HomeMy WebLinkAbout95-14 RESOLUTIONRESOLUTION NO. 95-14
A RESOLUTION TO ACCEPT BIOBASED REALTY, LLC'S OFFER OF
$200,000.00 AS SATISFACTION OF THE CITY'S RIGHT TO RECEIVE A
PORTION OF THE INCREASED SALES PRICE OF THE RAW LAND SOLD
TO BIOBASED REALTY, LLC IF SUCH LAND IS SOLD WITHIN TEN
YEARS
WHEREAS, the City of Fayetteville and BioBased Realty, LLC entered into a Real
Estate Sales Contract on November 4, 2005 wherein BioBased purchased about 19 acres of City
property for $940,000.00; and
WHEREAS, paragraph 14 of this contract required that BioBased Realty, LLC share a
declining percentage of any increased sale value of the raw land purchased from the City if
BioBased Realty, LLC sells this property within ten years; and
WHEREAS, BioBased Realty, LLC desires to sell this property to the University of
Arkansas and has offered this City $200,000.00 as its fair share of the increased value; and
WHEREAS, the City Council has determined that it is in the best interest of Fayetteville
citizens to accept this offer of $200,000.00 as full satisfaction of the contractual duties of
BioBased Realty, LLC pursuant to paragraph 14 of the Real Estate Sales Contract.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby accepts the
offer of $200,000.00 from BioBased Realty, LLC as full satisfaction of the City's right to receive
a portion of the increased sales price of the raw land sold to BioBased Realty, LLC if such land
is sold within ten years and authorizes Mayor Jordan to sign any documentation needed to
effectuate this agreement.
PASSED and APPROVED this 6th day of May 2014.
APPROVED:
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ATTEST:
By: 0412/1�' a 011Irrrrr►6.
SONDRA E. SMITH, City Clerk/Treasuo"\,,,, °/ •REg1//e
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AGENDA REQUEST
FOR: COUNCIL MEETING OF May 6, 2014
0.204 - D 4
FROM:
Mayor Jordan
Kit Williams, City Attorney
ORDINANCE OR RESOLUTION TITLE AND SUBJECT:
A RESOLUTION TO ACCEPT BIOBASED REALTY, LLC'S OFFER OF
$200,000.00 AS SATISFACTION OF THE CITY'S RIGHT TO RECEIVE A
PORTION OF THE INCREASED SALES PRICE OF THE RAW LAND SOLD TO
BIOBASED REALTY, LLC IF SUCH LAND IS SOLD WITHIN TEN YEARS
APPR AGENDA:
Mayor L
ld Jordan
City Attorney it Williams
Chief of Staff Don Marr
ioLtA
Finance Director Paul Becker
fC( �� 2 c L(
Date
Date
Date
OFFICE OF THE
CITY ATTORNEY
DEPARTMENTAL CORRESPONDENCE
TO: Mayor Jordan
City Council
CC: Don Marr, Chief of Staff
Paul Becker, Finance Director
Jeremy Pate, Development Services Director
FROM: Kit Williams, City Attorney
DATE: April 28, 2014
Kit Williams
City Attorney
Blake Pennington
Assistant City Attorney
Patti Mulford
Paralegal
RE: Authorization of "early" sale of BioBased Realty LLC's land to the
University of Arkansas
In early March, BioBased Realty, LLC contacted me to see if the City of
Fayetteville would agree to BioBased Realty, LLC's proposed sale of its
property (purchased from the City in mid -2006) to the University of Arkansas.
The City of Fayetteville sold about 19 acres of its old Water and Sewer
Headquarters and pipe storage yard along Cato Springs and Razorback Road
to BioBased Realty, LLC pursuant to Ordinance No. 4787 passed on
November 1, 2005. The Real Estate Sales Contract authorized by the
ordinance was fully executed on November 4, 2005. Closing occurred and the
City of Fayetteville received $940,000.00 in mid -2006. The City of Fayetteville
offered what it believed was a somewhat discounted price for the land in
order to put this important land on the corner of Cato Springs and Razorback
Road to a more valuable and productive use and to encourage the innovative
and eco -friendly BioBased Technologies to build a high tech lab building and
hopefully production facilities. BioBased did build the lab building but did
not build a production facility. For the last several years, BioBased Realty has
rented its lab building to the University which the University has used partly
1
as a component in its technology business incubator efforts. The University
now would like to purchase the lab building and all remaining raw land from
BioBased Realty.
