On October 15, the Standard-Examiner published this Scott Schwebke story, reporting, among other things, that the erstwhile Windsor Hotel Project developer, Ogden Properties LLC, had transmitted a letter to Ogden City officials, announcing the developer's abandonment of the project, and demanding that the city purchase the property and cough up additional monetary compensation.
In that connection, we're delighted to report that we've finally obtained a copy of that letter, a PDF version which we link here:
10/9/08 Ogden Properties Inc. demand letter
We'll be brief in our analysis; but we do want to make a couple of basic points.
Referring to the the original grant agreement between Ogden Properties and the Ogden RDA, we find this instructive language:
Paragraph 2: All improvements will comply with applicable Design Guidelines for the 25th Street Historic District, and other applicable rules, laws and ordinances (the "work").Substantially similar language is found in the Ogden Properties/Ogden City development agreement, at paragraphs I(C)(4), II(A), III(B)(1) and III(C)(3).
Paragraph 3(d): In the event Donee has not completed the Work and obtained a certificate of occupancy on or before April 30, 2009 then Donor shall have the right to purchase the Property from Donee for $332,000 plus verified expenditures for capital improvements by Donee on the Property after the disbursement of the Grant to Donee. [Emphasis added].
The developer devotes a significant amount of ink to lambasting the council for its refusal to bend the zoning rules for the developer's benefit, yet the developer knows that it agreed to abide by the rules in place at the time it entered into these contracts in the first place. Moreover, the governing documents merely provide Ogden City (and the Ogden RDA) a right to purchase the Windsor property under set terms in the event of a developer default. Significantly however, they do not impose upon these city entities the affirmative obligation to do so.
Maybe it's just us... but the developer's threat looks pretty "thin" to us.
And sorry folks. We haven't yet succeeded in obtaining the "separate document" referred to in the letter, in which Ogden Properties itemizes its "expenses" to date. Rumor has it however that the developer is putting the arm on the taxpayers for at least a cool $million.
So... what say our gentle readers about all this?
38 comments:
Kudos to Rudi: getting and posting this letter is a great scoop.
I've never been more proud of the city council.
Diagnosis of Ogden Properties LLC's notions of marketing million-dollar condos on 25th Street: delusions of grandeur, for which Ogden City is not responsible.
Let's see, a company that claims the Council has acted in a manner that could be the basis for "criminal litigation", still wants "to move forward with our other projects."
You'd think if they really believed they were dealing with criminals, they'd hardly want to continue to do so.
Looks like a sweetheart deal that they were promised by the administration. Kind of like the Stuart Reid buyout when he left the cities employment.
The City Council would seem to tire of passing ordinances or payouts after the facts.
Maybe the new Economic Development Director being an attorney can tell the developer to take a hike, since it looks to a layman like they don't have a real reason to re-coup any money from the city.
Reads like basic blackmail. I say call their chickenshit bluff.
Just read the letter. It appears to have been drafted by the same person who's managed the Mayor's relations with the Council so wonderfully over the past couple of years.
The developers object to the Council's "bad judgment." They're certainly entitled to think the Council's judgment flawed, but that seems thin grounds on which to rest a legal action. Councils --- legislatures, mayors, governors, presidents --- are not required to make good decisions [though we all hope they will, of course]. Making an error in judgment by a legislative body is not grounds for legal action, as a rule. So even conceding their point that the council did not act wisely, seems to me they have little to go on. Ditto the claim that the council acted out of "political" motives. By that standard, all of us could sue the Utah legislature and the city council and the Mayor and the congress and the President for every decision they make every day.
The long account of how bad off the Windsor was before they bought it also seems beside the point. What they say is true. But it does not affect in any way the fact that the developers submitted a rehab plan that did not conform to the existing zoning, which is so far as I can see the sole source of their problem with the Council. [Had their rehab design conformed to the existing zoning, the matter would never have come before the Council at all.]
It's hard to say what would be be fair compensation for work already done without seeing the developers' claims itemized. If the city opts to buy back the property, the developers should be compensated for any improvements in the property they have made, and they claim to have made some. I assume they've included in their claims for compensation the fees paid the architect who did the design that did not fit the existing zoning. Whether such a non-conforming design is a legitimate expense they can expect reasonably to be compensated for if the city buys the property back is, seems to me, a very doubtful proposition.
