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HomeMy WebLinkAboutCRC-05-24-01 CARMEL REDEVELOPMENT COMMISSION Meeting/Public Hearing, Thursday, May 24, 2001 President Rick Roesch called the meeting to order at 7:05 p.m. Commission members Luci Snyder and Ron Carter were present constituting a quorum. Also present were Amy Boldt, Sue Beesley, Richard Hennessey from the Linder Company, Karl Haas, Steve Engelking, and Loren Matthes. Phyllis Morrissey as support staff. Recognition of Past Commission Member, Amy Boldt Ms. Boldt was given a plaque honoring her meritorious service and thanked for her years of service. She in turn presented books to each of the Commission members. Public Hearing for Merchants Pointe Confirmatory Resolution Mr. Roesch opened the Public Hearing at 7:14 p.m. He asked if there was anyone present to speak for this project. No one came forward. He then asked if there was anyone present to speak against the project. Again no one came forward. The Public Hearing was closed at 7:15 p.m. Mr. Roesch asked if there was any further discussion on the Confirmatory Resolution (7- 2001). Ms. Mathes distributed a revised Impact Statement, noting the school maximum rate was incorrect in the original statement but this did not affect the analysis in any way because if this project weren't being done, the assessed value growth would not occur. Ms. Snyder moved the Commission approve Resolution 7 -2001. Following a second by Mr. Carter the motion was unanimously approved. The resolution was signed. Report from the Director Mr. Engelking reported we have more than enough topsoil dirt from the Merchants Pointe project for the City Center area at $5 a cubic yard which is under the market value. "The amount we will be getting will exceed that which we need, but upon the advice of Les Olds we're going to take all we can get in case we need it in another area of the project." Ms. Snyder asked who pays for this dirt. Mr. Roesch has talked to the attorneys about this. The CRC will pay for the dirt because there was simply not enough dirt on site, but any cost for moving the dirt and cost for any delays would be paid by the surveyor [through errors and omissions]. 1 Mr. Haas: Yes, that's generally correct. An additional thing you could recover is if you have additional costs because of the timing of acquiring the dirt. If the cost of the dirt you have to acquire now exceeds the cost of the dirt you would have paid to acquire before, then you could recover that, too. Mr. Thomas indicated to Mr. Haas that the AMLI project was not delayed because we were able to move some dirt from another area of the City Center. Report from Attorney Discussion about whether to discuss upcoming issue at this meeting or in Executive Session. It was decided to discuss it at this meeting. Mr. Haas: Goodyear has a lease that runs until August 2002 with the right to some extensions. As you know, there is an issue over the zoning of the Goodyear store and Mr. Hollibaugh has determined that the zoning is no longer appropriate for the operation of a Goodyear store and Goodyear is not grandfathered because the operations were ceased for a year. Goodyear would like to reopen its store and would like for the CRC to support a variance allowing it to reopen the store. If Goodyear reopens they want to be guaranteed they'll be able to operate there at least until April 2003. They've requested that the Commission support a variance on that basis. On the other hand, Goodyear has agreed if a variance on that basis is supported then Goodyear will vacate the premises without cost to the CRC at any time after April 2003 when the CRC has a project for the site and has given Goodyear six months notice so they can move. The upside to the Commission is we have a definite time by which we get rid of Goodyear, there won't be any condemnation required, and they'll leave for free. The downside is that it prohibits a project getting underway on that particular piece for another two years. My recommendation is if you think a project is two years or more away on that site, I think this is a great deal. It solves a lot of problems. We've had difficulty with acquiring property with tenants in place, then having to terminate those leases. We would avoid all of that here and the expense of condemning a leasehold. On the other hand, if we're going to have a project sooner than April 2003, we need to proceed down another path. Mr. Roesch: Mr. Koven expressed some concerns: He doesn't really think we're going to be doing anything for that two year period. I also talked with the Mayor and he thinks we probably will be doing something before that two year period or probably will have a sale on the retail parcel. This would indeed block or delay the retail parcel and could cause us to lose a sale on that retail parcel. Looking at the season, we probably are at least a year off but we don't know about two years. The shorter the better but realistically it is Goodyear's motivation that if they gear up they certainly want more than a year in a Carmel location. 