The Reno City Council / Redevelopment Agency finally, after at least 3 postponements, considered the ordinance to sell the land lease under the Fitz parking garage to Reno Parking LLC, a shell company for the entity that ultimately owns the physical garage structure and the Fitz itself. In the end, the issue was kicked down the road to the 11 May meeting. Bear with me, I am going to have to play a little fast and loose with the actual LLCs involved, and trying to make all this read like a straight narrative will be impossible. The Staff Report was not posted until mid-morning today, but here are some of the key provisions of the proposed sale:
– Fitzgerald’s Virginia and Plaza (FVP – the entity that currently owns the garage and has the land lease) will continue to rent the land lease for $165,000 per year. This is about half of the current lease agreement.
– FVP needs to pay the $165K ahead of time, and post a letter of credit for the second year of the lease.
– FVP / Reno Parking LLC has a 2 year option to purchase the land lease from the city. In the first year, the cost is $2.5M. In the second year, the cost is FMV minus any capital improvements, but a minimum of $2.5M.
– If the purchase option is excercised, the current (and accruing) back rent on the existing lease will be forgiven. This is currently about $800,000 and could grow to $1,500,000 by the end of the option period.
– If the garage is not maintained during the 5 years after a purchase by FVP, the City has the right to buy the garage back at FMV.
Before the hearing even got started, things turned bad for the CommRow forces. During the public comment section, the guy who subleases (Hardy?) the souvinier shop in the garage from FVP spoke. He had not heard anything about the proposed sale, and offered to beat the offer on the table. The sale apparently never was openned up to public bid, and the council has a lot of explaining to do about that lapse. Hardy is in litigation with FVP. When FVP stopped paying rent to the city on the land lease, FVP was keeping Hardy’s rent payments. Those payments are now in an escrow account, and total about $142,000.
The amount owing on the bond the city took out on the garage is about $6M. Jessica Sfarzza opined that if the city accepted this offer, it is on the hook for the remaining $3.5M balance. The city attorney responded that the lease payments would cover the bond payments, but the fact remains that if the option to purchase is excercised, the city has a $3.5M obligation and no revenue stream to pay it off. The short sale from hell.
Fernando Leal talked, and I actually felt sorry for him. Council seems to be open to the sale, but only if it is tied to a guarantee to open the garage and CommRow. Leal is at the mercy of his finacial partner, Donald R. Wilson (DRW), so couldn’t offer that guarantee. DRW seems averse to funding the project unless the garage is in hand (plus the trench, I’ll talk about that in a minute). So it is a classic stand off.
Leal mentioned a couple other things of interest. The fabrication of the wall has not started. There is a deposit in place, but due to the delays, the manufacturing window to have the wall up this summer has been lost. Other phases of the project might be able to move ahead, though. CommRow construction is moving ahead, but at a “snail’s pace” compared to what Leal would like to see. For the record, I haven’t seen a permit pulled for construction within the Fitz for the restaurants and other proposed improvements. Leal thinks it would take 90-120 days to build a revised phase one, which would include the exterior balconies to support the wall, the restaurants, and lobby improvements. Maybe an August opening for a much diminished project. There has been at least $400,000 in vandalism (copper stripping) done to the garage since FVS closed it and stopped paying rent – this did NOT garner any sympathay from council.
Another element that emerged today is that CommRow (who knows what entity) is negotiating to take over the “programming” rights for the trench cover – basically acting as the clearing house to get events going on there. Approval of this agreement seemed critical to Leal to placate is partner, and was a second roadblock that needs to be resolved before the project moves foreward. The first council hearing on this is at the 11 May meeting. I am not aware of any RFP being publically issued for this project at this time, but Leal at one point had a STAR bond proposal out their to develope the trench retail before withdrawing.
My opinion – The city council is feighning surprize at the financial issues involved in the garage sale, but every one of them has been informed about the situation. They HELOC’d $7M and are going to lose $3.5M, which is a really embarassing OOPs they are trying to soft sell. And yet they TOTALLY support the CommRow project publically. The council is certainly guilty of not even trying to solicit the highest and best offer for the Fitz Garage, though they have some latitude after proposals are in hand to decide what is best for the city.
In the end, the clutter really doesn’t matter. The terms will all get worked out, locally. It is interesting that Donald R Wilson is on the signatory line of the agreements. But if DRW doesn’t quit acting a spurned prom queen, CommRow could easily tank.