Choose a price, and we'll back you up.
That was essentially the City of Toledo's message to the Toledo-Lucas County Port Authority regarding the purchase of One Maritime Plaza, the seven-story riverfront downtown office building whose sale has garnered allegations of back-room dealings from a local community development group that claims it is owed money from the deal.
Under the terms of the sale, the current owners, the American Maritime Officers Pension Fund, would sell the riverfront property to the Port Authority for $143,000 in cash. The Port Authority, whose offices are in the building, would also commit to making $757,000 in upgrades to the building that it says are desperately needed to retain tenants.
Mayor Mike Bell's administration brokered the deal and city council approved it last month. The city expects to close on the deal at the end of March.
The city is playing a role in the deal because it awarded a $2.5 million federal loan to the maritime officers' pension fund in 1982 to help construct the building. As a condition of that loan, called an Urban Development Action Grant, the maritime officers' pension fund was required to use a portion of its revenue to repay the loan to North River Development Corp., a community development group in Toledo's North End neighborhood.
But as of Tuesday, North River Development, now called United North Corp., hasn't received a dime.
The city and the maritime officers' pension fund claim the union never made enough money on the building to trigger the clause requiring payments to United North -- a claim backed up by financial statements provided to the city and United North by the union. For that reason, United North is legally owed nothing, according to Paul Syring, general counsel for the city.
Terry Glazer, executive director of United North, disagrees. He argues that United North and the neighborhood it serves were the intended beneficiaries of the loan repayment. Without that benefit to the neighborhood, the federal government wouldn't have given the money to the city, he said.
As proof that his organization's claim is legitimate, Mr. Glazer pointed to negotiations between his group and the Port Authority. Why else would they be negotiating?, he asked.
The city's role in those negotiations has emerged as major point of contention for Mr. Glazer, who is now claiming the city undermined his organization's effort to strike a deal with the Port Authority.
"They totally disregarded the interest of the neighborhood," he said.
Mr. Glazer and representatives from the Port Authority began meeting last year to work out a deal under which United North's claim on the building would be released. But Mr. Glazer said the city was communicating independently behind the scenes with the Port Authority, undermining his negotiations.
Emails obtained by The Blade show that city officials made no effort to negotiate a higher price for the sale, the proceeds of which could have gone to United North to help revitalize North Toledo neighborhoods.
On more than one occasion, Deputy Mayor Tom Crothers told his counterpart at the Port Authority to essentially name a price.
"I think you folks need to determine what you want to pay for the building and we'll 'fight the battles,' " Mr. Crothers wrote in a September email to Port Authority Chief Operating Officer Matt Sapara.
Mr. Crothers echoed that sentiment in later emails.
"You know the story," he wrote to Mr. Sapara in December. "$1.00 to infinity."
And again in January: "Remember, 'One dollar to one million dollars.' LOL!"
When Mr. Sapata asked in a September email if Mr. Crothers had spoken with Mr. Glazer, the deputy mayor responded: "Nope, but I see him in person at 8:00 a.m. this Friday. LOL!" He added: "P.S.: Are you sure you don't want to pay $1.00?"
"It is very upsetting to see the city of Toledo has chosen to give away assets or cash that would have gone to the neighborhood," Mr. Glazer said. "It wasn't a fair negotiation."
He said Mr. Crothers had assured him that the city would allow United North and the Port Authority to negotiate without interference. "The city was negotiating behind our back," he said. "That's not transparency."
Trade for cash, hotel
Mr. Crothers said this week he doesn't think the emails show a disregard for United North or a lack of transparency.
"I told Terry Glazer to his face on two occasions that United North and the Port Authority needed to get together and determine a fair and reasonable amount," Mr. Crothers said. "I said, 'You need to pick a number between $1 and $1 million.' "
Asked why he punctuated some statements with "LOL" -- which means "laughing out loud" -- Mr. Crothers said, "I guess it was an attempt at humor."
If anything, the emails represent the city's frustration in dealing with United North, he said. The organization had agreed early last year to release its claims in exchange for $100,000 and the vacant St. James Hotel, a historic North Toledo building, Mr. Crothers said. A February, 2011, letter from United North's attorney, Keith Wilkowski, confirms that the organization was at one time willing to settle for such a deal.
