MRC's new partner, cited for misconduct in 2021, has strong financial wherewithal nonetheless

OTHER NEWS: Bar Harbor postpones vote on Cottage Street hotel; Reason why SWH has virtually no parks, public recreation

HAMPDEN, April 16, 2023 - White Oak Global Advisors was ordered to pay back almost $100 million in assets it managed for a New York nurses pension in 2021 after an arbitrator and a federal judge cited misconduct, according to press reports.

Other than that misstep, White Oak appears to possess the best chance of all of MRC’s choices as commercial partners to re-open the waste-to-energy plant which was shuttered three years ago.

On Thursday the MRC (Municipal Review Committee) held its most promising public event in three years, introducing the principals after two previously failed attempts to re-open the $80 million plant here which was shuttered in May 2020 when the then operator ran out of money.

Since then, most of the trash generated by 115 towns has ended up in landfills in direct opposition of MRC’s goal to divert 80 percent of the garbage to other sources including repurposing it to create pulp and alternative fuel.

In answer to a question at the public “town hall” meeting on whether the plant “worked,” newly named team leader James Condela answered, “Fundamentally they work, and so the question is, do they work economically?

“Our belief is that it can and will work.

“We're just diving into how do you get that to be the case on a 24/7 consistent basis that has reliability for us as the operator and investor and for you as the community supplying waste.”

Condela leads a small team which has until June 2 to determine which of the plant’s components and processes are workable and what must be replaced.

It would forfeit a $350,000 deposit if it walks away from the partnership. Or it could seek an extension to the 60-day “exclusivity” clause as the sole negotiator.

The deposit gives MRC almost $2.5 million in operating cash which should sustain it into the fall. Warm weather has also helped ease the financial pressure as its heating bill declines, MRC Director Michael Carroll stated.

Condela was the CEO/CFO of Houston-based Continuus Materials, which makes recycled roofing products. In 2022 Continuus Materials was one of two companies selected by Kent County, Michigan, to build a facility to process a mix of waste products “capable of handling 430,000 tons of municipal solid waste and recyclables each year to produce renewable natural gas, fertilizer, and recyclable commodities.”

That is four times the volume at the MRC plant here. Condela was CEO for only two years. It was unclear why he left in 2022.

Condela introduced team member Kevin Hogan, co-founder of Omni Recycling, which served municipalities in Central and Southern New Jersey. White Oak provided the financing in May 2022 for Omni to be acquired by Salt Creek Capital of San Francisco.

Unlike other companies who kicked the tires, White Oak does not have a problem raising money. It is constantly searching for opportunities to spend the billions it already has raised.

White Oak was one of 10 companies which expressed interest after Revere Capital Advisors was unable to raise the financing to acquire the plant from the MRC. Before that, Delta Thermo Energy failed as a partner in 2021.

White Oak raises capital from investors who lend directly to medium and small businesses. It also specializes in distressed assets.

In direct lending, borrowers obtain loans directly from institutional investors, rather than going through traditional financial intermediaries such as banks.

White Oak created a new single-purpose firm, Innovative Resource Recovery, on March 29 in Delaware solely as MRC’s partner.

It appears to have only two staffers at this moment although their employment status was fuzzy - James Condela and Kevin Hogan.

Condela said Innovative has received financial commitment from White Oak, which originated $1.4 billion of loan transactions across 60 deals in 2022, including the Omni deal. The commitment is dependent on final due diligence.

The plan calls for the commercial partner to acquire the plant for $3 million by the closing June 2. MRC will retain a 10 percent ownership and a seat on the board. MRC would use the funds to pay off remaining creditors.

Innovative then will spend an estimated $20 million to restart the plant and to bring it to profitability which may take two years.

Under-capitalization doomed the previous owner Coastal Resources of Maine. Ultra Capital was the majority owner who selected an operator with little experience in waste management and chewed through all its cash in seven months.

The plant was designed by Fiberight Corp., which was a minority partner but not the operator. Condela said he would seek Fiberight’s input as part of his due diligence.

“2022 was an exceptional year for White Oak,” said Andre Hakkak, Co-Founder & CEO. “The current economic landscape continued to drive demand on the borrower side for flexible lending solutions that can be executed with speed, and investors continued to show their appetite for a private credit strategy that offers bank-like lending within an asset management framework. I’m thrilled by the impact we had in 2022 and look forward to another year of success.

“With many traditional banking lenders withdrawing from a market challenged by tighter monetary policy and significant volatility, small and medium enterprises (SMEs) continued to look for ways to access differentiated financing solutions. White Oak continued to position itself as a primary non-bank lender to SMEs and remained deeply committed to providing tailored and flexible solutions, underwritten by industry experts.”

MRC continues to pursue in parallel a loan guarantee from the State of Maine as a “Plan B” in case the current effort fails again.

MRC Board President Karen Fussell said she has had encouraging meetings with the legislative Environmental and Natural Resources Committee.

