Press Release: Redgate-Kane Resumes Lawsuit Against City of Portsmouth


October 22, 2021

Redgate-Kane resumes lawsuit against City of Portsmouth.

City Council breached original agreement on McIntyre site.

New deal to build a different design was reneged on by council subcommittee.

PORTSMOUTH, NH – The Kane Company announced today that a partnership created to redevelop the McIntyre site into a dynamic, community-oriented, mixed-use project has filed a motion in Rockingham Superior Court to remove an April 2020 stay that was issued in the partnership’s lawsuit against the City of Portsmouth and proceed with the litigation.

The action means development partners Redgate-Kane will move forward and pursue relief and damages against the City for its breaching of a binding agreement and failure to act in good faith during negotiations over re-design of the McIntyre project – a planned redevelopment of downtown property that requires approval of the National Park Service.

The Portsmouth City Council has done a disservice to this community with its actions, its indifference, and its complete failure to act in the best interests of Portsmouth,” said Michael Kane, President and CEO of The Kane Company. “The Council’s reckless decision to breach our agreement has been compounded over the past 18 months by their disregard for the deep commitment of Redgate Kane to redevelopment of downtown Portsmouth. Regrettably, resuming this litigation is our only recourse.”

In March 2020, Redgate-Kane filed suit against the City after the current City Council breached a binding agreement between the City and Redgate-Kane to develop the McIntyre project. The City Council had voted to reject a ground lease that was based on the project design approved by the prior City Council. In April 2020 Redgate-Kane agreed to stay the lawsuit while the parties negotiated in good faith to achieve resolution on changes to the existing project acceptable to both sides. Redgate-Kane filed documents with the court on Tuesday, October 19 to lift that stay. The partnership seeks the profits it would have received under the development agreement.

The City Council has betrayed every stakeholder in the future of the McIntyre site and the redevelopment of downtown Portsmouth,” Mr. Kane said. “They broke our original binding agreement that was based on our original design. And they refused to honor the terms we negotiated to contemplate a redesign of the project.”

Among the agreed upon terms reached during negotiations since April 2020: any design changes to the McIntyre project would be economically neutral to Redgate-Kane; and a public review process would evaluate changes that only involved removing one of two buildings from the design. Over Redgate-Kane’s objection, however, the public process produced a completely new “preferred design concept” for the McIntyre project – including major design elements previously rejected by the National Park Service.

Unfortunately, the McIntyre Sub Committee never informed our development team of their departure from the agreed upon direction and never included us in their design process,” Mr. Kane said. “Additionally, the Sub Committee and their urban planner never consulted the body of information that the Developer had produced in the two plus years of design.”

Redgate-Kane nonetheless was and is still willing to proceed with the City’s new design on terms contained in a “Project Restart Agreement” presented to the City in September based on negotiations with the McIntyre Sub Committee. Although the Sub Committee had led Redgate-Kane to believe those terms were acceptable to the City, the City’s failure and refusal even to respond to the proposed Project Restart Agreement led Redgate-Kane back to court.



DLA Piper LLP (US)
33 Arch Street
26th Floor
Boston, Massachusetts 02110-1447
Bruce E. Falby
T 617.406.6020
F 617.406.6120

October 18, 2021

Robert P. Sullivan, City Attorney
City of Portsmouth
1 Junkins Avenue
Portsmouth, NH 03801

Re: SoBow Square, LLC v. City of Portsmouth, Docket 218-202-CV-00352,
Rockingham Superior Court (the “Lawsuit”)

Dear Bob:

In July 2021 you suggested that it was time for my client SoBow Square, LLC (the
“Developer”) and the City of Portsmouth (the “City”) to engage in substantive
discussions and negotiate a term sheet that would resolve the Lawsuit and set forth
terms on which the Developer and City would proceed with the McIntyre project as
entirely redesigned by the City, including compensation for the Developer. Initially, as I
told you in a letter dated July 29, 2021, my client believed a term sheet would be
premature unless and until the National Park Service (the “NPS”) indicated it would
approve the City’s new design and the Developer determined it was feasible. If those
two things occurred,

only then will we be able to address terms to compensate us for our efforts
and investment to date as well as for our efforts going forward with the
City’s entirely new design – rather than with a good faith modification of
the original agreed-upon project pursuant to the parties’ Interim Stay

Nonetheless, my letter informed you, if you wanted to draft for the Developer’s review
the term sheet that you had in mind, the Developer would review it.

