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11/24/1993 CITY COMMISSION SPECIAL MEETING SUN BANK November 24, 1993 The City Commission of the City of Clearwater met in special session at City Hall, Wednesday, November 24, 1993 at 2:00 p.m., with the following members present: Arthur X. Deegan, II Vice-Mayor/Commissioner Richard Fitzgerald Commissioner Sue A. Berfield Commissioner Fred A. Thomas Commissioner (arrived 2:16 p.m.) Absent: Rita Garvey Mayor/Commissioner Also present: Kathy S. Rice Deputy City Manager M.A. Galbraith, Jr. City Attorney Cynthia E. Goudeau City Clerk The purpose of this meeting is to approve the documents for the sale of the Sun Bank Building to Atrium at Clearwater, Limited (Walter Krumm). The City Attorney apologized the documents were received by the Commission late last night, however, the documents were not available to him until sometime after four o'clock yesterday. He listed the documents in the packet: 1) Escrow Agreement with the law firm of Richards, Gilkey, Fite, Slaughter, Pratesi and Ward, P.A. containing the terms for the closing and escrow; 2) Second Amendment to the 1983 Development Agreement. This acknowledges that certain requirements of the Development Agreement carry forward, such as the limitation on the resale of the property; 3) Assignment to the Buyer of Rights Under the Escrow Agreement for the Repair of the Walkway Canopy. This escrow agreement relates to $50,000 in cash being held for repairs; 4) Easement for the Crosswalk over Park Street; 5) Easement to the CRA (Community Redevelopment Agency) for ingress and egress over the exterior surface parking and driveways east and south of the garage; 6) Amendment to the Maintenance and Operation Agreement for the garage; 7) Right of First Refusal on the Police Station; 8) Option to Purchase the CRA portion of the garage. This is a transaction between the CRA and the Buyer, but the City is being asked to sign as joinder as further proof of the City's consent and to allow a Quit Claim Deed from the City at a later date after closing on the purchase of the garage to bring any possible loose ends back under a single unified title and one owner; 9) Bill of Sale; 10) Assignment and Assumption of Leases, Tenancies and Security Deposits; and 11) Assignment and Assumption of Licenses and Contracts. The liability for claims by Faison Associates for leasing commissions was questioned. The City has given Faison Associates a Notice of Termination. The buyer wishes to establish no liability for commissions if any are owed. It is unclear from the facts available whether Faison Associates is entitled to a leasing commission. Mr. Galbraith noted several of the documents are three party documents between the purchasers, the CRA and the City. He stated the CRA will vote on the documents pertaining to it at its meeting December 13, 1993. Commissioner Fitzgerald expressed confusion regarding exhibits attached to the documents. Emil Pratesi, outside counsel for the City in this transaction, indicated some of the exhibits have exhibits and, therefore, there may be multiple exhibits with the same identification. Escrow Agreement with the law firm of Richards, Gilkey, Fite, Slaughter, Pratesi and Ward Vice-Mayor Deegan pointed out the closing document was not in the packet. He also pointed out, in the Escrow Agreement, paragraph 4.a. referencing the CRA in connection with the right of first refusal on the Police Department. He stated this is an error as the CRA would not grant that as the police department is owned by the City. Vice-Mayor Deegan questioned, in paragraph 4.b., reference to the CRA being unable to meet the obligations of the contract. He questioned what situation might cause this circumstance, and Mr. Pratesi indicated if someone else came forward with an offer the CRA chose to accept. Al Justice, representing the purchasers, indicated they had no knowledge of any other possible purchasers. The City Attorney reported as of 9:30 this morning, the CRA office was unaware of any inquiries regarding the first two floors of the parking garage, which is owned by the CRA. Vice-Mayor Deegan questioned the expiration date of all waiting and/or notification periods, that are required by the CRA. Mr. Galbraith indicated they will all expire on December 10. Vice-Mayor Deegan questioned when the escrow funds would be disbursed, and Mr. Pratesi indicated on December 17. Vice-Mayor Deegan pointed out a typographical error on page 5, paragraph 21, in that a phrase is repeated. He requested an explanation of paragraph 24. Mr. Pratesi indicated it had been requested by the buyers as they are waiting for some items to be concluded. Vice-Mayor Deegan expressed concerns that he did not understand how the City could close and the other party have additional time in which to walk away from the deal. Mr. Justice indicated this was a