Originally Posted Online: Nov. 20, 2012, 8:53 pm
Last Updated: Nov. 20, 2012, 8:55 pm
Case Creek developer sues airport authority
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By Dawn Neuses, firstname.lastname@example.org
A dispute over financing led a developer on Tuesday to file a multimillion dollar lawsuit against theMetropolitan Airport Authority of Rock Island County.
According to Rock Island County Circuit Court documents,RDC Case Creek Trails LLC is seeking more than $12 million in damages, court costs and attorney fees from the airport authority for an alleged breach of a development agreement.
In October 2010, RDC Case Creek, the airport authority and Moline officials signed a development agreement for a planned $90.5 million hotel,office, retail and technology park.It was to be built in nine phases between 2012 and 2020 on 105 acres of airport land.
In early March, officials with the airport and the city terminated RDC Case Creek as the master developer.
Court documents state that the agreement contained a contingency allowing its parties to terminate the pact for failure to secure financing. The suit states RDC Case Creek "diligently pursued" financing for Phase I of the project and had a lender ready to finance it once a lease was executed.
Court documents allege the airport authority refused to negotiate a lease with RDC Case Creek until project financing was secured and did not follow Federal Aviation Administration guidelines for leases.
RDC Case Creek attorney John Doak declined comment Tuesday.
The airport authority's attorney, Roger Strandlund, said he could not comment on the suit because he had not seen it because of an error in filing.
Before RDC Case Creek was terminated, there was movement and money spent on the project, according to interviews and documents obtained earlier this year through a Freedom of Information Act request and voluntarily provided by RDC Case Creek Trails managing member Todd Raufeisen.
Moline annexed the land, created a tax-increment-finance district and issued $6.5 million in bonds for site infrastructure and other project costs.As of April 30, Moline was spending the bond funds to pay initial project costs of $829,706.
This spring, Mr. Raufeisen said he had begun marketing the project and signed letters of intent from potential Phase I tenants. He also had plans to build a Courtyard by Marriott hotel.He hired an architect and engineering firm and put out for bids the construction plans for the roads, water and sewer lines.
OnAug. 25, 2011, the airport notified Mr. Raufeisen he was in default of the development agreement because he had not obtained the required financing, or commitments for financing, for Phase I of the project within 90 days.
Documents obtained by The Dispatch and The Rock Island Argus show the airport wanted the project financed before signing a lease.
This spring, Mr. Raufeisen said he needed a signed lease and land cost before he could get that financing.He said the airport did not follow FAA guidelines, which require that ground rent be based on a land appraisal. Instead, the airport wanted to charge 40 cents per square foot, a figure the airport cited to Mr. Raufeisen in a Nov. 9, 2009, document that stated the rate was not based on "expert consultation" rather than a formal appraisal.
Thedevelopment agreement states the airport has an obligation to lease the property to the developer at a commercially reasonable and FAA-approved rate at the request of the developer or by Jan. 1, 2011 -- but only after certain terms were met, including "procurement of financing."
Between October 2011 and February 2012, Mr. Raufeisen and his attorney requested three times to work with the airport on land lease and/or land cost, according to documents provided by Mr. Raufeisen.
On Oct. 31, 2011, Mr. Strandlund replied to one request by stating in writing that the development agreement "does not require a land lease from the airport in order for you to obtain financing."
"To date no lender has communicated with either the city or the airport about the need for a lease," Mr. Strandlund's statement reads. "If you contend that a lease constitutes a contingency to financing, please identify the prospective lender and allow direct communication between the prospective lender and the airport."
According to documents, the airport authority began questioning other aspects of the proposed project, including the quality of the hotel and the amount of land Mr. Raufeisen wanted to lease -- 13 acres for Phase I instead -- of the entire 105 acres all at once.
This spring, Mr. Raufeisen said he decided to keep trying to make the project work even after he received the termination letter from the airport. He said he ordered an appraisal of the airport property, which came back with a land value of eight cents per square foot, according to the document.
Mr. Raufeisen said he used the appraisal's land cost to draft a lease, obtained a letter of financing from a bank and presented everything to the city in early April. He said he never heard back from the city or the airport.