Tue07292014

Last update10:45:00 PM

Font Size

Profile

Menu Style

Cpanel
 
Back You are here: Home News Local and State News Local Carolina Beach Gets $2.1 Million Offer On Hotel Properties

Carolina Beach Gets $2.1 Million Offer On Hotel Properties

Surfside Motorlodge hotel in Carolina Beach. One of several properties purchased in 2009 by the Town of Carolina Beach.

By WILLARD KILLOUGH III
Managing Editor

CAROLINA BEACH - The Carolina Beach Town Council approved contract terms for the sale of properties purchased in 2009 for over $4 million dollars at their May 13th, meeting.
William B. Troutman has deposited $105,000 earnest money as a down payment on his offer to purchase the hotels and properties for $2.1 million dollars. If no other party submits an upset bid before June 18th, at 5:00PM, the property will be sold to Troutman.
The Town Council adopted a resolution on May 15th, 2014 agreeing to the sale of properties located on Carolina Beach Avenue North. The Council previously agreed to entertain an offer by Smooth Rock Hospitality, LLC for $2.1 million dollars. If Smooth Rock declined the Town's terms, CBP3 could make the same offer with the same conditions to Troutman.
The Town has wrestled with how to deal with paying the debt on $4.3 million dollars in property it purchased in 2009 on Canal Drive and Carolina Beach Avenue North to facilitate a future NC Aquarium Pier and park.
The 1.972 acres of land included the Surfside Motorlodge, Guy Johnson Motel and other parcels on Carolina Beach Avenue North and Canal Drive.
When the land was purchased the Town set up a non-profit shell corporation called CBP3, Inc. (Carolina Beach Public Purpose). That shell corporation was established because the Town hoped to fund the purchase by obtaining state and federal grants. Some agencies will not award grants to reimburse for property that's already been purchased by a local government. Using a separate corporation to purchase the property, the Town had an option to purchase the land from CBP3 at a future date even though the Town was actually paying the bills through property taxes and revenues from the hotels.
Among the grants obtained for the Pier Project, an $800,000 grant from the State Division of Coastal Management was obtained. Later the Town was able to secure $603,000 of that grant to be transferred to a project to improve the aging wooden Boardwalk walkway along the downtown oceanfront.
With the economic downturn in the economy, the state said they would not be able to fund the Aquarium Pier project. The estimated cost was $15 million for the pier with the state funding the land upon which the actual structure would be located.
The North Carolina Aquariums Division had planned to construct three piers along the coastline. One was built in Nags Head, NC in the Outer Banks. The second pier was planned for Emerald Isle, NC but was not funded. The Carolina Beach project was to be the third pier.
The original pier project called for a 1,000 foot long concrete pier with wooden decking proposed by the NC Aquariums complete with seating kiosks, fish tanks, conference space, kitchen facilities, pier store, decks and balconies to view the ocean, equipment rentals, a 10,000 square foot pier house, ADA accessibility and the potential for outdoor entertainment. The Town would be required to sponsor other improvements including 150+ parking spaces that are adjacent to existing parking lots.
The Council later worked to renegotiate the loans with BB&T as well as generate revenue from two hotels located on the properties to help pay the mortgage.
On October 9th, 2012 the Town Council voted to forego an expensive oceanfront park plan and put all of the properties on the market to pay off what they owe the bank.
In February of last year the properties were put up for sale for $4.65 million dollars. That decision included properties located at 234, 235, 236, 237, 239, 302, and 309 Carolina Beach Avenue North, Carolina Beach, NC. That included a lot known as the Harbor Master's Lot on Canal Drive that was purchased directly by the Town, not CBP3, and is currently used as a public pay-parking lot. That lot is not part of the current deal and will be retained to generate parking revenues.
The Council unanimously adopted a resolution at their May 15th, 2014 meeting. The resolution stated:

