Mayor voices his opinion on CBRE with late night memo

A little before 7:30 p.m., City COO Tamara Fountain sent to the Pensacola City Council an email with several attachments regarding the CBRE and the proposed master developer for the Community Maritime Park.

Included in the attachments was a memorandum from Mayor Ashton Hayward. The mayor outlined the history of the CBRE listing agreement and the RFP for a master developer.

Contrary to what City Administrator Eric Olson told the Pensacola City Council, Mayor Hayward said he is extending CBRE’s listing agreement for one year—which is what Councilman Larry Johnson said, during the Monday agenda review meeting, that CBRE had told him.

“We asked CBRE to do a job, and they have done it,” wrote the mayor. “They have brought forward a strong prospect and project for our consideration. As a result of my satisfaction with CBRE’s performance, I am in the process of extending their listing agreement by one year.”

Mayor Hayward fell short of fully endorsing the proposed project for the park. He wrote, “At first glance, this looks like a win-win deal, but we’re just beginning the due diligence process. The MOU is simply a framework for the City and the developer to closely examine one another, open negotiations, and determine if a deal makes sense for all parties involved.”

He said he would reach out to the council president and ask him to schedule a special meeting for the council to consider the MOU (Memorandum of Understanding). The mayor said he, along with legal counsel and representatives from CBRE, will attend the meeting.

In his outline of the CBRE history with the City, Mayor Hayward said that he was aware of the controversial “success fee” arrangement in the listing agreement. The contract allowed CBRE to be paid a commission on the build-out of a project by a prospective developer, instead of the city paying a commission on the land leases of the parcels. However, he said it was the decision of his city administrator and the CMPA executive director to make it part of the RFP for a master developer.

“The City Administrator and the Executive Director of the CMPA were empowered to negotiate with CBRE on the substance of a request for proposals (RFP) that CBRE would issue to potential developers,” he wrote the council. “As the fee is paid by the developer, the City Administrator and CMPA Executive Director felt it was most appropriate to include that language in the RFP.”

The CMPA executive director was Ed Spears. The City Administrator was Colleen Castille until August 15, 2014. The RFP was finalized and released on Sept. 18. CBRE told council members that Interim City Administrator/CFO Dick Barker and COO Fountain also knew of the success fee in the RFP. Mayor Hayward only used titles in his memo and chose not to name the people involved in the decision process.

So where are we? This memo cleared up many of the questions that the council had on Monday.

Mayor Hayward, CBRE and the prospective developer are working on a MOU for a hotel and luxury apartments/condos at the maritime park. He wants Council President Andy Terhaar to call a special meeting to discuss the MOU. That date is to be determined.

The success fee – which could pay CBRE $2.53 million, instead of $446,326, on the deal – was part of the listing agreement and originally approved by a City Administrator and Spears to be included in the RFP, presumably with the mayor’s permission.

The mayor is extending the listing agreements with CBRE, which expired in February, although there is no written extension yet.

The remaining legal questions are: What is the power of the city council in regard to the MOU?; if the MOU is approved, does the final agreement still come back to the CMPA and Council for votes?; Can the mayor override the council and proceed with negotiations even if they vote down the MOU? Like he did with the airport concessions lease; Does the mayor have the power to extend the listing agreement for the maritime park without CMPA and Council approvals?

Stay tuned. Read AH CBRE Memo.