In Surprise Move, DDA Gives Royal Vlahakis Another Exclusive Deal
Above: Jeff Kusler (right) at a Sept. 19 meeting of the DDA. Kusler flipped his vote, helping the new exclusive deal pass. Photos by Raymond Holt.
In a reversal of what’s been happening over the last month, a majority of the East Lansing DDA voted today to give the Royal Vlahakis development team a new exclusive purchase agreement for the Evergreen Avenue properties.
Those in favor indicated they thought the project site plan is acceptable and that they believe the Royal Vlahakis team is the best bet to pay off the $5.6 million debt on the DDA-owned land.
Tom Yeadon, who serves as the DDA’s attorney as well as the City’s, was absent from today’s meeting, and no other member of his firm came to fill in.
That meant that the DDA had no legal counsel in the room, a point repeatedly noted when several members had questions about what the legal ramifications of the agreement could be. There was little discussion of the actual terms of the agreement, submitted for the agenda last night.
Today saw an unexpected turn of events.
On August 22, the DDA voted 7-4 to let expire the last exclusive agreement with the developers, made up of members of Royal Apartments and Vlahakis Development.
At that point, those voting against indicated that the developers had failed to cohere a worthy, clearly viable project for this area just north of Peoples Church.
After that, it seemed very likely that the DDA would soon vote to put out a Request for Proposal (RFP) for the properties, inviting ideas and bids from other developers.
When, four days later, the Planning Commission voted 7-1 against recommending the Royal Vlahakis site plan (rendering below), it seemed even more likely the DDA would go to an RFP.
Sticking with the pattern, on September 19, the DDA’s Project and Infrastructure committee voted to recommend the full DDA put off any further deal-making on the properties until Council holds the public hearing on the Royal Vlahakis Park Place West site plan on October 8.
The expectation on the part of the committee was that the Council would vote up or down on the site plan on that date, indicating decisively whether the Council supports going forward with the deal.
Based on prior comments by Council members, the general expectation has been that Council would act in a fashion that would support the move to send out an RFP.
But today’s vote at the DDA went in a completely different direction.
The vote went 7-3 in favor of giving another exclusive agreement, with several people who had voted “no” on an extension on the last agreement now voting “yes” on this one.
Greg Ballein, Lynsey Clayton, Jill Rhode, and Eric Sudol voted in favor, like last time.
But Luke Hackney, Mike Krueger, and Jeff Kusler switched from voting against staying in an exclusive deal with Royal Vlahakis to voting for a new one.
It was their three votes that breathed new life into the deal.
Above: Krueger and Hackney at the July 25 meeting.
Agreeing with Ballein, Kusler named as his reason the debt on the property. The developers have offered the full amount owed on the properties, about $5.6 million, if they can get approval of other parts of the deal.
Ballein and Kusler said they saw another deal with Royal Vlahakis as probably a faster way to get to closing than going to an RFP.
As before, Rhode expressed significant concern that no one else would offer to pay the full debt price for the property. (Croom asked rhetorically, if that is the case, why are these developers willing to pay this amount and why are they so desperate to avoid an open bidding process?)
Clayton said she wanted a work session with City Council to try to understand what Council members are looking for on these properties. She said she was voting to go with Royal Vlahakis because she saw it as the “fiscally responsible” thing to do.
Below: Clayton at the July 25 meeting.
Clayton also called the Royal Vlahakis proposal an “exciting project.”
For his part, Sudol said the project is “not as good as when it started” but is “good enough.”
Kusler spoke of the DDA being an “independent body” saying it “does not have to fall in line with Council.”
Nevertheless, the fact is that the DDA can’t get to the finish line if Council doesn’t want this project, since the Council alone must approve a site plan and Special Use Permit (SUP).
Guessing at the City Attorney’s take
The impression of a number of DDA members at today’s meeting was that the City Attorney Yeadon was comfortable with the DDA entering into the new agreement, because a new draft had been attached to the agenda the night before with changes from him.
However, also attached to the agenda was a lengthy memo from Yeadon in which he advised, “Before entering into a purchase agreement on this property, I would recommend the DDA wait to see how Council reacts to this project” on October 8.
The three people voting against the new exclusive deal – DDA Chair Peter Dewan, DDA Vice Chair Jim Croom, and Mayor Mark Meadows – all warned against the legal risks involved with a new deal now, particularly given that the DDA still does not have a legal release from the last exclusive agreement that is signed by the developers.
Meadows and Croom, the only two attorneys on the DDA, both warned that entering into this new agreement could add legal risk to an already very legally complicated situation.
Below: Croom at the July 25 meeting.
Croom spoke specifically about “needlessly” adding “another layer of legal complexity” that could be difficult “to unwind” later.
Croom disagreed with the ”pro” side’s characterization of the urgency of the debt, confirming with City staff that the recent restructuring of the debt gives the DDA more time to find another approach.
Croom also said that the issue isn’t just debt, but “land use.” He noted that Peoples Church is against the site plan and said he thinks it is just a bad design for the location. Dewan agreed, saying “land use is critically important.”
Saying he might sound like a “broken record,” Dewan noted that the DDA had been poised to send out the RFP a year ago. But, he said, that was “suspended” to entertain the bid from Royal Vlahakis that started with presentations back in August 2018.
Time had long since run out on the Royal Vlahakis bet, in Dewan’s opinion. He called a continued exclusive deal a waste of time.
An amendment with an uncertain import
Before the vote occurred, Dewan proposed an amendment to the new exclusive contract. The DDA voted that through. That amendment reads:
“This agreement is contingent upon the City of East Lansing approving the site plan identified in paragraph 23.d above, or an amended version of that site plan on or before October 30, 2019. In the event the City Council fails to approve that or an amended site plan by said date, this agreement shall terminate and neither party shall have any further liability or responsibility under this agreement except such liabilities and responsibilities as this agreement provides shall survive such termination.”
Below: Dewan at the July 25 meeting.
The goal is to get the DDA out of the contract by November if Council indicates in October that it won’t sign on to the site plan.
But whether the contract as a whole really allows such an exit from the new exclusive agreement remains to be seen.
Developer Michael Henneman responded to legal concerns from Croom and Meadows by saying he didn’t plan to sue the City.
But Meadows noted that the development team has made allusions to a lawsuit previously.
Brent Titus, lawyer for the developers, responded that it was the City Attorney who had brought up the possibility of a suit, and that he (Titus) had neither confirmed nor denied it.
Below: Developer Michael Henneman and his lawyer Brent Titus at the Sept. 19 meeting.
During one part of the meeting, Titus said he wanted a narrower release than the City Attorney had drafted. This could suggest he was looking to retain his clients’ right to sue, perhaps as a negotiating lever.
Titus also told the DDA he did not think it made sense for City Council to make a decision on October 8.
But Meadows told him he fully expects Council to do so, as Council often acts on major site plans the same date it holds a public hearing.
Hinting at what Council might consider in its decision, Meadows said he found the land use issue very important and that publicly owned land gives an opportunity “to leverage what you want out of it.”
If the developers were simply offering to pay off the debt with a simple sale, free of contingencies, Meadows said, he’d vote to sell. But, he said, the site plan matters.
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