Government - http://maxpages.com/minnickward4/QPANEL

23 Nov 98

Mayor Deanna Hill Delivered by Hand

Dear Mayor Hill:

I am writing to lay out my perspective on the ongoing conflicts among Cypress Equities, the City of N. Ridgeville and Qpanel relating to our 20.3 acres of land on Lorain Rd. Over the last two years, I've worked hard to accommodate the interests of the City and Cypress Equities, but again and again the rights of Qpanel have been ignored by others involved in this process. I believe that Cypress has repeatedly dealt with us in bad faith. I also believe that the City has aggravated this situation by their misguided offer to use their eminent domain powers on Cypress' behalf. A fair-market sale of Qpanel's land to Cypress could have ben completed long ago if Cypress hadn't known they could fall back on the City's eminent domain powers if we didn't cave in and give them a below-market price for our land.

Qpanel has made substantial concessions over and over again. We have even deliberately refrained from making public comment on our grievances, so as to avoid political embarrassment to the City. But we have now been backed into a corner. The City has passed an ordinance that in effect assures Cypress that the City will take our land by eminent domain if Cypress asks them to. Cypress has given us written notice that they will ask the City to see eminent domain. It appears that an eminent domain suit is inevitable. W don't want to fight the City, but we will defend our rights with all judicial means available.

I would like to review the history of how we came to this situation. Qpanel purchased 20.3 acres of land on Lorain Rd. in 1992 because we loved the property. Qpanel was growing rapidly and was about to outgrow our facility in Westlake. We needed a new home that would permit Qpanel's business to grow without physical restraint. The 20.3 acres on Lorain Rd. were perfect. That property is situated right at I-480 and the Ohio Turnpike. It is convenient for our vendors, employees, and truck lines serving our customers. The price was affordable. We could expand in stages as our business grew. At the time of our purchases, the City assured us that they would extend the sanitary sewer line so that our facility had the sewers it needed.

We waited patiently from the end of 1992 until the middle of 1996 for the sewers to be built. While waiting, we invested substantial sums of money over and above the cost of the land in engineering studies, architectural plans and other soft costs. When the sewers arrived in 1996, we spent over $200,000 for site work specific to our building. We were excited about the prospect of finally getting started on our new home. All told we have spent more than $370,000 over and above the cost of the land purchase.

In 1997 we were still planning to begin construction when I was approached by Cypress Equities, an out of state broker, concerning sale of the property. The City encouraged me to sell the property of Cypress and even offered to help to find an alternative location. We told the City that we would consider selling the property only if a substantially higher price was offered than the price we had paid. This was because we had worked for several years to secure this site and prepare it for development. We knew that if we had to replace the property, we would have great difficulty in finding a location nearly as good. Moreover, we had purchased it at a time when the local real estate market was depressed. Land prices had increased dramatically during the year since our purchase of the property.

At the urging of the City, we began negotiations with representatives of Cypress Equities. During those negotiations, we were approached by a local developer, First Interstate Land Development Company. First Interstate presented us with a signed contract for our property at a purchase price of $5,075,000 and even tendered a check to us for the initial earnest money to be deposited under the contract. Because we knew the City wanted us to sell to Cypress Equities, and because we were already in negotiations with Cypress, we elected to offer our property to Cypress Equities at the same price offered by First Interstate. The price was accepted by Cypress and a purchase agreement was executed on July 9, 1997, for $5,075,000.

Later, in October of 1997, we were advised by Cypress Equities that they needed even more time to complete the transaction. We agreed to the extension and, coincident with this amendment of the July agreement, the purchase price was increased to $5,115,000 by Cypress Equities. In early December, 1997, Cypress advised us that site development costs were too high on the project and that they needed a $1 million reduction in the purchase price of our property. We were quite unhappy with this late development, especially since we had passed on the opportunity to see to First Interstate (who was by then developing an alternate site). We believed that the site development costs being used by Cypress Equities as the basis for the price reduction, were actually known by Cypress before the October amendment when they had agreed to increase the price of land. We felt that they were dealing in bad faith. Nevertheless, on December 10, 1997, we met with representatives of the City and Mr. Heideloff, the adjacent land owner who was working with Cypress. Mr. Minnis of Cypress Equities was in contact by telephone and concurred in the ultimate decisions reached at the meeting. We insisted that several conditions would have to be met by Cypress Equities before we would agree to a price reduction. These included the making of a substantial earnest money deposit, the waiver of all contingencies relating to the condition of the property (wetlands, soil condition, title, etc.) and the establishment of a firm closing date. In short, after we made a significant price reduction, we didn't want a replay of the problems we'd already had with Cypress: they had tied up our property for months; they had backed out of what I had considered a firm agreement, and they hadn't even deposited the $150,000 in earnest money they had agreed to in July. We stressed that if we signed an agreement to sell the property, we would need to rely on that agreement so that we could find an alternative location for our facility and commit ourselves to that location by contract. On behalf of Cypress Equities, Mr. Minnis agreed to those conditions and, in turn, Mr. Heideloff and Q- panel each agreed to accept a $500,000 reduction in the purchase price for our respective properties.

