St. Paul’s Struggling Parking Ramp Buyer Was an FBI Chicago Corruption Informant
The City of St. Paul is set to lose a downtown property after a parking ramp at the site failed to raise enough money to pay the debt used to build it.
A Hennepin County judge recently issued an order clearing the way for the sale of the Capital City Plaza parking ramp to a company led by Chicago-based real estate developer John Thomas, who spent time in federal prison after pleading guilty in 2014 to defrauding an Illinois town.
The Port Authority of St. Paul issued bonds to build the parking ramp in 2000 and defaulted on the debt in 2009. St. Paul’s ratepayers are sheltered from the loss – they are the holders of bonds that will be losers.
Meanwhile, the Port Authority is paying out $2.5 million a year to bondholders caught up in previous failed real estate speculation. These payments, authorized by a 2011 court settlement and funded by the authority’s rental income from other real estate, will continue until 2032.
Port Authority Chairman Lee Krueger, who joined the agency in 2012, said the decision to build the Capital City Plaza parking ramp was based on “the best information we had at the time.” and that it is now in the hands of bondholders and Wells Fargo, the trustee representing them.
“It’s so out of our control,” he said, “and has been for at least a decade.”
The project has already changed the way the Port Authority does business. The agency hasn’t issued revenue bonds since, opting instead to fund third-party guaranteed projects, Krueger and Bruce Kessel, the agency’s comptroller, said.
A failed project
Established by the state legislature in 1929, the Port Authority played an aggressive role in funding downtown redevelopment efforts beginning in the 1970s, to see many such projects, such as Galtier Plaza, default on their loans in the 1980s.
In 2000, the Port Authority issued three series of bonds totaling $23.8 million and loaned the proceeds to its nonprofit arm, Capital City Properties, to fund land acquisition and construction of a ramp at 50 E. 4th St. in downtown St. Paul.
When the Port Authority was planning the ramp project, projections showed it would help fill a downtown parking need, said former authority manager Patrick Dean, who managed the project. The ramp revenue was supposed to pay off the bond debt.
“Everything looked good on paper at the time,” said Dean, who was ousted from the Port Authority in 2006 after alleging the agency diverted money to its nonprofit arm instead. to repay investors. “What happened is that while you continued to see businesses move, daily parking was no longer necessary in St. Paul four to five years later.”
The 954-seat ramp opened in 2001, and financial records show he lost money from the start. In 2009, after years of non-payment, the Port Authority defaults on bond debt. As of early 2018, court records show nearly $38.7 million was owed in principal and interest combined.
Sale is pending
Wells Fargo, the trustee representing the bondholders, has put the ramp up for sale. Thomas’ company, Jet Park LLC, submitted a bid for $14.2 million in late 2017, but has since negotiated the price to $12 million, citing the ramp’s “surprisingly poor financial performance” and the need for structural repairs, according to a notice dated October 5 from Wells Fargo to bondholders.
Parking ramps are risky investments, with a bond default rate comparable to privatized prisons and seniors’ residences. Thomas’ offer, while a fraction of what’s owed, would provide bondholders with a small payback, said Matt Fabian, a partner at Municipal Market Analytics, an independent research firm that tracks the bond market.
“At this point, nine years later, bondholders just want to get their money back and move on,” Fabian said.
It is not known when the sale will be finalized. John Rupp, who previously owned the land where the parking ramp was built, had an option to purchase and a right of first refusal with the Port Authority. Wells Fargo, acting on behalf of bondholders, is seeking to circumvent this agreement.
Rupp, who owns the monuments of Saint-Paul including the University Club, St. Paul Athletic Club and WA Frost & Co., are fighting back in court. He declined to comment.
Wells Fargo told bondholders in the Oct. 5 notice that as part of the sale agreement, Thomas can lease the ramp from Capital City Properties for $66,000 per month. Eric Larson, the Port Authority’s general counsel, said the authority had made it clear it only wanted to lease the ramp to Thomas if he eventually bought it.
The details of the sale, including the selection of Thomas as the buyer, are beyond the Port Authority’s control, Krueger said.
“I don’t know anything about John Thomas except what I read in the newspaper,” he said. “Wells Fargo drives the bus. We don’t even change the tires.
The buyer has a criminal past
Thomas is new to the St. Paul real estate market but has a long history in Chicago and New York.
Formerly known as Bernard Barton, he pleaded guilty in 2004 to fraud charges in New York related to his operation of a billboard business, but avoided prison by working with the government on cases of corruption. He spent more than 10 years cooperating with the FBI, and his work played a key role in the indictments of Chicago developer Antoin “Tony” Rezko, former Chicago alderman Isaac “Ike” Carothers, and former Illinois Governor Rod Blagojevich, according to court documents. and local reports.
In 2011, Thomas purchased an 11-acre property in Riverdale, Illinois and entered into an agreement with the city to develop the site, known as Riverdale Marina. Riverdale paid Thomas a total of $900,000, more than $370,000 of which he used for personal expenses, such as paying debts and rent, rather than construction costs, according to the deed. ‘charge.
A federal grand jury in Illinois indicted Thomas in 2013, and in 2015 he was sentenced to five years in prison and ordered to pay $374,182 in restitution. In 2017, Thomas said, he was released to a halfway house after serving part of his sentence in Duluth and completing a drug and alcohol rehabilitation program. He is now back in Chicago, and he said in an interview Friday that he plans to make his final restitution payment next month.
Riverdale Mayor Lawrence Jackson did not respond to multiple requests for comment, but he provided the Star Tribune with a statement in September saying the marina remains closed and the city is “still dealing with the John Thomas mess.” “.
Thomas said “the issues around Riverdale have nothing to do with St. Paul.”
“I am not looking for any government subsidy. I am acquiring property as a private investor with my partners and we are going to do a very good job,” he said. “We think we have a good plan to make the garage a much more productive asset for us and the city of St. Paul.”
Thomas is also purchase of the former Ecolab University Centerand he said he was looking for other properties.
“I think we’ll be settled in that market for a while,” he said.
Previous versions of this story incorrectly described a Hennepin County judge’s order regarding the sale of the Capital City Plaza parking ramp.