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'It's never been about the money.' McCormack Baron says Carr Square sought control in Preservation Square redo

'It's never been about the money.' McCormack Baron says Carr Square sought control in Preservation Square redo

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Demolition of Preservation Square apartments in St. Louis

Demolition work progresses as a construction crew works on Thursday, Dec. 10, 2020 at Preservation Square as the first phase of the long-anticipated project begins as part of the McCormack Baron Salazar rehab of the low-income housing project located on Cass Avenue and 16th Street. Photo by Cheyenne Boone, cboone@post-dispatch.com

ST. LOUIS — Executives of one of the nation’s largest affordable housing developers, ensnared in a bitter feud with a powerful St. Louis political family, are now saying that the family wanted legal control over some investment decisions at a key north side housing complex renovation.

In a no-holds-barred interview on Wednesday, the top executives of St. Louis-based McCormack Baron Salazar blasted Rodney Hubbard Sr., the nonprofit Carr Square Tenant Management Corp. that he runs, Hubbard’s daughter, Alderman Tammika Hubbard, and their attorneys, for trying to insert themselves into decision-making on the project.

Carr Square was also seeking a 7.5% cut of McCormack’s development fees. But that wasn’t the holdup, the executives said.

“It’s never been about the money,” McCormack President Vincent Bennett said in an interview with the Post-Dispatch editorial board on Wednesday. “It’s never been about the fees. It’s been about control, and through extension, concerns that (Tammika Hubbard) had about where and how the grant was going to be directed and utilized.”

“If it was just about the money,” he added, “we’d be done.”

The Hubbards’ attorneys fired back on Thursday, outright denying the developer’s story.

Neither the Hubbards nor their attorneys ever sought legal control over project money, said Stone Leyton & Gershman attorney Bill Clendenin, who represents Carr Square. He called McCormack’s assertions “a very troubling mischaracterization of Carr Square’s position.”

The dispute continues to shed light on powerful interests’ efforts to profit from the development of the near north side, long a poor area of the city, but whose stock is rising now that the National Geospatial Intelligence Agency’s western headquarters is under construction there.

The rift between McCormack Baron, which has already begun renovations on the 675-unit low-income Preservation Square community, and the Hubbards spilled into public view late last year, four years after St. Louis won the $30 million Choice Neighborhoods grant from the U.S. Department of Housing and Urban Development. Alderman Hubbard sponsored a bill barring construction permits in the project footprint — though it never received a hearing. She has also refused, McCormack officials say, to introduce bills vacating a city street in Preservation Square and granting property tax abatement to the project, a common development subsidy, particularly for low-income housing.

McCormack is one of the nation’s largest affordable housing developers, financing its projects mainly with federal grants and tax credits. Its co-founder, Richard Baron, has a long history on the near north side, first representing tenants as a young legal aid lawyer during the rent strike of 1969 and later redeveloping former public housing sites there. He said he actually drew up the original incorporation papers of Carr Square Tenant Management Corp., which was designed to organize public housing tenants following the rent strike.

The HUD grant, combined with tens of millions of dollars worth of state and federal low-income housing tax credits McCormack has won, is supposed to help finance the Preservation Square project as well as pay for social services in the neighborhood. The project began construction last summer and is a top priority of the city, which is administering the HUD grant.

McCormack 40 years ago partnered with Carr Square, before it was controlled by Rodney Hubbard Sr., in the original construction of Preservation Square, then known as O’Fallon Place. McCormack officials said they were open to a partnership on the current redevelopment so some money could be put into neighborhood programming.

‘What are you talking about?’

Bennett, McCormack’s president, said negotiations broke down when Carr’s attorneys asked for “veto and approval rights” over some of the project’s financial transactions.

“There were a lot of other controls that were requested by Carr’s attorneys that, we just said, we’ll never get there,” he said. “At every turn, the issues come back to control of the grant, control of the resources, and some understanding or misunderstanding that these are frankly federal funds between HUD and the city.”