A big factor in our decision to accept this price reduction was a threat made prior to the meeting by Gary Johnson, attorney for the City. He said that the City would take a portion of our property by eminent domain if we did not agree to the price reduction. We felt this threatened use of the City's eminent domain authority was solely for the benefit of Cypress Equities, another private property owner. We could not understand how the public interest would be served by extracting a below-market price for the sale of our property. Nevertheless, we agreed to the price change and authorized our attorneys to prepare a second amendment to the July agreement embodying the terms of the oral agreement. Within two days of our meeting, the oral agreement was repudiated by Cypress Equities and we were served with a formal notice of termination of the July agreement.

During the Spring of 1998, as Cypress Equities sought rezoning of the Heideloff property, I and other representatives of Qpanel attended various meetings of the north Ridgeville City Council and Planning Commission. At several of these meetings we heard Tom Sweeney and other City officials represent to the City Council and Planning Commission that eminent domain proceedings would not be initiated against Qpanel. Nevertheless, on June 9, 1998 Scott Serazin wrote to my attorneys advising of the commencement by the City of a formal eminent domain action to take property from Qpanel for construction of "Cypress Avenue." At about the same time, Cypress Equities and Qpanel renewed negotiations to purchase of the Qpanel property. Understandably, we did not want our property cut into pieces for the benefit of our adjacent property owner. This would also force us to become a real estate developer and to coexist with a much larger Cypress development for years to come -- prospects that we do not find appealing. For this reason, during all of our negotiations with Cypress, we insisted on the sale of the entire 20.3 acres or at least the northern three quarters of the property that abutted Cypress on two sides.

On August 25, 1998, Qpanel and Cypress agreed on a sale of the 20.3 acres at a price of $4.2 million. This was the second time that we had reduced the price of our property below what we believed to be its fair market value because of the threat of an eminent domain action by the City and because of the prospect of having the destiny of our property linked to an adjacent development. We knew that Cypress had thoroughly investigated our property and the surrounding property for over a year, so we were confident that they knew that the property was worth at least $4.2 million. However, we were by now less confident that Cypress Equities had the capability of completing that development in the manner originally represented to us and to the City. In fact, during negotiation of the August agreement Cypress Equities represented to us that it did not have the financial resources to purchase our property without the assistance of a new "investor." We were also told by Cypress that it had long since completed all of its necessary investigations of the site (including title, wetlands, soil conditions, etc.) and didn't need to repeat them, but that the "investor" would require time to review those investigations.

On September 23, 1998, Todd Minnis advised me that the "investor" had backed out of the transaction, but he assured me that Cypress would proceed to acquire the property for its own account. In spite of that assurance, on October 8, 1998, we were formally advised by an attorney for Cypress that the Agreement was terminated because of certain "unacceptable physical conditions." But Cypress already had full knowledge of the condition of the property many months before it signed the agreement in August. in fact, the conditions sited in October, 1998, for repudiation of the August agreement were more or less the same as the conditions which Cypress had used for a rationale for the price reduction it had demanded and received back in December of 1997. In addition, Cypress' attorney cited their failure to obtain a partial release of certain blanket right-of-way rights from Columbia Gas Transmission Company. The same attorney had previously acknowledged to us that she was confident that obtaining the release was just a matter of time. The letter concluded "Buyer regrets that the property is not satisfactory and wishes you the best of luck with its disposition."

Needless to say, we were outraged by what we knew to be a contrived rationale for terminating the August agreement. We don't know what motivated this action by Cypress Equities. Had prospective re-purchasers of property decline to complete those purchases? Had Cypress run out of money? Or did they just decide it was more convenient to fall back on the City's promise to use its eminent domain authority to take a roadway, thus eliminating the need to purchase the 20.3 acres? Whatever the reason, it was clear that Cypress Equities had not dealt with us in good faith.

Following the receipt of the October 8 notice, my attorney and I called to arrange a meeting to bring these facts to your attention. The meeting was rescheduled several times for your convenience. Ultimately, I was out of the country on the date that was convenient for you, but I asked my attorney, Tom Keen, to attend the meeting. At the meeting on October 21, 1998, he brought to your attention much of this history. You had invited representatives of Cypress Equities to the meeting, including Mr. Coker from Dallas, and Attorney Coyne, local counsel to Cypress Equities. Also present were Mr. Sweeney, Mr. Zirzow, Mr. Johnson, and Mr. Serazin. During that meeting Gary Johnson disclosed to Mr. Keen for the first time that the City of N. Ridgeville was attempting to get parallel eminent domain action by the City of N. Olmsted to permit taking of Qpanel property within N. Olmsted. City officials again threatened to use eminent domain authority if the matter wasn't resolved promptly. Mr. Keen stated to you and other representatives of the City that it appeared Cypress Equities was assuming it had a commitment from N. Ridgeville to take Qpanel's property by eminent domain and this would explain Cypress' attempt to terminate the August agreement. He asked whether there was such an agreement. He was told by City officials that there was no agreement but that Cypress was "probably expecting it."