2 There are possibilities that if we entered into this two year agreement and then get that retail site sold then we would be in a position where we have to buy out that lease. Mr. Haas: I'm certain that we could negotiate some sum of money for Goodyear to leave earlier than two years. I think it would be a very substantial amount of money, more than the commission would want to pay. Goodyear's emphasis here isn't on money; it's being able to open and stay open long enough to find another site and get a new building built and open. If they were able to accomplish that earlier than two years I believe they would leave and the problem might be solved sooner than two years. The experience that Goodyear has had and also the experience that the Mayor's had in looking for sites for Goodyear relocation is that it may take as much as a year just to find a site and to get it zoned. And then you have construction on top of that. One way to look at this in terms of risk assessment is, if we don't strike a deal with Goodyear and Goodyear decides just to drop this site and go away, we'd be a lot better off. There wouldn't be any need to condemn their leasehold. So there is the possibility that Goodyear will decide, if we don't support their variance, not to seek a variance and to let its lease expire in August of next year and not reopen the store. In which case we would only have Mr. Huffer to deal with. On the other hand, Goodyear might either win on its variance or might decide to mount some challenge and claim the leasehold was condemned by the action of the Redevelopment Commission even though no formal condemnation has been brought. I think the odds probably are that if we don't support the variance that Goodyear will not pursue it and will probably just let the lease expire. Of course, I'm not certain of that. Mr. Roesch: Also in dealing with Mr. Huffer, he does not have an income and that affects his judgement about whether to negotiate for an option versus immediate sale. Mr. Haas: Absolutely right. One of the benefits of having Goodyear there is that if we want to strike an agreement with Mr. Huffer whereby we have the option to buy in the future so that we avoid a cash outlay now. Mr. Huffer certainly will be more amenable to that if Goodyear is there as an operating rent paying tenant for another two years. That probably makes dealing with Mr. Huffer easier; at least if what we hope to achieve is getting from him an option to buy the property at some time in the next two to four years when we need it. Ms. Snyder: Huffer will be getting lease payments until August of 2002, right? Mr. Haas: That's correct, unless Goodyear argues that Mr. Huffer permitted his property to be rezoned in such a way that Goodyear as tenant could no longer use the property. It's quite possible that there would be a dispute between Mr. Huffer and Goodyear about that. Ms. Snyder: It's obvious that they would not exercise their options at the end of '02 under ordinary circumstances even if we weren't in the mix here because the store is too small. They would have been looking or are looking now for a new store so Mr. Huffer would not have lease extensions beyond August of '02 giving him to April of '03 gives him something he probably wouldn't have had anyway. However we need to look at our 3 project. When is AMLI scheduled to open? When are people scheduled to move into those apailuients? Mr. Roesch thought it was toward year end [this year]. Their intent was to build so it could be completed during the building season this year. Ms. Snyder: Generally speaking, retail doesn't like to be there before the rooftops. Retail likes to trail, so retail would not like to build this year. If the rooftops are there and occupied, they might consider building next year. It's highly unlikely that we're going to have a deal any time this year. Mr. Haas: I think it's highly unlikely there would be a deal this year that would require a groundbreaking, certainly before spring of next year. In a worst case scenario, we have an issue of a year. Mr. Carter: Karl, give me a timeline on this again. When is the earliest if we did this that Goodyear would be out of that space? Mr. Haas: The earliest is that they would leave if they could find another site and get their store built. The earliest, and it's hard to predict what date that would be, that's probably eighteen months. The earliest we could force them out would be April 15, 2003. Mr. Carter: With your background in this area, what do you think is going to happen over the next year from the standpoint of possible developers for this retail site coming forward knowing that the earliest they would be able to get this would be mid April 2003? Mr. Haas: My guess is if we had a developer show up in the next few months... Mr. Carter: I'm not asking that. I'm asking what do you think is going to happen from a development standpoint. I'll just answer the question. What I see is, the next year on, by virtue of us possibly going into this, will be a complete downtime for developers looking at that. I don't see a developer coming forward if we enter into this lease since it wouldn't be available for almost two years. I would suspect any developer that might have an interest in this would just stand down for the next year at least and see what happens to the economy. Am I erroneous on my thought in that? Mr. Haas: No, I can't say that you are. But on the other hand the redevelopment projects in my experience have quite a long lead time. The answer to your question is whether the project is tenant driven or whether it's developer driven. If we have a situation, a movie theater, or some sort of entertainment center, or bookstore who is anxious for this site, that's an opportunity that would need to be seized and probably might be passed entirely if the site's not available. That's what I mean by tenant