The TEE Center and Parking Deck are tainted with deception
Billy’s Best Bud?
Originally posted by CityStink
February 6, 2012
By Indy Injun
The author, Al M. Gray is President of Cost Recovery Works, Inc., a provider of Cost Avoidance and Cost Recovery for America’s leading companies, businesses and governments desiring Superior Returns.
Mr. Paul S. Simon has been a successful Augusta business leader, civic-minded patron and is a proud founder of one of the best banks in the area, Savannah River Banking Company. He is admired far an wide. His partner in Augusta real estate ventures, newspaper publisher emeritus Billy Morris, has been a man of similar high regard here from his history of generosity and benevolence.
Admiration stops when it comes to the activities of these men with respect to the Tee Center and Deck controversies. In an article in Morris’ Augusta Chronicle in 2007 it was clearly stated that “Augusta Riverfront’s land would be deeded to the city”Subsequent articles told of the land “donation.” The land never got deeded and the donation turned into air. Barry White,of the Augusta Convention and Visitors Bureau wrote July8, 2007, “Not only does Augusta Riverfront LLC bring proven expertise, it has offered to donate to the city downtown real estate valued at an estimated $1 million.” The “land valued at $1 million” looks to be underwater because of $7 million in liens. Despite these things these gentlemen never set the record straight, with the assertion that land would be donated continuing to the commission meeting in December 2009 in which the Tee Center was approved. Setting the notion of the grand donation in print and never retracting it certainly looks like deception from this vantage point. See the timeline in one our earlier stories on the matter here —> Deeds and Misdeeds: A “Chronicle” of Promises to Donate Land for TEE Center/Parking Deck.
If someone can show otherwise, please do so and a retraction can be issued.
The deception of the LLC mavens may have been simply neglecting to correct misdirected glowing praise they had first basked in. Indeed there are no documents known to be in the public domain that have their signatures or even business letterhead on to prove anything. Most of the versions of the Term Sheet used in the negotiations even state that the LLC’s would retain the land. If there are ways to tie the Term Sheets back to the LLC mavens, then can’t one conclude that deception was there because they represented to the public one thing while expressing the opposite in private?
The actions of the County Administrator and attorneys look far worse. They represent the greatest malfeasance in office of any public officials that most of us engaged in this matter have ever seen. Their deception of the county commission, the media, and the public looks to have been continuous. Their actions to cater to the financial needs of the LLC’s look to have overridden the public interest that they have been paid to protect. A forensic audit like the one that the County Commission has approved is an appropriate response. The circumstances demand it.
Both county administrator and county attorneys admit to knowing about the Wachovia Bank (now Wells Fargo) liens very early on. They failed to tell the County Commission that the valuable “land donations” were really enormous liabilities. They allowed the $12 million Reynolds Street Parking Deck to be built on land the city mostly doesn’t own and the Tee Center to be built over a parcel the city doesn’t own. Now the city is being forced into retroactively approving contracts that the administrator promised commissioners would be in place up front. The commission is being told “approve it first and then you get to use the building you constructed.” These are grounds for dismissal in this writer’s opinion.
Attorney Jim Plunkett‘s assertion Monday that the buildings “had to be built” before the necessary easements could be established flies in the face of the public’s experience with real estate transactions.
The $1.8 million claimed financing savings from using air rights, the Jackson land swap, and the WAGT purchase to reduce the LLC ownership interest appear bogus. Examination of the situation shows that the only reason higher cost taxable bond financing would have ever been necessary was because the LLC’s were retaining too much ownership. In other words, the interest ‘savings’ came from not losing tax exempt financing on that which would have otherwise been eligible. Isn’t this like setting a neighbor’s house afire, then rushing in with fire extinguishers pretending to be a hero?
The new wrinkle in the TEE story – Assignment of Rents
Why did the attorney’s have to maintain the same number of parking spaces for the LLC’s? The truth is probably found in the Assignment of Rents that the LLC’s had also executed with Wachovia Bank.(See The Assignments of Rents Leases Document for 933 Broad Investment LLC Here). Since the property is entailed and also liened by the Assignment of Rents, that had to be accommodated by going to the air rights package.
