Thanks for posting this interesting piece from Mr. St. Anthony today.
I feel obliged to respond as someone who has been fairly informed about the
status of these loans and the recent negotiations. It's unfortunate that
Mr. St. Anthony didn't take the time to give me a call about this issue
prior to going to print as I have a somewhat different viewpoint as an
elected official and one who must vote on the eventual resolution.
A few important points about the negotiations:
1. Nothing prevents Brookfield from continuing to negotiate with MCDA
staff. The reality is the last offer presented to me was an "informal"
offer i.e. not in writing, which would have given Brookfield essentially 12
or so more years to pay off the loan due on April 15th. There was no offer
of interest on this loan but a 6% increase to account for the present value
of the amount now owed. So while the City would recoup more actual dollars
in the end, that is not interest but the present value calculation of the
$11.375 million in 2014.
2. The "informal" offer included a large balloon payment at the end of the
loan - which is what we have now and part of the reason we have this mess in
the first place.
3. Mr. St. Anthony mentions in his article that Brookfield was, "willing to
improve the city's security on the loan". How nice of them. You would
think the City would be accused of malpractice to negotiate for anything
less.
4. He also mentions that Brookfield is willing to give the city, "some
future upside on any sale of the Gaviidae complex, which includes Saks and
the adjacent retail parcel." Well given that Brookfield and its shell
corporations which hold the first mortgages on both parcels have admittedly
lost a significant amount of money on the deal and they would be paid first
- what future actual upside potential is there? And if there is a believe
on the part of Brookfield that the parcel will increase in value over time -
why wouldn't the City want to own the Saks parcel now. Or as I have said
many times, the City needs to buy low and sell high!
5. Brookfield owes the taxpayers another $17.5 million on the retail
portion on September 15th. A condition of accepting the "deal" on the Saks
parcel would include giving up the City's interest entirely on this loan.
While admittedly the City is an an awful position on the second loan and may
very well take a total loss, giving up our right and I would argue
responsibility to explore future options on the second loan doesn't make
sense as part of the negotiations on the first loan.
6. Mr. Brant's comments that the City "doesn't have a plan" may be
correct but Brookfield obviously doesn't have a plan either. Allowing
stores in their properties to close on Sunday's, the dismal situation at
City Center and the lack of retail tenants in both sides of Gaviidae doesn't
give me faith in the direction of their retail strategy either.
The Saks parcel that the City will take over has a cash flow in excess of
expenses. In fact, it is the parking ramp not the tenants which generate a
mass majority of the revenue. The Saks lease runs until 2015. We will hire
one of the many quality real estate companies in Minneapolis to operate the
building on our behalf until an acceptable offer comes along.
What this decision boils down to for me is one simple principle. I do not
believe the City of Minneapolis, on behalf of the taxpayers, should be in
the business of making loans to those who have proven that they will not or
can not make the payment on their existing loans.
The "informal" offer on the table but not in writing to MCDA staff
essentially involved loaning Brookfield the money they owe the public right
now for 10 or more years, interest free, with another balloon payment. In
return, Brookfield will promise to pay something now ( the amount I saw was
$2 million), secure the loan better and foreclose on the $17.5 million loan
due in September.
Let me know where I can get in line for that kind of deal.
Lisa Goodman, Chair Community Development/ MCDA Operating Committee
Loring Park
-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]
Sent: Wednesday, June 12, 2002 2:08 PM
To: [EMAIL PROTECTED]
Subject: [Mpls] City Actions at Gaviidae
While the list has been discussing such barnburner topics as
Lavender Magazine
editorials and the DFL Stonewall caucus vs. Log Cabin
Republicans, there has
been a pretty interesting issue happening at City Hall.
Whether you agree with the decision or not, the City's vote
to discontinue
negotiations and take possesion of the downtown Saks 5th
Ave. building was
pretty bold. Obviously our leaders wanted to send a message
that it isn't
business as usual at City Hall.
But was it smart?
The Strib's Neal St. Anthony has a pretty good story (as
usual) in yesterday's
paper about the decision. The story is somewhat sympathetic
with Brookfield's
stance that negotiations should continue. Couple that with
today's article
about downtown vacancy (although the focus was on office not
retail space) and
one gets the feeling that the City needs to think clearly on
this one and not
get cutesy with "making a stand."
I'm not saying the City decision was wrong, just that if a
good deal can be
negotiated, it probably should be pursued.
Here's the Neal St. Anthony link:
http://www.startribune.com/stories/535/2895451.html
Dean E. Carlson
East Harriet, Ward 10
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