As for the lost funding: if they had submitted a rehab design that conformed to the existing zoning, as it seems they initially agreed to do, that funding would still be in place and the project would have already been approved. So the lost funding seems to result, yet again, solely from the developer's failure to submit a rehab plan that conformed to existing zoning requirements.
If there is another developer in line, with a conforming plan to rehab the property, it might be the course of wisdom for Ogden to buy the property back at the original price plus cost of improvements. We gain nothing by having the Windsor continue to stand empty, and to continue to deteriorate. This is not about... or it should not be about... calling bluffs or putting the developers in their place or anything like that. This should be about what would be best for Ogden in general and Historic 25th Street in particular going forward from where we are right now. Period.
The bottom dropped out of the finance market for this kind of project several months before the council acted to deny the increased height limits. This makes their "lost financing" a blatant falsehood.
I think that the declining market and financial collapse made this project un-viable and un-fundable quite a while back and these amateur developers are just looking to bail themselves out of some bad and greedy decisions. This height restriction denial by the council is just a straw man that was dumped into their laps by a stroke of luck. If the council would have approved the increase it would have then put these minor league hustlers in a real jam cause they then wouldn't have a handy excuse for being incompetent developers.
So, Curm, let's assume the developers are asking $1 million for the property as has been suggested. There's no way they've done that much improvement. So would you rather the city pay off this blatant attempt to squeeze profit out of their failed project (which I think at this point is preferable to them rather than actually developing it)? Or would you suggest the city tell the developers that they can sell it back at the amount agreed in the contract or they can go pound sand? That's calling their bluff. And that's what's best for Ogden. Period.
Beaver:
I said we'd have to see the itemized list of what they are claiming to know what's reasonable. That still holds. At no point did I suggest paying, without question, whatever they asked. But the development agreement does entitle them, if they sell back to the city, to be reimbursed for what they've spent improving the property. What that amount justly is, I don't know.
But let me get at your question this way: let's say they demand a million, meaning they're claiming about 700K in improvements. Let's say for the sake of argument, the city thinks the reimbursable improvements come to only, say, 200K. If there is another buyer in the wings, it might be prudent to negotiate a buyout including reimbursement somewhere between the two numbers to get a rehab project underway, because it would not be in 25th Street's interest to have the property sit idle and deteriorating while this wound through the courts for a couple of years. The standard of judgment for the city as to what it decides to do should be "what's best for Ogden and Historic 25th Street given where we are right now."
Who are the main owners/partners on Ogden Properties LLC? Where can we find out who is behind this project and the other developments alluded too?
At least they do state they will give back the grant monies.
Curious
Can't tell you who is really behind this stinko deal but their initials are Scott Brown and Matt Godfrey.
While a city employee, Brown negotiated this deal with some unknowing California investors that Mayorial pal Curt Geiger brought to the table. Brown and his little mayor buddy are the ones who made all the promises that the city council is now unwilling to keep, but then the council never made the promises to begin with.
Brown now represents these hapless investors who are claiming the city (Brown) lied to them! So the upshot is Brown lies to these chumps to get them invested and now switches sides and claims that his clients were lied to and wants a million bucks from the Ogden treasury to make it good!
Seriously folks, Hollywood script writers couldn't make this crap up! Maybe Jason, but not the Hollywood boys.
"The bottom dropped out of the finance market for this kind of project several months before the council acted to deny the increased height limits. This makes their "lost financing" a blatant falsehood."
Bingo, Frank. You've nailed it.
rudi:
True about the bottom dropping out of the market, but it is also possible the developers had the loan locked in for this project, pending approval of the zoning change. That would have been arranged some time ago. I don't know that that happened, but it's at least possible, is it not?
"I don't know that that happened, but it's at least possible, is it not?"
Anything is possible Curm. But I seriously doubt Ogden properties' lender pulled the loan because the council disapproved the developer's non-conforming plan.
I think Frank is right.
Think about it. NOBODY can borrow money in the current credit market.
These amateur investors, who probably DID put some of their own money into this project, got paralyzed by the current conditions in the U.S. credit market.
