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POAH-MPTTA Joint Venture, LLC v. New Mass. Pike Towers Limited Partnership

Superior Court of Massachusetts, Suffolk, Business Litigation Session

October 31, 2017


          Caption Date: October 30, 2017


          Edward P. Leibensperger, Justice

         Plaintiffs, 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 plaintiffs’ " 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, Trinity’s motion to dismiss is allowed.


         The facts as revealed by the Complaint are as follows.

         Mass. 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).[3] 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.

         In 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 developer’s 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. § 42. The Low Income Housing Tax Credit provides a subsidy through the federal tax code to private developers who develop affordable housing. Trinity’s proposal also required a $500, 000 loan from the City of Boston and another $500, 000 loan from state funds.

         In an 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, ¶ 13. South Cove issued a letter of support of Trinity’s 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 plaintiffs’ attempt now to purchase Mass. Pike Towers.

         On 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, ¶ 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.[4] 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.

         Section 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.

         In 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 area’s 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 ‘affordable rental housing for occupancy by low income and homeless households.’ " Complaint, ¶ 20.

         Trinity 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.

         The 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 City’s letter to Trinity states that the designated non-profit organization for the City’s option " shall close on the transaction by October 27, 2016, 120 days from the date of this notice as specified by the Agreement." [5]

         In 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.

         On 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, ¶ 27. There is no allegation in the Complaint that the offer by plaintiffs was ...

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