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Borough Council sells 1 West State Street in 4-3 Vote to Claudio Sandolo: What happened?

Jul 07

Borough Council sells 1 West State Street in 4-3 Vote to Claudio Sandolo: What happened?

Borough Council voted 4 to 3 to sell 1 West State Street last Thursday evening for $670,000 to Claudio Sandolo, after voting down the offer from Christian Christiansen and The Heritage Group 3 to 4.

Because each offer goes by many names, for readers, to clarify:

  • Christian Christiansen, The Heritage Group, and Bluestone development are all the same name for the first offer for $650,000, presented March 17th, 2011
  • Claudio Sandolo, Spasso’s are the same name for the second offer for $670,000, presented May 20th, 2011

The vote was split down the lines of the “New Coalition” with Pete Alyanakian (R), Jim Cunningham (R), Dawn Roe (I) and Monika Rehoric (D) voting in favor of selling to Claudio Sandolo, with Monica Simpson (D), Eric Stein (D), and Peter Williamson (D) against.

Discussion and public input from Media residents took up more than 50 minutes prior to the legislative portion of the meeting. Over twenty residents packed the second floor meeting room to discuss and hear the arguments for the decision.

The summarize the points made at the meeting in a clear way:

Christian Christiansen Offer Claudio Sandolo Offer
Price $650,000 $670,000 (+3%)
Written commitment to building renovation $550,000-$750,000 None
Use Multi-use: Restaurant, Retail, Offices Single-use: Italian restaurant
Contingency Period 90 days 10 days
Closing Period (after Contingency) 30 days 30 days
Offer announcement date March 17th, 2011 May 20th, 2011
Deposit $10,000 signing, $20,000 after contingency period $25,000 signing, $25,000 after contingency period
Financing Contingency None None
Recommended by town planner Yes No
Facade Easements Transferred to a Preservation Alliance Held by Media Borough
Future Easement Enforcement Costs Preservation Alliance Media Borough
Risk of being sued for accepting lower offer “Some risk” Unknown

 

Resident Kent Davidson, author of Media, PA News, asked Monika Rehoric if her credentials as liaison to HARB, the Historic Archives, and an owner of a historic home in town would cause her to favor the first offer from The Heritage Group (a historic preservation company), and if not, why not:

Monika Rehoric:

I’ll reserve my decision for later. As terms as my liaison for HARB, HARB is comfortable with the easements put in place by council. The Archives really has no position on it so, they really only take care of the documents in town.

When pressed and asked whether her ownership of a historic home affected her decision at all:

Not really, no. It’s really what’s in the best interest of taxpayers of Media, which I am one of. And it depends on the better offer, the cleaner offer.

Resident James Tangorra asked:

Based on what the councilperson just said, “It’s in the best interests of the taxpayers” … so, your constituency … What are the factors that go into that decision, and I’m gathering/guessing that price has a weighted percentage that goes into this objective function, long term use of the building … use of it, the value that it adds to our community, from a historical perspective because we do, for business purposes, rely on historical elements of our town. The businesses they intend to encourage so it does affect the Media Business Council [sic].

I’m wondering what expertise was brought in and what was used to evaluate the best, because I’m assuming it’s not just total price, because I assume you’re interested in more details than that, so I was hoping you guys would address that.

Monica Simpson then outlined the committee, made up of herself, Peter Williamson, Pete Alyanakian, and Mayor Bob McMahon.

Bob McMahon, Mayor of Media, and committee member for the 1 West State Street Committee said:

When I first saw an offer from Spasso’s, I did not think I’d be interested in them… I went down several times to the place, been there, talked to them, have a good idea of what their setup would be here, and I can’t speak for everyone else… Based on my own research, and knowing what I think I personally know about the economy, that is my choice… and I’m happy to defend it. But I don’t have a vote, though.

With some conversation with Mr. Tangorra, Bob McMahon confirmed that his choice was for Spasso’s. His reasons were the track record of Mr. Sandolo, that he has owned dozens of restaurants in his life, and that his fare was somewhat different than Fellini’s, and that Fellini’s and the Town House felt it wasn’t an issue to have another Italian restaurant in town after he spoke with both of them.

Monica Simpson then clarified the terms of the deals, indicating that the 90 day waiting period for The Heritage Group offer was to apply for historic preservation funds from the federal government.

She indicated they had contracted Thomas Committa Associates to write a report regarding best use for the property, and indicated that the consultant favored The Heritage Group offer as a more sustainable usage of the property.

