Inside the Congress Heights Metro development sham that left a crime-plagued neighborhood in decay
By Jeffrey Anderson
The last place Chico Horton wanted to be on June 28, 2019, was the law offices of Arnold & Porter, answering questions under oath about his role in his client’s convoluted real estate transaction that had turned into a full-blown shit show.
The lawyer, lobbyist, developer, political appointee and charter member of Mayor Muriel Bowser’s coterie had represented developer Geoffrey Griffis in the acquisition of a cluster of blighted apartment buildings at Congress Heights Metro Station; Griffis planned to demolish and redevelop the site into a “transformational” mixed-use project.
The problem was that a Superior Court judge had already placed the properties under receivership, and the tenants had first rights to redevelop them under the Tenant Opportunity To Purchase Act (“TOPA”).
Despite a court order giving him a 60-day reprieve from having to undertake costly repairs so he could negotiate “exclusively” with his tenants to sell them the properties, Aubrey Carter Nowell of the real estate management company Sanford Capital had surreptitiously transferred them to a company formed by Griffis, in December 2017.
Horton knew about the court order, according to emails filed with court pleadings and reviewed by District Dig; He had facilitated an unusual transaction in which his client, Griffis, borrowed from the bank that held Nowell’s mortgage notes in order to purchase those notes and acquire the properties as would a lender who was threatening to foreclose.
So did executives at EagleBank, the community lender that had financed the transaction.
As did a friend of Horton’s, fellow Bowser insider and EagleBank board member Ben Soto, the real estate attorney who did the closing.
Horton and Soto were so involved with the deal they even loaned Griffis $200,000 each to assume Nowell’s debt to EagleBank, according to emails, documents and sworn testimony filed in Superior Court.
In a May 2018 lawsuit against companies controlled by Griffis and Nowell, the tenants described these machinations as a “brazen scheme” to evade TOPA, and demanded the transfers be nullified.
A Superior Court judge said it was “undisputed that avoiding TOPA was one of the defendants’ goals.” That by itself was not illegal or improper, the judge said, but taking all the facts into consideration, the tenants argued, Griffis and Nowell failed to qualify for an exemption they were claiming.
The tenants, eventually displaced from their homes due to uninhabitable conditions, have fought what some see as a blood war to enforce their rights. Until recently, they have been unable to partner with a developer to buy out Griffis and build new, affordable apartments that they can return to.
The dispute has exacted a toll on just about everyone involved.
Pilloried by activists and the media, Nowell was branded a slumlord, and forced to declare bankruptcy and dissolve Sanford Capital.
Determined to realize a grand vision for the site, Griffis has sunk millions into an ill-fated endeavor and gotten stuck with vacant properties he cannot develop, along with supplemental rental payments for nine re-located, low-income residents–mostly seniors–who have refused to back down.
Those nine are just the die-hards; Dozens of other residents vacated their festering apartments long ago. Some have since died.
Experts say communities ravaged by blight can become dangerous. The first thing you see when you come out of the Congress Heights Metro station is this grouping of tear-downs that surround a transportation hub in a neighborhood where deadly shootings are commonplace.
Recently, police shot and killed a man who was allegedly brandishing a long gun near the Metro station, at Alabama Avenue and 13th Street S.E. –the very corner where these buildings stand.
Two Saturdays ago, a Maryland man died after being shot elsewhere in Congress Heights. Last week, two people were killed and three were wounded in a shooting nearby.
The Congress Heights imbroglio might be the biggest development failure this side of the Anacostia River. Even Horton, who is not a defendant in any lawsuit and has not been accused of wrongdoing, might have regrets:
He not only serviced a raw deal, it’s unclear whether he’s recovered his $200,000 from Griffis. It also is unclear whether Soto, who also has not been implicated in any lawsuit or wrongdoing, ever got his $200,000 back, either.
Despite any inconvenience, unease, or loss he may have experienced, the Congress Heights debacle does not appear to have adversely affected Horton. He remains a well-connected and highly-compensated city contractor, still near and dear to the Mayor.
Nor has it seemed to set Soto back: He since has partnered with Griffis on city subsidized real estate transactions in rapidly developing parts of D.C. that appear lucrative and drama-free.