Since the City believed that it was selling its land at a discount, I wrote
into the agreement a provision in which the City of Fayetteville's interest
would be protected if BioBased Realty LLC sought to sell the property within
ten years. The City of Fayetteville would be entitled to 75% of the increased
raw land value if sold within 5 years and to 40% if sold within 10 years. The
ten year period will expire in 2016 when the City would no longer be
entitled to any portion of the increased value of the land. Fortunately,
BioBased Realty would like to sell now. The Mayor, Senior City Staff and I
met with BioBased Realty and University officials to discuss this proposition.
I asked for and received appraisals that BioBased Realty and the
University of Arkansas had done during their negotiations over the sale of
this property. BioBased's attorney suggested using the University's appraisal
and initially offered $36,000.00. I pointed out that his computations had
omitted one of the two parcels. He agreed and raised the amount due to
$166,000.00 through an email dated March 7, 2014. However, because the two
appraisals (one for the U of A and one for BioBased Realty) valued the raw
land differently, I explained that the City would need to strictly follow the
contract's terms and obtain a truly "independent appraisal of the land's value
(not to include the value of any building thereon)...." (Paragraph 14).
Accordingly the City selected, paid for and obtained its own
independent appraisal from a company that had not worked on this property
for either the University or BioBased Realty, LLC. We received the
independent appraisal on April 16, 2014. Applying the Real Estate Sales
Contract formula to the independent appraisal's valuation yielded a figure of
$292,000.00 which I relayed to BioBased Realty, LLC. If this amount had been
acceptable to BioBased Realty, LLC, no City Council action would be
required. However, BioBased Realty, LLC says that it is already losing money
on this sale and cannot pay the $292,000.00 called for in this contract.
Today BioBased Realty, LLC's Co -Managing Member Phil Phillips did
offer a settlement figure of $200,000.00. Only the City Council can agree to
an amount not strictly in conformity with the Real Estate Sales Contract. The
2
U of A and BioBased need to close this land sale soon and have therefore
requested to present this to the City Council on May 6, 2014. Attached is
Ordinance No 4787, the Real Estate Sales Contract and email from Phil
Phillips of BioBased Realty, LLC.
CONCLUSION
The issue for the City Council is whether or not it is in the best
interest of our Citizens and our City to accept this $200,000.00 offer. Factors
to recommend City Council approval are summarized below:
1. We have been informed by BioBased Realty that because its building
will not sell for what it cost to build, BioBased Realty must actually
bring in a substantial sum of its investors' money to pay off its debt
when the property is sold to the U of A. It can only afford to offer the
City this additional $200,000.00 to sell the property now.
2. If this settlement is not agreed to, BioBased Realty, LLC can legally wait
a couple of years to sell the property and the City would receive
NOTHING.
3. We are more than half way through the 5 to 10 years second period so
that it is reasonable to be willing to reduce our 40% entitlement by less
than one third. Our citizens would still receive 68.5% of the most we
could have been entitled to for a sale in year six based upon how our
appraiser valued the property.
4. Our citizens will receive $34,000.00 (17%) more than what we would
have received if the University of Arkansas' appraisal had been used at
the full 40% level.
5. This rapid sale is desired by and will be beneficial to our City's largest
and most important employer and economic engine, the University of
Arkansas. It can only help and assist the University foster new high
tech innovation and industry for our City.
3
• •
ORDINANCE NO. 4787,
AN ORDINANCE WAIVING THE REQUIREMENTS OF
§34.27, CODE OF FAYEU bVILLE AND APPROVING A
REAL ESTATE SALES CONTRACT WITH BIOBASED
TECHNOLOGIES IN THE AMOUNT OF $940,000.00 FOR
THE PURCHASE OF THE WATER & SEWER OPERATIONS
CENTER ON CATO SPRINGS ROAD; DESIGNATING THE
PROCEEDS FOR ECONOMIC DEVELOPMENT PURPOSES;
AND APPROVING A BUDGET ADJUSTMENT
IMPLEMENTING THE DESIGNATION.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE,
ARKANSAS:
Section 1. That the City Council of the City of Fayetteville, Arkansas hereby waives
the requirements of § 34.27, Code of Fayetteville, and approves a Real Estate Sales Contract
with BioBased Technologies in the amount of $940,000.00 for the purchase of the Water &
Sewer Operations Center on Cato Springs Road. A copy of the contract is attached hereto
marked Exhibit "A" and made a part hereof.
