City of Portsmouth Files Suit Against McIntyre Development Partner
April 11, 2023
Today the City of Portsmouth filed suit against SoBow Square, LLC, its Development Partner (Developer) in the McIntyre Project. The suit, filed in Rockingham County Superior Court, asked the Court to find that the City fully complied with its obligations under the Settlement Agreement, signed in April of 2022, and to find the Developer committed numerous material breaches of that agreement.
Other claims in the suit seek damages for breach of contract and unfair and deceptive business practices. The City claims these actions by the Developer prevented it from filing a timely application to the National Park Service to acquire the Thomas J. McIntyre Federal Building from the General Services Administration (GSA) for one dollar through the National Historic Monument Program (Monument).
In April of 2022, the parties entered into a Settlement Agreement to resolve a prior lawsuit filed by the Developer against the City. The Agreement required the parties to negotiate in good faith to prepare an application to develop the McIntyre property consistent with the Community Plan. The Agreement also required the City to contribute public financial support to the project, which was not part of the original project. In November of 2022, the Developer presented the City with a pro forma detailing the costs of construction, the expected revenue and the contributions expected from each party. This initial pro forma calculated the City’s contribution at $80 million, while the Developer’s contribution was estimated at $40 million.
In response to the draft pro forma and for due diligence purposes, the City retained a financial expert in real estate development, RKG Associates. Their work was to review assumptions of revenue projections and anticipated costs in the Developer’s draft pro forma. RKG produced a new pro forma that reduced the City’s $80 million contribution to approximately $6.5 million. This pro forma included the City’s proposed profit sharing commensurate with its percentage of the contribution to the project. RKG’s work spoke directly to the City’s concerns that the previous pro forma was not in its best interest. However, the Developer declined to entertain the City’s request for profit sharing and disputed numerous assumptions in the pro forma.
In addition, the Developer had refused to include certain termination rights that had been in the previous Development Agreement. The City worked in good faith to resolve the disputed issues right up to the March 31 deadline. On the evening of March 30, after the close of business, a letter received from the Developer’s lawyers indicated a willingness to accept the termination rights as part of the Development Agreement but failed to agree on the other major outstanding issues. On March 31, the City was informed that the GSA’s was withdrawing its support for this project under the Monument program.
At the request of Mayor Deaglan McEachern, there will be an opportunity for public input at the City Council meeting on Monday, April 17 in the Eileen Dondero Foley Council Chambers at City Hall regarding the possible acquisition of the McIntyre Property from the GSA through its negotiated sale process. The public is welcome to attend or provide comments in advance via the City Council contact form. https://portsnh.co/contactcouncilors
More information can be found on the McIntyre Project Page on the City’s website: https://www.cityofportsmouth.com/mcintyre-project