Others can take the time to educate themselves as I should earlier have done. (Here, e.g., is reporting to consider, but a digression from Flaherty and Collins specifics).
Regarding Flaherty and Collins; Dec. 10, 2010, Sakry reported:
With the financial market still weak because of the state of the economy, the assistance the project will receive is only the minimum required to make the complex a success, [Jim Crossin, Flaherty and Collins development vice president ...] said.
There is no luxury family housing in communities northwest of Minneapolis, which presents a challenge to secure financing without subsidies because it is a new concept, he said.
Using TIF and other financial means that other financial entities don’t have, the city can make sure this project has the horsepower to finish, said Councilmember David Elvig.
Caught off guard
Although Flaherty & Collins Properties has been in business since 1993 building, constructing and managing multi-family housing in nine states and has 90 properties, totaling 12,000 units, the company has had two projects go into bankruptcy in recent years.
In October 2009, the company filed for Chapter 7 bankruptcy on a 48-story, 419-unit condo tower it was constructing in Charlotte, N.C.
It was followed seven months later when the company filed for Chapter 11 bankruptcy on a 274-unit apartment complex in Raleigh, N.C.
“The bankruptcies happened at a time when real estate values deflated because of the economy and (changes in) credit market,” Crossin said.
The Raleigh project had been completed, but the mortgage market situation made it difficult to get permanent financing to pay off the construction loan, even though the complex was 93 percent filled and was already making money, he said.
The project was later sold and everyone was paid, Crossin said.
“There was no impact to the residents,” he said.
Although the council was aware of the 2009 bankruptcy, several councilmembers were caught off guard when the 2010 bankruptcy was discovered after it approved the purchase agreement for the three acres of land and the development agreement Nov. 23.
Elvig supported the project at the Nov. 23 council meeting.
“It’s an exciting component,” he said.
The project is of a quality unsurpassed in the state, said Elvig.
Having 3,000 square feet of retail space under the housing is one of the most difficult aspects of The COR project and this gets it done right away, he said.
It will also brings about 400 people into The COR and to the proposed rail site, according to Elvig.
After the Nov. 23 meeting, city staff and councilmembers found out about the second bankruptcy.
“That was new information. It was a real blow to find out,” said Elvig.
The council had asked specifically on Flaherty & Collins’ business history and financials, he said.
Although the city had a Dun & Bradstreet report done on the company, it did not show both bankruptcies, Elvig said.
While Elvig said he understands the financial game is different in today’s market, “it’s not the mistakes, it’s how they are fixed that are important,” he said.
“It makes me a little more skeptical about the project,” Elvig said.
Councilmember John Dehen is concerned that Flaherty & Collins may be “attempting to pull the wool over council’s eyes to make it look favorable in the eyes of the Ramsey City Council that is giving Flaherty & Collins subsidies/monies,” he said.
“Bankruptcies are relevant information that should be disclosed and discussion should be had where public dollars are at risk,” Dehen said.
“The failure to disclose that information is either not being forthcoming from Flaherty & Collins or a pathetic failure to apprise the city council from Landform (the city’s development management consultant firm) who stands to gain financially on the project.”
“Either way, it stinks and places a cloud of suspicion on the project. I may choose not to do business with persons or companies who deliberately fail to give me relevant information but failure to disclose in my estimation is a reason for termination.”
After the council found out about the second bankruptcy, Flaherty & Collins provided the city with an explanation, Mayor Bob Ramsey said.
He has no concerns about the bankruptcy or that the city had not been told, he said.
The project meets all the criteria set by the council, according to Ramsey.
It’s going to bring more development into The COR and at least 230 new residents,” Ramsey said.
“A claimed high-end apartment complex that is subsidized approximately $6.75 million in The COR on the back of taxpayers is not a score for The COR,” said Dehen.
The city’s agreements with Flaherty & Collins provide protections if the project does go into bankruptcy, said Assistant City Administrator Heidi Nelson.
In addition to stopping any TIF payments, the agreements also allows the city to seek court action to reclaim the land.
(Subheadline Bolding in original - italics and red text emphasis added.)
I missed all that. Plain and simple.
To seek court action? Final paragraph of the quoted ABC reporting. So? You can take court action anytime you have any real or imagined cause, and the filing fee. What, when behind a first lender lien of twenty-six million dollars, is taking court action against a thin asset-free shell worth?
It's worth zippo. Zero. Nadda. Nothing.
Rx: Take an aspirin now, and face a twenty-six million first lien in the morning?