Previously unexamined exhibits attached to court pleadings, however, reveal an unseemly side to the whole affair. Emails among the parties detail intentional dealings that speak poorly of how the privileged class conducts its business in less fortunate parts of town.
On the surface, it seems inconceivable that such prominent, well-connected figures could be involved in such a travesty.
Yet D.C. is a city where those with easy access to capital do well on one side of the Anacostia River, while the less fortunate on the other side of that divide have to scratch and claw for what they can get–as communities of color suffer the consequences of derailed economic development.
Document Drop
The Congress Heights Metro Station project was in and out of the news for years until the fall of 2018. But in the fall of 2019, a cache of documents appeared in court files that allowed The Dig to drill down further.
The internal exchanges produced during legal discovery are illuminating, if not compromising. An attorney for Nowell has said his client has no desire to discuss those exchanges or answer any questions. Neither Griffis, Horton, nor Soto returned calls or replied to written questions.
In sworn testimony–and emails to this reporter–Griffis has denied any intention to mislead the Congress Heights tenants. He has claimed that an affiliate of his company, CityPartners, acquired the properties only after negotiations between Nowell and the tenants reached an impasse.
Griffis has long insisted that he always wanted what’s best for the tenants, and that he always dealt with them in good faith.
Horton and Soto also have disclaimed that anything was amiss, and deny having invested in the deal; they say they merely provided professional services and loaned money in what looked like a good business opportunity.
The project’s origin dates to 2008, when Nowell started to acquire three parcels containing four, three-story brick apartment buildings adjacent to the Metro station at Alabama and 13th—financing his purchases through EagleBank, the preferred lender of the politics and business community.
In 2011, he and Griffis formed the first of two Limited Liability Companies (“LLCs”)–which Griffis controlled. In 2013, under those LLCs, they applied for a Planned Use Development (“PUD”), an entitlement that eases zoning restrictions to provide greater public benefit than development “by-right.”
In 2015, the Zoning Commission approved their PUD, which included a 41,000 square foot parcel they sought to acquire from the Washington Metropolitan Area Transit Authority (“WMATA”) through a purchase and sale agreement, and a parcel neither of them owned that was the subject of an investigative report last fall by The Dig.
The long-range plan was that once they got PUD approval, Nowell would sell the properties to Griffis and exit the scene.
In January 2016, as they were negotiating a sale, D.C. Attorney General Karl Racine’s office filed a lawsuit against Nowell and the companies associated with the three dilapidated properties he owned, asking the court to put them into receivership.
Nowell promptly alerted Griffis via email, who on January 7, replied, “Did you know about this? What [are] you thinking to do? This is nuts-as I said-the city can make this impossible – call me in the AM.”
As litigation commenced, the two weighed the threat of receivership and how it might affect their plans. On May 20, Griffis made an offer to buy the properties from Nowell in a straight sale.
Before any sale could take place, TOPA required Nowell to give the tenants a “bona fide” offer of sale for each property, which he did, on July 1, according to documents in the case.
By all accounts, no one told the tenants about Griffis’s May 20 offer. As far as they knew, he and Nowell were partners. And given the deplorable conditions of the apartment buildings, and the tenants’ fear of being driven from their homes, tensions began to run high.
In late July 2016, the tenants, along with activists who had been protesting the sale of the WMATA properties, gathered outside Griffis’s house in Cleveland Park and accused him of running a business model of attrition and displacement of low income residents. It was a hot local story.
“Carter, I think this has gotten to a critical point. These fuckers are controlling the message and situation and I do [not] see this changing until we directly combat,” Griffis wrote to Nowell, on July 28. “We have to start to control [the] message. I think we should discuss and I think a healthy budget needs to be funded to quickly take this back.”
“I’m happy to discuss options,” Nowell replied. “How exactly do you think we can quickly take this back? I think it’s time to threaten litigation.”
“Litigation is a part- but this will not play out in court, it is in the public forum, so with threats has to come a message- and meetings coordination with [WMATA] and community folks- needs to be a coordinated full effort, hitting media, etc.” Griffis wrote back.