In August 2021, while you did not present a draft term sheet, you again raised the
subject of a term sheet, stating that the McIntyre subcommittee of the City Council had
authorized you to pursue it.

Throughout July and August, the Developer was requesting that it be permitted to
observe the Zoom meeting the McIntyre subcommittee was attempting to schedule with
the NPS to determine its reaction to the City’s new design. On September 9, 2021, at a
Zoom meeting the City hastily arranged with the Developer that morning, the City and



Robert P. Sullivan, City Attorney
October 18, 2021
Page Two

subcommittee chair Peter Whelan informed the Developer that the subcommittee had
met with the NPS on Zoom the day before (without informing the Developer that the
meeting was occurring), that the meeting went very well, that the NPS was generally
supportive of the City’s new design, and that the subcommittee expected that the NPS
would approve the new design with some modifications. The City stressed that it was
time to get serious about settling the Lawsuit and negotiating a resolution, including
modifying the Development Agreement and finalizing the Ground Lease. Mr. Whelan
invited the Developer to meet the next week with the City’s historic preservation
consultant Lisa McCann and designer Russell Prescott of the Principle Group, who
were in charge of making the modifications to the new McIntyre project design that the
NPS had indicated would be needed to meet NPS standards. The Developer’s Michael
Kane said the Developer would be happy to meet with them, as the Developer wanted
to understand what modifications would be required to obtain the NPS approval as well
as to begin to understand the plan that the Principle Group had developed with the
McIntyre subcommittee.

After the September 9, 2021 meeting, hoping that the parties were making progress
toward resolution, the Developer took the City and subcommittee up on the suggestion
that the parties negotiate a resolution and prepared a term sheet that followed the
format you had described and called for corresponding modifications to the
Development Agreement and Ground Lease. I informed you that we were drafting the
term sheet, and you and I agreed that it would be important to finalize and sign the term
sheet in September in advance of the runup to the November 2, 2021 City Council

On September 20, 2021 I sent you the promised term sheet that my client had
optimistically titled “Project Restart Agreement.” As our discussion contemplated, it
addressed compensation for the Developer, including reimbursement of amounts
already spent on development efforts that could not be used in pursuing the redesigned
project, a specified rate of return, and return of the $400,000 that the Developer had
previously deposited under the Development Agreement. My cover email reminded you
that, as we had agreed when we spoke,

we need to get this signed up by the end of the month to avoid running
into the election.

If we are going to resolve this, now is the time.



Robert P. Sullivan, City Attorney
October 18, 2021
Page Three

Please let us hear from you promptly. We were disappointed last week
when the promised meeting with Lisa McCann and the Principle Group did
not happen and hope that the subcommittee is sincere in wanting to move
forward with us. Redgate/Kane is committed to working expeditiously with
the City to reach agreement on this path forward, but if the City’s approach
will be to stall and defer until after the election, then we will be forced to
take different action.

[My partner] Bryan Connolly and I are ready and available at your
convenience to discuss the City’s comments on the attached.

You replied that day in an email stating you would present the draft agreement to the
City Council in non-public session at its meeting that night. Your email also imposed
new conditions on the Developer’s meetings with Ms. McCann and the Principle Group,
including that the Developer agree that nothing said and no documents exchanged
would be used in the Lawsuit. In a spirit of cooperation, my client immediately agreed.