driven. And developers probably would stand down, if not a year, at least six to nine months. On the other hand, if this is developer driven and the developer thinks this is a good opportunity and wants to see what kind of deal can be struck and then find tenants, that kind of developer probably 4 would be willing to negotiate with us in the meantime. It's hard to know which kind of deal would be presented to us. I do agree with you. It certainly would be detrimental to a tenant driven deal, if not fatal. That doesn't mean, of course, there wouldn't be another one the next year, but we could lose that kind of opportunity. Mr. Carter: What we're saying here then is that while we might not have a deal come along in the next year, if we pass this we're probably guaranteeing we don't have a deal come along for the next year for that area. Mr. Haas: I think we're guaranteeing that we don't have a tenant driven deal. We may have developers that are interested and in fact think that 2003 is not only a suitable but a probable time line for getting this deal put together and lining up their own financing and tenants. Mr. Roesch: But we are limiting our market. Mr. Haas: Absolutely. Mr. Carter: Best case scenario would be for Goodyear to find something, best case scenario #2 would be that they didn't find their place, but we were able to find a tenant, give them six months notice (would that be six months' notice prior to April 15, 2003 Mr. Haas: Yes. Mr. Carter: Or do they have it regardless till April 15, 2003? Mr. Haas: They have it regardless until April 15, 2003. The six months' notice could be given six months prior to that date so they would leave on April 15, 2003. Mr. Carter: So if they left on April 15, 2003, doesn't that really take another two months off the construction season of 2003? Wouldn't a developer want to be able to start in late February or early March getting the pad prepared? Would they wait till the next construction season? Mr. Haas: I don't know the answer to that. I wish we had Les Olds here to answer that because it may be that it's an adequately large site so that site work could be commenced on another portion. I don't imagine it would take very long for either the Commission or the developer to raze that site. It's probably a question whether that site is critical for utility extensions or some other site preparation work and I don't know the answer to that. Ms. Snyder: Have we decided when we're going to take down the Kroger center? Mr. Haas: Sherwin Williams should be moving this summer. Their lease is still in effect. What I expect to happen is that we have a trial on their condemnation set (I believe it's for January.) and so they'll be paying double rents for some period of time. I would 5 expect shortly after they move we'll be notified that they now deem their current premises to be uninhabitable and therefore the lease has been terminated. Once they're gone, there's no particular reason that we'd have to preserve the premises for them. Mr. Carter: Is this not materially different than the deal that you told us about at the last meeting? Basically they wanted a year? Mr. Haas: I thought it was two. There was discussion about the desirability of limiting it to a year. Mr. Roesch: I assume you've asked for the shortest period you could get. We're here tonight with as far as they'll go. Mr. Haas: Absolutely. Yes. Could we negotiate to shave a month or two off? Probably. If we take any more time than that off, I think their response will be that they're just not going to reopen. Ms. Snyder: Their lease went to '02 and they wanted a year's extension to August '03 figuring they'd get in here in August and they wanted two years. So when I saw April I thought you did a good job, cutting some of that time off. Mr. Haas: Yes, I told them we had to have it for the '03 construction season. If the sentiment is it's unlikely that we will have a deal in the next two years, I think this is the way to go. If on the other hand there's a determination that the most likely outcome here is that if we don't support the variance, that Goodyear will simply go away, then there's no point in doing this. The value in doing this is if Goodyear doesn't go away and we would otherwise have to condemn their leasehold, in the event that they extend their leasehold as Sherwin Williams did just to increase their damages. I think it's hard to guess here what their course of action will be. Mr. Carter: Is it not hard to foresee a judge putting any merit in an extension of a leasehold of an unoccupied building, that's been unoccupied for two years? Mr. Haas: No, because the appraisal is based on whether they are under market. And they're likely to be under market if you can use the premises for a Goodyear store. If we have that kind of litigation Goodyear will claim if there wasn't a conscious conspiracy, there was a conspiracy of circumstances such that it shouldn't be counted against them in a valuation that the property is no longer zoned for that use. Mr. Roesch: There also is something that goes the other way. What if we negotiate an offer with Mr. Huffer and in two years we don't have anything for this. At least there is somebody paying that rent and allowing Mr. Huffer the luxury of receiving that rent while he's waiting for us to buy. Mr. Haas: That's true. Probably approving this deal is the only way we'll be able to get Mr. Huffer to agree to postpone accepting a cash payment. 