The tenants were represented by the Washington Legal Clinic for the Homeless, which brought in Arnold & Porter’s pro bono unit to assist on the case. On October 24, 2016, an associate of the firm wrote to Nowell and said they were willing to “engage in good faith bargaining” over the “bona fide” offers of sale, through December 31, 2017.
This gave Griffis a date to shoot for if he was going to get ahold of the properties before the tenants could purchase them.
On April 3, 2017, he presented an “offer strategy” to a venture capital specialist who was advising potential investors and urged that they move quickly to “silence the noise and to get back to the work of development.”
One option, Griffis suggested, was that Nowell could transfer what was referred to as the “Sanford properties” to his company through a prepackaged Chapter 11 bankruptcy–a process that is exempt from TOPA.
“TOPA is removed,” Griffis wrote to the adviser, in his outline of the proposed strategy.
He and Nowell sent a Letter of Intent to the investors, on June 13, that stated: “Upon execution of this Letter of Intent, [Sanford] agrees to negotiate exclusively with [CityPartners] and not to market, solicit, entertain, receive or accept other offers.”
Obtaining the Sanford properties was one thing; Griffis was attuned to the optics and legalities of orchestrating a workaround of TOPA. He also felt he needed to disassociate himself from Nowell as soon as possible.
“CityPartners must be able to honestly and substantively state we have made a clean break from Sanford Capital,” Griffis wrote to Nowell that July. “Whatever we structure and represent to [the] Bankruptcy Judge must be truthful and will be public fodder for potential negative reporting.”
In September 2017, the court ordered the properties into receivership, complicating the prospects of a bankruptcy sale. The following month, Nowell, who had defaulted on his loans from EagleBank, told Griffis he was planning to let the properties be sold at foreclosure, according to a “Statement of Material Facts Not In Dispute” that Griffis filed with the court.
A foreclosure sale also would be exempt from TOPA, though it caused Griffis to consider “alternatives to acquire [the Sanford properties] without the cooperation of [Sanford],” his statement says.
Then a suspicious sequence of events occurred:
On November 2, 2017, at a hearing to discuss the receivership plan, Nowell agreed to begin funding the plan after 60 days unless he could negotiate exclusively with the tenants to sell them the properties. The resulting 60-day order was entered on November 9.
But in between the time of the hearing and the time of the order, Nowell received an email from his attorney, Richard Luchs, on November 6:
“Geoff Griffis et al want to speak with me about how to acquire the property, working with you,” Luchs wrote. “Am I permitted to speak to them?” (Nowell promptly replied in the affirmative.)
Meanwhile, depending on whose account is most accurate, EagleBank had asked Griffis whether he would consider purchasing the delinquent notes it held on the Sanford properties.
Sanford’s other creditor, Revere Bank, expressed interest in pursuing this strategy as well, according to Griffis’s statement.
This would allow the CityPartners affiliate to become a de facto lender, putting Griffis in a position to foreclose on the Sanford properties “in lieu of EagleBank,” according to his statement.
Presumably, this too would allow Nowell to transfer the properties to Griffis while still avoiding TOPA. And it presupposed that they could make the receivership go away once Nowell no longer owned the properties.
But it also would open a Pandora’s Box of dubious real estate transactions that blew up in their faces.
Economic Divide
While the Congress Heights tenants were living in horrid conditions and fending off displacement, Horton and Soto were doing just fine–a contrast emblematic of D.C.’s social and economic disparities.
In addition to his law firm, Tiber Hudson, Chico Horton is a founding partner of Graves, Horton, Askew and Jenkins LLC, specializing in financing multi-family apartment and condominium projects, office buildings, hotels, retail and mixed use projects. He also has expertise with low income housing tax credits–the mother’s milk of “affordable” housing in D.C.
Horton’s ties to the Bowser administration run deep. In 2015, he co-chaired FreshPAC, the Mayor’s political action committee that was forced to shut down amid pay-to-play connections to city contracts.
When Exelon pursued a merger with PEPCO, Horton served briefly as its lobbyist to help secure a settlement, even after Bowser had previously supported a regulator’s decision to reject the union–a turn of events that drew similar criticism.