But Mr. Glazer said the organization didn't fully understand its rights until more recently, and that it wasn't aware of the possibility of a sale at that time. Meanwhile, additional studies of the St. James Hotel revealed that renovating the property would cost $3 million to $4 million.
Port Authority officials said that when the city approached them about the possibility of buying One Maritime Plaza, it was with the understanding that United North would be willing to accept $100,000 and the St. James Hotel.
"After my first meeting [with United North] it became apparent that wasn't the case," Mr. Sapara said this week. "Once they found out the Port Authority wanted to purchase the property, then it became $2.5 million. I don't think they're getting the short end of the stick."
United North is actually getting less than that in the deal negotiated by the Bell administration -- it's getting nothing.
The mayor is expected to sign the deal Thursday, after waiting the required 30 days after city council approval. As it currently stands, the decision about how much money, if any, to give United North has been put off for future debate.
Mr. Crothers said last week that after the real estate closing on One Maritime Plaza, the city plans to keep the $143,000 the port authority paid for the building in a Community Development Block Grant fund. It will be up to council to present legislation authorizing use of that money, he said, explaining that the money could be paid to United North or used to fund other development efforts or organizations in that part of the city.
Sales price an issue
The sales price has emerged as another major point of contention.
An October appraisal of the property by Martin + Wood on behalf of the Port Authority estimated its market value to be $900,000 -- far more than the $143,000 the Port Authority would pay under the pending deal for the building and its two parking lots.
But Mr. Sapara said the building is in desperate need of repair. On Tuesday, water leaked through the ceiling tiles of the port's seventh-story office space and fans whirred in most rooms, stirring 80 degree-plus air. Mr. Sapara provided photos of a heating, air, and ventilation system held together with clothes hangers and other makeshift remedies. The leaky roof and insufficient HVAC system require well over $700,000 in improvements, he said.
"We realized there were all these problems," he said. "This is the cost to rectify them."
But Mr. Glazer points to statements in the appraisal report that suggest those problems were taken into account. The appraised value of $900,000 is an "as is" assessment, according to the report.
"At the time of our viewing, the interior and exterior of the subject property appeared to be in average(+) overall condition," the appraisers wrote, noting that the building's boiler had just been replaced in 2005. Elsewhere in the report, the appraisers say the interior appears "to have been fairly well maintained and in average overall condition."
All of this matters, Mr. Glazer said, because the low sales price dramatically limits the amount of money his organization -- and thus the neighborhood -- can recover.
Ultimately, only the market can determine true market value. In this case, the market value of One Maritime Plaza may remain a mystery because it was never listed on the open market.
'Our motives are pure'
It currently has eight tenants and is 78 percent occupied. Those tenants paid more than $606,000 in rent in 2011. The Port Authority pays about $125,800 a year to rent 7,588-square feet on the building's top floor. Its lease runs through 2017, but most other leases, including those of U.S. Rep. Marcy Kaptur's office, expire within the next year or two.
Given the condition of the building, Mr. Sapara of the Port Authority said his organization's willingness to purchase the property will save it from inevitable decline.
"Our motives are pure," he said Tuesday. "We want to stabilize this building and make sure it doesn't get shuttered."
Mr. Syring, the city attorney, said he was waiting for a close-out document on file in the U.S. Department of Housing and Urban Development's archives in Washington that he hopes will bring resolution to some of the issues surrounding the deal.
Representatives from the American Maritime Officer's Toledo office did not return phone calls seeking comment for this story.
But in a Feb. 7 letter to the city, John P. Macuski, finance director for the Maritime Building Realty Holding Trust, said the building "has never generated sufficient cash flow (as that term is defined in the agreements between the city and the Maritime Building Realty Holding Trust) to enable the American Maritime Officers Pension Plan or the maritime Building Realty Holding Trust to make any payments against the promissory note held by the City in this matter."
That's the legal explanation for why the Maritime union failed to repay to United North any of the $2.5 million it received from the federal government through the city to build One Maritime Plaza. But Mr. Glazer is still trying to understand why his city allowed this to happen.
"It's just so unjust," he said.
Contact Tony Cook at: email@example.com, or 419-724-6065.