You can’t trust Dayton City Hall

Arial view Dayton AirportIf you think the people running the City of Dayton have your best interests in mind, you are in for an eye opener. I warned of problems with this deal with Industrial Realty Group last week.

First, meet our local hometown hero: Mark Herres, CEO of The Builders Development Group. Mark had an idea to put a solar array on top of the former Emery air freight hub at the airport. The building, currently owned by UPS, which would cost about $380 million to build today, sits in a mothballed state until 2020.

Over the next 9 years, UPS must keep it in perfect operating condition, because of special regulations of buildings that sit on FAA grounds. The city leases the land for $657K year- and is guaranteed it until 2020. UPS pays about $185K in property taxes to the county. All in- UPS spends at least $2 million a year to keep an empty building. Included with the building is a conveyor system worth about $20 million, 5 diesel generators worth about $500K each and a fuel farm that’s worth about $15million (it’s made of stainless steel and aluminum). There is 166K square feet of IT office space built out with fiber and fast internet. There is a million square feet of warehouse space, in an International Free trade zone. It even includes the old airport tower- which, believe it or not- has nothing to do with the FAA tower that was just built. If you just scrapped the metal in the building- you’d get a cool $6 million or so.

Mark approached UPS in 2009 with a way to end up at least cash neutral though 2020- by leasing the roof for $1- supplying UPS with cheap power- and slowly filling the facility with jobs- both in green energy (solar manufacturers) and in turning the fuel farm into bio-composters. The warehouse could also house distribution for tech companies- but all this really doesn’t matter, because his deal was with UPS- and they weren’t getting out of their lease.

Mark approaches the city and has a conference call with airport director Ahmad Iftikhar, Stan Earley, Tim Riordan, Shelley Dickstein from the City manager’s office- Walter Krgowski (airport deputy director). Chris Meyer from the Dayton Development Coalition and representatives from UPS. As the lease holder, the city must sign off so the FAA can approve the use.BDG dec 10 Krygowski

Even though the lease would still be paid by UPS no matter what BDG does- this is a deal between BDG and UPS, the city asked for “Financing Details” and- at some point asked what would happen to the building in 2020 when the UPS lease was done.

UPS said that by 2020- they’d sell the building to BDG for $1 and let them take over the 20-year option.

Apparently- when that number popped up- someone saw a chance to cut themselves a deal.

On Jan. 25, 2010, Director of Aviation Ahmad Iftikhar (who is already looking for another job) wrote Riordan- about the “Emery MOU” – Memorandum of Understanding between the city and UPS/BDG and says in item 8. “At some point we would want IRG to talk to Mark Harries (sic.).” In item 3 he’s also asking Doug Hanish- a local real estate property appraiser to look at this deal. Why would an appraisal be done since this deal has nothing to do with the sale of the building which belongs to UPS? Jan 25 2010 Iftikar to Rirodan IRG

By March 1st- on city stationery, Ahmad- who is about to accept a job in New Orleans, sends the wording of an MOU to Stuart Lichter- the President of IRG in Downey, Calif., that he should use to make an offer to the city of Dayton to buy the building out from UPS and cut Herres and BDG out. Ahmad is promising to undo a deal which the city had already entered into a Memorandum of Understanding with a local player. Mar 1 2010 Iftikar to Lichter

Of course, Lichter takes a week or so- to review it- and then sends back Ahmad’s language- copy and paste: Mar 12 2010 IRG to Iftiakr

Next we have city manager – fast tracking IRG deal, asking via e-mail April 1st, 2011 to “Stuart,” as if they are best friends- where he wants to see a pro forma- asking why IRG’s deal only is through 2016 instead of 2020- and something in the agreement that indicates the UPS funds will be spent on the project (as opposed to pocketed by IRG- who has not shown any kind of plan for the building).Apr 1 2011 Riordan to Lichter

Note, IRG set up an LLC explicitly for this deal so they can take the money out and run if they feel the need. IRG also wants the fuel farm taken out of the deal- as they see it as a liability.

Lastly- we have an e-mail on April 15, 2011 where the FAA is sticking their nose in- rightfully- asking what IRG plans to do with the FAA’s investment in an aviation facility- which requires the new owner to have at least 10% aviation-related use. There is a final jab- in that if the new owners don’t comply- the FAA can pull the ownership of the building- probably after IRG has scrapped as much as they can out of it. Apr 15 2011 FAA to City

The City Commissioners were handed this- plus a lot more information on this deal today- for a vote on Wednesday as part of the city manager’s recommendations: http://www.cityofdayton.org/cco/Commission%20Agendas/2011/04-27-11%20Agenda.pdf

They are entering into a deal with IRG- doing business as “Air Commerce LLC” and walking away from a guaranteed contract with UPS.

