FALL RIVER ─ Local developer James Karam received a $2.85 million loan from a Boston bank, just five days after signing a long-term, discounted parking rights lease for the Pearl Street garage in 2013 and used the parking agreement as collateral.
The bank transaction was done under a so-called “leasehold mortgage” and done with the blessing of then owner, Fall River Redevelopment Authority (FRRA), and then mayor, Will Flanagan. According to public records, the vote to approve Karam’s offer was unanimous with FRRA members Chairman William Kenney, Anthony Cordeiro, Ann E. Keane and William Whitty voting to pass the offer. Member Ronald Rheume was absent at the time of the vote.
Karam’s ability to use the Pearl Street garage lease as collateral for a bank loan is codified in the parking garage lease agreement with FRRA that was transferred when the local developer became the new owner of 99 Main Street, the former Aetna building, later renamed, the Travelers building in 2013.
“Lessor permits Lessee to grant a leasehold mortgage on this parking lease from time to time (including without limitation a leasehold mortgage to Cambridge Savings Bank),” according to the lease contract.
It was one of several provisions added to Karam’s parking contract in 2013, and again in 2015, that was not included in the parking agreement between former Mayor Carlton Viveiros and Aetna signed in 1983.
The parking garage was built in 1980 by the city when Aetna built 99 South Main Street.
Karam purchases the former Travelers building
Karam signed the parking agreement on August 22, 2013, under 99 Main Parking LLC, that now gives him the option to rent nearly 400 parking spaces at a discount until 2043, at the time he closed on the sale of 99 South Main Street.
On August 27, 2013, a notice was filed with the Fall River Registry of Deeds that Karam secured the $2.85 million loan from Cambridge Savings Bank.
According to other documents filed with the Registry of Deeds, Karam, CEO and president of First Bristol Corporation, purchased the approximately 100,000 square foot property on South Main Street for $1.227 million.
Under the parking lease agreement which initially was 10 years, Karam has the option to renew the lease for four additional five-year terms for a total of 30 years.
However, the original 2013 contract gave Karam only two opportunities to extend the contract for five years each. In 2015, an amendment to the contract filed in the Registry of Deeds extended it to four opportunities, citing it was a “correction” to the previous filing.
Karam is in the first of the four renewals.
Building sale and parking agreement fanfare
On Aug. 27, 2013, it was announced in the media that Karam had acquired the building at 99 South Main Street from Travelers Insurance.
News reports indicated that Karam intended to spend $2 million on renovations and subdivide the building for multi-tenant use.
According to Providence Business News dated Aug. 27, 2013, Karam credited Flanagan, “who played an instrumental role with his economic development team,” in addressing the building’s parking needs with the long-term lease.
“Mayor Flanagan indicated that this exciting location will serve as a key anchor stimulus and continue to upgrade the Central City Government Center area along North and South Main Street by bringing other regional tenants to the downtown area,” according to the PBN article.
At the time FRRA owned the city’s two parking garages, Ken Fiola, executive vice president of the Fall River Office of Economic Development (now renamed Bristol County Economic Development Consultants) was providing management services to the redevelopment authority and worked with the city on economic development.
Under former mayor Robert Correia, the city sold both the Pearl Street and Third Street parking garages to FRRA in 2008 for $1.
Eleven years later, the city took back ownership in 2019 under Mayor Jasiel Correia II with the promise that the two aging structures, badly in need of major repairs, could be funded through grants and become revenue generators, but it never came to fruition.
At the time Karam purchased 99 South Main Street in 2013, Travelers threatened to leave the city, but after layoffs, the company signed a lease to rent office space at 99 South Main Street.
The company eventually moved out of the city in March 2018.
A tale of two lease agreements
The Pearl Street parking garage was built around 1980, and by 1983, former mayor Viveiros entered a 30-year parking contract with Aetna that had just constructed 99 Main Street. The company could lease up to 400 spots.
That’s where the similarities of the 1983 and the 2013 parking garage agreements end for the most part.
Former mayor Viveiros negotiated that Aetna would be charged the prevailing city parking rates with modest credits for fees based on the usage of the garage.
He also negotiated that the city had operational control of the facility and had the right to adjust terms of the contract, including increasing the monthly rates with 60 days’ notice.
Not so in the Karam/FRRA contract.
In addition to Karam being able to use the agreement as collateral for a bank loan – a provision that did not exist in the 1983 agreement – a clause protects his tenants at 99 Main Street in the event Karam defaults.
Meaning the city is bound to allow Karam’s tenants to “continue to use their parking spaces by paying the Lessor the Lease Rate then in affect … during the term of the lease.”
And unlike the 1983 contract, the city has no rights to adjust the monthly rate terms. According to the lease, Karam paid $35 a month per space for the first five years, with 6 percent increase every five years.
Karam is currently paying $39.22 a space per month.
Unintended consequences
The city put the Pearl Street parking garage up to bid recently through a request for proposal and with a minimum bid of $1.4 million after the administration learned of the lease with Karam.
The deadline to submit bids was Monday, and a bid opening revealed only one RFP was submitted and it was Karam’s company, First Bristol Corporation.
It’s unclear how much he’s offering to pay for the Pearl Street garage and the number won’t be revealed until a committee vets his proposal.
It’s hard to assess whether the dealmakers of the Pearl Street parking agreement back in 2013 was aware that the terms would put the city in a bind regarding the Pearl Street garage, when current redevelopment in the city demands more parking than maybe ever before.