continuation of obtaining documents. He stated by the time the CRA votes, all documents are to be in hand. He stated $6.5 million will be placed in escrow at Monday's closing. Vice-Mayor Deegan stated he did not understand how a closing could occur and the deal not be over. Commissioner Thomas asked Mr. Justice to go on record stipulating to the things that would cause termination of the transaction on or before December 10. Mr. Justice indicated that, from a business point of view, the only issues he is aware of that would cause termination of the transaction are 1) if the Estoppel letters are not in place, 2) if the title policy were not free of major objections, 3) if the buyers' counsel has problems with any of the documents being prepared and submitted today and 4) if a party from outside comes forward wanting to purchase the CRA portion of the garage. Commissioner Thomas questioned the City Attorney if he saw any problems with resolving those four issues. Mr. Galbraith indicated the Estoppel letters were out of the City's control, however, they have been promised. He stated the CRA waiting period simply has to expire, accepting other deals is within the CRA's control. He stated the only problem with the title insurance would be if someone filed a lien within the next few days. Review of the documents is up to the buyer's attorneys. He stated he felt the deal was on sound footing. Commissioner Thomas questioned if there was any critical Estoppel letter that has not been obtained. Mr. Justice and Mr. Galbraith indicated not to their knowledge. Discussion ensued regarding the exhibits to the Escrow Agreement, with confusion being found. It was indicated the exhibits need to be straightened out. Second Amendment to the 1983 Development Agreement and Assignment to the Buyer of Rights Under the Escrow Agreement There were no questions regarding these two documents. Easement for Crosswalk Regarding this easement, Mr. Justice pointed out they are requesting the City place pedestrian hatchmarking on the pavement for this easement. Easement to the Community Redevelopment Agency Regarding this easement for ingress and egress of the exterior surface parking and driveways, Vice-Mayor Deegan stated the exhibit referenced in the last sentence in paragraph 4 needs to be changed. Mr. Pratesi stated it should be corrected as exhibit B. Amendment to Maintenance and Operation Agreement Vice-Mayor Deegan questioned the blank left on page 2, paragraph 5. Mr. Pratesi indicated the purchasers did not want the right to use the garage to be indefinite. The City Attorney indicated the date to be included may be a schedule based on existing leases. With regard to paragraph 6, Vice-Mayor Deegan pointed out the sentence in the middle of the paragraph referring to damage to the first or second floors of the parking garage, for which the cost of repairs are to be borne "solely by the City." He felt the phrase "CRA or the City" should be included as the CRA owns the property, while the City has an agreement to maintain it. Mr. Pratesi and Mr. Galbraith agreed. Right of First Refusal There were no other questions regarding this document other than the corrections made when it was discussed as an exhibit to the Escrow Agreement. Option to Purchase the CRA portion of the garage Vice-Mayor Deegan pointed out that Pierce Street was misspelled throughout the document. He requested that 12:00 p.m. be clarified; and he questioned what length of time mid-term debt covered, as the interest rate will be based on the amount charged for mid-term debt by the Internal Revenue Service. No one was certain regarding the time frame referenced. Blanket Conveyance, Bill of Sale and Assignment There were no questions regarding this document. Assignment and Assumption of Leases, Tenancies and Security Deposits Vice-Mayor Deegan questioned a security deposit paid by U.S. Computers, which has since gone into bankruptcy. Mr. Pratesi indicated there was a $5,000 plus security deposit being held, and U.S. Computers is no longer a tenant in the building. Mr. Justice indicated substantial, valuable property is stored in the building for the bankruptcy trustee of U.S. Computer. He stated it was the purchaser's position the security deposit belongs to them. Vice-Mayor Deegan expressed concerns the deposit was there in order to make good on any arrears, and questioned if the City is owed any money by U.S. Computers. Mr. Justice said disposition of the funds would be subject to the bankruptcy trustee. The City Attorney was requested to check with the bankruptcy trustee to make a claim for the proper party. Commissioner Thomas questioned if the City had the right to place the materials from U.S. Computers in storage until disposition is determined. The City Attorney indicated he had no opinion since he is not knowledgeable regarding bankruptcy law. Commissioner Thomas