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FEBRUARY 4, 1997 SCHERTZ DEVELOPMENT FOUNDATION FOLLOW-UP MEETING MINUTES February 4, 1997-3:30 p.m. Mr. Kerry R. Sweatt's Office Item #1 Call to Order: The meeting of the Schertz Development Foundation Board of Directors was called to order at 3:30 p.m. by Chairperson Jackie Jones. Those present: Jackie Jones Don Jeffreys Kerry Sweatt Mark Marquez Earleen Ehlers - Executive Director - Recording Secretary Ms. Jones called this special meeting so that the Board members present at the January 31, 1997, meeting could bring Mr. Don Jeffreys up to date on Item #3 from that agenda. Item #3 Discussion/Action on Sale of Lots #18 & 19: Pyka Properties request for waiver of two year period to build as outlined in the restrictive covenants. Mr. Marquez explained the critical element of what Fiber Art wanted to do in the earnest money contract. He read the special provision they had written in Paragraph #11 on page 5 of 9 of the contract. He added that they want to waive the two years up front. Mr. type that Jeffreys asked if they wanted additional time or gave any of time frame. Ms. Jones said no. Mr. Marquez said they might counter with a date that might be satisfactory. Mr. Marquez asked if it is appropriate to waive the covenants, if it can be done without opening the door for everybody else. Mr. Jeffreys said that he felt anything the Board does will likely set a precedence. He then said that the attorney was quick to point out the problems of waiving covenants. Discussion of all options available to the Board were trying to find ways to satisfy both the Foundations and meet the expectations of Pyka Design. discussed concerns It was explained that Pyka Design wanted to purchase the extra lots so that Fiber Art is not land locked. Mr. Sweatt said that Fiber Art has grown bigger than they ever thought they would and they want the assurance that if they do get larger there will be a place to go without having to start over again. He added that he did not mind committing to them if the Board could do so without causing problems with other present owners and potential new owners. -2- Mr. Marquez said that the Foundation could give Fiber Art an option on the land with a right of first refusal for the next couple of years. They could then purchase the land if their expansion plans call for it. At the end of the time frame they would make a decision to purchase or not. Only if someone else wanted to purchase the lots would they have to decide. Mr. Jeffreys said he felt this was a good idea and an alternative to breaking the covenants. Mr. Marquez said that we would have to come up with some reasonable number for them for the option. Mr. Jeffreys asked if that reasonable number would apply toward the purchase price of the land if they buy it. Mr. Marquez said if they buy the land the option to buy may be applied to the total cost of land if they agree. I don't feel bad to let the option number go toward the purchase price. He said that they could maintain the price at the same value for the next year or two. Mr. Jeffreys said that the covenants would stay intact with this option and provided they are not purchased by another buyer, they would have time. He said that it seemed to him that no one is comfortable with waiving the two years. Mr. Sweatt said he did not mind waiving for Fiber Art, but it might cause a problem when dealing with someone else. Mr. Jeffreys said what about the attorney's fees, the other land owners, and the precedence the Foundation is setting for others that hear about it. I feel like the attorney when he said it would be complicated, that would make his fees go up even higher. I don't see that the option to buy and give them two or three years would hurt. Ms. Jones said that she would like to run it in front of Mr. Borgfeld at Schertz Bank to ask if it would be a problem. Call was made to the unavailable. Schertz Bank, Mr. Borgfeld was Ms. Jones said that the Foundation should give them the option, but if it doesn't work they should just let it be. Mr. Jeffreys said he would lean toward not changing the covenants. He would not mind helping Fiber Art, but he thought it might run into a lot of expense and complications for several reasons. Mr. Sweatt said he understood, but by all purposes what the Foundation wants to do is to try to grow industry and here we have a chance for a local business to expand. If they buy and still don't expand we would still have the right to repurchase if they wanted to sell. He said he hated for the Foundation to get in the way. Mr. Jeffreys said that on one hand you're getting in the way, but you are sticking to convenants so that other businesses, as well as Fiber Art, have rights. Mr. Marquez said there are distinctions between SAC and Fiber Art, but I don't think it would hold up in court. He added that the last discussion on SAC was making him rethink, but that he would have to wait and see. I think Don is right, we should not waive the covenants. I just don't feel real good about that. -3- Ms. Jones added that the Foundation may not be in control in two years. Mr. Marquez said we have four lots if #18 & #19 are sold. There is likely to come a time when the owners rise up and say they control it. Sixty five percent of the owners need to say you are not the declarant anymore. Then they can rewrite the covenants any way they want to. Mr. Sweatt said that the two year thing is not there for their benefit. Mr. Jeffreys said if they want to control it themselves that would be fine. I really think we want to help these people if possible, but not if it hinders our helping others in the process. Mr. Marquez said we have only four more for which we have control unless we buy back CSC. We are going to leave SAC alone until their legal problems are resolved. Mr. Jeffreys said we need to go and show our intent to exercise our option. Mr. Marquez said that they were involved in litigation. Mr. Jeffreys said we need to notify that we want to exercise the option, if we don't say anything it's like we are letting the option pass. Mr. Marquez said the two years is up in April. Mr. Jeffreys said that the Foundation should go ahead and notify that we intend to repurchase, but we will delay until litigation is resolved. Mr. Jeffreys said that he hoped g1v1ng Fiber Art the option to buy will be what they need. Mr. Marquez asked what would happen if they waived. Lots 7 & 8 back on the market, we are looking at three or four lots that might be affected by the two years. Ms. Jones asked what about SAC. Would a waiver ruin the repurchase of SAC lots? Mr. Marquez said it could. How much leverage do we have and do we want to exercise. Ms. Jones said it would cost us more than to buy the lots back. Mr. Sweatt said I think it would be an eye sore down the road. One business down there is not happy because we are not enforcing the rules. Mr. Jeffreys said if they rise up and want to take control, can they sue us because we did not make that one stray keep the contract. Mr. Marquez said we will talk to Mr. Borgfeld and see if that option thing will sell. He said that he would report back. Mr. Sweatt reiterated that he did not mind doing the waiver, but . Mr. Jeffreys said there are too many complications, the only option is to say there is no way we can change our covenants. Mr. Sweatt said let's offer them an option of three years with first right of refusal on those two lots. Mr. Marquez asked how much do we charge for the option? Mr. Sweatt said he was thinking of $500 for them to purchase the option. Either $100 or $500, it doesn't make any difference. Mr. Jeffreys asked if we offer them the option would they have to purchase it? Would we give their money back? Will we sell the lots at market value? Mr. Marquez said let's charge them what it costs for our attorney fees plus $500. Mr. Jeffreys said it would not be part of the purchase price then and Mr. Marquez said if they bought the lots, whatever money they applied to purchasing the option, minus attorney fees, would be included in the purchase price. They would not get a refund, but it would be applied. Lets get it bought and developed. Mr. Jeffreys said that $500 plus legal fees for three years is not -4- unreasonable. Mr. Marquez asked if it was ok to make that offer. Mr. Jeffreys said that if someone can come up with a better idea, to let the Board know. Mr. Sweatt said this is the Foundations best offer, if they can make a suggestion, the Board will listen. Mr. Marquez said that they made an offer and the Foundation would counter with the offer of a three year option. The meeting was adjourned at 4:30 p.m. Earleen Ehlers Recording Secretary Jackie Jones Chairperson