She and other MRC members are meeting Tuesday with Economic Development Commissioner Heather Johnson.

“We will see what input she has to offer, then circle back with the ENR Committee chairs. 

“I think we will have to draft the legislation, but we are struggling to figure out the best structure and approach and are hoping our legislative contacts will assist with that.”

So it’s possible that if White Oak decides not to operate the plant, it could still finance it, especially with a state loan guarantee.

That is unless legislators are spooked by a disclosure last year that White Oak owed more than $96 million to a pension fund covering New York nurses over allegations the company mismanaged plan assets, including secretly hiring away the plan’s chief investment officer.

“Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York on Thursday confirmed nearly all aspects of an arbitration award favoring the trustees of the New York State Nurses Association Pension Plan,” Bloomberg News reported on March 22, 2022.

The order required White Oak to return the pension plan assets it holds - more than $96 million, according to Kaplan - and repay some of the fees it charged the plan, along with paying interest and attorneys’ fees.

The dispute stemmed from plan trustees’ decision to hire White Oak to manage and invest about $80 million in plan assets from 2013-2015.

“Near the end of the contract’s term, the plan’s former chief investment officer began undisclosed employment negotiations with White Oak that culminated in him being named the company’s vice chairman. The trustees renewed White Oak’s contract while the secret negotiations were pending,” according to Bloomberg.

The trustees then investigated the officer’s conduct and the plan’s relationship with White Oak, concluding that White Oak had engaged in misconduct. The trustees filed a successful arbitration action, obtaining a financial award and a decision that White Oak had violated ERISA (Employee Retirement Income Security Act of 1974).

“Kaplan’s order confirmed the arbitration award in nearly all respects,” Bloomberg reported.

Here’s hoping that White Oak’s dealings with Condela, Hogue and others in Innovative are uneventful and free of similar drama.

MRC Board President see more flexibility for members to reduce waste

The biggest surprise Thursday was not the details of the deal, but MRC Board President Karen Fussell’s expansive view of waste management of the future.

Asked whether MRC supported waste reduction at the source, Fussell said:

“There's really an endless array of ways that communities could reduce at the source or encourage their residents to and taxpayers and businesses to reduce at the source.

“People can implement pay-as-you throw programs or other sorts of incentives to minimize the waste that they're needing to dispose of,” she said.

“This region generates enough waste that we want people to be able to feel like they can do that if that's what they want.

“That is where we feel like the state should be headed. And we want to be able to support that for the communities that want to pursue something along those lines.

“So we feel like the facility is sized appropriately to be able to still accommodate the waste in this region and allow folks to really be able to have those sorts of reductions at the source.

“I know at one point way back in the early days, we were talking about trying to get textiles out of the waste stream and then get those textiles to some other process or or some other source that can utilize those things that don't go so well through the facility. We think there's a lot of opportunities for that sort of diversion.

“So I think there's a lot of opportunity out there so we look forward to being able to exploit those opportunities as we can, once the facility is up and running.

Bar Harbor council postpones decision on favoring hotel at taxpayers’ expense

BAR HARBOR - The thorny issue of whether to bail out two former town board and council members from an inconvenient situation in their hotel project on Cottage Street will not be on the Town Council agenda Tuesday, interim town manager Sarah Gilbert stated Friday.

If you need an abject example of how this town government works, you only need to view the recording of the Town Council’s April 4 meeting on Town Hall Streams starting at Hour 1:24 into the meeting and lasting almost an hour.

Listen to the desultory conversation about whether to approve use of public space on Cottage Street as a “loading zone” for a hotel being constructed by the town’s former planning board chairman and a former town council member.

Given the choice between the interest of the citizenry and that of businesses run by insiders with a manifest influence, the public will always end up on the losing side of the equation in this town. At least that’s been the pattern since the mid Eighties.

There are no policies, no rules of engagement for such use, so the council members just offered their opinions, subjecting the process to possible cronyism, personal favoritism.

At one point, Council member Gary Friedmann, whose record on supporting the tourism industry, has been wildly uneven, said the hotel was an “asset” to the town and urged the council to grant the request to allow the 40 feet fronting Cottage Street to be a loading area so guests may check in and out more easily.

That would deprive the town of anywhere from two to four parking spaces and the revenue from those meters. At $2 an hour for 10 hours of parking, and assuming 100 days (conservative estimate), the town could lose up to $8,000 in annual revenue, according to one senior town employee.

Assuming the parking rate is increased to $4 in the next few years - which is likely - the revenue loss could double.

Several council members worried about setting the precedent for other businesses to ask that sidewalks be turned into loading zones.

Member Matt Hochman said he was already concerned about the precedent set when the council allowed Leary’s Landing on Main Street to use the sidewalk in front for outdoor seating. “What if the new owners of the Whale (Thirsty Whale) asks for the same thing?”

The council last year issued a proclamation thanking Tom St. Germain for his service as chair of the Planning Board. Neither St. Germain nor Stephen Coston, former council member, appeared April 4. They are partners in the hotel. Their names were not mentioned.