Section 2. That the City Council of the City of Fayetteville, Arkansas hereby
designates the proceeds of this sale for Economic Development purposes.
Section 3. That the City Council of the City of Fayetteville, Arkansas hereby
approves a Budget Adjustment implementing said designation of proceeds.
Section 4. That the City Council of the City of Fayetteville, Arkansashereby
authorizes the Mayor and City Clerk to execute said contract with BioBased Technologies.
PASSED argi+ ►Pi39VED this 1st day of November, 2005.
``�•G��Y ........, APPRO
;FAYEITEVILIE
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By:.6-a,'^""''t`1
SONDRA SMITH, City Clerk
ATTEST:
By: 0://
D N COODY, Mayor
• •
REAL ESTATE SALES CONTRACT
1. The City of Fayetteville, Arkansas offers to sell and BioBased Realty, LLC offers to buy,
subject to obtaining acceptable financing and other terms and conditions set forth in this
contract, approximately 19.5 acres including all of Parcel 765-03017-000 and Parcel 756-15399-
010 except for a one acre parcel where the Children's House is currently located and a right of
way easement where the Children's House driveway is not located. This property is more
particularly described in Exhibit "A" attached hereto and made a part hereof.
SEE ATTACHED EXHIBIT "A" FOR PROPERTY DESCRIPTION
2. Purchase Price: Subject to the following conditions, BioBased Realty, LLC shall pay for the
property at closing, the total cash payment of Nine Hundred Forty Thousand Dollars
($940,000.00).
3. Conveyance will be made BioBased Realty by general Warranty Deed, except it shall be subject
to recorded instruments and easements, if any, which do not materially affect the value of the
property. Such conveyance shall include mineral rights owned by the City of Fayetteville.
4. The City of Fayetteville shall furnish a policy of title insurance in the amount of the purchase
price from a title insurance company as selected by the City of Fayetteville. The City of
Fayetteville shall pay the cost of the title insurance.
5. The City of Fayetteville agrees to allow BioBased Realty, if BioBased Realty so desires, at
BioBased Realty's expense, to survey the property. The City of Fayetteville agrees to cure any
title problems which may result from any differences between the recorded legal descriptions of
the property and the survey description. Said title problems, if any, must be solved prior to
closing to the satisfaction of the City of Fayetteville. The City of Fayetteville shall provide at its
expense a survey of the one acre tract for Children House and right of way easement as depicted
on Exhibit "B".
6. Taxes and special assessments due on or before closing shall be paid by the City of Fayetteville.
Insurance, general taxes, ad valorem taxes, special assessments and rental payments shall be
prorated as of closing.
7. The closing date shall be within one hundred twenty (120) after approval of this offer by the
City Council, which can be extended by agreement of the Mayor for an additional sixty (60)
days. If such date of closing falls on a weekend or holiday, it will be held the following working
day.
8. Possession of the property shall be delivered to BioBased Realty on the date of closing.
9. The City of Fayetteville hereby grants permission for I3ioBased Realty or their designates to
enter the above described property and improvements for the purpose of inspection and/or
surveying.
10. Risk of loss or damage to the property by fire or other casualty occurring up to the time of
closing is assumed by the City of Fayetteville.
• •
11. The City of Fayetteville shall disclose to BioBased Realty any and all environmental hazards of
which the City of Fayetteville has actual knowledge. Upon acceptance of all conditions and
terms of this Offer and Acceptance, the City of Fayetteville shall bare the costs of any and all
testing for the existence of environmental hazards, including Phase I environmental study and a
Phase II study if necessary. Should the existence of environmental hazards be discovered, the
City of Fayetteville shall either cure such at its expense or BioBased Realty may terminate this
contract.