6 Ms. Snyder: Karl, are you dealing with his attorney on this now? [Affirmative] Because his attorney called me and I said, "You really need to talk to Karl Haas." Mr. Haas: Is this his new attorney? [E. Davis Coats] I have not heard from him. Mr. Carter: What's the lease payment Mr. Huffer is receiving from Goodyear? Mr. Roesch: It's in the range of $74,500. Mr. Haas: That does present the opportunity that we could strike an arrangement with Mr. Huffer where our option payment covers that rent. Mr. Carter: From my own point of view I'm wondering if there aren't some other ways of "skinning this cat" without putting Goodyear back in there. Has that been discussed with Mr. Huffer? Mr. Haas: We've been discussing with Mr. Huffer what the price would be for his building amidst, I wouldn't call them threats, suggestions that if Mr. Huffer isn't paid the amount he has demanded he'll file suit against the Mayor and the Commission. His prior counsel wasn't very interested in discussing any alternatives other than a cash payment in the amount that Mr. Huffer thought had previously been established. Now that he has other counsel we may be able to work out something. Mr. Carter: How much longer does the Goodyear... [August `02] And they have an option for two five year options past that? Ms. Snyder: That's what Huffer will argue but Goodyear will never exercise them because the store was too small to begin with. Quite frankly, they'd better hustle and find a location before there aren't any good ones left. Mr. Carter: I'm reluctant to guarantee that this space is taken out of the Redevelopment Commission mix for probably two years because of this. I don't think I could support this proposal the way it's set up here. I frankly would like to see us get on with City Center. We're getting rooftops fairly soon. I think with AMLI and the folks across the street that this is going to start to bloom and pick up steam fairly rapidly, especially over the next year as we get people there and we get the Monon open. I'm really reluctant to see us pull this out of the mix and almost guarantee we won't get any serious proposals over the next year and a half. Ms. Snyder: I think that if you say they're going to start moving in the end of this year, they'll probably flesh it out and fill it across the spring. People will notice the activity. Ryland will be up. I think they're going to be gone in thirty days. I don't think any retail guys are going to buy this year. They're going to look and they'll compare sites. But they'll come in to buy next year. If we have control of the site and at that time are beginning to tear down the Kroger building and prep the site with the exception of the 7 Goodyear building, they will probably be able to negotiate for this site quite happily. The only thing that really bothers a developer is an indeterminate date. If you've got a date of April '03 they're okay with that because they understand what they can do and what you can do before they really have to start in earnest. Anybody who buys next year is perfectly willing to go to the next year before starting construction because they build in six to twelve months for approvals. They've got their design work up front, they've got their tenants to solidify, they've got their approvals to go through. I agree with you. If there was a tenant driven deal out there right now, this would kill it, but I don't think there is. So I don't have a problem with it. I think it will work, especially since you've got it pushed back to the spring. I would almost guess that Goodyear would like to be out of there as fast as they can in early '03, making sure they've got their site and their building. Mr. Roesch: Is there something we can do to cut this back from April? Mr. Haas: I think we might be able to get a short period cut from it. I don't think that addresses Ron's concern. [Correct] We might be able to get Goodyear to agree that site work commence on their site so long as we're providing adequate parking and access. Mr. Roesch: If you're looking at this lease, what do you think offhand the value is? If we get a tenant driven project and we were to do nothing and had to condemn this lease, what do you think it would cost us? Mr. Haas: We would condemn the lease and the fee all at once as a package. The last appraised value was $615,000. I don't see any particular reason why that would have increased substantially. If it was appraised as a non conforming use, it will have decreased substantially. Now when you condemn on that basis, to some extent a valuable leasehold detracts from the value of the fee. So you're looking at that $615,000 as a total payment. When you go into condemnation and then you end up with a trial and damages, it's a crap shoot as to where you end up. One of the good parts of condemnation in Indiana is once you pass the period where they can challenge the actual taking, you of course can plead the appraised value in the court and take the property and begin your project and the trial on damages can go on and on into oblivion. On the other hand, if there is a challenge to the take, you may be in a position where you cannot commit the property to a developer on a set date. Mr. Carter: If we were to pay Mr. Huffer his lease income for the next two years and have that under our own control, would that markedly change this set of circumstances? Mr. Haas: Yes, I think so. As long as we get past the risk of a claim by Goodyear and an extension of their