Horton’s law firms have landed millions of dollars in D.C. government contracts over the years, according to the Office of Contracting and Procurement database:
- He’s in the third year of a $950,000 annual contract with a total of four option years to provide legal services to the City Administrator;
- He’s in the second year of an Industrial Revenue Bond Counsel contract with the Deputy Mayor of Planning and Economic Development (“DMPED”), also with four option years, ranging from $241,250 per year up to $281,875 in the final year;
- He had a Bond Counsel contract with DMPED from 2013 to 2018, earning from $406,700 per year up to $466,700. (Horton also is Bond Counsel for the D.C. Housing Finance Agency.)
If Horton’s firms exhaust all options on those contracts it will net him and his partners more than $8 million. (Tiber Hudson also has raked in another $94,000 in purchase orders for various city services dating back to 2013.)
Horton is an active political contributor as well. Through his law firms, family and development company, Blue Sky Housing LLC, he has contributed tens of thousands of dollars to political candidates over the years, according to campaign finance records, much of it going to Bowser and her clique, the “Green Team.”
In 2020, she appointed him to her “Reopen D.C.” pandemic advisory team.
Ben Soto is equally dialed into the D.C. power structure. In addition to being a lawyer with his own full-service title company, Premium Title & Escrow LLC, he owns Paramount Development, which has partnered with Griffis’s firm on major development projects such as The Wharf, Waterfront Station II and 555 E Street S.W.–all of them receiving public financing.
Soto’s Green Team credentials are equally as solid as Horton’s, serving as an appointee of former mayor Adrian Fenty to the D.C. Sports & Entertainment Commission, handling campaign finance duties for Fenty, Bowser and Bowser’s protege, former Council member Brandon Todd, and contributing generously to political candidates through multiple entities.
Like Horton, Soto serves on the Board of Directors of the D.C. Chamber of Commerce, among numerous other upstanding boards.
But perhaps the most interesting position on Soto’s resume is Director of EagleBank, and its parent, Eagle Bancorp, Inc.
Essential Services
Horton and Soto are more than just bit players in the Congress Heights redevelopment saga. They both wore multiple hats and played pivotal roles.
Soto has provided title services to Nowell and Griffis for years; He processed Nowell’s original acquisition of the Sanford properties and the activity leading to their transfer from Nowell to Griffis–all transactions financed by EagleBank. His title company processed the purchase and sale agreement on the WMATA property.
Horton represented the Griffis-controlled LLC in the WMATA transaction, and CityPartners in acquiring the Sanford properties. He also has represented Sanford before.
By November 2017, both bankruptcy and foreclosure were seeming too expensive and time-consuming as options for getting around TOPA. Emails were flying around between the parties and their lawyers–and Soto.
At 10:00 AM on November 6, Horton sent the following email to Luchs, Griffis, a Griffis associate and Soto: “Group, I don’t know if anybody received my email from Friday…I want to schedule a conference call to discuss TOPA issues related to CityPartners acquisition (still trying to determine actual execution strategy) of Sanford Congress Heights portfolio. One of the main issues we want to discuss does TOPA get triggered if the title is transferred from Sanford to CityPartners via deed in loui [sic] of foreclosure.”
At 10:07 AM, Luchs–a go-to guy for owners and developers on all things TOPA–hit “Reply All” and wrote, “Chico…while a deed in lieu [of foreclosure] is not subject to TOPA, the deed has to be to the lender so CityPartners would have to acquire the outstanding loan in order to make that work.” (Then he asked his client for approval to talk with “Geoff Griffis et al,” at 10:34 AM.)
Basically, the lawyers were saying that if CityPartners acquired Sanford’s debt, Griffis, as the new “lender,” could move to foreclose on the properties, then receive an immediate transfer via deed in lieu of foreclosure without triggering TOPA.
Griffis couldn’t afford Nowell’s debt, so first he’d have to borrow money to purchase the notes from EagleBank (and Revere Bank). EagleBank would lend him that money, and Soto would do the closing on the whole shebang.
Taking on debt to purchase debt to become a lender in order to acquire property under the purported threat of foreclosure is not exactly commonplace–certainly not using the same bank.
EagleBank officials later testified they had never conducted such a transaction before.
