Part I: ~ $86,000 + for “Convention Center” Planning
by Don Moniak
On January 23, 2023, Aiken Economic Development Director Tim O’Briant and Finance Director Kim Rooks co-signed a $36,799.93 check to the Aiken based law firm of Hull Barrett. The check was reimbursement for the firm’s fifteen months of legal counsel on behalf of Newberry Hall in Aiken, LLC (Agent: Patrick Carlisle) during negotiations with the Aiken Municipal Development Commission (AMDC). The lengthy negotiations involved “convention center lease and operating agreements,” consulting agreements, and existing lease agreements.
This payment closed another chapter on the Project Pascalis story, this one involving the City of Aiken’s pursuit of a downtown conference center. The check to Hull Barrett raised the costs of all Pascalis project work specific to conference center planning to approximately $86,000.
More than half of the costs were in legal fees, and another $30,800 was spent on market surveys conducted by Chicago-based consultants, money that left the community and the state. In addition to the Newberry Hall of Aiken negotiations and document reviews, the costs included a ground lease appraisal for a possible long-term lease of the city’s former historic municipal building at 214 Park Avenue.
Table 1: Direct Project Pascalis Convention/Conference Center Costs.
| Party | Role | Task | Cost |
| Hull-Barrett | Newberry Hall Legal Counsel | Negotiation of Legal Agreements | $36,799.93 |
| Pope-Flynn | AMDC Legal Counsel | Negotiation and Review of Legal Agreements | $7,052.00 |
| Capstone Services | Project Manager | Review of Legal Agreements | $1,615.00 |
| HVS Consulting | Consultant | Conference Center Market Review | $6,000.00 |
| AECOM Technical Services | Consultant | Project Pascalis Market Review | $24,800.00 |
| McNeil Appraisal Services | Appraiser | Ground Lease Appraisal of 214 Park Ave | $9,700.00 |
| Total | $85,966.93 |
Additional factors that would better reflect the true, total costs of conference center planning and design include city staff labor (1), Boudreaux Group’s work for the first, secret Project Pascalis effort in early 2021 (2), Cranston Engineering’s support in 2022 of the second Project Pascalis effort (3), and design work by the second Pascalis Project developer, RPM Development Partners, under a cost sharing agreement with the AMDC. However, these costs are difficult to break down by project area.
The Convention Center and The Mayor’s Vision
A downtown conference or convention center with a capacity of 500 people, along with a 100-room hotel, downtown apartments, and a parking garage, were the stated goal of Mayor Rick Osbon and City Council, articulated in the Mayor’s March 2021 letter to the AMDC:
“Explore meeting the existing demand for a conference/convention facility that will fulfill the persistent call from regional membership organizations and others who have indicated they would host regular large events in our charming and historic city if there were an appropriate venue here to meet their needs. Such a venue would need to be adjacent to sufficient first-class lodging to accommodate as many as 500 overnight and multi-night attendees.”
Mayor Osbon’s letter was delivered two weeks after City Council adopted the $115,000 AECOM prepared Economic Development Strategic Master Plan, and the AMDC’s vague announcement of “Project Pascalis.” At the time, the project was only known to involve an unnamed, “well-capitalized, seasoned investor” seeking to revitalize unidentified areas in the city’s historic and treasured Parkway District. Three weeks after the Mayor’s letter, conceptual designs of a new hotel, conference center, parking garage, and apartments were in the hands of the AMDC—but not shared with the citizenry.
The Market Surveys: $30,800+
The Mayor articulated his vision, and the concept designs were completed, prior to any market surveys being conducted. In May 2021, the AMDC commissioned the first of two assessments, paying Chicago-based AECOM Technical Services $24,800 (4) to conduct a market and financial analysis for its downtown plan. Prior to procuring the study, AMDC Executive Director Tim O’Briant also described the intent of the study as a supporting document for potential Tax Increment Financing:
“Here is the proposal for a full market study related to Project Pascalis from AECOM. Such as report would be required by law if the County considers a TIF for the project. I’d like to get these guys, or another firm if you have suggestions, started so we can be ready for the TIF debate ASAP. Let’s discuss.”