Instead, Nina St. Germain, wife of Tom who worked for the town as manager of its public surveys, represented the hotel. She pleaded for quick action as construction deadlines approached.

Why didn’t St. Germain and her partners think of this problem when they planned the hotel?

Member Joe Minutolo said after the meeting that having a better loading and unloading process for the hotel “is not the town’s problem.”

The 44-room hotel cynically dubbed a “bread and breakfast” at 77 Cottage Street is a monstrous edifice being plopped down on one of the town’s busiest arteries across from its only grocery store, its only hardware store, the town office building and its busiest daytime restaurant.

Was there a traffic study conducted on adding 40 or more cars a day on Cottage Street?

But more importantly, who does it benefit? How is it an asset to the town as Friedmann stated.

The town needs another hotel like Ukraine needs more incoming missiles.

The developers have already stretched their legal and ethical boundaries to the limit.

In 2017, while as chair of the Planning Board, Tom St. Germain voted along with two other members, including the director of the Chamber of Commerce, to designate a hotel on Mount Desert Street owned by former council member Coston as a “bed and breakfast,” setting off a legal debate which had the town’s own attorney stating it was not a B&B.

A bed and breakfast designation gave it much lower standards for approval, as opposed to a hotel.

Four years after his vote, St. Germain, while still sitting as chair of the Planning Board, went into business with Coston to build the 44-room hotel on Cottage street, and because the application was for a B&B, they did not need Planning Board approval.

This is the way this town rolls.

Voters will have an opportunity to change the makeup of the council in a big way on June 13, when four of the seven council seats are up for grabs.

How many candidates are truly independent and not subject to the kind of insider influence which has turned the town into a giant ATM machine?

Ever wonder why SWH has few public parks, recreational facilities?

SOUTHWEST HARBOR - The Facebook page captured the essence of a community coming together to share, celebrate and commune during the darkest days of a Maine winter, centered around a town skating rink.

The rink was made possible through donations - $20,000 was needed. More than $25,000 was raised. The select board approval to build a temporary rink atop a tennis court was attained without much fuss. The only restaurant still open offered free hot chocolate.

The village burst with pride. It was a feel-good moment worthy of a Norman Rockwell painting.

That was Northeast Harbor last winter.

Around the same time, Southwest Harbor was painting a different picture - one more like Goya’s Inquisition Scene.

This is a town with virtually no public recreational space. Its most prized asset, the harbor, caters largely to commercial interests. A proposal to seek grants to allow a small recreational sliver near the town ramp in Manset was greeted with howls of objection by the harbor committee in 2020.

It has a small park on Main Street the size of a large closet which until recently fell into disrepair.

But it does have a skating pond, one of the natural gifts on the island.

Last winter, around the time Northeast Harbor was celebrating its new skating rink, Chris’s Pond once again became a lightning rod.

The town’s motto might as well be:

“Let no good deed go unpunished.”

This is an island built on the largesse of individuals and institutions with a public spirit who valued its beauty - from John D. Rockefeller to Charlotte Rhoades.

In 1970, her land with a view of Norwood Cove was donated to the town to make it a park.

Charlotte "Si" Rhoades at Norwood Cove (1903-1969)

In 1996 Maine Landscape Architect Bruce John Riddell volunteered to create a plan for a butterfly garden. Suggestive of butterfly wings, he designed the garden beds to include perennials, annuals, and shrubs that are butterfly host plants.

That remarkable park came under the stewardship of the SWH Conservation Committee, along with oversight of the town’s precious Chris’s Pond.

About five year ago, members of the committee and others began ruminating over how better to serve the public with this natural asset, a perfect pond for skating.

Maine Coast Heritage Trust proposed to acquire the land and then donate it to the town as the basis for federal grants to upgrade the pond with better parking, access and aesthetics.

In May 2020, the proposal was made public, but attendant proposals to upgrade the Manset recreational space and potentially have Island Housing Trust take one of the lots near Chris’s Pond and build affordable housing made for a confusing story to explain.

It was too much to swallow, and it gave the nativists in town ammunition to attack the entire project.

Now in 2023, the proposal before voters at the town meeting in May is stripped down to just the skating pond.

Maine Coast Heritage Trust acquired two properties abutting Chris’s Pond, demolished the dangerous buildings on site, and is offering to donate them to the town.

The town would then apply for federal funds to upgrade Chris’s Pond to make it a year-round destination. The ownership of the abutting properties is a big consideration for the grant approval.

The town would lose the tax revenues of those properties valued at $4,600 a year, although the actual tax loss could be much lower.

There would be ongoing expenses to maintain the area, such as snow plowing and summer trimmings. A “Friend of Chris’s Pond” non-profit could easily be set up.

Voters will decide May 8 whether the town favors upgrading its community skating pond. Or the town could continue to allow more miniature golf courses and the like to define its character.