The judge’s 60-day order further complicated matters–although that did not stop Nowell and Griffis from moving forward with their plan:
On November 21, Griffis wrote to Nowell, “Carter, Do you have a copy of the Judges recent order (requiring the 60 day negotiation) and also when that started and when the 60 days expires? We received the [Bank’s] mark up on the note purchase today- reviewing and should sign shortly.”
Horton and Soto were leaning into the deal as well. On November 29, Horton emailed Griffis and offered to loan him money to help CityPartners assume the mortgage debt on the Sanford properties.
“Ben [Soto] and I are willing to loan CityPartners LLC or the acquiring entity $400,000 to close on the purchase of the notes from EagleBank and Revere Bank,” Horton wrote–from his law firm email account–signing as “Managing Member of Blue Sky Housing LLC.”
The loan, made by Blue Sky and Soto’s development company, Paramount, would be at 10 percent per annum, and secured by a second deed of trust.
“We still need to get comfortable on the Tenant/TOPA issues for us to consummate the loan,” Horton added. “We are not rich and can’t have our money tied up for a long period of time, so we are looking to exit at the acquisition of [parcel/refinance] of the properties.
“The agreement will need to contain a waiver of any conflicts of interest with my firm [doing] the legal work or Ben’s company doing the title work.” (The Dig was unable to confirm any such waivers, or any recorded instrument to secure the loan.)
On December 1, Griffis replied: “Chico, Ben, Thanks for taking an interest in this. I think there is an incredible amount of value that we create when we work together. I will respond to your initial loan offer terms shortly. Our meeting with Luchs today is to address my concerns on the receiver and TOPA issues.”
Griffis followed up on December 4 in an email to Horton at his law firm address, and Soto at Premium Title–not Paramount, the proposed lender–to iron out details.
In an email titled “Congress Heights Purchase of Notes,” Griffis wrote: “Ben, Chico, From our meeting with Luchs on Friday I am even clearer on next steps and risks…I do appreciate your interest in assisting on the first step of acquisition. As we will purchase the WMATA site in January, the equity position will be short term.”
“I would propose that at the $400,000 investment that it would be for up to 12 months at 10%. If paid off prior to [a] 12 month term a prepayment premium [would] be paid by CityPartners equal to 1% of the loan.”
Other emails show that Horton and Soto were aware of the OAG’s lawsuit, the receivership and the court order for Nowell to negotiate exclusively with the tenants, putting them even closer to the heart of a problematic situation.
On December 7, in an email titled “Deed In Lieu of Foreclosure Agreement – Eagle Loans,” Soto contacted Griffis and Horton, and Nowell and Luchs, and said, “Can somebody send me the [OAG’s] Complaint and order related to the litigation and receivership, so I can work with [the title insurance company] in not taking exception to these cases?”
“See attached Order,” Horton wrote back, within the hour.
On the other side of the bargaining table, another issue had come up.
Change of Circumstances
Just as Griffis was negotiating his loan with Horton and Soto, Nowell was being told that he should disclose to the investors the change in plans from a Chapter 11 bankruptcy to a deed in lieu of foreclosure.
“While I understand this route is more desirable and expeditious for you personally, it is not what you communicated to investors,” their adviser wrote. “Do you intend to get investor consent to change the plan or just concede to a side letter instead of a security interest in Griffis’s deal?”
This “side letter” would become key evidence to support allegations against Nowell and Griffis that they were not playing fair and square with the tenants. (Whether the investors knew about the tenants and the 60-day order is unclear.)
Nowell reasoned that the return for investors would be the same for a deed in lieu of foreclosure as it would for a Chapter 11 bankruptcy, which would cost “hundreds of thousands of dollars.” And he worried that Griffis could buy the notes from Eagle Bank and foreclose on the Sanford properties without any investors, cutting them–and him–out of the deal.
“I’m open to doing whatever you and the investors want to do here but it has to happen quickly,” he replied to the adviser. “What do you suggest?”
“You need to organize a conference call ASAP to get investors up to speed on all this so they know,” the adviser replied. “I suggest you disclose these developments immediately.”
As instructed, Nowell wrote to investors on December 12: “Three months ago we intended to take the properties into a Chapter 11 bankruptcy and sell the properties free of the encumbrance of DC’s TOPA laws.
