Monroe, WA. Developer Dupes City Officials, Flips Property To Wal-Mart
Municipal officials sometimes get in over their heads trying to be entrepreneurial real estate developers. The results are often not pretty. Such is the case in the small city of Monroe, Washington, where Wal-Mart and a developer kept critical information from the city that ended up saving Wal-Mart millions.
Almost a year ago, the city council in Monroe, Washington, a community of roughly 17,000 people, voted to allow Mayor Robert Zimmerman to enter into a land agreement with a private developer for a 24 acre big box project.
According to the Herald newspaper, the deal was worth $9.6 million for the city land. The city bought this land some 70 years ago from the state of Washington for $40.
The developer, the Sabey Corporation, was given until May of 2010 to come back in with a site plan for the project. This city council agreement was reached in January of 2010. At the time, City Councilor Kurth Goering had some misgivings about the deal -- fearing that it could pave the way for a Wal-Mart. So Goering attempted to amend the buy/sell agreement to add a clause forbidding the developer to lease to a Wal-Mart. Councilor Goering's amendment was not accepted -- -- but some council members noted that the developer was required to return to the council to approve the site plan. "We still have something to say about it," another councilman was quoted as saying.
As it turns out, the land deal was not consummated until 11 months later, when the city voted 5-2 to sell 24 acres to Sabey, which is based in Seattle. The delay cost the city $2.1 million, because the sale price to Sabey was $7.5 million instead of the original $9.6 million agreement.
The city council had rejected an earlier offer of $9.6 million because they feared the deal would lead to a Wal-Mart. But when they signed off on the land sale this month -- -- there was nothing in the agreement to prevent Wal-Mart from coming. "I am not thrilled," Councilman Tom Williams said. "(But) I don't think there is anything else we can do to sweeten the deal."
According to the Herald newspaper, Councilor Goering, who had pushed for no Wal-Mart, changed his mind. "I don't believe that it's our role is to pick and choose " Goering said. "That's why we have zoning." He voted for the Sabey deal.
As part of the agreement with Sabey, the city will have to pay $600,000 towards the cost of an environmental study of the site. The developer will pick up the other $1.5 million for those studies. Not all councilors liked that outlay of taxpayer's funds. "I think we are giving too much away," Councilman Tony Balk was quoted as saying. Balk balked at voting for the deal with Sabey.
It turns out the city will have to take the $7.5 million from this sale, and use it to pay off part of $11.3 million that the city had to borrow to buy a similarly-sized property nearby from the county some five years back.
When the deal was inked with Sabey this month, the developer was given until June of 2012 to actually buy the land. A spokesman for Sabey told the newspaper that it had been talking to several big box stores over the past year. But the company was not willing to reveal who was interested in the property.
It only took six days after the sale to Sabey for the truth to be revealed. It was announced in the newspaper that Wal-Mart had come out of hiding. On December 22nd, Wal-Mart announced that it would be building a superstore in Monroe. "Wal-Mart not only gives economic opportunity but a chance for consumers to save," a Wal-Mart spokeswoman told the Herald. The retailer told the public that their new store would create "about 300 jobs," but would not say how many would be part-time, or how many were projected to come from existing merchants. The head of the Monroe Chamber of Commerce admitted that she did not know what impact the proposed store would have on existing merchants.
Another Councilor who voted against Wal-Mart last year, John Stima, told the Herald he now supports the store because "I hope it will help us sell the rest of the property and [be]closer to be a debt-free city."
Two days after emerging from the shadows, Wal-Mart had another surprise for city officials: the giant retailer was going to buy the land from Sabey's that the city had just sold off. In other words, Sabey's had been used for months as the stalking horse for Wal-Mart, and as soon as the land was sold to Sabey's, the real estate developer flipped the property to Wal-Mart.
It is not clear what city officials would have done if Wal-Mart had outted itself as the real owner of the land -- -- but Sabey's served as a convenient front for the deal. A spokesman for Sabey's tried to put the best face on it -- by suggesting that this kind of property flipping was very unsual for Sabey's -- and they only did it "because that is what the client wanted in order to make the deal."
Sabey's never revealed that Wal-Mart was the silent partner in the deal, and that Sabey's was only covering for the retailer. Sabey's withheld that key information from the city -- a fact which might have affected the asking price. No doubt Wal-Mart felt that the city might raise the price if officials knew it was really Wal-Mart buying the parcel. It was assumed that Sabey's would be the landlord, and some big box would be the tenant. But that idea must have been killed months ago -- if not longer.
So far, Wal-Mart has not revealed how much it is paying Sabey's for the land. That figure will eventually show up when the deed is transferred, but presumably Sabey's wanted to make money on the sale and for agreeing to keep Wal-Mart hidden. The city ended up losing more than $2 million below its original asking price -- and all the while Sabey's was negotiating a deal with Wal-Mart.
Six acres of the 24 acre parcel are not buildable. Wal-Mart has indicated that it plans to build a 155,000 s.f. superstore. The city ends up losing $2 million, and getting a retailer that it did not want. The developer's agreement now comes before the City Council for approval.
What you can do: Readers are urged to email Mayor Robert Zimmerman and the Monroe city council at: email@example.com with the following message:
Dear Mayor Zimmerman and Council,
The Sabey Corporation apparently was withholding key facts from you when negotiating a land deal for the 24 acre parcel you just sold them. They clearly had a buy/sell not only with you -- but with Wal-Mart. It was all ready to go, just waiting for your deal with Sabey. The real estate company immediately flipped the property to Wal-Mart. Instead of Monroe taxpayers reaping the profit, Sabey's gets any price above $7.6 million, and the city loses $2.1 million in the process.
But there is a solution: you should instruct your city attorney looking at your buy/sell to see if Sabey misrepresented itself if it already had a deal with Wal-Mart. Secondly, you can refuse to approve the site plan with this deal, and require a scaled down building that is more compatible with surrounding properties. Now that you know a Wal-Mart is going to control the land, you still hold power over the developer's agreement -- and if you still maintain site plan control over the size and extent of facility.
Don't be misled by Wal-Mart's fuzzy math about jobs and revenues. Your Council's first instincts about Wal-Mart were right: this company will cannibalize your existing commercial tax base by driving other merchants under -- and you will reap neither new jobs nor revenues from this use of a huge parcel of land.
You have been duped by Sabey's and Wal-Mart, but you still have time to reject the site plan."