She indicated that The Heritage Group would split the property into three uses, a retail space, and a restaurant on the main floor, and an office on the 2nd floor with a renovated rear entrance.

She stated that the other factors were:

  • Proposed use of the building, and the town planner’s recommendation
  • The amount of money to be invested in the building. (Verbally $250-$400 in interior renovations from the Sandolo offer vs. $550,000 in writing from The Heritage Group)
  • Feedback from public meetings in the past year
  • Presentations by the prospective owners to the committee
  • The facade easement terms

Pete Alyanakian stressed that they have had 45 days of “public comment” since the most recent offer had been received.

After further discussion, Pete Alyanakian stated the facade easement for Spasso’s would be given to Media Borough in perpetuity, and then asked Peter Williamson to explain the facade easement for the Heritage Group, saying “I’m a little fuzzy on how that works.”

Peter Williamson explained that the facade easement is a permanent restriction on the use of a building, accepted by the Federal government, and Pennsylvania state, and is enforceable by the holder of the easement.

The easements requested by the borough for both offers restricts the way 1 West State Street building looks on the exterior, permanently.

He then went on to state that The Heritage Group, who specializes in historic preservation of buildings, requested modifications to the timing of the easement on the property after the building was registered as a national historic landmark, and requested the facade easement be assigned to a professional organization for facade easements, the Preservation Alliance instead of the borough.

Peter Williamson also added that in accepting the Sandolo offer, it would then become the only facade easement held by the Borough of Media. He also pointed out the building was representative historically as a post office built around World War I.

Eric Stein mentioned during further discussion that The Heritage Group actually had committed $750,000 of funds to restoration of the interior, exterior, and the rear of the building facing Jasper Street.

Per follow up questions from Mr. Tangorra about the value of $750,000 invested in the building and its effect on neighboring properties, Pete Alyanakian said that “it could include wiring or plumbing … new roofing materials, infrastructure.”

He then went on to state his opinion that the front and side of the building “wouldn’t change much” but the back of the building would be dramatically renovated. He finished stating, “Whoever buys it will make sure the front of their building looks nice and is maintained… the paladine … what is it, palladium windows have to be kept intact, so from the outside, the building will look like what the building looks like today.”

He then raised the issue that once we sell the building, $700,000 invested in the interior and exterior, we would not know what it would look like. [Editor’s Note: The Heritage Group did present publicly what their plans were on April 21st, 2001, and included renderings of restorations they planned.]

Further discussion from resident Addie Cianella (spouse of Councilman Peter Williamson) outlined that the money promised by The Heritage Group would “be more than just electrical work.” Eric Stein pointed out that the building was in need of many repairs and that funds would be both for preservation as well as restoration. Monica Simpson then said that The Heritage Group, which specialized in historic preservation, has said they intended on making this property their flagship project to attract additional historic preservation business.

Resident Tom Bates asked:

“With the Spasso offer, obviously they have a business plan, they know how they are going to utilize the space. With the Heritage offer it sounds like they have approximately 25% of the space accounted for … do they actually have anyone lined up for the remaining space?”

Pete Alyanakian stated that they did not know, but only took it on faith that there would be new tenants. He then speculated that due to the 120 day waiting period for this offer, tenants would not be able to move in until November.

Monica Simpson then contradicted Mr. Alyanakian, and stated that they did know the new tenants, but legally, Borough Council could not disclose the new tenants because the offer had not been accepted.

Eric Stein, an associate professor in management science, then corrected Mr. Bates and stated that in their presentation, Spasso’s did not have a business plan at all, and then said that when asked, Mr. Sandolo stated that “he doesn’t do business plans, he relies upon his experience” which Mr. Stein asserted made him feel uncomfortable with his offer.

Resident Paul Cavanagh added his comments thanking the attendees, and re-iterating the support for the Sandolo offer, supporting Bob McMahon’s statements:

“I think the Mayor really hit the nail on the head. He’s brought a lot of the business to State street, he’s been around a long time … He’s the one with the track record.”

Kent Davidson (Media, PA News) then highlighted the discrepancy in the 90 days versus 10 days for the offers, noting that The Heritage Group offer was announced publicly March 17th, and the Spasso’s offer was announced publicly May 20th, over 60 days later. Had council acted on the first offer, The Heritage Group offer would have been through the contingency period on July 14th, one week from the meeting date.

Pete Alyanakian responded:

“I have no idea what you’re talking about at this point.”