questioned how much money they owed the City. It was indicated the sum was not know. Mr. Justice indicated, to his knowledge, it was a substantial amount. Vice-Mayor Deegan raised the same question regarding the First National Bar. Mr. Galbraith indicated they were not in arrears. A question was raised regarding whether or not any other tenants were in arrears. Vice-Mayor Deegan pointed out this was needed in order to make sure no security deposits are turned over to the purchasers if the City is owed money due to unpaid rents. Mr. Justice indicated they will need the rent roll at closing, certified by a City official. He stated this will be the basis for future relationships with the tenants. Vice-Mayor Deegan questioned if it was appropriate for the City to retain the deposits if tenants were in arrears. Mr. Justice indicated the leases would state for what the deposits are to be used. Mr. Pratesi agreed with Mr. Justice. Mr. Pratesi indicated if he had the leases and knew which ones were in arrears, he would be happy to review them and determine any security deposits that may be retained by the City. Assignment and Assumption of Licenses and Contracts There were no questions regarding this document. Mr. Justice stated, for the record, the purchasers are not assuming any obligation under the contract with Faison. Vice-Mayor Deegan stated he would not like to see any future claims from Faison, and questioned how this could be cleared up. Mr. Pratesi indicated the agreement with Faison required reports to be submitted to the City. He indicated these have not been seen, however, Faison is now listing certain tenants for which they have a 120 day protection clause that, should they sign lease agreements, Faison would be entitled to a commission. Vice-Mayor Deegan stated the documents say the buyer is assuming all liabilities. Mr. Pratesi indicated the documents specifically exclude the Faison agreement. Commissioner Thomas questioned what the worst case would be for any funds owed Faison. Mr. Pratesi indicated he had not studied the document in detail enough to be able to answer that question. He stated, however, Faison is "making noise" that they believe they are entitled to a commission if some companies, shown the building by Faison, lease after the purchasers are in control of the property. Mr. Justice reminded the City Commission the Faison agreement was executed with Maria Real Estate. Mr. Pratesi indicated the City assumed the agreement when it purchased the property. Mr. Pratesi questioned what the Commission desired. Commissioner Thomas stated he does not want to be liable for any commissions to Faison after closing. Mr. Pratesi stated, hypothetically, if there was a 60% liability, what direction the Commission wished to take. It was suggested the buyers release the City from the liability. Mr. Justice indicated they would not be prepared to do that. He stated they have been saying, since the beginning, they would not be liable for any commissions due Faison after closing. Mr. Pratesi then pointed out it was not clear if the City ever got a list of the companies to whom Faison had shown the building. Commissioner Thomas pointed out the Justice Corporation will aggressively lease the building, and he would hate the City to have to pay Faison a commission. Mr. Galbraith pointed out there are two unknowns, 1) it was not clear that Faison gave the notice to the City they were suppose to give and 2) he is not certain of the instructions given to Faison by the City Manager. This will be clarified between Mr. Wright and Mr. Galbraith. Commissioner Berfield questioned if Friday provided enough time to gather the information. Mr. Pratesi indicated it did. Commissioner Thomas questioned if the City every formally notified Faison of its obligation. Mr. Pratesi indicated it was their obligation, not the City's. He pointed out a list was received last week after the contract was terminated with Faison. He indicated this was not proper. Commissioner Thomas questioned if the odds are that the list is not legal. Mr. Pratesi indicated the person dealing with Faison needs to answer when, and if, a list was obtained. Ms. Rice indicated some reports had been received but, if the information referenced was included, she could not tell at this time. Commissioner Thomas moved to accept the document subject to the changes pointed out during the meeting. The motion was duly seconded. Commissioner Fitzgerald stated he is on the record of not approving the sale, however, he saw no reason not to approve the documents. Upon the vote being taken, the motion carried unanimously. It was stated the documents are to be executed on Monday. Mr. Galbraith indicated a Commission meeting would be occurring at that time, and it may be necessary for a recess to be taken in order for the documents to be executed. The meeting adjourned at 3:14 p.m.