“Circumstances have changed, and we believe bankruptcy isn’t the best option right now.”
Without elaborating on those “circumstances,” Nowell explained the deed in lieu of foreclosure, and he assured the investors that the side agreement would guarantee protection of their investment just the same as if Griffis acquired the properties through a Chapter 11 proceeding.
“This would achieve the same end result that we had contemplated through bankruptcy, but would allow it to happen much faster and with considerably less expense.”
No matter the path they chose, Griffis and Nowell (and their proxies) would need to be on the same page for the pieces to fall into place. Yet trust between the two was long gone.
On December 18, Griffis expressed concern to Nowell that reconfiguring the deal could lead to “extensive liability, most of which we have had little control or involvement in.”
Nowell copied Horton in his reply, proposing terms for the investors that would be “better than the tenant offer although it would get paid later than the tenant offer.”
This showed that Griffis and Horton not only were aware of the court’s 60-day order; they also knew Nowell was talking with the tenants while also talking in earnest with the investors–and Eagle Bank, and Soto, and Revere Bank–about a deed in lieu of foreclosure.
The whole venture was resting on shaky ground.
“I understand there is risk in this deal but a deed in lieu of foreclosure gets you the same fee simple ownership that we have been discussing for months so I don’t see why the material terms should be different for the investors,” Nowell wrote back to Griffis.
Griffis still wasn’t sold. The next day, December 19, he underscored that he was “taking on an incredible amount of unconventional risk.”
“I think we both want something to transact here, so I think the following works to be put in a side agreement,” he wrote, proposing that “a CityPartners controlled entity” would take on Nowell’s mortgage debt, borrow from investors, and issue them common equity in the properties.
On December 20, Nowell agreed to the specifics Griffis had laid out, and stipulated that the investors should receive the same credit they would have in the proposed bankruptcy sale. “If you can have your attorney write up the agreement, I will execute it concurrent with the deed in lieu.”
About 20 minutes later, Horton contacted Nowell–copying his client, Griffis, and Nowell’s attorney, Luchs–to say he was busy dealing with note purchase agreements with Eagle Bank and Revere Bank. “It would be great if you authorize Richard Luchs to put together a short agreement,” Horton wrote.
Luchs was on it: “Please see attached. We have sought to keep it very simple and will rely on the good faith of the parties to accomplish what is in the letter,” he wrote in an email to Horton, a few short hours later.
The following day, December 21, Horton returned redlined and clean versions of the “side agreement” to Luchs–copying their respective clients, Griffis and Nowell–and suggested it could be signed by the parties at the same time Nowell was to sign the deed in lieu of foreclosure documents.
In a separate email to Nowell that day, Horton attached the final deeds in lieu of foreclosure and documentation of the Eagle Bank and Revere Bank note purchases, and asked him if he was free on the 26th or 27th to complete the transaction(s), which would take place at Soto’s title office.
“Ben is getting the title ready and he can close anytime,” Horton wrote.
Soto confirmed this by email to Horton, copying all the parties, about an hour later. Horton then emailed his counterpart, Luchs, and copied all parties to inform them that EagleBank was finalizing loan documents.
Again, Luchs was all over it: “Chico,” he replied just 10 minutes later, copying all of the parties, “Carter [Nowell] is willing to sign the deed in lieu agreements, but cannot execute [them] until he is provided evidence that Geoff’s [Griffis] entity which is a party to [them] has in fact acquired ownership of the loan documents.”
All of these matters were being addressed, albeit undisclosed to the tenants.
Parallel Negotiations
While Griffis had been negotiating his loan from Horton and Soto, and he and Nowell (and their attorneys, Horton and Luchs) were working out the specifics of the “side agreement,” Nowell purportedly was negotiating with the tenants about their offer to buy the Sanford properties.
On December 15, 2017, Arnold & Porter’s senior pro bono counsel, Blake Biles, asked Nowell for an update:
“Hi Carter — Per our conversation earlier this week, please let me know whether you have resolved your remaining matters so that we have agreement on the purchase price and therefore may write up the basic deal terms early next week. Thanks.”
