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Press Herald Owner Sussman Hit With Lawsuit Amid Condo Project Fallout

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Newbury

An artists rendition of the Newbury Lofts condominium complex.

Billionaire Democrat S. Donald Sussman and wife Rep. Chellie Pingree (D-Maine) are dealing with a lawsuit following the collapse of an $8,000,000 condominium project that residents in the First Congressional District had hoped would revitalize a blight-stricken Portland neighborhood.

According to Cumberland County District Court documents, copies of which were obtained by The Maine Wire, Portland-based Developers Collaborative is suing Sussman and his real estate attorney Thomas B. Federle for consultancy services provided on the Newbury Lofts – a much-ballyhooed condo complex that was never built.

Kevin Bunker, the manager of Developers Collaborative and plaintiff in the lawsuit, alleges nonpayment of $400,000 in services rendered. According to court documents, he is seeking to claim a lien of $175,000 against properties Sussman owns through Rebeco, LLC.

Sussman formed Rebeco, also known as Hampshire Street Properties, in 2008 for the purpose of building the Newbury Lofts. City tax records indicate that Sussman paid more than $3.3 million to acquire land for the project, which includes six properties on the block bounded by Hampshire, Federal, Franklin and Newbury Streets. According to District Court documents, the properties are 96 Federal St., 100 Federal St., 32 Hampshire St., 42 Hampshire St., 167 Newbury St., and 169 Newbury St.

Federle, an attorney with Federle Mahoney LLC, served as an authorized agent to Rebeco and is representing both himself and Sussman against Bunker’s charges. But Federle’s role in the project itself—and thus his potential legal obligation to Bunker—is a matter of open dispute.

Billionaire S. Donald Sussman and wife Congresswoman Chellie Pingree own the Portland Press Herald.

Billionaire S. Donald Sussman and wife Congresswoman Chellie Pingree own the Portland Press Herald.

According to court documents, Sussman, Bunker and Federle’s relationship began in November of 2011 when Federle approached Bunker requesting that Developers Collaborative submit a proposal to develop a portion of land in Portland. One year later, the deal fell through, leaving Bunker empty-handed and upset.

According to a January 5, 2012 letter of intent, which was signed by both Bunker and Federle on March 26, 2012, Bunker agreed to partner with Rebeco on the Newbury Lofts development. Bunker was to conduct the preliminary feasibility analysis, negotiate with contractors and vendors, and secure permits and re-zoning measures with the City of Portland.

Over the course of several months, Bunker worked extensively on the project with the understanding that Sussman would compensate him according to verbal promises made by Federle. In June, Bunker sought to cement his compensation arrangement via a “Development Services Agreement” which he presented to Federle. Documents appended to the suit include e-mail exchanges between Federle and Bunker that show how Federle avoided signing the agreement and instead offered Bunker promises.

In a June 22 exchange, Federle, having received the Development Services Agreement, wrote to Bunker, “Sorry I haven’t gotten back with comments on the developer’s agreement you presented. I got hung up early in the dense doc (page 1) on the conclusion of feasibility.”

Bunker replied on June 23:

“On feasibility: Basic concept on here is we initially agreed to “speculate” on one another while we built up a relationship that would allow us to go forward with a development plan, should there be one that works for both parties. I think we’ve done that so it is not appropriate for me to be still “working on spec” for much longer. That said, obviously the bulk of my compensation is tied to achieving stated Owner goals, one of which is economic feasibility, i.e. as we’ve come to understand it, i.e. this may not be a huge windfall but it should not lose money. If that is demonstrable but Owner chooses not to proceed, I should still be incrementally compensated for doing my end of it based on some agreement on where the value has been added and that is why I have performance benchmarks like receipt of approvals, etc.”

Federle responded the same day:

“I understand that without an executed agreement that you are at risk and given the size of the project a written agreement is certainly necessary. Practically speaking I don’t think your risk is beyond negligible as neither Donald nor I would leave you in the lurch.(Emphasis Added)

“As for progress, I recognize that we are still engaged in broken field running but the key to that is downfield blocking. I want us executing as close to perfectly as we can be… Donald is not going to leave anybody unpaid…” (Emphasis Added)

Bunker replied:

“I think we’re on the same page re the agreement and I get the fact that you and Donald are stand up guys.” (Emphasis Added)

 

After being assuaged of the low-risk involved in partnering with a stand up billionaire of Sussman’s stature, Bunker resumed his work on Newbury Lofts, despite the lack of an ironclad written contract guaranteeing him payment. Bunker’s work during this time period involved securing permits and re-zoning orders from the City of Portland and urging the City to place the project on a “fast track” for approval.