Clendenin, Carr’s attorney, provided several drafts of an agreement between the two sides from early 2020 suggesting that some of the dispute revolved around whether Carr Square would be able to approve McCormack’s future development agreements. The drafts, the last of which was sent in March 2020, indicate that the controls Carr Square sought were over the payment of the sub-development fee to Carr Square — estimated at $169,000 of the $2.25 million McCormack expected in developer fees on the first phase.

McCormack would get Carr Square’s cooperation in vacating streets, zoning and tax abatement — all actions that in St. Louis, an area’s alderman informally controls.

Carr Square in return wanted to be able to approve any new agreements proposed by McCormack that would prohibit the payment of the sub-development fee. It also wanted language removed that subjected Carr Square’s payment to approval by HUD and the city.

Clendenin said that provision “was defensive in nature.” Carr Square didn’t want McCormack Baron to divert fees due to Carr Square through sub-development agreements.

Another issue: Carr Square wanted its portion of the development fee “up front,” said Baron, the company’s chairman.

“And we said, ‘What are you talking about?’” Baron said. “’You’ll get your funds when we get our funds.’ We basically said, ‘Listen guys, this is the way the world works. You understand this very well.’ Stone Leyton & Gershman has done all kinds of tax credit jobs.”

But Clendenin said Carr Square had been burned by McCormack before. Receiving the fees up front, he said, gave Carr the “best chance at actually receiving the development fee.”

Nor could the two sides agree on whether Carr Square even still had an ownership interest in the Preservation Square property. McCormack maintains that Carr Square’s interest was reduced in past refinancings of the property. Carr Square repeatedly insisted that its ownership interest should be purchased — though a dollar figure still needed to be negotiated, according to the drafts.

While negotiations were ongoing, Clendenin said McCormack “was actively trying to eliminate Carr Square’s ownership interest in Preservation Square.”

When financing for the project ultimately closed last summer, the property was transferred to a company controlled by the city’s economic development arm — the St. Louis Development Corporation. SLDC says the structure was only designed to lower McCormack’s federal income tax burden.

Carr School

Among the Hubbards’ biggest complaints are that plans never moved forward to rehab Carr School, two blocks south of Preservation Square, and turn it into a community center. McCormack said that’s because the structure is in such poor shape that HUD later decided that Choice grant funds couldn’t be put toward it.

Baron and Bennett maintained that they wanted to develop a community center and tried to find another way. Carr School is owned by Carr Square. The ground surrounding it is owned by NorthSide Regeneration, the Paul McKee-led effort to compile property in north St. Louis, in which Carr Square is partner. Plans to renovate the school had to involve NorthSide. Baron and Bennett said they met several times to discuss alternatives with McKee, Rodney Hubbard and Steve Stone, NorthSide’s attorney and a partner in Stone Leyton & Gershman.

“Tammika Hubbard never sat in a single meeting we had about the community center,” Baron said. “Never. Not one. Would not talk to us. I asked Rodney repeatedly, why isn’t Tammika at the table? This is her ward. Isn’t she interested in this community center?”

Tammika Hubbard confirmed via email she didn’t attend those meetings. But she said she didn’t believe McCormack was acting in good faith to find another development plan for the community center. McCormack, she said, “tricked” her and her constituents about the school.

McCormack has worked on multiple HUD Choice grants across the country, she said. “They knew the rules,” she wrote. “MBS brought renovation of the school to the table for a state-of-the-art community center. Then almost four years later they said that it was not allowable.”

Baron said Carr School talks broke down after Stone Leyton attorneys continued to push for legal rights over the private development agreements required to bring on tax credit investors. He wasn’t about to let an outside party insert itself into the project like that, he said.

“Every time we got down to having an agreement, the lawyers for Carr Square kept adding specific requirements on our part giving them control over this or that and made it so impossible to try and work this out that finally I just decided it wasn’t worth the time,” Baron said.

Regardless, Baron and Bennett say they’re still interested in helping to develop a community center in the area. They’re currently looking at the Elkay building next to Carr School, now owned by nonprofit Justine Petersen.

Bottom line, said the McCormack executives: The Hubbards and their lawyers can’t stop the Preservation Square project.

If they think they’ve been cheated, Bennett suggested, they could always sue.

“Obviously they have other recourse they could always have sought, legal or other,” he said. “That’s not been sought.”

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