The Frisco Town Council on Tuesday decided to terminate the lease to Whole Foods Market shopping center developers, opting instead to sell them town-owned property for $4.5 million in a split vote. The decision came after more than an hour of public comment from a standing-room-only audience.
Many citizens who spoke expressed concern the contract was a bad business deal, while others urged the council to move forward. Others said they wanted the deal to be more open to public input.
Nevertheless, the council voted 4-2 to move forward with the land sale. One councilmember was absent.
“If you look back over the history of what has gone on that parcel, nothing has been built — and that was the purpose of buying that parcel. It was bought to generate revenue,” said councilmember Kim Cancelosi just before voting yes on the sale.
“How much revenue is coming out of an empty lot? None,” she said. “We have put a lot of time and energy into this. ”
The commercial development project was originally approved in June 2012 under a 50-year lease agreement. The first phase consists of three stores, including a 32,000-square-foot Whole Foods Market, expanded in size from the originally proposed 25,000-square-foot building. At final build-out, there will be a total of five buildings.
The original lease included an option for the developer to purchase the land outright within the first 10 years. David O’Neil said he and Brynn Grey X LLC were exercising that option.
The purchase agreement between the town of Frisco and Brynn Grey partners allows the developers to buy the 9.4-acre parcel for $4.5 million. It includes a deed of trust and a subordination agreement under which the town agrees to subordinate up to $5.4 million for infrastructure improvements. The agreement also allows the town to take over payments should the developer default on its loan.
The “Interstate Parcel” property sale includes a promissory note from the developer with a term of 20 years. The note has an annual interest rate of 2.25 percent, with no principle or interest payment required for the first 10 years. If the developer constructs the five buildings by June 3, 2018, the interest rate will drop to 1.75 percent. The contract includes a “personal guarantee” by the developer for the first three years of ownership.
The developer is not required to make payments on the property until June 3, 2024. Under the agreement, all principal and interest must be paid off by June 2033. A number of residents at the meeting said the contract was too lax.
During the meeting, Frisco resident Paul Connelly asked, “When did Frisco get into the banking business?” Others urged the council to rework the deal.
“I have been in business and done commercial developments and own a number of properties, and I have never heard or seen anything like this business deal,” said Frisco resident Lou Wagner.
“The idea of not getting any principal payments for that period of time and the lack of security beyond three years, all of those things just go against everything I know about sound business deals,” he said. “This deal really has its shortcomings.”
Cindy Abramowitz, owner of Frisco’s Butterhorn Bakery, said she bought her building on Main Street 12 years ago, and should have it paid off in the next five months.
“We pay a lot of sales tax, and I like paying sales tax. It means we are doing good business. But I will tell you what, we didn’t get a real estate deal like that,” she said. “I think everybody should get the same deal.”
Frisco resident and business owner Christy Campton urged the council to move forward with the development.
“I haven’t spoke to anyone who doesn’t think Whole Foods isn’t a great idea. We can’t wait,” she said.
“I don’t know anything about commercial real estate development, but obviously with a desirable tenant, we are going to have to give up a little bit more than if it was a Kmart. Obviously nobody in Frisco wants a Kmart,” Campton said.
“I’m here to say to you think about your vote tonight, and if a no vote means that Whole Foods is going away, then all we are left with is a dirt parking lot again.”
Developer O’Neil said if the town council delayed the land transaction, it risks Whole Foods moving Frisco to the bottom of their list.
“Whether or not they come back to this location is unknown,” he said. “Delay also risks the pending leases with other tenants.”
The developer said rumors that Whole Foods never publicly announced they were coming to Frisco is false.
He sited a list of agreements he had with Whole Foods Market Inc., as well as the company’s 2012 financial report, which reports eight new leases, including one in Frisco.
Councilmember Woody Van Gundy said when he came into his position, the sale of the Interstate Parcel was one of his main goals.
“Up until two months I felt very comfortable with the deal we had been working on, but at this juncture I have a lot of concerns,” he said. “I continue to struggle with disagreement at this time, and I’m not going to support this tonight.”
Mayor Gary Wilkinson voted yes on the sale.
“This council represents you,” he said to the audience. “It’s not easy. It’s complex and it takes a lot of work.”
“We aren’t giving away anything here. We are going to get value for the land. We are going to get a good development and a proper development,” he said.
O’Neil said the council’s yes vote allows Whole Foods to break ground on the building in June. He said he also expects to sign a fully executed lease with a restaurant for the commercial site within the next few days.