Under the terms of the deal, UPS will pay IRG (not Air Commerce) $5,750,000 and Air Commerce will place $1,280,000 in escrow and pay the city $640K a year for a total of $3.2 million- with options. Why the rush to do a deal with a company that clears an easy couple of million right off the bat- without promising the city ANYTHING in return? Why did the city rush out to move around our local hero, BDG- who was promising jobs, innovative technologies- and not changing the terms of the lease at all? Why do we need to do a deal with someone smaller than UPS- which is what we have now?

There can only be one answer- and that is that someone at IRG is paying people in City Hall- or promising to pay them. Both people who started this deal at the airport have moved off to New Orleans.

There is ZERO reason to act on this deal this week– yet, already, almost 70 employees of UPS and their security firm etc- were already given walking papers- with a termination date of Friday. How does this benefit the taxpayers?

Questions need to be answered- because we can’t trust city hall at all. These documents prove that they are conniving backstabbers, unable to do an honest deal.

 

 

 

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11 Responses

  1. Brew Meister April 25, 2011 / 10:18 pm
    David Esrati, this article is a great piece of work.  Those who read it and think it may have a sharp tone, believe me – David was being gentle.  Being close to the source and development of this deal over the past two years, there are some very shifty characters involved, and I am glad that someone has finally called them out.  Dayton’s City manager, BIG TIM,  has been the ringleader of deceit and disaster followed by a crew of minions starting with his now departed Airport Manager, IFIKAR along with his Assistant Airport Manager  – both now working in New Orleans, Airport Business Development Manager, Regina (who originally enthusiastically brokered potential deals with BDG and UPS), and the Dayton Development Coalition who were under direct influence and control of the ringleader City Manager to throw any obstacle possible in the wayof a UPS/BDG deal.  Numerous honest attempts to work with the city were deflected by this circle of clowns who obviously had other plans in mind, plans that I am sure are not in the best interest of the City of Dayton or future devlopment.  If you follow the money trail, I am sure you can find some loose change falling into some of these key players pockets.
    The real question is this – do you trust your City Manager to force this decision down your throats becuase he thinks he knows what is best?  He only has his interests in mind, not the city’s and not the peoples.
    Do you want another vacant Renovated office building in the City of Dayton or would you rather see something new – some innovative reuse of a great building bring green technology business and jobs into the city.
    You have been warned, do nothing and pay the price.  Speak up and oppose, shut these city crooks down.
  2. Civil Servants Are People, Too April 26, 2011 / 2:10 am
    @There can only be one answer- and that is that someone at IRG is paying people in City Hall- or promising to pay them.
     
    Really, that is the ONLY possible answer?    Corruption is the only answer?   I am disappointed.  We all know the old saying about people who “assume” too much.
     
    Why ruin a compelling (and interesting) case by shouting fire in the theater?   By stepping over the proverbial line, you disrespect your local leaders, damage your own credibility, and show the limitations of the biased citizen journalist.   Asking questions is the proper first step.   Pointing fingers should come later.
     
    Please allow me to me pose two questions…
    1)  How many large solar arrays has Mr. Harries built?
    2)  How many large industrial sites has Mr. Harries revitalized?
     
    And finally, sir…
    Is there not at least the POSSIBILITY that there is something at play other than outright corruption?
     
     
     
    PS.  Mr. Harnish is a respected local expert in real estate finance, not just ordinary appraisals.   He does work for communities across the region.
     
  3. David Esrati April 26, 2011 / 6:42 am

    @CSPAT- ahh, let’s see- with the City task force having zero ideas on what to do with the building- a guy comes to you with a good idea. You enter into an agreement with him- then actively start soliciting the building to someone else- even though the current lease on the building still keeps the building and its contents intact and paying you revenue.

    Then, you WRITE the agreement- send it off to the competition- and get it back- verbatim.

    There was no real estate deal being done in the first deal- with no handing over of assets- therefore no chance for payola. Your new deal however- takes the building away from a company that could use it again- is an upstanding company with a track record and deep pockets- and hands it to vultures.

    Yep- corruption.

  4. Bob April 26, 2011 / 2:31 pm
    Here’s my take on the whole deal:

    1.  If you attended IRG’s unvailing this morning, and you have half a brain, you know that it could take many, many years for the redevelopment to come to fruition….which is the nature of the beast with developments.

