- Published on Wednesday, 06 February 2013 20:15
- Written by Super User
By WILLARD KILLOUGH III
CAROLINA BEACH - The Town of Carolina 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.
On October 9th, 2012 the Town Council voted to forego an expensive oceanfront park idea and put all of the properties on the market to pay off what they owe the bank.
Earlier this week the properties were put up for sale for $4.65 million dollars.
According to a release issued earlier this week, Paul S. Loukas CCIM, Vice President of the Wilmington based firm, Cape Fear Commercial, announced the sale of nearly 1.972 acres of oceanfront and 2nd row land that includes a 62-room operating and stabilized motel.
The release states, "The sale is an assemblage of seven parcels totaling 1.972 acres along Carolina Beach Avenue North in the central business district. The properties can be classified into two distinct assets: (1) six parcels owned by CBP3, Inc. (an entity controlled by the Town of Carolina Beach) that contain Surfside Oceanfront Lodge and Guy Johnson motel, and (2) a single, vacant parcel of land owned by the Town of Carolina Beach that is currently used as paid public parking."
According to the release, "This sale presents a tremendous opportunity to acquire prime oceanfront and 2nd row properties that provide immediate cash flow with excellent future development potential," Loukas said.
The bulk asking price for all the properties is $4.65 million dollars. The offering will be hitting the market early next week.
Loukas said he has already received serious interest from both local investors and larger buyers from outside the region.
The properties are located at 234, 235, 236, 237, 239, 302, and 309 Carolina Beach Avenue North, Carolina Beach, NC.
Mayor Bob Lewis recently commented that, "To understand the current challenges with the property you have to know the land parcels themselves were acquired and loans secured by the town in 2008 with the property titles and loans setup in a non-profit holding company CBP3, LLC."
He explained, "The hope of that council at that time was that the NC Aquariums would move forward with a planned educational and fishing pier as the centerpiece of the central business district. Unfortunately council went ahead and approved the purchase of this land without any formal signed agreement with the State of North Carolina agreeing to build a pier on the site."
With the economic downturn in the economy, the state said they would not be able to fund the 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 Town said they don't own the land, their separate shell corporation - called CBP3 - owns it. The Town pays the bills. That shell corporation was established because some state grant agencies will not award grants to reimburse for
property that's already been purchased.
The Council has 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.
Mayor Lewis explained, "The town still has some state grants which we can possibly be utilized if we wanted to build a park of some sort on the property but the challenge there is these are mostly matching grants which means the town would need to come up with close to $2 Million of our tax dollars to pay off the loan and would need to demolish buildings on the land and build a park at an additional cost. A park which cost the taxpayers between $3 and $4 million dollars just does not seem to be a good investment when we have Freeman Park, Mike Chappell Park and the Lake which serves us well for recreation and open green space."
Lewis explained, "As you know a couple of our current council representatives secured a reduction in the interest rate and terms of the financing of the property in question significantly reducing our annual debt payment. Thinking out of the box and at the direction of the bank holding our note on the property, council also restructure how we managed the revenue and expenses on the two operating motels on the property reversing our financial exposure on a yearly basis so we now find ourselves in a situation where the current revenue income basically covers our annual costs. This however is just a short term strategy which was targeted to get us through the next 5 years or so with little or no cost to our taxpayers."
He explained, " The plan is that during the next 5 years the property value of these parcels may return to a closer number to what we paid for it originally. Council never planned to keep the property long term as the mission of a public entity is not to be in the hotel business and that is not in the best interest of the town to keep the property. We also
made the decision in October, 2012 to begin the process of selling off this commercial real estate if possible without taking a huge hit and have recommended the board members of the CBP3, LLC execute an agreement to hire a professional commercial real estate company to do so. CBP3 interviewed a number of commercial real estate companies in November and signed a listing agreement with Paul Loukas and Cape Fear Commercial in December of last year to market the properties."
Lewis explained, " The reality is that the property value in today’s market may not bring the $4.3 million dollars needed to retire the note. It is not our intention or interest at this time to take a $1.5 - $2 million dollar hit on our town’s revenue reserves to quickly sell off this property. We will offer the property for sale but are prepared to hold out for our price as the market continues to improve with the plan that as we get to a breakeven on the sale of the property versus our pay off we would take action."
He explained, "We have been presented with a proposal to exchange one parcel of land in this group for that of another where we could house our fleet maintenance and waste disposal facilities. There are several hurdles to overcome to work an exchange of property out but council will entertain the merits of the proposal and we will have public hearings and be open to all counter bids for this parcel of land as well."
The land owned by CBP3 can be sold just like any other commercial property depending on whether or not the offer is acceptable to the CBP3 Board and Town Council.
The parcels owned by the Town must go through a different process.
Councilman Steve Shuttleworth said Monday February 4, the Town would have to follow an upset bid process where an offer is entertained, a deposit is made by the potential buyer, and then a period of time is required to permit other interested parties to submit higher bids.