These poor schmucks aare now plainly looking for "the easy way out."
Mr. Curmudgeon
Even in the loosey goosey world of funny finance we have just lived through, no "loan" is a done deal until the money is actually dispersed. I doubt very seriously if these wanna be developers actually had a committed loan agreement in hand. Even if lenders agreed pending final zoning change, it is doubtful they would have gone through with the loan after the bottom dropped out of the market.
Exterior work done to remove porches and stairways was all done without a permit (they had no Landmarks Commission approval when they were removed, and you can't get a permit for work in the Historic District without a permit).
It seems unlikely that the city would be responsible for covering expenses incurred for un-permitted work.
Oz:
OK, Oz.
The points I was trying to make were these:
(a) they claim they had financing in place and have now lost it because of the Council's action
(b) we don't know for a fact that that is not true
(c) but even if it is true, the loss of the financing resulted from their submitting a rehab plan that did not conform to existing zoning, which they had agreed to do in the development agreement, and so
(d) the financial consequences of their losing financing resulted from their failure to submit a conforming rehab plan, and so they are not, by any reasonable interpretation, something the Developers should expect the city to compensate them for.
Mr. Curmudgeon
I don't think I disputed any of the points you made in the immediate above post, did I? If I did, I hereby retract such foolishness.
May I be so bold as to suggest that what we are discussing is an attempted shake down of the city by some failed wanna be developers? Hope that bit of aggression doesn't get me in any trouble here.
Oz:
No, you didn't dispute anything I'd said. I just thought the conversation [my part of it anyway] had gotten side tracked into a discussion about whether they actually lost funding or not. Which [see above] I think matters not at all with respect to their claim against the city for compensation.
As for your suggestion.... Well, Oz, just as an experiment, let's not presume bad motives on the part of the developers, and see if there's a plausible scenario that fits the facts, so far as we know them, that explains their anger and their actions in re: the city. I think there may be.
The developers come in, make a bid for the Windsor, expecting to rehab it at a profit. Their plans involve a 4th floor, which they made no bones about up front [though it's not clear that it will involve violating existing zoning; I presume they didn't know that until they got their plans drawn up]. They're welcomed and encouraged, and --- this is an assumption that may not be so, but let's presume it is for the sake of argument --- told by the Administration that getting a zoning change should one be needed will not be a problem. They get funding locked in, pending the approval of their architect's plans for the 4th floor. They get them past the PC, and get a unanimous vote in favor from the LC. And then it all goes south when the Council receives testimony from several credible sources that changing the zoning will endanger the street's Historic District status.
Oz, were I one of the investors, if it happened as I've outlined above, I'd be pretty pissed off too. And it does not seem implausible that something like that happened. I'd feel I'd been abused by the City, and I'd want to recoup every dime I'd spent so far from the City if I could. And I wouldn't think I was ripping off the city in the process. I'd feel I'd been misled, promised things by people whose guarantees I thought I could count on, and I'd not look at my compensation request as involving in a shake-down at all.
Just a plausible possibility, Oz, one that fits the facts as we know them so far, and that would explain the developers' anger, and demands [however clumsily expressed] in the letter to the city, without necessarily their having been duplicitous.
Rudi said:
“Rumor has it however that the developer is putting the arm on the taxpayers for at least a cool
$million.”
One of Godfrey’s henchmen was overheard while in a very talkative mood. The scheme to bilk the taxpayers out of more than a million dollars is not just the developers idea but is condoned and encourage by a high ranking officer of the administration.
Maybe the real reason Scott Brown came back to work for the city was to get back under the liability protection umbrella afforded him as a city employee knowing that if the City Council didn’t approve the zoning variance that the developer would possibly file a civil lawsuit against him. The developer would most likely only have recourse on those within the city that they negotiated the agreement with and the city itself, not the city council or the individual members of the Council who knew nothing about the agreement until this all blew up.
Scott would not want to be personally responsible for the of funding a defense or want to have to pay the damages should any be awarded in any lawsuit filed against him personally and Godfrey would be motivated to take Scott back in and under the liability protection umbrella for fear if he didn’t that Scott would turn hostel to the administration. Scott knows where all the skeletons are buried.