Biles sent another email to Nowell on December 18–the same day Nowell and Griffis had been emailing each other about the risks associated with their deal structure: “Hi Carter — Please let me know this morning whether we have agreement on the purchase price. Thank you.”
That same day, Nowell replied, disingenuously, “Hi Blake. I have one more guy to get across the finish line. I’m talking to him later today and will let you know as soon as I can. Thanks.”
In fact, Nowell was negotiating with two parties “exclusively” at the same time: The tenants, per court order; and Griffis, per Letter of Intent to the investors. If there was anyone Nowell wanted to cross the finish line with it was Griffis, whose December 18 email to Nowell about changing the property transfer from a bankruptcy to a deed in lieu of foreclosure arrived in Nowell’s inbox about an hour and half later.
Hearing nothing from Nowell over the next couple days, Biles reached out and asked–again–if they had agreement on the purchase price. He did not know that within the last two to three hours, Nowell and Griffis had been working out their transactional concerns, while their attorneys, Luchs and Horton, prepared the “side agreement.”
Things were moving fast: Just three hours after receiving the inquiry from Biles, Nowell was emailing Horton–copying his attorney, Luchs, and Horton’s client, Griffis: “Any update on status with banks?”
By the following day, December 21, the side agreement had been drafted, and the note purchases, loan documents, deeds in lieu of foreclosure and Deed of Trust securing the loans were ready.
The closing was within arm’s reach.
Yet Biles was still trying to get through to Nowell: That same day, he sent him a copy of the letter of agreement the tenants had secured from their purchase partner, National Housing Trust-Enterprise Preservation Corporation (“NHT”), confirming an offer on the properties.
“Please confirm that we have an agreement on this purchase price, so that we may write up the basic deal terms,” Biles wrote. “Thanks.”
Biles was really barking up the wrong tree, however. The following morning, December 22, Griffis emailed Nowell asking him to provide insurance policies on the properties.
“Happy to provide that too,” Nowell replied, adding, “Just confirming that it’s still your intention to close this transaction before contacting OAG, tenants, receiver etc?”
The Dig could not locate a reply from Griffis confirming this “intention,” though he was clearly busy pursuing his own agenda–which meant finalizing his loan from Horton and Soto in order to purchase Nowell’s debt and acquire the Sanford properties by deed in lieu of foreclosure.
On December 22, he informed them that the deeds in lieu of foreclosure were imminent. “I have attached a simple promissory note for your review and revisions. This is to continue our discussions [regarding] your interest in equity participation in the transaction. Let me know what you guys think.”
Horton wrote back later that day with a Deed of Trust Note and a Guaranty and Loan Agreement to effectuate and secure the $400,000 loan. “The documents are the ones Eagle used – very straight forward,” he wrote.
Griffis, however, wanted to keep it less formal.
“Chico, Let’s discuss this. I think these documents are a little too much for what we are discussing,” wrote Griffis, on December 26, objecting to an “excessive” filing cost of recording “another deed” and a 1% percent processing fee, known as an “origination” fee.
“I understand the concern of protecting the principle, but at this stage, owning the notes and the properties, the level of risk is minimized,” he wrote, assuring them that their money was safe.
“To give you an example, that one page document I sent before is what I use for friends and family. I know that may be too simple, but the point is, my commitment is real, no matter what amount of paperwork that backs it.”
What Griffis had in mind was a “raise structure” to “get the PreConstruction financing to recap all the initial equity in the short term,” he wrote. “We already have a term sheet from Eagle for this and will have another from Revere in the next few days.”
Horton promptly wrote back with revised loan documents related to “the Blue Sky and Premium loan”–confusing the name of the Soto company that was making the loan.
He then took out the origination fee and made the Deed of Trust optional “at a later date based on credit worthiness.”
“The guaranty should be all we need to secure our loan,” Horton wrote, copying Soto. “I will send over to Esther at Premium for your signature…Ben, Geoff is planning to sign around 3:30 today at your office.”
Biles would’ve been the last to know about any of this:
“Hi Carter –Not having heard from you since last Thursday, are we to conclude that you are not going to confirm agreement on the purchase price?” he wrote to Nowell, that afternoon.