    2.  IRG’s plan, if you want to call it that, is to move the fence, and create and industrial site.  Weren’t they just handed 4M+ sf of industrial space at Moraine GM.(see above)  This city doesn’t need more dedicated industrial space.

    3.  IRG would pocket $2M from the jump, and could potentially walk after 5 years, and dump a non-revenue generating hog back on to the City.

    4.  IRG markets themselves as owners, managers, and redevelopers of over 50 million square feet of facility space.  What those numbers don’t show is that 30% of that space is currently unoccupied, and they cut 20% off the facility space number because it is slated for demolition.

    5.  The vast majority of IRG’s tenants are “lateral” movers.  They are companies that move into the redeloped space from the other side of town, sometimes just around the corner.  That would be like moving DP&L to the UPS site…lateral move.

    6.  BDG’s plan, which the City has not officially reviewed, yet another Riordan lie, would create a revenue-generating facility for the City whether or not it is occupied.  So if the redevelopment fails, the City will get back a revenue-generating facility even if noone is in the building.

    7.  BDG has financial backers and a possible air-hub user already on board.

    8.  I keep hearing City reps nagging Wright Patt to contract to local contractors.  Here you have the same City trying to give this project to a California company who could give to flips about Dayton.  CAN ANYONE SAY, “HYPOCRISY?”  BDG is local and has put together a more than capable team.

    9.  See all documents which have been made public by David Esrati and others.  ENOUGH SAID.

    10. City officials constantly tout the abilities of their citizens and that Dayton can do it all on their own.  And that Dayton will be a hub of innovation, etc.  Here you have both:  A local developer with a very good plan, and the opportunity to create a “Green Jobs” hub.  See:  “HYPOCRISY” from item 8 above.

    11. These same City officials bombasted Gov. Kasich for assigning his Dept. of Dev. position to a guy from California for $1.  See:  “HYPOCRISY” from items 8 & 10 above.

     
    I think the City should shelve the IRG proposal for a year or two to allow BDG to get their plan running.  If they fail, then reconsider the IRG proposal.  There is nothing to lose doing this.  And for those of you who think that IRG is not the type of company to strip sites and dump them back on their owners, then you haven’t done your homework.  They have done it many times.  If you talk to anyone who has been around their redevelopment, they will tell you that they are not as advertised in the press.

    One final note:  I don’t blame IRG for anything that has transpired with this particular project.  Esrati labels them as vultures, which they may be(See Richard Gere in “Pretty Woman”, he did this very thing)  But they have been successful in doing this, so more power to them.  City officials should be embarassed for drinking the IRG cool-aid.

  5. Jamie April 26, 2011 / 4:05 pm
     I sat in on the first meeting a few years ago as Mr. Herres brought his ideas to the city . I think after hearing all of his great ideas and contacts he had made , someone decided to get in on the action themselves and cut Mr. Herres and all his ideas and creativity out of the loop . It seems to me that Mr. Herres plan brings many more jobs to the Dayton area , thus more money for our City leaders to blow , they should be behind that .
  6. djw April 26, 2011 / 4:09 pm
    Unbelievable. Thanks for your good investigative work on this, David. In a better world, exposing this predictably disastrous strategy would be very bad news for the city government, but sadly I doubt it’ll make a difference here.
  7. Brad April 26, 2011 / 6:11 pm
    Let us not forget that IRG is also doing the old Delphi area at I-75 and Edwin C. Moses where they just moved MedWorks.. for better or worse, they’ve certainly jumped head over heels into the Dayton market at a pretty rapid pace.. probably almost 2 million sq. feet between GM-Moraine, Delphi site, and the UPS hub..
  8. Doug Hansen August 9, 2011 / 3:53 pm
    Just heard Mark give a presentation- incrdible story about the incompetence of our city leaders-  I understand the Mayor is in favor of Mark’s proposal but the other commissioners- all of whom are in the one-party monopoly that has destroyed the city- are supporting the IRG group which has already screwed up several projects and caused many environmental problems- google what they did in Downey California area.  It is important that this story goes out to the neighborhoods and priority boards so that they understand how their so-called leaders are choking the life out of this one great City.
  9. bobby August 9, 2011 / 6:29 pm
    This reminds of the urgency plea  IRG made to the city because of two prospective users they had. More than three months have passed since this deal was signed…. Were there prospects, or did IRG hustle the city?

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