Resident James Tangorra then asked:

I’m very pleased at the depth that you all seem to be aware of it … seems like a lot of the issues you guys attended to … and also I appreciate the confidence in the Mayor’s gut feeling … these are all important in decision-making … The difference in value is what, 3.1 percent, so that’s not a huge amount to make a decision, so it doesn’t seem that price … is a huge difference. It’s kind of what you want there and what long-term benefit is … one, historically, restaurants … as far as I can see it – I’ve only been here a short time – have not done well there … so we’re expecting … and it’s not that it matters … somebody buys it, it’s their problem. But once they buy it, they can sell it to whomever they want, so we lose a little bit of control…

My question is … I have a military background … A lot of people view two-engine aircrafts as safer … except if one engine fails … that plane goes down. Right, so it’s twice as likely to fail. So my question is, having three businesses … if one of the fails … does the whole thing fall apart? Or is there redundancy such that having three businesses can sustain it? Is there a benefit to having three businesses vs. one?

Pete Alyanakian brought up Thomas Committa Associates and conceded that a mixed use was a “reasonable use” for that property. He then stated that it could bring in more shoppers with the right mix of businesses. He also stated that the fact that two prior restaurants have failed at this location was “a concern for all of us,” and admitted that Borough Council may have charged too much rent in the past. He then highlighted the concern with being sued for not accepting the higher offer, confirmed by Bob Scott, borough solicitor, who stated, “I just want to say … there is a risk in not taking the high bid. I can’t quantify it.”

Resident Addie Cianella asked Bob Scott if there had ever been a precedent set for this type of issue. Bob Scott replied,

There is, to my knowledge, no case law in Pennsylvania of the situation where the borough is now … which is that twice it has been offered to public auction, public advertisement, and twice there were no bids .., and now means the borough can sell to a private sale. There’s no case law on that situation.

Pete Alyanakian then read a prepared statement which outlined the history of the property as outlined previously on the Borough web site. However, he added a statement regarding the offer from Dan Brodeur which was turned down in a vote of 2 (Pete Alyanakian (R) and BIll Tyson (R)) to 5 in 2005 to sell the property for $1 million dollars.

This has been “reported” elsewhere, but he excludes the important details that this offer was from Dan Brodeur, who then rented the property, and did not include any of the facade easements in the current sale; meaning that owner could demolish the historic building if they wished. He then stated that lost revenues from both leases is in excess of $470,000 in “potential lost revenue” while they’ve managed the building since 1999.

Unfortunately, Mr. Alyanakian’s number is factually incorrect and misleading.

The former lease was for $58,500 per year as outlined in the public document attached at right. The borough put out a public bid which expired April 2005. Dan Brodeur took over the lease and received 6 months rent abatement, and started paying rent in January 2006. He stopped paying rent six months prior to moving out in November 2009. So, the actual revenues since 2005 are closer to $211,350 (including the settlement with Brodeur) not a loss of over a half-million dollars.

Exact figures for both income and loss from the building are being requested from the borough manager.

After additional discussions between Pete Alyanakian, who stated that “the borough should not own commercial real estate” and Paul Robinson, who countered by asking if the borough should then sell the Armory which houses Trader Joe‘s:

Alyanakian: We should not be in the commercial real estate business.

Robinson: That’s what you just said.

Alyanakian: [Regarding Trader Joe’s] It was a redevelopment of a public building right there. Totally different part of what we’re doing with the Spasso‘s deal.

Robinson: And the borough building isn’t the redevelopment of a public building?

Alyanakian: We have been managing that building with very poor luck with tenants. And we have not done a good job managing that building the entire time. With the Trader Joe’s building … it works there. We have not had that type of luck there.

Robinson: Maybe we should look at the model of Trader Joe’s and reflect that on the borough building.

Further discussion brought a rebuke from Monica Simpson, stating that the building has been available for sale for a year and that the outreach was great for the building with dozens and dozens of interest letters.

Mr. Tangorra stated that he was still waiting for an answer to his question regarding three business versus one.

Eric Stein:

Based on my voting, I would vote for three businesses over one, I think it mitigates risk, I think it ensures long-term stability.

Peter Williamson read from a statement from the Media town planner:

A diversity of uses might also help, referring to the Heritage offer, with the future users of the building. If a small shop goes out of business in the 575 square foot space on the first floor , it will be easier to find a new tenant, compared to the entire 5000 square foot first and second floor space, if it were devoted only to retail. The former restaurant went out of business, the building has sat vacant for a while. This proves that it is difficult to quickly fill and entire space with similar use. In contrast, small scale uses are easier to re-lease. Therefore, a better balance for the building could occur with three uses as opposed to one use.
That’s the most specific, explicit, professional input we’ve had on your question.