Mr. Curmudgeon
Your scenario is plausible as far as it went. Suppose we take it one step further and say that the "victims" in this case, in their anger, then decided to attempt to extort the city tax payers out of maybe three or four times what they actually have invested, would you then consider them to be "duplicitous", or is treble damages justified in your scenario?
Not stating fact here, just wondering.
My guess is that these investors got led down the rosy path by some wild eyed monopoly players in Ogden just before an economic downturn and they got their amateur fingers burned when the market went to hell in a hand basket.
Why is it that you never see Boyer company falling into these Godfreyesque ponzi schemes? Why does Boyer always make millions while the tax payers of Ogden, and innocent investors like the Windsor gang, get it in the shorts? And while were on the subject of Boyer, why is it that they (and Godfrey's high paid empty suits) are the only people in the entire history of the Godfreyites that have ever made big money while the vast majority of everyone else loses? Again, just wonderin.
Did anyone, anyone at all tell the Ogden llc. that the problem is not the city council but just might be the stupid mayor and if they quite talking to him they just my get something.
Curmudgeon and Beaver have had some good dialogue above about what’s good for Ogden. Beaver doesn’t think that the city should “pay off this blatant attempt to squeeze profit out of their failed project,” and I agree. They made a bad investment, period and should suffer the consequences as millions are doing with their bad investments in the stock market. Ogden City should not bail them out, especially at taxpayer expense! I have my doubts about how wise it is to even buy “it back for the amount agreed in the contract.” I think that would be pouring good money into a bad and losing project.
Curmudgeon, you said: “it would not be in 25th Street's interest to have the property sit idle and deteriorating while this wound through the courts for a couple of years.”
I don’t believe OP, LLC has grounds for a lawsuit against the City Council, so I don’t see it going to court.
Curmudgeon also stated: “The standard of judgment for the city as to what it decides to do should be ‘what's best for Ogden and Historic 25th Street given where we are right now.’" To which everyone agrees and has stated in one way or another.
In considering what’s best for the Ogden and Historic 25th Street, let’s look at the situation realistically: 1 - No one else is going to buy the Windsor from either Ogden Properties, LLC or the City – it’s not economically feasible with the price tag that OP, LLC has put on it. 2 - The Windsor Hotel does not have any special features or attributes to offer, ie., unique historic architectural design, or is a good architectural building of the time period that it was built. 3 - It is in terrible condition and really isn’t worth saving even from a historical point because it is an unimpressive, nondescript building (personally, I think it’s ugly and does nothing for Historic 25th Street and I’m sure I will receive burning comments for this suggestion as will my next suggestion). The only reason that it is considered a “contributing building” to the Historic District is because of its size and history as a major hotel. 4 - Other options need to be considered for the building. I believe it was determined that the loss of the Windsor Hotel as an historic building would not affect the Historic Street District Registry Designation, so it could be razed and a more economically feasible building constructed within the guidelines and zoning regulations of the Historic District.
I'm prepared for your arguements, (we'll give Oz Boy a reprieve for now) Curmudgeon, as you always have some regarding my posts.
Curmudgeon, a couple of flaws in your scenario: 1. The developers WERE ENCOURAGED to invest in Ogden and PROMISED a sweetheart deal on an old historic building on the famous Historic 25th Street with a gondola just a couple of blocks away (see their web site). This is assumption, however, that they were told thousands of visitors come to Ogden, and investors are eager and just waiting to spend millions in Ogden, they need to move now to ensure this bargain price. They are told that some of the investors are just waiting for the gondola before making the move. But the gondola IS Ogden’s #1 goal, it’s just a matter of time and finding the money. 2. Ignorance of the codes and laws is no excuse for a bad investment in business or not subscribing to required conditions. Wise business people always do their “due diligence” before commiting to anything. A judge will give them no leniency for not knowing what the requirements are for restoring or building within an historic district. 3. The statement that “testimony from several credible sources that changine the zoning will endanger the street’s Historic District status” is not true. None of the letters and information received by the Council indicated that – quite to the contrary. The Utah Historic Preservation Society had indicated to the Landmarks Commission and the owners of the Windsor Hotel that the proposed addition to the building would result in their inability to receive federal tax credit which amounts to the fact that the building would lose its historic designation. The Society and the Utah Heritage Foundation in letters stated that if enough other historic buildings within the Historic 25th Street Historic Designation District were to make similar changes to their buildings that disqualified them also of their historic designation, then the Historic District would be at risk of losing its historic designation and hundreds of thousands, possibly millions of federal dollars.
