PRESCOTT, AZ (August 1, 2012) -- On May 24, 2012, the City of Prescott issued a "Notice of Intent to Sell and Request for Proposals for Purchase of Real and Other Property; Elks Theatre."
The City's goals for the offering, set forth in the Request for Proposals (RFP), included conveyance to a qualified successor owner who would maintain the historic quality and integrity of the Elks Theatre, operating and preserving it as a community venue for performing arts and related purposes. Financially, the City's expectation was to sell the property for an equitable and reasonable current market value encompassing and acknowledging the appraised value, grant funds, prior City expenditures, and the private philanthropic efforts and donations made for the restoration of the Elks Theatre.
The City commissioned an appraisal of its property interest, which valued that interest at $2.78 million on a fee simple basis, effectively identifying the replacement cost for insurance purposes. A substantial reduction from this figure, by 50% or more considering the significant deed restrictions to be imposed as to use and perpetual operation, was applied to determine a realistic market value range for negotiation purposes.
While no minimum cash requirement was specified by the RFP, the document disclosed expenditures of public monies totaling $1.8 million, including over $1.38 million by the City of Prescott; and the investment of an additional $1.75 million from private contributions to the Elks Opera House Foundation, a separate non-profit corporation, for restoration of the theatre house.
Approximately equal halves of the total floor area of the Elks Building located at 117 E. Gurley Street, Prescott, Arizona, are owned by the City of Prescott (the Elks Theatre and marquee) and the Prescott Elks Building, LLC (storefronts, law offices). The RFP specified that sale of the City's interest would require simultaneous sale of the remainder of the building (separate escrows, simultaneous closings).
One proposal was received on June 29, 2012, in response to the request, from The Elks' Theatre & Performing Arts Center (the "Elks' Center"), an Arizona Non-Profit Corporation.
The proposal, pertaining to the City's property interest, contained three principal points:
(1) Cash to City of $500,000; (2) Deed restrictions to assure continuing public benefit; and (3) Establishment of an endowment for perpetual operation.
A Real Estate Purchase Agreement incorporating the principal points of the proposal was subsequently drafted by legal counsel for the Elks' Center, and forwarded to the City for consideration.
The City Council discussed the proposal in executive session on July 24, 2012, and provided direction to its attorneys and staff, which was subsequently communicated to legal counsel for the Elks' Center.
Given the City's investment of $1.38 million and goal of reasonable and sufficient cost recovery, the City asked that the Elks' Center consider amending their proposal to include a higher cash component. Since the City was neither provided written information regarding the overall project budget and funding available to the Elks' Center, nor a copy of the separate agreement with the Prescott Elks Building, LLC, no comment is possible by the City as to the relative consistency and equity of the terms, including the respective amounts of cash at closing to the two owners, and conditions, specifically the intended uses and restrictions contemplated for the privately owned portion of the Elks Building.
The City's request for a higher cash amount was declined by the Elks' Center, ending the negotiations and RFP process.
"Although we were unable to reach a mutually satisfactory purchase agreement, the City of Prescott sincerely appreciates the interest of The Elks' Theatre & Performing Arts Center in preparing and submitting a proposal worthy of detailedconsideration," commented Matthew Podracky of the City's Legal Department.
The process which began with issuance of the RFP on May 24, 2012, has been concluded. The City will not be issuing another RFP at this time; operation of the Elks Theatre will continue by the City with the production assistance of the Elks Opera House Foundation.