The public input portion of the meeting lasted over 50 minutes. First, there was a motion to “untable” the motion to table the offer from Christian Christiansen last meeting.

The vote to untable the motion was unanimous.

Then a motion was made to vote on the Christian Christiansen offer, and during the discussion, Peter Williamson made a statement:

“I’d like to say a few things about why I’m going to vote for this… There’s a 3% difference in sales price, so I don’t see that as significant. Many of the things that we do in life carry risk; it is an attorney’s job to tell us what those risks are…

One is for a long-term restaurant with lots of experience who has bought and sold over a dozen restaurants in course of his career. He is bringing a product which is already available in Media and that will have to have high volume to succeed. The other has a fleixble program that is intended to be modified as the economy changes, and, as we heard, has tenants waiting to fill the space.

One grants the facade easement to Media, it will be the only one we hold. One will grant it to a professional organization dedicated to holding facade easements.

One has guaranteed a significant investment in the interior and the exterior of the building, in fact, has to do it in order to get the tax credits they need to meet their program. One has made a verbal commitment to put a certain amount of money into the building, but really has no compelling interest to work with us to make any of the restrictions in the facade easements, it’s not part of what they’re doing. What they’re doing is providing a restaurant, not advertising themselves as a historic renovationists.

One is recommended by the only professional planner we brought in to review the two offers, and one is not.

The Christian Christiansen offer was then voted down, 3 to 4. Monika Rehoric then made the motion to accept the offer from Claudio Sandolo, seconded by Dawn Roe. Before the vote, Jim Cunningham asked if this offer included a Right of First Refusal which would give the borough first right to purchase the building back within a certain period of time at an agreed upon price if the purchaser wished to sell the building later. It was confirmed by Pete Alyanakian that it did not include a Right of First Refusal.

Peter Williamson requested that those council members who had voted against the Christian Christiansen offer and would likely vote for the Claudio Sandolo offer to express their reasons to the room full of residents.

Jim Cunningham:

Because of the higher price.. we’re not Uncle Sugar, we don’t print money in the basement. We represent other people’s money not our own personal money. Number two: Better business viability offered by the proposer’s experience and record. Number three: My own personal discussions with members of the public and community, that there is more public support and opinion for this proposal than the other.

Monika Rehoric:

I’ll reiterate some of that, Mr. Cunningham. Again the price has a factor, it may only be 3%, but it’s 3% higher and not 3% less.

This particular gentleman has a proven track record, whether he has a formal business plan for us or not, it’s his business … um … again standing on what our Mayor has done in the town for bringing in specific businesses that have proven themselves … I again will listen to what he has to say.

As far as the three businesses and one, I have not seen one of three businesses … actually, I only know two … I do not know the third restaurant, I was not given that information … of the restaurant that was supposed to go into that space. Of the two businesses that I do know of … The Heritage group, and the retail space … it’s nothing exciting. We’re not bringing in anyone that’s going to be bringing in foot traffic and making that a spotlight on the corner of State and Jackson Street. To my knowledge the one retail is an existing retail, and they’re moving from one place to another … not a far distance.

According to what I remember, in our first discussions, we received a business as far away as California… bringing in someone new and exciting. We were talking Stephen Starr restaurants coming out of Philadelphia. We have none of that. We have two existing business that … the Heritage is not going to bring any foot traffic. They’re going to bring in their customers, their clients hrough the back door, upstairs, sight unseen. What time are they going to be open? Are they going to be open at 9 o’clock in the morning, close shop at 6 o’clock at night? There’s not going to be any foot traffic at that space … the retail business, I don’t know what their retail hours are going to be. Is this person going to be open until 11 o’clock at night? Are they going to be involved in the particular things we do in this town, the music series? These are the things that we initially looking for to bring into that building.

You keep talking about this building as being a cornerstone in Media. And from my estimation, what I’ve seen and heard, we’re not going to get any of that. Now we have another offer on the table, it’s a 3% higher price, it’s coming from out of town … they have a following … they have a following … they have customers that drive from Philadelphia, Haverford and Havertown to Philadelphia to their restaurant in town. These people will now gravitate to Media. These are people that have left the area and gone someplace else. Now we’re going to be bringing those people into Media.