The rest of your scenario is probably what happened, except that you left out, that the administration carefully and cleverly led them to believe it was the Council’s fault or at least should be blamed for the big fiasco. By this time though, with the downturn in the economy, financial institutions failing, and the home/condo market doing a nose dive, OP LLC could see that the Windsor was a loser. In an effort to save face, the administration urged them to blame the Council and sue them, after all it’s only funny taxpayer money that’s involved, and OP, LLC could even profit from their loss!
GK:
You won't get an argument from me about the administration mis-managing this whole thing. And the LC person who posted here a while ago noted that it was probably unwise to allow the Windsor variance request to get tangled up in the request to change the zoning over the whole downtown district, so no argument there either.
What I was trying to do was see things through the eyes of the developers, how things might look from their POV. Often wise to try to do that, see things through the other side's eyes. It can give you a leg up in negotiations, and it often works better to approach people, if you can, not assuming they're scam artists out to extort money from your side. Makes for more effective negotiations with better outcomes for you side, very often.
Looked at from outside and above, the whole fiasco looks like yet another example of Administration mismanagement.
Speaking of businesses closing, has anyone noticed that the movie theater that WAS on 12th Street by Subway has closed? A result of the “MegaPlex” – just as predicted. Another victim, although not in Ogden is the “NorthPointe Theater.” Sad to see them close, but Godfrey doesn’t care if he closes businesses just as long as he makes himself look good at the Junction!
What a sad town Ogden has become even with all its games and toys downtown.
GG:
Well, GG, I liked the Pointe theaters, and I'm sorry the 12th Street site closed. But in the age of megaplexes, multiscreens, foodcourts and stadium seating, flat-plan old style theaters often can't compete. I'm not sure that attributing the closing of every older business, particularly one overtaken by newer designs that the public likes better [stadium seating, eg] can be laid at the administration's feet. When the mall on Riverdale came in, with its stadium-seating megaplex theater, stand-alone flat-plan older theaters in the area closed. Times, and markets, change.
The Gateway development in SLC, for example, by every reasonable measure, has been a great financial success. [When I ride Frontrunner on Saturdays, I always see people coming back with shopping bags from Gateway stores]. But it pretty much shut down Main St. in SLC. I recall Rocky Anderson trying, unsuccessfully, to prevent more stores from moving from Main Street to the Gateway.
BTW, what the SLC Gateway project did to SLC's Main Street bears thinking on, since the proposed gateway project outlined in the SE this morning, if it takes off, could have the same effect on 25th Street.
Curmudgeon,
Then we'll just have to stress the historic aspect of 25th Street, advertising it more. We have quite a few activities centered on 25th Street, but we need to come up with more and more variety of activities. We can apply for more federal grants for preserving historic sites so the property owners can spruce up their buildings. Maybe some of the City's CIP money could help with more infrastructure of the area.
We will have to keep a close eye on the area and watch for early signs that they're struggling more.
Debbie:
Right on. You can't build new historic districts. What is unique about 25th Street is its historic nature, and they can't build that over by WalMart or the Riverwalk sites. The Riverwalk may work wonderfully. I hope it does. I've seen similar work elsewhere. But it will all be new development. 25th Street's uniqueness is not replicable, and that can be a major draw for it. It has worked that way for other places. And that is why it is so important develop the street in ways that preserve and enhance, rather than detract from, its historic character and appeal.
transplant said...
Mr Curmudgeon,
It wasn't the Gateway that killed main street retail in Salt Lake, it was a combination of three things, the Main Street Beautification project, the ZCMI center and Crossroads Mall. I grew up in SLC, and remember shopping downtown with my parents in the 70s & 80s before the mall was built, There were all kinds of great stores, including a neat little joke shop that I spent a great deal of my allowance in.
I've only lived in Ogden for about four years, but if my memory is correct the Ogden Ctiy Mall did to Ogden what ZCMI Center did to SLC.
