The two Hoboken landowners that derailed an initial hotel redevelopment agreement have again filed suit over what they call a “slush fund” that’s included in the newest version of the plan.

To quickly recap the never-ending saga of KMS Development Partners and their attempts to build a 20-story Hilton at 1st Street and Sinatra Drive, their vision formally gained approval via a redevelopment agreement in October 2018. Designed by Cooper Carry Associates, the hotel would rise 270 feet, include 350 rooms, and feature amenities like a restaurant, conference space, and a rooftop bar.

The deal included a developer-funded renovation of the neighboring post office building and KMS had initially agreed to contribute $4.85 million to the city as a community giveback, which set aside money for several initiatives like rehabilitating a YMCA building into a community center. Just one month later, two companies that own buildings near the future Hilton site sued to block the deal, arguing the giveback payments constituted “a blatant quid pro quo.”

Judge Anthony D’Elia refused to dismiss the case earlier this year and ruled that Hoboken lacked the statutory authority to require the givebacks, writing that permitting a municipality to do so “would create unacceptable possibilities for abuse and fraud.” Rather than defend the lawsuit, Hoboken’s city council voted to void the original deal in May and approved a renegotiated pact the following month.

The Hilton 2.0 deal makes no changes to the hotel portion and would still include a post office renovation, but it nixes the original giveback scheme in favor of a $3.2 million payment from KMS. Those funds would be placed into an escrow account to be put toward projects within the Post Office Rehabilitation Area. Allowable uses listed under the redevelopment agreement include “infrastructure improvements; flood control; enhanced storm water retention; improved bicycle and pedestrian access; improved access to and safety of local parks and recreation areas; conservation of energy and potable water; furthering open space initiatives; and/or transit/transportation/traffic/parking improvements.”

That payment is at the heart of the latest lawsuit, which was filed on August 2 in Hudson County Court by the owners of Hoboken Land Building and Baker Plaza. Naming Hoboken, the city council, Mayor Ravi Bhalla, and KMS as defendants, the suit says the latest agreement is “a transparent attempt to circumvent the court’s opinion” regarding the first lawsuit and claims that the $3.2 million payment from KMS creates “what amounts to a slush fund for the city to use in the future as it deems fit.”

The case goes on to argue that the payment from KMS is “an exaction unrelated to legitimate land use concerns” and claims that the city’s decision to allow the hotel to cover a greater gross floor area than what’s allowed under a redevelopment plan “constitutes a blatant quid pro quo,” using the exact same language from the first case over the Hilton deal. The suit calls the council’s approval of the agreement “arbitrary” and wants the latest redevelopment agreement declared null and void.

The plaintiffs, Hoboken Land Building LP and Hoboken Holdings LP, are both registered out of Delaware and share an odd similarity in that both parcels were obtained for almost nothing. Hoboken Holdings purchased their building in 1998 for $10 while Hoboken Land Building acquired their property for $1 back in 2012. Neither party has responded to our request for comment on their lawsuit, nor has their legal counsel at Red Bank-based Giordano, Halleran & Ciesla P.C.

In a statement to Jersey Digs regarding the case, a spokesperson for KMS Development said, “The 2019 Redevelopment Agreement clearly provides on Page 65, a specific explanation consistent with the Judge’s previous ruling for the utilization of the [giveback] escrow funds.” KMS argues that the new lawsuit is “fundamentally flawed” and “is designed to hold us and the City hostage in order for the plaintiffs to push for their own development interests.”

“Hoboken Land LP have been actively petitioning the City since the filing of the previous lawsuit to have their property, which is listed on the National Registry of Historic Places, included in the Post Office Redevelopment Plan so they could construct up to 20 stories of residential units,” KMS says. “A large residential project of that size would increase the types of impacts that they claim to be concerned about in the litigation. This duplicity reveals a lot about the plaintiff’s motivation behind these lawsuits.”

Hoboken has not yet returned our request for comment on the litigation. Despite the lawsuit, the city’s planning board is still scheduled to hear the hotel’s application at their August 14 meeting.

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