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HomeMy WebLinkAboutItem #14 Discussion on Purchase of State Farm Building 1 ! : FOLEY FOLEY & LARDNER LLP ATTORNEYS AT LAW MEMORANDUM CLlENT.MATTER NUMBER 020377.0841 TO: The Honorable Mayor and City Commissioners of the City of Ocoee FROM: Mary D. Solik, Esq. DATE: September 4, 2007 RE: Purchase of Existing Building for Relocation of Police Station! Fonner State Farm Building - 646 Ocoee Commerce Parkway Pursuant to discussions with the City Commission, staff has been pursuing the potential purchase of the fonner State Fann Building for the relocation ofthe Police Department. The property is listed for sale at a price of $3,600,000. It is owned by Ocoee Partners Ltd. which acquired the property from State Farm in April 2006. The appraisal prepared for the City by DeRango, Best & Associates indicates that the market value of the property as of July 17,2007 is $2,590,000. The appraised value does not include any personal property which may go with a sale. The documentary stamps on the transaction between State Farm and Ocoee Partners indicate a purchase price of $2,073,200 which would exclude any personal property. A representative of State Farms advised the appraiser that the purchase price was $2,760,000 (which presumably included the personal property). Around June 20tl\ the Assistant City Manager, in consultation with the Mayor, City Manager and City Attorney, forwarded a purchase contract to Ocoee Partners with a proposed purchase price of $3,000,000 (inclusive of personal property) subject to a variety of contingencies, including an appraisal and environmental site assessment and approval by the City Commission at a public hearing. Ocoee Partners, through their legal counsel, rejected the City's proposal and advised that Ocoee Partners had a proposed Letter of Intent to purchase the property at the asking price with a quick closing and no contingencies. He indicated that Ocoee Partners would be willing to sell the property based on a Stipulated Order of Taking at $3,600,000 provided that the City could move quickly. At that time, the City was unable to agree since an appraisal had not been obtained. Last week, we reinitiated communication with Ocoee Partners legal counsel. He advised that the property had not been sold and was not under contract. He further advised that the owner was negotiating a lease of the property at a lease rate that would support a value of $3,600,000 and that their preference was not to sell to the City. They also expressed concern that discussions by the City could adversely affect their lease negotiations. He reconfirmed that the owners were not interested in selling the property at a price below $3,600,000. Our impression is that Ocoee Partners would sell to the City at their $3,600,000 asking price and waive any claim for attorney's fees. ORLA_590B72.1 : FOLEY FOleY I LARDNER LLP The City Charter requires an advertised public hearing for the purchase of property with a value greater than $1,000,000. The Charter further prohibits a purchase above the city's estimate of the fair market value except in cases where specific good cause is shown. However, this Charter provision is not applicable to property acquired by eminent domain. An acquisition by means of a Stipulated Order of Taking would not fall under the Charter provision, while a contractual purchase under threat of condemnation would be subjcct to the Charter provision. Under normal circumstances, the City would make an offer based on thc appraisal. This could not include an offer with respect to the personal property unless the City also got an appraisal of the personal property. In a condemnation case the City has cxposure to pay the landowners expenses, including legal fees, as well as to pay its own litigation expense'l. If the City to condemned the property and a jury determined that the property was valued at $3,600,000, it is likely that the City's ~xpenses through trial would be between $500,000 and $600,000 (City ~xpenses plus expenses of landowner which thc City would be obligated to pay) on top of the property's value. There is a possibility that a jury could find a value over the City's appraised value if the appraisal obtained by the property owner supports a higher amount. There is also a possibility that Ocoee Partners could persuade the Court to allow the jury to consider its negotiations with third parties who the owner asserts will support the $3,600,000 asking price. It is difficult to predict the outcome of this condemnation case without knowing more information regarding any bona fide sale and lease n~gotiations undertaken by the owner. include: Staff is looking for direction from the City Commission. Potential options 1. Order to Taking. Offer to purchase thc property for $3,600,000 by means of a Stipulated 2. Offer to purchase the property for $3,600,000 by means of a sales contract under thrcat of condemnation, subject to approval by the City Commission at an advertised public hearing. 3. Offer to purchase the property at a price somewhere between the appraised value of$2,590,000 and the asking price of$3,600,000. As noted above, the owner's legal counsel has advised that any such offer would be rejected. Ifit were to be rejected a'l suggested, the City Commission would then have to decide whether to initiate a condemnation action. 4. Discontinue further discussions regarding the acquisition of the State Farm Building and pursue other options for the new police station, including the construction of a new facility on the recently acquired Prairie Lakes PUD .property. 5. Explore lease negotiations with Ocoee Partners. The owner's counsel has indicated that they would reject any lease proposal that didn't support the $3,600,000 valuation made by the owncrs. Previous discussions with staff indicated that a lease on the terms requested by Ocoee Partners would not make economic sense to the City which can borrow at a tax exempt rate. 2 ORLA_590872.1 : FOLEV FOLeY. LARDNER LLP 6. Explore the possibility of a land swap under which the City conveys the Prairie Lakes PUD commercial tract to Ocoee Partners and they in turn convey the State Farm Building along with the personal property located therein. This option was raised by the landowners attorney without consultation with his client and we do not know if they are interested in such an approach. There are likely other options which may be suggested by the members of the City Commission. It is our recommendation that the City Commission decide whether they want to pursue acquisition of the State Farm Building under the circumstances described herein and, if so, at what price. If the price is below $3,600,000, then the City Commission will need to indicate whether they want to pursue a condemnation action since the landowner has advised that they will reject any such offer. These circumstances do not tend to lend themselves to protracted public negotiations. cc: Rob Frank Jamie Croteau Paul E. Rosenthal, Esq. 3 ORLA_59D872.1