lease simply for the purpose of running up damages, and I think the likelihood of that is fairly low. Yes, it would. There's no reason why Mr. Huffer would care where the money comes from for the next two years. Mr. Carter: We need badly Street Department space, especially if the annexation goes through. By the end of this year we're going to have to be geared up from a facilities 8 standpoint and we're probably a year and a half to two years away from having an opening of a new Street Department garage to handle the amount of equipment that we're gong to need to take care of the increased geographic area the annexation's going to bring to us. I wonder if we wouldn't be well advised to look at this as an annex to the Street Department garage for the time being, let the City lease this from the Redevelopment Commission for the amount of Mr. Huffer's lease payments from Goodyear. We have it under control and the City has space to work on that's heated with lifts, etc., to work on. [Mr. Roesch said the lifts are gone.] But someplace to help alleviate our Street Department garage concerns. I throw that out as a possible solution to get us through this so we don't have the problem of taking this out of play for two years and getting Mr. Huffer's concerns possibly taken care of. Ms. Snyder: The price you mentioned, $615,000, would he be willing to take that? Or is he still holding to his "pie in the sky original offer that the real estate fairy gave him Mr. Roesch: We should discuss that in Executive Session. Mr. Haas: So far there hasn't been much movement. Mr. Roesch: I'm developing another... hearing some other thoughts, I think we go with this agreement for a year, throw that at them and if they don't like it, then that's the best they can do. Your rooftop speech got to me [to Ms. Snyder]. I do think there is a time that this is going to snowball. I did think it would be further away, but when you started talking about the rooftops... Ms. Snyder: Retail people look at this site as a site on a secondary street, an interior site. It's not at Keystone and 116 It is a site that is not for a large bookstore, a Gap. They don't want to be in a site like this. This is considered a "B" shop site. Nice little shops, but nothing major usually. I have heard the idea of the movie theaters batted around and I would be very surprised if that happened. Movie theaters are not expanding anymore. They are in a severe slump and again, for a movie theater we are not even a `B" site. Mr. Carter: If we went with a year and that didn't work [directed to Luci] does the Street Department suggestion have any merit as a fallback position if the year didn't work out, that it was attractive enough? Ms. Snyder: I think he needs heated space, but one of the things we're going to try to do is to pare the City budget down and we have to build a new Street Department somewhere. This would be a lease that we'd have to pay while we're supposed to be paring the budget down so that's one consideration. On the other hand, they don't have any heated space for repairs, so I'm sure they could use it. From our point of view, the thing that makes me not want to buy this right now is, (1) somebody's got a price in his mind that I don't agree with and (2) we've got dirt to pay for and we've got work we want to do. We've got to clear this site. We've got expenses. I'm very concerned about our expenses. Every time we come here we've got bills to be paid. You just wonder 9 where they all come from. I would like to be able to get the work done that we need to get done. It's hard to guess, isn't it? Mr. Roesch: From my point of view I'd rather be laying out the $75,000 per year up front, whether the City used it or not. I'd rather do that than take that big chunk out of the cash flow because of all these unforeseen things until we get some property closings. Cash flow is something we've got to be responsible about. Mr. Carter: Steve Engelking], do you know whether the Street Department has to use the Printsley building for truck storage and maintenance? Mr. Engelking: I think they have been using it. Today Dave made a comment, "When we lose that I'm not sure what we're going to do." He's running out of space. Ms. Snyder: Excuse me, the Street Depaitment is in the Printsley building and they're not paying rent and we own it? Okay. Mr. Roesch: I don't have a problem with that. Mr. Carter: From our own cash flow standpoint, if we were to work out something like this, we would need the City to pay the lease cost back to us. Mr. Haas: One possibility is to table this for tonight. I can explore with Mr. Huffer and his counsel whether they would be amenable a two year lease arrangement with an option [for the Redevelopment Commission to acquire this site] and then we can revisit this at the next meeting. The idea being there's an option to acquire it for a set price. During the period of the option, two -three years, until it's exercised, we would cover his cash flow. I'm certain that by the next meeting we would be able to have a response on that kind of deal structure. Mr. Haas: I would propose I send a draft of this to Goodyear, tell them it's subject to Commission approval. The next meeting is June 12. If there's a question on Goodyear's part, I'll tell them information was gathered, no vote was taken. Adjournment Ms. Snyder moved the meeting be adjourned. Following a second by Mr. Carter, the motion was unanimously approved and the meeting adjourned. 10