On September 28, 2021, Mr. Kane and Mr. Whelan spoke and agreed on the essential
financial terms in the draft Project Restart Agreement, including that the City would pay
the Developer the money that the Developer has invested in the project that cannot be
used in pursuing the redesigned project, which is in the order of $2 million to $2.25
million, and would return the Developer’s $400,000 deposit. Mr. Whelan agreed to
arrange calls with Ms. McCann and Mr. Preston for the next week. Mr. Whelan agreed
that prior to doing further redesign, the City would finalize and sign up the Project
Restart Agreement so that the Developer could be involved in further redesign to avoid
wasted effort. I reported their conversation and agreement to you, concluding,

Michael understands that Peter will be talking to you about finalizing the
Project Restart Agreement. Our goal is to sign it up before next week’s
meetings. We stand ready to respond to comments on the draft at any
time of day so we can get this done.

We then spoke on September 30, 2021. You reported that Mr. Whelan and the
subcommittee were on board with the Project Restart Agreement and needed to get it
through the City Council. However, you stated that you did not know whether or when
that would happen.

On October 5, 2021, there was a status conference in the Lawsuit. I reported to the
Court that we had presented the City two weeks before with a settlement agreement



Robert P. Sullivan, City Attorney
October 18, 2021
Page Four

consistent with settlement discussions with the City, that we had expected to sign the
agreement within those two weeks, and that we would give the City two more weeks to
consummate the agreement. The Court ordered that we file a status report by October
19, 2021, informing the Court whether the Lawsuit would be proceeding.

On October 6, 2021, I confirmed our position by email to you stating:

As I told [the City’s litigation counsel] Michael Connolly yesterday and as
Michael Kane told Peter Whelan, if we don’t sign up the Project Restart
Agreement by October 19 we will resume the lawsuit. Consistent with
what you and I discussed in September, we are not going to let this drift
past the election, then be dealing with a lame duck council and have to
start all over again with a new one. We’ve been there and done that.
Yesterday, Peter Whelan was telling Michael Kane that he needed to talk
to you, so I hope you two have connected and we can get this done. I am
at [phone number] if you have anything to report. Thanks.

I have not heard from you in response to my email.

On October 8, 2021, however, Mr. Whelan told Mr. Kane that the City will not enter into
any agreement with the Developer, if at all, until after the election.

Meanwhile, as a result of meetings between my client and Ms. McCann and Mr.
Prescott as well as information that has been brought to my client’s attention from
people who were on the Zoom meeting with the NPS, it is apparent to the Developer
that the City’s and subcommittee’s characterization of the subcommittee’s September 8,
2021 meeting with the NPS was not accurate. In fact, the City and Mr. Prescott are in
the midst of a substantial redesign of the City’s new design in an effort to obtain NPS
approval. Based on this information, my client does not believe that the City has a
project that is currently approvable by the NPS. Substantial questions remain as to
whether the NPS will ever approve any version of the City’s new design. Moreover,
there are serious questions as to whether it is even feasible to build the City’s new
design, either financially or even as a matter of civil engineering and structural
engineering. My client has learned from conversations with Mr. Preston that the
Principle Group never consulted a civil engineer in developing the City’s new design, it
never consulted a structural engineer, and it had no financial model guiding the design.
Additionally, the Principle Group never consulted my client’s two plus years of NPS
meetings, never met with a historic preservationist, and never consulted the NPS
standards to determine what would be acceptable to the NPS. Obviously this is all very



Robert P. Sullivan, City Attorney
October 18, 2021
Page Five

troubling, indicating that the last 18 months of the City’s unilateral efforts to develop an
entirely new design for the McIntyre project have been a complete waste of time and
taxpayer money.

Barring some unforeseen breakthrough, therefore, we will report to the Court tomorrow,
October 19, 2021, that we will be resuming the Lawsuit.

We trust that you will share this letter with the City Council. The Developer regrets that
the Council neither complied with the parties’ Interim Agreement to Stay Pending
Lawsuit requiring the Council to negotiate in good faith “to achieve resolution on
revisions acceptable to both sides” nor acted reasonably by entering into the term sheet
as the City and subcommittee had proposed to resolve the Lawsuit in light of the City’s
unilateral and complete redesign of the McIntyre project.

On a personal level, thank you for your own efforts and professional courtesies.

Yours very truly,

/s/ Bruce E. Falby
Bruce E. Falby