. The MOU provided that MPTTA will
have minority representation in a new ownership entity
created to purchase Mass. Pike Towers pursuant to the Right
of Refusal Agreement. The MOU acknowledged that MPTTA has a
significant interest in the future ownership, maintenance,
and operation of Mass. Pike Towers and its continued
availability as affordable housing. The MOU further provided
that: " The parties will work toward an agreement on
defining a long term meaningful role for MPTTA in decision
making on all decisions related to the ownership, management
and operation ... of the Mass. Pike Towers ..." Trinity
also agreed to give MPTTA support, guidance, and significant
participation in management operations in preparing MPTTA to
acquire and operate Mass. Pike Towers in the future.
fifteen-year compliance period expired at the end of 2014.
The precise date is not pleaded in the Complaint, but MPTTA
concedes that in March 2016, it learned that its opportunity
to exercise the option had passed. The option, by its terms,
passed to the City. The City gave timely notice that it
intended to exercise the option. The City then, in September
2016, designated MPTTA and POAH to exercise its option. The
Cityâs letter to Trinity states that the designated
non-profit organization for the Cityâs option " shall
close on the transaction by October 27, 2016, 120 days from
the date of this notice as specified by the Agreement."
preparation for the exercise of its option, the City had
commissioned the preparation of an appraisal to determine the
appropriate purchase price of the property. The appraisal,
dated June 27, 2016, " concluded that the purchase price
pursuant to the Option Agreement should be $61 million."
Scibelli Aff. Ex. 5.
September 13, 2016, plaintiffs, " having been designated
by Boston to exercise its option to purchase the property,
offered Defendants $42 million to purchase Mass. Pike Towers,
more than six times what Trinity paid for the property with
government subsidies." Complaint, Â¶ 27. There is no
allegation in the Complaint that the offer by plaintiffs was