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Wednesday April 16th 2014

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Negotiation Blues

Studer and the City Struggle for Big Win
By Jeremy Morrison

Quint Studer is hoping to construct a $12 million dollar office complex on a parcel of land located at the Community Maritime Park. And while officials with the city of Pensacola seem to desire the same, hammering out an acceptable deal is taking some effort.

“I’m used to being in the barrel,” Studer told the Community Maritime Park Associates board July 18. “I’ve got a bit of vertigo, so I’m the right guy to be in the barrel.”

Studer—owner of the Blue Wahoos baseball team—told the CMPA board that he wanted to exercise an option in his 2009 agreement and lease a parcel at the park, but that negotiations with the city were a “learning situation.”

“Most cities would love to have what we’re offering,” Studer said a couple of days after the CMPA meeting.

If Studer leases the downtown parcel—located at the corner of Spring and Cedar streets—from the city, he plans to construct a 60,000-square-foot office building. The facility would be capable of housing 240 employees, some of which would hail from Studer’s health care consulting firm, which he plans to relocate to the property.

“It’s a land lease,” Studer said. “It’s pretty simple.”

But it’s not that simple. Studer and the city have been unable to resolve several lease specifics. And the negotiation process itself was apparently somewhat unclear.

CMPA Chairman Collier Merrill met with the Wahoos owner and Mayor Ashton Hayward the day before the July 18 meeting. He then tried to catch his board up, chalking the overall process up to being “as clear as mud.”

Merrill explained to the board that the CMPA was to now act as an agent of the city—“I didn’t think we were involved”—and negotiate acceptable lease terms with Studer. Those terms would then need the approval of the mayor and the Pensacola City Council.

“That’s where I think we are,” Merrill said.

Later in the week, Merrill explained that normally the city would be negotiating with prospective tenants.

“But in this one instance, we’re supposed to be the agent of the city,” he said. “And, that’s fine.”

During the CMPA meeting, Studer explained that the sticking points in negotiations were the length of the lease, as well as the costs. While he wants to pay around seven percent of the property’s $1.6 million appraised value in annual lease fees, and get the property for 60 years, the city has pushed for 40 years and between eight and 10 percent.

“I think the difference on percentage is something like one percent—which is $16,000—which I don’t think is a deal breaker,” Studer told the CMPA.

He later said the differences on the lease’s length would be a deal breaker.

“Many times, it’s the lenders that dictate the length of time,” Studer said.

Studer said he could also walk away from the property. He encouraged the CMPA to put out a Request for Proposal. Merrill seemed to shy away from that option.

“We do not have a lot of people knocking our door down, obviously,” he said. “That’s why I think it’s important Mr. Studer is here.”

Studer stressed to the board that he was not asking for incentives or a “sweetheart deal.” Later in the week, he compared his project to the city’s dealings with Pen Air (it wrote off a debt) and Hixardt (which was asking for incentives).

“Pen Air had to do with a parking lot,” he said. “This is probably more similar to Hixardt and the fish hatchery—and I’d put this side by side with those any day.”

During a July 16 city council meeting, Councilwoman Maren DeWeese had brought the issue of Studer’s lease up for discussion. Like the rest of the council, she had received a letter from Studer—whom she referred to as “the last man standing in economic development”—and wanted to know why the city had yet to reach a deal with him.

“We have $12 million staring us in the face,” DeWeese told the council.

At the CMPA meeting a couple of days later, Councilman Larry Johnson—who also sits on the CMPA board—echoed that sentiment. He noted that he had requested to be involved in the negotiating process and was “disappointed” that the mayor had denied his request.

“I thought it was just very unfortunate that we didn’t have a council person involved,” Johnson said to his fellow board members.

A few minutes later, the mayor entered the meeting room. Taking a seat behind Studer, he was there to tell the CMPA board that the city hoped to make the negotiating process “painless” and encouraged all parties involved to “move it along.”

“Everyone can’t be anymore excited,” Hayward told them.

The mayor left the meeting shortly after someone on the CMPA board suggested negotiating the terms with Studer— “let’s do it”—on the spot.

“We can negotiate it on TV as far as I’m concerned,” Studer said. “You’re only as sick as your secrets, I’ve heard. The more out in the open, the better.”

The Wahoos owner went on to say that he would not be interested in building on or leasing the property if Hayward was not on board.

“We would not move forward if it were not a unified front,” Studer told the CMPA board. “We think that his support is important. And, also, if he doesn’t want it, that’s important.”

Earlier in the day, during the city’s rebranding event at the Saenger Theater, a reporter from a local radio station had asked Mayor Hayward if the negotiations with Studer were progressing.

“Of course,” Hayward replied. “I had a meeting with Quint yesterday. It’s a big win for us.”

Councilman Johnson later said that the lease discussions thus far had involved “some frustration” possibly related to the mayor’s recent absence during an overseas trip—“during that time, Mr. Studer reached out to the council”—and also “some other issues I’d rather not go into.”

“Some things weren’t going as smoothly as maybe it was presented this week,” the councilman said. “I’ll just leave it at that.”

The day after the CMPA meeting, the Pensacola City Council decided to throw Johnson into the negotiations. His involvement triggered Sunshine laws, meaning the deal will be worked out in an advertised public meeting.

“I’d rather just do it in the sunshine,” Johnson said. “Not only does that make it in the sunshine—which I don’t think that anyone has a problem with—I can go back to the council and assure them we’ve hammered it out and have a good deal, and I think there’s importance to that.”

Merrill, the CMPA’s point person for the negotiations, said that once a meeting is scheduled a deal should be reached shortly.

“This really could be knocked out within a day,” he said.