The next day Tom Sweeney called Mr. Keen and advised him that several proposals would be presented by Cypress Equities to Qpanel. He explained that these would include a proposal for purchase of the entire 20.3 acres and, as one alternative, a proposal to purchase only the land necessary to construct a roadway. Mr. Sweeney advised Mr. Keen that he did not think Qpanel would like the prices being offered but that serious consideration ought to be given to a transaction involving only the land necessary for the roadway. Mr. Keen told Mr. Sweeney that this was not Qpanel's preference and had never been its preference. Mr. Keen told Mr. Sweeney that the City was actually encouraging Cypress Equities' high handed conduct by freely offering its eminent domain authority as a fail-safe remedy for their access needs.

On October 27, 1998, I received the formal proposals described by Mr. Sweeney in the telephone call with Mr. Keen. cypress made liberal use of the words "good faith" in its transmittal letter. However, the formal proposals bordered on the ridiculous. The first proposal was for a purchase price approximately one-half of the purchase price agreed to in writing by Cypress in August of 1998, just two months earlier. It also was for a lower price per acre than Cypress had paid for most of the Heideloff property, which is in an inferior location. The second proposal was for purchase of the choice Lorain Rd. frontage land at a price per acre which was less than the purchase price per acre that Cypress had agreed to pay for the entire 20.3 acres in July 1997. The frontage land is by far the most valuable land we own; the 20.3 acres includes some wetlands and low lying areas. A third proposal was for purchase of the roadway land only, but at a price per acre equal to the price per acre which had been offered in the proposal for the entire property. Again, the proposed roadway contains the most valuable land we own. To treat it the same as the wetland and low-lying areas at the north end of the property is ridiculous. The final proposal seemed like a deliberate slap in the face: it was for a "donation" of land for the roadway by Qpanel and the retention of Staubach Retail Service to act as Qpanel's agent to sell the land on our behalf! Finally, the letter demanded acceptance of one of those "one-time basis" proposals by November 3, 1998.

These proposals were obviously not made as good faith efforts to resolve this matter. Indeed, Cypress has paid more per square foot for other land it has acquired for the project and the Qpanel land is obviously much more valuable. The proposals appear to be meaningless formal gestures designed for legal and public relations purposes.

This course of conduct by Cypress has continued through today. At the N. Ridgeville City Council meeting on November 2, 1998, Qpanel committed to continue efforts to resolve the matter in spite of its frustration with the process. Toward that end, on November 6, 1998 Tom Keen and I scheduled a meeting in Cleveland for November 12, 1998, with Jeff Coker of Cypress and its local attorney, Anthony Coyne. The purpose of the meeting was to discuss a roadway-only alternative to a purchase of the entire 20.3 acres. This was the first time we expressed a willingness to consider this alternative and we did so only because of the continuing threat of eminent domain. Because such an alternative would require long-term coexistence between Cypress and Qpanel and the sharing of an extensive common boundary and access way, we believe a meeting was necessary to address the myriad details of such a long-term coexistence. On November 11, 1998, without explanation, we were advised that Cypress did not intend to attend the meeting.

We have compromised the interests of Qpanel repeatedly over the last 18 months in deference to the interests of the City of N. Ridgeville. Under threat of eminent domain we reduced what we believe to be the market value of our property by nearly $1 million in an effort to help you get what you want. Eminent domain is an extraordinary governmental power which is intended to be used only in matters of public necessity. The record is clear that Qpanel has not acted in a way that would necessitate any exercise of such authority by the City of N. Ridgeville. Moreover, the threatened appropriation is essentially for the benefit of one adjacent property owner. Apparently the City has determined that the property interests of Cypress Equities are more important than those of Qpanel. Obviously Qpanel will have to do whatever is necessary to protect its interests. We hope that does not become necessary. Qpanel is still willing to negotiate a reasonable resolution to this matter but we will not give away our property at a below-market price. We see no indication that Cypress Equities intends to do anything other than usurp the eminent domain authority of the City to serve its private interests at our expense.

Sincerely, Qpanel Lab Products, Douglas M. Grossman, President
Copy: Members of City Council, Dan Zirzow

Editor's note: Notice names affiliated with Cypress Equities. You see them on Hill's campaign contribution reports on this site.

minnickgail@hotmail.com

Page Updated Fri Oct 1, 2004 11:25pm EDT