12. The City of Fayetteville will remove at its expense the existing buildings (not including
Children's House) and debris in coordination with BioBased Realty prior to or immediately after
closing.
13. Prior to closing, BioBased Realty in conjunction with BioBased Technologies/BioBased
Systems will provide the City of Fayetteville with a Master Plan layout of the property
acceptable to the City Council. BioBased Realty or BioBased Technologies/BioBased Systems
shall take all reasonable action to ensure that any minor possible odor or pollution emissions do
not affect surrounding areas. BioBased agrees to build in scrubbers to protect air quality where
reasonably appropriate. Each building's general design (including construction materials) shall
be presented to the City Council for its approval prior to the building's construction. Normal
city developmental requirements such as Large Scale Development standards, etc. shall still be
required.
14. If any portion of the land conveyed by this contract is sold by BioBased Realty within the first
five years of the date of closing, an independent appraisal of the land's value (not to include the
value of any building thereon) shall be performed. BioBased Realty shall pay 75% of the
increase in appraised value of the land (with prorated sales cost deducted) to the City of
Fayetteville. BioBased Realty shall pay the City of Fayetteville 40% of the increase in appraised
value of the land (with prorated sales costs deducted) for any sales after 5 years until 10 years
from the closing date.
15. BioBased Realty is granted an option to purchase the remaining acre where Children's House is
located eight years after the closing date. BioBased Realty may exercise this option to purchase
at any time during the year following the eight year period after the closing date. BioBased
Realty and the City agree the price shall be determined at that time as follows:
(a) The property including improvements thereon shall be appraised by an independent
appraiser.
(b) BioBased Realty shall receive an offset from the appraisal value using the following
formula: For every full $100,000.00 in annual payroll paid to BioBased
Technologies/Systems and related companies' employees working in Fayetteville
over the Two Million Dollar annual payroll estimated for 2008, BioBased Realty
shall receive a reduction of $25,000.00 from the appraised value of this remaining
acre.
(c) Reductions allowed in paragraph (b) shall not reduce the final price for this acre
parcel below $60,000.00.
2
(d) The City of Fayetteville may sell to BioBased Realty this acre at any mutually
agreeable time prior to the expiration of the eight year period upon terms agreeable
to both parties.
16. This agreement shall be governed by the laws of the State of Arkansas.
17. This agreement, when executed by both BioBased Realty and the City of Fayetteville shall
contain the entire understanding and agreement of the parties with respect to the matters referred
to herein and shall supersede all price or contemporaneous agreements, representations and
understanding with respect to such matters, and no oral representations or statements shall be
considered a part hereof.
By:
CITY OF FAYETTEVILLE
A Municipal Corporation
DAN COODY
Mayor
Date: L /DOS~
Attest:
Sondra Smith, City Clerk
Date: �lI�/D,5:
BIOBASED REALTY, LLC
BIOBASED TECHNOLOGIES, LLC
BIOJED SYSTEMS, LLC
•
By: 1 / f
TOM MUC IO
CEO
Date: l0
Date: / "/^ U 5
3
Williams, Kit
From: Phil Phillips <phil@aadvan.com>
Sent: Monday, April 28, 2014 10:29 AM
To: Williams, Kit
Subject: Fwd: BioBased
Kit:
Ken Shemin provided me with your email dated April 16, 2014 regarding the proposed payment to the City of
Fayetteville in the amount of $292,000.00 based upon an increase in the value of the raw land of $730,000.00.
While I totally understand the City's position, BioBased Realty does not have the funds to pay this amount. In
fact, as I previously stated in our meeting, certain members of BioBased Realty will be required to provide the
funds to the entity to make any payment to the City. As we further discussed, if we cannot agree on an amount,
it may be necessary for BioBased Realty to defer all or part of the sale to the University of Arkansas until after
July 26, 2016 simply due to the economic reality of the situation.
In order to facilitate a resolution of the matter, BioBased Realty is offering the sum of $200,000.00 to be paid at
closing.
Time is of the essence. You have been extremely cooperative in the past and we would appreciate your
assistance in attempting to have this proposal placed on the agenda for the May 6, 2014 city council meeting.