For Biles and the tenants, the train was leaving the station–and they weren’t on it.
Closed But Not Over
December 27, 2017. Go time.
If all went well, by the end of the day, an LLC that Griffis had formed when applying for the PUD would be the owner of the Sanford Properties.
To reach his final goal, he would have to finalize the loan from EagleBank (with the help of the $400,000 from Horton and Soto); assume the notes on the Sanford Properties from EagleBank and Revere Bank; sign (with Nowell) the “side agreement”; and “simultaneously” execute three deeds in lieu of foreclosure and a Special Warranty Deed that would transfer the properties from Sanford to his LLC.
Depending on who’s describing it, the closing would consist of one multifaceted but simultaneous transaction, or a series of related transactions occurring at the same time and in the same place: The Premium Title office of EagleBank director Ben Soto.
The plan from there was for Nowell to record the legal documents with the Recorder of Deeds and move to dismiss the receivership, so Griffis could be unencumbered to start planning for demolition and redevelopment. (What would become of the tenants was a question for another time.)
At least that’s what Griffis was hoping for.
By mid-afternoon, as the parties came and went from Soto’s office to sign on the dotted lines, things were looking good: “Guys, appreciate your work getting this portion done today,” a Griffis associate wrote to EagleBank Vice President Kevjorik D. Jones, copying Executive Vice President Ryan Riel–and Griffis–at 2:55 pm.
“Congrats to you guys,” Jones replied to all, within five minutes. “What happened with Carter in court?”
“[The transaction] closed too late to keep Carter from having to write a check, but hopefully he can stop the receiver from spending the money once he has recorded the deed,” the Griffis associate wrote back, seeming to assume the sale to Griffis would extinguish the receivership.
Recording the documents by close of business looked unlikely, however.
“Still waiting on bank approval and signoff on the [Settlement Statement]. We can’t record until then,” Soto wrote to Nowell, at 3:33 pm, copying Horton, Griffis and Griffis’s associate.
“Do you [expect] that today?” Nowell replied, one minute later.
“We are hoping and pushing,” replied Soto, to no avail.
The following day, December 28, the closing documents were filed with the Recorder of Deeds and Griffis finally controlled the former Sanford Properties. Naturally, he too wanted to know about the status of the receivership.
“Carter, Would you provide a summary of what transpire[d] at court yesterday? Did the judge make [a] statement, receiver etc. What is to happen next?” Griffis wrote.
“I didn’t tell the judge anything about the transfer yesterday as I didn’t have the paper to support it,” Nowell wrote to Griffis, copying Horton and Griffis’s associate. “As soon as I get final paperwork from Ben [Soto] we will file a motion to dismiss the case and discharge the receiver.”
Biles was still in the dark, and not letting up on Nowell. Less than an hour after Nowell updated Griffis, he received yet another email from Biles, asking whether the tenants had an agreement to acquire the properties.
Biles followed up the next day with a reminder that he was scheduled to update the judge, on January 2, 2018, on the status of negotiations under the 60-day order.
“Hi Carter — Having received no response from you to my past three emails (see below), should we conclude that you no longer are engaged with us in our discussion about sale of the properties?
Nowell waited until the last minute to reply: “Hi Blake, I was not able to get agreement on [the] sale to NHT,” he wrote, at 9:41 AM on January 2–to the lawyer for the tenants, who were partnered with NHT.
Biles tried one more time, a little more than a half hour later: “Hi Carter — Please let me know if you are available for me to give you a phone call.”
By then it might have dawned on Biles and the tenants that Geoff Griffis now controlled the properties at Congress Heights, and that he was their new landlord. Time would tell what that meant for them.
For Griffis and Nowell, all that was left was to get the receivership dismissed so they could go their separate ways.
Now that the transaction had closed, Soto’s title work was done. All he had to worry about was getting his $200,000 back from Griffis–with whatever additional percentage he was owed.
Horton (and Luchs), however, still had work to do: Griffis was about to hear from the OAG, and it was not to wish him and Nowell a Happy New Year.
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Stay tuned for a look at how the Congress Heights deal came apart, and to hear what Griffis, Nowell, Soto, Horton and the principals at Eagle Bank had to say about it–under oath.
