Municipality defends purchase contract
A prominent local lawyer says he’s perused the purchase agreement for the former Sears building and believes there are serious holes in it that could potentially cost the municipality millions.
Municipal officials disagree.
The agreement, between the developers who own the Downtown Chatham Centre (DCC) and the municipality, placed the building in municipal hands for a purchase price of $2.95 million in January. The municipality has until the middle of next year to opt to go ahead with the project – which would see the Civic Centre, museum and Chatham branch of the library land under one roof – or sell it back to the developers for the same $2.95-million price.
Investors Rob and Jessica Myers, Don Tetrault and Ron Nydam oversee 100 King, the organization that is selling the Sears building.
It’s what could happen should the municipality move forward with the project that Steven Pickard, a local lawyer and former municipal councillor, said he’s concerned with. But it would only be a problem should operations at the Sears building, dubbed the Community Hub, change, or should the property go up for sale.
“The terms of 100 King’s right to buy back the property is this: In the future, no matter how many years, no matter how much investment by C-K, if C-K ever wishes to ‘change the proposed use of, sell, transfer, lease or otherwise dispose’ of the property, then 100 King can force C-K to sell it back to them at $2,950,000,” he said.
Dave Taylor, head of the municipality’s legal department, said that’s not the case, adding there is a five-year, right-of-first-refusal period.
“If we continue to own it and run it as a community hub, they won’t be buying it back from us,” he said. “But if we say we’re going to sell it to somebody, they have an option to buy.”
Taylor said that the option would be at market price, but only within a five-year window.
“If we were to divest – the time period for them to have the right to buy back from us is only five years. It’s their right to match the third-party offer received,” he said.
Pickard disagreed.
“This term is a ticking time bomb that, someday, will result in C-K losing the entire building for the return of the purchase price, uninflated at that,” he said.
Taylor said the agreement states any repurchase would be completed with the original purchase price “plus any direct costs incurred by the municipality for any improvements to the Option Property.”
“The direct costs are estimated at $53 million. As a result, if 100 King sought to re-purchase it, it would have to agree to do so within 15 days and would have to pay an amount that compensates the municipality for any costs it has incurred to renovate or improve the property,” Taylor said in a media release.
Pickard said what defines direct costs is lacking in the agreement.
“There is no definition of what constitutes the ‘direct costs.’ This would likely be left up to the courts to determine what it means and if it even means anything,” he said. “The interpretation given here is not in the contract.”
Rob Myers, interviewed by The Voice prior to Pickard’s announcement, said he and his partner developers just want to ensure that if the municipality goes ahead with the project, as it appears it will, the use of the facility is for what is agreed upon, and work is completed in a timely manner.
“When we made the deal with the city for them to buy Sears, we said if you don’t get going on this thing at some point, we’re not going to sit there and have an empty Sears building forever as we’re developing the rest of the centre,” Myers said.
The 100 King group has plans to revamp the rest of the DCC, creating a blend of shopping, dining, living and entertainment options.
The 220,000 square-foot space is being redesigned to host 10 apartments as part of the project, which is estimated to take 18-24 months to complete.
Myers said if the municipality proceeds with the project, he does not see the property changing hands in the future.
“If the municipality is going to spend $30 or $40 or $50 million on that property to make a museum, to make a city hall, to make a library – why would they want to divest themselves from it?” he said. “Can people have some common sense?”
Pickard said his questioning of the agreement is done without malice and is intended to produce greater transparency.
“I hope that this public discourse helps not only fix what seems to be acknowledged as a deficient contract, but it also demonstrates that the public is not the enemy,” he said. “Transparency is an integral part of the governance of our municipality. I look forward to the steps taken by C-K and 100 King to clarify the wording of the contract to reflect the stated intentions.”