The attorneys did not notify the commission about the Assignment of Rents nor did they notify about the Security deeds on the property. They failed to do this even though the security deed says that any buildings or structures “hereafter erected” also come under the security deed. (See the Security Deed Here). How does an attorney let his client build on land under such language without clearing that up first?
|Billy Morris got another sweetheart deal at our expense|
In the background, coincidentally or otherwise, the LLC’s interests were being sublimely served. The banking crisis that exploded in 2008 spilled over into commercial property markets in 2009 and 2010. Across the nation and especially in Georgia, the epicenter of bank failures, borrowers were being faced with crushing demands by banks, when loans came up for refinancing. Banks increased the amount of equity required and also reappraised properties which were falling in value, generally increasing the amount of new equity required to refinance. Morris Communications announced its bankruptcy filing in March 2009, just as the Tee Center cost estimates were being prepared. The security deed against the deck parcels owned by 933 Broad showed a final payment date of June 30,2009, (See the 933 Security Deed 2nd modification here) only a week before the July 2009 commission meeting where the commissioners were first confronted with the terminology about air rights instead of land donation. Did the LLC’s have demands or needs to come up with more collateral like everyone else?
The appraised value of the parcels was $552,000, far less than the loan amount cited in the security deed of $7 million, Now to clear up one misconception, the $7 million loan seems to have been secured by additional properties, not just the deck land. This being said, commercial property values fell by 20 to 40% locally, which likely prompted action or concern with respect to the LLC loans. Please see the land acquisitions document here—> TEE Center Land Acquisitions. Pay close attention to Page 2.
The Jackson land swap and hot dog stand buy-out must have looked like manna from heaven to those LLC’s. It gave any bank real estate appraiser a comp value of $2.2 million an acre! This would not only have applied to the deck parcels, but the parcel under the Tee Center, and the lands of affiliated Morris Simon entities. It would have relieved the pressure from the reappraisal process.
There is no way of knowing the magnitude of the cash outlays the Jackson swap averted for the LLC’s except that the relative values before and after the swap transaction had to have been huge.
|Fred Russell has been less than honest over this deal|
Then there is the matter of the effects of Augusta’s Administrator and attorneys hiding the loans and liens from the Augusta Richmond County commission. Approval of the Tee Center was a close thing, with the term sheet initially failing a vote on August 21, 2007, only to be revived and approved later in the meeting. The disclosure of security deeds for a $7 million loan would have been disastrous. Approval would have been impossible. As it was, the commissioners were under the impression that $1 million in land would be donated, not $552,000 of land with $7 million in liens.
Get the picture? Morris Communications announced a restructuring in March 2009 that ended up writing down its debt by more than $100 million. About the same time, or sometime well before construction by the city began on land it doesn’t own, administrator Fred Russell and attorneys had to have been aware of the liens and Assignment of Rents on the Morris LLC property, yet they did nothing to inform the commission! The conclusion is that they had a determination to see the Tee Center built no matter what, even to the extent of hiding material facts from their employers. What kind of discipline or censure is the Commission going to respond to that with?
The commission is in a box of these peoples’ making. It has to approve the Conference center and Reynolds Street Parking Deck Agreements first, before there is any relief from the bank liens. There is no option but to approve the deals. In any other environment couldn’t this be seen as extortion by the county’s own employees?
Why did they do these things?
Forensic Audit Would be Impotent
Despite our call for a forensic audit in the past, this new information would makes the exercise a farce. First of all, Administrator Russell and attorney Plunkett admitted last Monday to knowing about the liens and not telling the commission. Second, the forensic auditor would likely run into the same stonewall of claimed attorney-client privilege and unsigned, undated documents that citizen Lori Davis met in her open records request. Mayor Copenhaver and Finance Chairman Brigham are right that a forensic audit in the face of such pronounced and determined refusal to disclose anything of a material nature would be a fruitless exercise.Commissioner Johnny Hatney very correctly pointed to the need for all agreements with these LLC’s to be audited. It is noted that the two new agreements call for financial audits. Those would be even more worthless than a forensic audit. Those things are rubber stamps.
Serious reforms have to be in place before the Commission votes to approve the new agreements with the LLC’s.
The public simply won’t stand for anything less.
Meanwhile. Mr. Morris is so happy with Administrator Fred Russell that his Augusta Chronicle feted Russell with a tribute piece.
The people of Augusta-Richmond County might have a different tribute in mind.
Commissioners find themselves in a box canyon not of their making. They cannot be happy.***