The Chicago-based AECOM team submitted an underwhelming five-page report in July 2021, titled “Downtown Aiken Hotel + Conference Center + Municipal Garage Market & Financial Findings.” In regard to construction and operation of a conference center, AECOM’s authors presumed taxpayer subsidies:
“Presumes that a private operator can run the food and beverage business at break- even, with a focus on banquets and local events rather than conventions and trade shows
• Subsidy is likely needed to offset debt service on construction cost
• Estimated annual debt service: $300,000
Based on a total development cost per square foot of $221 in 2021 dollars-“
The AMDC purchased the seven Pascalis properties in November 2021 for $9.5 million. AMDC later procured, for $6,000, the services of Chicago-based HVS Convention, Sports & Entertainment Facilities Consulting to conduct a “Proposed Conference Center Market Analysis.” (5)
HVS conducted interviews with “key informants,” but did not identify any by name. Among the underwhelming take-aways from the interviews were:
- Downtown Aiken lacks a ballroom to host banquets of 300 or more.
- Several events are lost annually to North Augusta, Augusta, and other nearby cities due to lack of facilities.
- Opinions vary, but most agree there is occasional need for banquet seating capacity of 300 to 500.
- Marketing and selling the facility will require significant investment in staff and other costs, especially in the first few years.
- A City-owned conference center could require ongoing subsidies.
In terms of demand, HVS concurred with AECOM: there was low demand for conventions and trade shows without signficant taxpayer investments in marketing the venue. The demand forecast was for six conferences annually in the first few years of operation, and ten conferences annually after a “dedicated marketing and sales staff” was in place.
The Newberry Hall Negotiations: $45,000+
Among the seven properties the AMDC purchased was the “Anderson property”, home to popular event and catering facility Newberry Hall. The commission paid $2 million, more than 2.5 times the appraised market value of $712,000 listed by the Aiken County Assessor. The intent of the AMDC and its developers was to demolish the Newberry Hall building, first built in 1965, and replace it with another conference center, in conjunction with a five-story parking garage and apartments.
This was all made possible when the owners of Newberry Hall exercised a one-time waiver on an existing option to purchase the property. As described in the Newberry Hall lease:
“Section 5 of the Lease provides Carlisle with a purchase option (the “Option”) that would be triggered by the closing of the Purchase.
Anderson and Carlisle desire that Commission close the Purchase without triggering the Option and have requested that Carlisle grant a one-time waiver of the Option to allow Carlisle and Commission more time to attempt to finalize an Operating Agreement.” (4)
The option was possibly negated by the high sales price originally offered by Weldon Wyatt’s WTC Investments, which was also negotiated with the Anderson family by members of the Smith, Massey, Brodie, Guynn, and Mayes law firm. Eight months after the first contract for $2 million was signed for the Anderson Property, Massey signed, on behalf of RPM Development Partners, a purchase and sale agreement with the AMDC for the Pascalis properties at nearly half the AMDC’s purchase price—-$5 million for properties that were bought with $9.5 of debt bonds issued by the city.
As reported in The Pascalis Evictees, the “Amended Lease Agreement (Second Amendment)” included options for compensation for lost income during demolition and reconstruction, purchase of a new building following a complicated appraisal process, and negotiating to operate a new conference or convention center. According to the appraisal clause, the owners of Newberry Hall had, as a tenant, reportedly invested $350,000 to improve the popular facility. (4)
Between October 15, 2021 and January 17, 2023, when Hull Barrett submitted its invoice, negotiations for operation of a future conference center and other matters, held between representatives of the AMDC and Newberry Hall, resulted in:
- Five “letters of intent”
- The November 2021 “Second Amendment to the Lease Agreement.”
- A ‘Third Amendment to the Lease Agreement,” which required two versions.
- Nine versions of the “Convention Center Lease and Operating Agreement.”
- An agreement to amend lease.
- Five versions of consulting agreements.
In response to a request for copies of the legal documents that were paid for with public funds, Aiken Economic Development Director Tim O’Briant responded:
“Legal expenses related to a potential displacement of Newberry Hall were paid by agreement with the owners. The work product of their attorney and his services on their behalf is their attorney-client privilege to waive or maintain. Please contact them directly. As you know, the project was canceled and no draft of any agreement was ever produced for, presented to or considered by the AMDC and/or Aiken City Council due to that cancellation. No further records beyond the invoice will be provided.”