WHEREAS, Resolution No.-09-1001, approving and endorsing the formation of CBP3, Inc. was approved by the Town Council for the Town of Carolina Beach on December 8th, 2009; and
WHEREAS, Articles of Incorporation for CBP3, Inc. were filed by the Secretary of State of North Carolina on December 1 11th, 2009; and
WHEREAS, the Articles of Incorporation for CBP3, Inc. state that CBP3, Inc. should be operated exclusively for charitable and public purposes as determined exclusively by the Town of Carolina Beach Town Council; and
WHEREAS, on May 13, 2014, CBP3, Inc. voted to enter into a contract for the sale of all real property owned by CBP3, Inc., for the sum of Two Million One Hundred Thousand Dollars ($2,100,000) subject to and in accordance with NC Gen. Stat. §160A-269 and conditioned on the Town Council of the Town of Carolina Beach resolving that:
1. The Town Council of the Town of Carolina Beach shall terminate its existing recorded Option to Purchase prior to the purchaser's purchase of the real property.
2. After the application of the net sales proceeds, the Town will assume all remaining indebtedness resulting from the Financing Agreement entered into between CBP3, Inc. and Branch Banking and Trust Company ("BB&T") December 17, 2009, as modified by subsequent modification agreements dated December 21, 2010 and December 20, 2012.
3. The Town Council, after the upset bid period prescribed by NC. Gen. Stat. §160A-269 concludes, shall appoint the highest bidder or its agent to CBP3, Inc.'s Board of Directors until such time as the real property is transferred to the buyer.
NOW THEREFORE, BE IT RESOLVED by the Town of Carolina Beach Town Council that:
1. CBP3, Inc. entering into a contract for the sale of all real property owned by CBP3, Inc. is a public purpose.
2. The Town Council authorizes CBP3, Inc. to enter into a contract for the sale of all real property owned by CBP3, Inc. pursuant to and in accordance with NC. Gen. Stat. § 160A-269.
3. The Town Manager and Finance Director shall file all necessary paperwork with the Local Government Commission for the Town to assume all the indebtedness remaining, after application of the net sales proceeds, from the Financing Agreement entered into between CBP3, Inc. and Branch Banking and Trust Company ("BB&T") December 17, 2009, as modified by subsequent modification agreements dated December 21, 2010 and December 20, 2012.
4. Upon conclusion of the upset bid period, the Town Council shall appoint the highest bidder or its agent to the CBP3,Tnc, Board of Directors until such time as the real property is transferred to the buyer.

An upset bid process will be followed.
Town attorney Noel Fox explained once the buyer agrees to contract terms and the President of the CBP3 Board signs off, the buyer will have to tender a 5% deposit to the Town Clerk. The Town Clerk will publish a notice of the offer which will include a general description of the property, the amount and terms of the offer and advising the public they have ten days raise the bid by not less than 10% of the first $1,000 dollar and then 5% of the remainder.
Fox explained, "It is ten days but its ten days without an upset bid. The reason this process exists is to make certain that you use this competitive way of selling Town property to make sure its going for the highest price possible. If it is upset
bid then it would be republished that there had been an upset bid and we would wait another 10 days." The process continues until no upset bids are received within a ten-day period.
The terms of the contract are firm. Any upset bid would have to adhere to the existing contract terms. Any changes desired by the buyer will require the matter to come back to the CBP3 Board and Town Council. The Town will owe $2,007,000.00 following the sale of the property. The town will still retain net revenues from the hotels until the properties are officially sold.
Councilman Steve Shuttleworth said, "I know a lot of people have said we've already spent a ton of money on the property but I believe Dawn's last summary to us showed where what we spent and what we brought in have
now zeroed out. We might be seven to ten thousand dollars to the good so we've been able to catch up on the past efficiencies and the money expended towards remodel on the revenues brought in. So I think that part has been a wash. So it really hasn't cost the Town another million dollars."
He said, "I think Dan's brought up a good point. The future loan balance is going to be $2,007,000 approximately. If you subtract out the $475,000 for the Harbor Master lot that really brings us down to $1.5 and some change."
Town Manager Michael Cramer said, "Currently we budget the loan amount, taxes and insurance for approximately $314,000 a year. By going with just these numbers we will end up saving approximately $130,000 annually on what we would end up budgeting."
Councilman Shuttleworth said, "If I were a sarcastic person I'd point out that might have covered the cost of a deficiency on a pool but I'll save that for another debate."
Mayor Dan Wilcox said, "There has been a lot going back and fourth between CBP3 and Council since the election and all in effort for everybody to wrap their minds around this and try and work towards a situation that would be the most beneficial or least loss to the citizens" and, "I want to thank Steve for all of the work he's put into it and the CBP3 and not just the work in getting everything together, the changes they made previously that resulted in more revenues and less cost due to the reduced interest rate."