Dawn Roe:

I think … I won’t reiterate everything everyone has already said at the table so, I agree with everything that supports Spasso and everything that supports Bluestone [Editor’s Note: a.k.a. Christian Christiansen]. When Bluestone first came forward, I though they were a dream buyer and I still do in a perfect world that that would be great. Just given the mere historical restoration, but in reality and out of common sense, you have to take a look at what’s really going to affect our town, the taxpayer’s base and preserve the building and that, the club, the Sandolo offer does do that.

Spasso gives us the easement free and clear and that was always and ever our intent that was the first an only thing that council seemed most preoccupied with, rightfully so, we wanted to make sure the buyer preserved the easement and kept that building intact the way we all love it and like to see it every day. Spasso’s meets that, they’re serious people, they’re savvy people, they want to get in there and make money, and I have no problem with that.

But Bluestone, I am worried about the 90 days, I’m sorry, it’s a big deal they can walk any time and not lose their deposit. I am worried about the time it would take for them to get up and running, not only to do the actual work but to get the businesses in there. And I think it would be much more than a year turnaround, and I think even a year is overly optimistic.

And price is real … sorry, I mean, $20,000 back to the taxpayers is $20,000 back to the taxpayers and you can belittle it all you want, but it’s real money and it can’t be ignored. And I’m not gonna ever claim to be smart enough or savvy enough about any of these kinds of issues when it comes to real estate to go against the solicitor’s opinion. We pay him, he works hard for us, and I listen to what Bob [Scott] says. And that does carry weight. So I think Spasso’s the … to me it makes the most common sense and I think that they would be very successful …

And I did go down there, I did spend time with them. I went to the restaurant I was impressed by the people, I had further conversations with them, and there’s nothing that they don’t seem to acknowledge and realize about the space they’re moving into and I have no qualms whatsoever voting for that offer.

Pete Alyanakian:

I will have to concur with what the other three said as well. I went down to the restaurant I … uh visited personally, I sat down with the gentleman, explained very clearly what the risks were for a town like Media, and the numbers he would have to generate … And, you know, here’s a successful restauranteur located right on Front Street between Chestnut and Market, in one of the toughest areas of Old City to be a restauranteur, and he has a 300-seat restaurant that is wildly successful.

I mean, if this was … maybe … somebody had mentioned Stephen Starr’s name, we would be all excited and there wouldn’t even be … a discussion over Heritage over Stephen Starr … that everyone would be falling over themselves to get a world-class restaurant in here. And I think that we have something like that with this genetleman. It’s fun, it was exciting, it has a good vibe to it, the food was great.

His lack of business plan does not concern me. Certainly the bank is going to lend him anywhere from six hundred to a million dollars. They must be comfortiable with his financial position to make this a viable destination point for Media and for Delaware county. I’m proud we have this offer … Do I wish it was higher? Absolutely. I wish both offers were higher. And if we didn’t have to have such a struggle to make this decision. But the die was cast back in 2005 and we’ve got to make the choice.

After requesting any additional discussion, Monica Simpson corrected statements made by Monika Rehoric, specifically:

  • The retailer tied to the Christian Christiansen offer needed to double their retail space due to the “great business” they were doing in town
  • She added that her comments regarding hours of operation, Spasso’s presentation had indicated that he would close the restaurant between 10 and 11:00 PM at night. (Music festival events typically end at 2:00 AM when bars close.)

Ms. Rehoric retorted that he said he would adjust his schedule for the town.

Further discussion surrounded whether the Sandolo offer was contingent on acquiring a liquor license, after some delays it was established that it only contingent on zoning for a restaurant.

After the statements, the vote was 4 to 3 in favor of accepting the Sandolo offer.

Afterwards, there was a vote which passed four to three to request a Right of first refusal for 1 West State Street with Dawn Roe breaking with her previous vote to vote in favor of it.

A Right of first refusal would give Media Borough first chance to purchase the property back from the owner if the owner chose to sell the property in the future. However, for all intents and purposes, requesting the Right of first refusal after the offer had already been accepted would carry little weight, as there would be no motivation on the part of the owner to limit their options to sell the building in the future.

After the vote, there was another unanimous vote to accept the amendments to Chapter 149 on Dogs and other Animals, which was approved unanimously.

After an hour and 32 minutes, the meeting ended at 9:03 PM.

One comment

  1. david palmer /

    SO, bottom line, once again Media and it’s residents are saddled with more ill thought out, decided in secret by Junta members liabilities.