My
name is Jan Bernath, and I am on the Preservation Chelsea Board of
Directors.
Janet
Kreger of the Michigan Historic Preservation Network has just spoken
about the time constraints that were determined by the Kadushin/Beal
Team and their legal counsel to be too tight to complete what needed
to be done. Additionally, however, I
believe we also arrived at the point of the withdrawal of the
Kadushin/Beal proposal due to misunderstanding. Specifically,
the resolution passed by the DDA at the meeting on June 7, 2012
placed new requirements on the developers beyond the goals and
requirements of the request for proposals issued by the DDA and to
which Kadushin/Beal responded. One key misunderstanding stemmed
from how the developers were to demonstrate their financial ability
to do the project.
Goal
2 of the RFP stated that the “offer to purchase must be accompanied
by a firm commitment from a financial institution or equivalent
source
for a minimum of $1 million for investment in the property and
improvements.” Accordingly, the Kadushin/Beal development team
presented a financial package of $3.7 million in their proposal to
redevelop the Longworth Property. They presented their sources
for their redevelopment dollars including private equity, incentive
financing, debt financing, and the equity investment of one of the
project partners who intended to take up residency in the building.
They presented these ‘equivalent sources’ – equaling well more
than the $1 million minimum - knowing that a firm commitment from a
financial institution would not be possible this early in their
project.
However,
the resolution of June 7 stated that “the agreement must be
accompanied by the irrevocable bank letter of credit of $1 M or other
security acceptable to the DDA to secure improvements in the property
and to cover any cost or damages incurred by the DDA and the City for
site restoration or removal of incomplete improvements if the project
fails, after satisfaction of due diligence contingencies.”
Just as the “firm commitment from a financial institution”
requested in the RFP was not possible, it was even less possible to
secure an “irrevocable bank letter of credit of $1 M” in this
short timeframe. Unable to ask questions of Chelsea leadership
about what further they could add about “equivalent sources,” the
Kadushin/Beal attorney told them to back away from the project.
As
you can imagine this resolution caused misunderstanding between the
DDA and the developers. Sadly, the Kadushin/Beal team withdrew their
proposal based on this misunderstanding.
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