In actuality, the “Second Amendment to the Lease Agreement” was a final document that was publicly disclosed, and any subsequent lease agreements for a city tenant are subject to disclosure. No legal expenses were included in the relocation agreements for five other potential Pascalis evictees. (7)
According to legal invoices contained in the AMDC Financial Binder (pages 155-172) , the Columbia and Spartanburg based law firm of Pope-Flynn was responsible for protecting the legal interests of the AMDC, and thus the financial interests of Aiken city taxpayers, during conference center negotiations. Pope-Flynn billed the AMDC more than twenty hours and $7,000 for review of contracts, letters of intent, conference calls, and other work relevant to the negotiations.
According to invoices on pages 44-59 of the financial binder, Aiken County based project manager Capstone Services also assisted in the review and discussion of the agreements and contracts. Upwards of seventeen hours and $1700 was devoted to tasks such as “reviewing pros and cons of conference center delivery method.”
The Ground Lease Appraisal: $9,700+
In April 2022 the AMDC decided, without any public input or formal City Council approval, to pursue a conference center at the soon to be vacated Municipal Building at 214 Park Avenue. As reported in Why is the City of Aiken Toying with 113 Downtown Jobs, the discussion leading to the decision occurred in back channels involving the city’s reportedly independent Design Review Board and AMDC Executive Director Tim O’Briant.
Following the announcement, O’Briant procured the services of local appraiser Thomas McNeil to conduct a “Ground Lease Appraisal” of the historic Municipal Building. His Appraisal and Ground Lease Market Survey was submitted to Tim O’Briant on June 6, 2022.
The purpose of the report was to:
“Assist the client in establishing a Ground Lease rental rate for the subject tracts, one parcel, as well as form an opinion of value of the subject site on the basis of the Ground Lease rental rate and other data. This report is contingent upon and made on the basis of the hypothetical condition that the improvements situated on the site, redeveloped as a portion of Project Pascalis and specifically denoted as the forty-six thousand gross leasable square foot, more or less conference center and commercial space, exists upon the site as of the effective date of this report.”
McNeil defined a ground lease as, “an agreement in which a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned over to the property owner… In the case of a ground lease, generally one party owns the land (i.e. fee simple interest) while a separate party owns the improvements (i.e. leasehold interest). In most cases, the owner of the land leases the land to the owner of the improvements for an extended period of time (20 – 100 years).”
The ground lease appraisal was hampered by a lack of “comparable properties,” specifically ground leases in the Aiken market area. Ironically, one of few local “ground leases” cited in the report included the new Taco Bell on Whiskey Road. That private redevelopment project was made possible after the locally owned bowling alley was demolished as the result of another City of Aiken project.
By using an “Income Capitalization Approach” that postulated an annual income to the property owner of $104,157 for twenty years, supplemented by a limited local ground lease comparison approach, McNeil concluded the ground-lease value of the subject real estate, “on the basis of any and all assumptions, extraordinary assumptions and hypothetical conditions contained herein to be $2,200,000.00 TWO MILLION TWO HUNDRED THOUSAND DOLLARS.”
How much is $86,000?
$86,000 would pay the annual salaries of three newly hired solid waste maintenance workers for the public sanitation department, or 7,227 lifeguard hours at the current advertised rate, or $1,000 bonuses to the eighty-six lowest paid city employees, many of whom are eligible for public welfare benefits.
FOOTNOTES:
(1) Staff time devoted to any aspect of Project Pascalis is unknown. Monthly reports from the two person, $165,000 a year City of Aiken Economic Development Department provided no breakdown of time devoted to any Pascalis related tasks.
(2) The conceptual plans for the first Project Pascalis effort were completed by the Boudreaux Group, on behalf of then project developer Weldon Wyatt, were publicly disclosed only after a Freedom of Information Act request in June 2022. The AMDC compensated Wyatt’s GAC, LLC $14,417.50 for the overall effort after the developer withdrew from the project less than two months after the first announcement.
(3) Cranston Engineering billed the City of Aiken for $33,692.93 for professional services in support of “Raines development” in downtown Aiken between March and July of 2022. The invoices are on pages 86-90 of the FOIA-induced AMDC Financial Binder.
Cranston also received $18,504.00 for a condition assessment of 214 Park Avenue. Although this bill was paid for by the AMDC, the project was requested in September of 2021, prior to any proposal for a conference center at the Municipal Building.
(4) The AECOM invoice.