Remember - This Flaherty and Collins counter-party withheld fair disclosure of its disturbing recent history of taking a hike on commitments, promises and projects.
So again - What's access to the courts, (something always available to anyone), worth in terms of protection against loss arising from possible project abandonment by a thinly capatilized interposed LLC counter-party corporate shell owned by the entity whose track record is of readily and recently abandoning once, for a Chapter 7 cleansing on a highly speculative and costly project not unlike the Ramsey thing, as it went sour and no longer to their liking - then twice - a repeat performance - for a Chapter 11 hands-on DIP reorganizaiton? If some party held a second multi-million dollar lien position in that reorg, or in the other North Carolina Chap. 7 purge, behind a much bigger multi-million dollar first lien position; is that relevant? Go figure.
Again, my challenge to the mayor is the "Would you continue doing business with such folks under the terms you find sufficient re the City, if it was YOUR MONEY being put at risk?" If so, the adage is a fool and his money are soon parted. Moreover, there is a public trust with public money. Prudent and conservative management is expected.
Bob Ramsey by comparison makes Tom Gamec look statesmanlike.
Now in my opinion Ramsey has forever made himself the Bobby McFerran "Don't Worry Be Happy" mayor.
Being fair - I cannot fault the mayor's trustworthiness but only his judgment. Nor do I fault the business judgment of Flaherty and Collins, in interposing a shell LLC or deals they cut, and wanting to minimize their capital at risk [purportedly $2.5 million of F-and-C cash for this thing being put into Ramsey, but with scant public detail about that]. Nor can I fault their business self-intersted judgment in trying to get an overly-compliant city council to plunge three times as much taxpayer money into the firm's for-profit risk taking than the firm itself is willing to expose to loss.
What Flaherty and Collins is attempting, Zygi would approve.
It is only "good business," for oneself, positioned as Flaherty-and-Collins is, to take as much advantage of the amateur-hour counter party as that counter party will permit. The city's purported fiduciary consultant, Landform, makes commission money if the deal closes but none if it flips, so go figure Landform's motivations in all this.
City permissiveness via the pliancy of the 4-member council majority may know no reasonable limits. So far that is the appearance.
Placing blame: I strongly fault Flaherty and Collins for the non-disclosure of material facts which if disclosed might have affected the decision making of a prudent counter-party.
That non-disclosure is beyond excuse and a deal killer in my book. It goes to fundamental trustworthiness.
I had not known of that situation while previously skeptical. Knowing that, the quality of reliance that can be placed in counter-party good faith disclosure, from this counter-party, is such that I would have nothing more to do with that bunch were it my decision, (in a referendum, for example).
Finally, after this non-disclosure situation became public, but not known on a widespread basis, our Mayor Ramsey and three others voted to hand to Landform, (relied upon for due diligence work as the city's agent), a two year honey-coated super favorable deal, lasting a year beyond the end of Bob Ramsey's present elected term as mayor; a year beyond Jeff Wise's present elected term at large; and a year beyond Mr. McGlone's present elected term ostensibly representing the interests of Ward 2. They voted beyond their terms, to bind future councils to a relationship with the Lazan-Jungbauer firm.
Just as insufficient due diligence was done at the start on the Flaherty and Collins past, there is nothing in the City-Landform contract I am aware of saying that Landform cannot take remuneration from a counter-party to the city while Landform is taking money from the city after bringing the counter-party to the city; i.e., Landform is not constrained by contract from working both sides of the street in a deal. Doing so is not expressly a breach of contract. Again, go figure. Is GOP cronyism at play?
The consultancy contract can and should be amended. I would make it as a breach if Landform has taken, or ever does take money or other inducement from any counter-party it brings to the City of Ramsey, with a suitable remedy for such a breach being defined in the contract to be forfeiture of commission on any such deal.
The mayor can huff and puff in blog comments about first to want to terminate if both sides of the street are being worked. Talk is talk.
In blog commenting, the mayor dodges the question of whether he ever made any due diligence attempt to pin down Landform about whether it in fact is working both sides. Huffing and puffing while the present sweetheart contract stands without a sensible protection against Landform dual agency is unconvincing. And disvantageous for citizen-voter-taxpayers. Huffing and puffing without having a look at general register and check registers for the firm is less than some views of due diligence. Opinions can vary.
Why was such a clause against dual agency profiting never required from the very beginning of Ramsey's situation with Landform onward to the present? That is a question for the mayor. One hint -
Don't Worry, Be Happy, is not an answer.