Phil Phillips
C0 -Managing Member
Bio Based Realty, LLC
1
RESOLUTION NO.
A RESOLUTION TO ACCEPT BIOBASED REALTY, LLC'S OFFER OF
$200,000.00 AS SATISFACTION OF THE CITY'S RIGHT TO RECEIVE A
PORTION OF THE INCREASED SALES PRICE OF THE RAW LAND SOLD
TO BIOBASED REALTY, LLC IF SUCH LAND IS SOLD WITHIN TEN
YEARS
WHEREAS, the City of Fayetteville and BioBased Realty, LLC entered into a Real
Estate Sales Contract on November 4, 2005 wherein BioBased purchased about 19 acres of City
property for $940,000.00; and
WHEREAS, paragraph 14 of this contract required that BioBased Realty, LLC share a
declining percentage of any increased sale value of the raw land purchased from the City if
BioBased Realty, LLC sells this property within ten years; and
WHEREAS, BioBased Realty, LLC desires to sell this property to the University of
Arkansas and has offered this City $200,000.00 as its fair share of the increased value; and
WHEREAS, the City Council has determined that it is in the best interest of Fayetteville
citizens to accept this offer of $200,000.00 as full satisfaction of the contractual duties of
BioBased Realty, LLC pursuant to paragraph 14 of the Real Estate Sales Contract.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby accepts the
offer of $200,000.00 from BioBased Realty, LLC as full satisfaction of the City's right to receive
a portion of the increased sales price of the raw land sold to BioBased Realty, LLC if such land
is sold within ten years and authorizes Mayor Jordan to sign any documentation needed to
effectuate this agreement.
PASSED and APPROVED this 6th day of May 2014.
APPROVED: ATTEST:
By: By:
LIONELD JORDAN, Mayor SONDRA E. SMITH, City Clerk/Treasurer
KIT WILLIAMS
FAYETTEVILLE CITY ATTORNEY
Blake E. Pennington
Assistant City Attorney
Patti T. Mulford
Paralegal
Phone 479.575.8313
cityattorney@fayetteville-ar.gov
Mr. Ken Shemin
Shemin Law Firm
3333 Pinnacle Hills Parkway
Suite 603
Rogers, AR 72758
RECEIVED
MAY 07 2014
CITY OF
OFFICE
May 7, 2014
113 W. Mountain Street, Suite 302
Fayetteville, AR 72701-6083
Mr. Scott Varady
Associate General Counsel
ADMN421
University of Arkansas
Fayetteville, AR 72701
Re: Acceptance of settlement offer
from BioBased Realty, L.C.C.
Dear Ken and Scott:
It was good to see both of you at last night's Fayetteville City Council
meeting. I was happy to see the Fayetteville City Council unanimously
pass the Resolution which accepted BioBased Realty, L.L.C.'s offer of
$200,000.00 "as full satisfaction of the City's right to receive a portion of the
increased sales price of the raw land sold to BioBased Realty, L.L.C. if sold
within ten years and authorizes Mayor Jordon to sign any documentation
needed to effectuate this agreement."
I will ask you, Ken, to draft whatever document you believe is
necessary and proper to protect your client's interest when the sale is
accomplished. If you can send me this document in Word, I will ensure it
has the proper signature block for the Mayor and City Clerk.
I will probably attend the Closing for this land and will deliver both
the fully executed document you have prepared as well as a certified copy
of the City Council Resolution accepting your offer and authorizing Mayor
Jordan to sign the document. Please let me know when you schedule the
Ken & Scott
May 7, 2014
Page 2
Closing. I will be in Alaska for the International Municipal Lawyer's
Association's Mid -Year Seminar May 19-23 and in Little Rock for the
Arkansas City Attorneys Association Seminar June 19th and 20th. However,
my assistant can probably attend if you need to close during the week of
May 19th through May 23rd.
Thank you for working with the City to get this issue amicably
resolved. It was a pleasure working with both of you.
With kindest regards,
KIT WILLIAMS
Fayetteville City Attorney
CC: Mayor Jordan
Sondra Smith, City Clerk
Don Marr, Chief of Staff
Paul Becker, Finance Director