Mayor Anderson, who you mentioned as a defender of Main Street, was trying to keep his anchor tenants from leaving Main Street . That's why the City Council and Mayor put limits on the size of store that could be located at the Gateway. And, by all accounts the development has been a success. The hope is that by redeveloping the downtown malls into an open space development that even more retail will move back in to downtown Salt Lake because the big-box retailers like Macy's and Nordstrom will draw other businesses back.
The Gateway developmet has transformed a part of Salt Lake City that used to be home to warehouses, prostitution, bars, and a large transient population and turned it into a thriving area. Look at the buildings around the Gateway and the development that's taken place there.
A lot of talk on the blog about retail in downtown Ogden, but it seems to me that the city's Economic Development team has been more concerned with Wal-Mart and High Adventure and they've blown a lot of chances to attract anchor retail tenants to downtown. All you have to do is drive down Riverdale Road to see my point. I know for a fact JC Penney used to have a store in downtown Ogden. Why did they build in Riverdale? Why not Downtown?
While I like original ideas, maybe it's time for our city's crack Economic Development team to take a field trip down South and see what success looks like and talk to some people that can actually claim a success on their resume.
As for the Windsor, someone will step in if the price is right and develop it. With the housing market the way it is, it could easily be developed into some kind of middle-scale apartment building that would attract working people.
Transplant:
OK. I've only been in Utah a little over seven years, and came in just as Rocky was trying to limit Gateway's drawing Nordstroms, I think it was, out of downtown. You've got a much longer perspective on what's happened in SLC that I do.
Sam Weller's is still there on Main, though. And it's become a frequent stop for Mah Woman and me whenever we go to SL for a day or, sometimes, for the night [usually to catch a play at SLAC or Pioneer Theater or Plan B]. Lunch, followed by Sam Wellers, or dinner, and a browse through Wellers. Or even breakfast in their coffee shoppe, followed by browsing [and, damnit, buying]. Absent Wellers, I don't think we'd be on Main in SLC at all, except riding through on TRAX. Bookstores, especially ones that are not cookie-cutter chains, can draw people to a street. Think The Tattered Cover in Denver, or Powells in Portland, or Elliot Bay Books in Seattle. Those all serve, true, much larger populations than a downtown Ogden site would. But still....
George K
Bottom line the Windsor itself is not worth saving. It is not an authentic turn of the century building, but a 1930 rebuild of an older building that had burned. It is a wreck and very unstable inside and out with absolutely no historical elements. The facade is not even original.
This from a dyed in the wool preservationist who is heavily invested financially and emotionally with historic buildings.
Oz:
In which case, it would have been tactically a better idea for the administration to have requested a height variance for that property alone, rather than a change in the zoning for the whole Historic District, using the very arguments you made.
I'm not sure I'd dismiss the Windsor as being as devoid of historic value as you do. The thirties facade has some historic interest as well, as does the building's history as a brothel, a two-bit street institution. Nor am I sure that a tear-down and new building would result in something that better fits the street than the Windsor does. Or did. But for those who think as you do on this, a single variance would have been, it now seems, a better tactic than trying to rezone the height limits on the entire street.
Mr. Curmudgeon
I totally agree with you on that. But then here in Godfrey World we have a ham fisted potentate who's style is to work on wrist watches with sledge hammers.
Ozboy
"A potentate" I love it!
How about an impotent potentate, would you accept that as a slightly more accurate description of our dear leader?
Well Marv,
I do like the meter of the "Impotent Potentate" I'm not sure it totally fits our own Little Lord however. He does seem to be rather potent in the endless string of loser projects he is able to heap on the back of the tax payers. How about the "Preposterous Potentate"
Curm:
"In which case, it would have been tactically a better idea for the administration to have requested a height variance for that property alone, rather than a change in the zoning for the whole Historic District, using the very arguments you made."
But if they did that, what would they be able to slime the uncooperative Negative NaySayers on the council with during the next election?
I think His Mighty Foreheadedness accomplished precisely what he set out to do.
Can anyone tell me the contact information of the developer of the Windsor Hotel project, so I can assist in connecting folks who may be able to help the city and Historic 25th Street have a viable solution before it completely goes south? The documents posted online don't have it. Thanks.
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