But not long after Bunker presented the Development Services Agreement and was met with Federle’s sooth-saying stonewall, Sussman started getting cold feet. According to court documents, Federle sent Bunker a text message on July 9 indicating that Sussman no longer wanted to “fast track” the project. The actual text read: “Tough Day with Donald. He told me to get off fast track. Took all my powers to get back on it. We should talk about it.”

Things between Bunker and Federle began heading south when Federle proposed that Bunker accept deferred or performance-based payment on the project in order to increase its feasibility.

Federle offered a revenue sharing arrangement between himself, Rebeco, and Developer’s Collaborative. Bunker alleges that Federle had lined himself up a $150,000 performance fee to be paid upon successful completion of the project. Under the proposed arrangement, Bunker would have received the same compensation. Bunker, however, wanted greater control over the costs of the project in return for accepting the greater risk associated with deferred compensation and performance-based revenue-sharing.

In an Aug. 24 e-mail, Bunker wrote, “[I] have no interest in being at risk if you aren’t. That was what made a ridiculous request palatable in the first place. Risk aligns with control. Period full stop.  I value the relationship but maybe professionally it isn’t a fit if I am unsuccessful in getting that across.”

Federle replied, in part, “I’m good w being at risk alongside u.”

Exactly how Federle was to profit from the project is central to the suit. Whereas Bunker’s lawyer contends that Federle was a joint venturer in the project with a vested financial interest, Federle maintains that he had no joint profit with Sussman.

Despite the ongoing conflict between Bunker and Federle, Bunker continued work on the project, and on September 11 the project received final approval from the City of Portland.

According to Bunker’s statements in court documents, receipt of final approval for permitting and re-zoning from Portland represented a milestone in the agreement between Developer’s Collaborative and Rebeco. Under the terms of the Development Services Agreement, which was never signed by Sussman, Bunker should have been compensated $175,000 for achieving the permit milestone. Bunker submitted an invoice for that amount to Federle in September and the partnership began to unravel rapidly thereafter.

“For the first time at the end of September 2012, Federle told Bunker that Sussman would need to approve and sign the Development Agreement. Subsequently Bunker learned that Sussman was not willing to execute the written Development Agreement and that Federle was no longer authorized to execute the agreement,” Bunker’s attorney stated in court documents.

At the same time, according to court documents, Federle and Sussman informed Bunker that they were no longer willing to pursue the project.

Although Bunker, Federle, and Sussman were aware that the project was dead in the water in mid-September — well before Pingree’s re-election — the fact was not made public until January, after Pingree had defeated Republican candidate Charlie Summers. At that point in time, more than half of the 24 Newbury Lofts condos were already under contract to be sold.

When the public did learn that Sussman had indefinitely postponed the project, Federle told the Bangor Daily News, “[Sussman] is taking a step back and re-evaluating the situation.” Sussman, who is a majority stakeholder in the Portland Press Herald, told his newspaper, “Unfortunately, the current climate makes the project not quite viable yet.”

Beyond these vague statements, neither Federle nor Sussman has provided any specific reason for withdrawing from the project. Neither man made any reference to the discord between themselves and Bunker.

Sussman, Federle and Bunker did not respond to multiple requests for comment on this story.

In February, the Press Herald reported that Bunker had won approval to convert the former Press Herald building into a boutique hotel and restaurant. He is reportedly seeking tax credits to help with the renovations.

Parties to the lawsuit – Developers Collaborative Predevelopment, LCC v. ReBeCo LLC a/b/a Hampshire Street Properties and Thomas Federle – are scheduled for a hearing at Cumberland County Superior Court on April 3.

By S.E. Robinson

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About Steve Robinson

Steve Robinson is the former editor of The Maine Wire and currently producer for the Howie Carr Show. Follow him on Twitter @Stevie_Rob or send him an email at Steve@HowieCarrShow.com.

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