(5) The HSV Invoice
(6) The Newberry Hall Second Amended Lease, located on pages 39-43 of the AMDC’s November 9, 2021 meeting agenda packet, read, in part:
“The development of the Project contemplates that the improvements on the Property would be demolished and replaced with a larger conference center and kitchen and that Carlisle would be compensated for loss of income during interruption of Carlisle’ s business and would lease the replacement conference center and kitchen pursuant to a replacement lease and operating agreement, the terms of which are under discussion but are not finalized (the “Operating Agreement”).
D. Section 5 of the Lease provides Carlisle with a purchase option (the “Option”) that would be triggered by the closing of the Purchase.
E. Anderson and Carlisle desire to that Commission close the Purchase without triggering the Option and have requested that Carlisle grant a one-time waiver of the Option to allow Carlisle and Commission more time to attempt to finalize an Operating Agreement.
NOW, THEREFORE, for ten dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby covenant and agree as follows:
1. One-Time Waiver of Option. Carlisle consents to the closing of the Purchase by Commission and agrees that closing of the Purchase by Commission shall not trigger the Option. Except for this one-time waiver by Carlisle of the triggering of the Option, the Option shall remain in full force and effect and shall be applicable to any future transactions that would otherwise trigger the Option.”
2. Negotiation of Operating Agreement. Carlisle and Commission shall continue good-faith negotiations of the Operating Agreement based on the latest draft of the letter of intent currently being discussed by them. However, the letter of intent has not been approved, and Carlisle and Commission agree that neither of them shall have any liability or obligations to the other for failure to enter into an Operating Agreement.
3. Failure to Enter into Operating Agreement. The Lease will continue in full force and effect after the Effective Date, with Carlisle being the “lessee” thereunder and Commission being the “lessor” thereunder. Failure of Carlisle and Commission to execute an Operating Agreement within five (5) years after the Effective Date shall trigger Carlisle’s Option to purchase the Property to the same extent as if “lessor” delivers to “lessee” notice of intention to sell the Property under Section 5(i) of the Lease. The closing of the purchase and sale of the Option shall be made under the same procedure as outlined in Section 5 of the Lease, except that the purchase price shall be determined by an appraisal as described below.”
- Appraisal. The purchase price for the Property under the Option shall be the cash equivalent price at which the Property would change hands between a hypothetical willing buyer and a hypothetical willing seller, neither being under a compulsion to buy or sell and both having reasonable knowledge of relevant facts, as determined by an appraisal, minus $350,000 (which is the amount paid by Carlisle for leasehold improvements) (the “Appraised Value”). After the Option is triggered, Carlisle and Commission shall attempt to agree on an appraiser to perform the appraisal for ten (10) days. If Carlisle and Commission cannot agree on an appraiser within such ten-day period, each shall appoint a MAI appraiser who is approved to conduct appraisals for commercial properties located in Aiken, South Carolina by Security Federal Bank, First Community Bank, or First Citizens Bank by each party delivering notice of the identity of its respective appraiser to the other within twenty (20) days after the expiration o f such ten-day period . If the two appraisers cannot agree on an Appraised Value of the Property within thirty (30) days after the last of them is appointed, then within five (5) days, they shall appoint a third appraiser. The third appraiser shall determine the appraised value of the Property within thirty (30) days after such appraiser’s appointment. The Appraised Value shall be the average of the two (2) appraisals which are closest to each other. Commission and Carlisle shall each pay the costs of the appraiser appointed by them, and one-half (1/2) of the cost of the third appraiser. The purchase price as determined herein shall be conclusive and binding on Commission and Carlisle. If any party fails
to appoint an appraiser within the time required herein, the Appraised Value shall be determined by the appraiser appointed by the other party and shall be conclusive and binding upon the Commission and Carlisle. In recognition that Commission may pay greater than fair market value for properties as part of economic development activities, properties acquired by Commission for the Project or otherwise shall be excluded from comparable sales by the appraisers conducting the appraisals. This Section shall supersede Section 5(ii) of the Lease.
(7) The generic relocation assistance agreements for all other AMDC tenants on Pascalis properties reads:
“Upon the Tenant vacating the Premises, the Commission shall provide relocation assistance in the form of a single payment calculated as the amount paid by the Tenant as Rent to the Commission to such date, beginning with the Rent paid by the Tenant for the month of December 2021, less any amounts paid by the Commission to any property manager or property management agency .for the management of the Premises and the collection of Rent.”
(8) The McNeil Appraisal Invoice (below) The Ground Lease survey was obtained via a FOIA request and is available here.
