I was following the proposal for the new restaurants downtown. I feared some decisions would be made without properly vetting the proposal. I wanted some professional real estate logic to go into the decision.
Therefore, I wrote an email to the City Council and the City Manager. It is reproduced below in it's entirety.
__________________________________________________________
From: "Ron Miller"
Date: Oct 15, 2014 9:58:41 PM
Subject: Fw: Millennium Road Holdingsthe
To: "RON MILLER" <ronm145@verizon.net>
From: Ron Miller Sent: Monday, October 13, 2014 6:11 PM To: citycouncil@rowlett.com Cc: Brian Funderburk
Subject: Millennium Road Holdings
Dear Council Members and City Manager--
I hope you are having productive and pleasant days. You earn them, that’s why you get the big bucks.
I wish to discuss a proposal that’s now before you. It is the development of the reported three new restaurants in downtown Rowlett. As we all know, the proposed developers are Serge and Jennifer Faucon. As far as I know, they may be the finest people in the world. I know nothing bad about them nor do I suspect anything bad about them. They may be excellent partners for the City of Rowlett. Individual council members may know the Faucons personally. Therein lies the problem. Most citizens know nothing about them. It is your job to vet the deal on behalf of the citizens of Rowlett, not any private personal relationships. You may know the Faucon’s as excellent people, but you must engage as stewards of the people and let the public know your findings.
I would like to draw a parallel between City Council and most loan committees I know. In this proposal, City Council operates almost like a loan committee. For example, a typical loan officer (say, Jim Grabenhorst,) brings a deal that he wants to propose to City Council (say, loan committee). Jim feels strongly about the deal. He wants to “do the deal.” It’s his job to push for it....to sell the deal. That’s okay. That’s the way it’s supposed to work. It is the loan committee’s job (city council) to find something wrong with the deal. They should challenge the proposal. If Jim can successfully defend his proposal against city council, the deal is made. If he can’t, the deal fails. No one is enemies of one another. Each is just doing their job. It’s the way it works. I never got all my deals approved, but I got a lot thru. I was never enemies with members of the loan committee. We were all friends with different jobs. Everyone understood.
Like a loan committee, you are making an investment. You expect a return on investment. The obligation of the developer is not to repay the city money that is loaned, but instead to repay the city with certain economic achievements that are promised. A deal is still a deal. I have read the Staff Report on the above referenced project. When I put my loan officer hat on, a number of things occur to me.
1. Why is the Chamber of Commerce a party to this deal? The land belongs to the tax payers, not the Chamber of Commerce. I have nothing against the Chamber, but they don’t own my undivided interest in the land.
2. No tax relief is mentioned. Is there any ad valorem tax relief offered by the City of Rowlett in this deal? You should tell us.
3. You really owe the citizens of Rowlett an explanation of 380 Grant funds. To keep this information away from the citizens is “squirrelly.” It’s clear it’s intentional. The citizens see this. They don’t like it.
4. I have visited the Millennium Road Holdings web site. I like the stated goals on the web site. However, have they ever done it? Do they have any experience in this type of re-development? Have the developers ever managed more than one restaurant and any one time? If they have, it should be discussed. Management of multiple sites is different than management of a single site. What type of restaurants did they manage? Were they hamburger stands or sit down $35/plate stores?
5. What does Rowlett want downtown? Do you want low traffic, boutique type restaurants, or do you want a destination restaurant? I don’t know many people that would drive across town, or from another town, for a dish of ice cream. I know they must exist.......but I don’t know any. I know people that would drive a very long way to sit down at a Daddy Jack, Rex’s, Poppadeaus, or Aw Shucks. I would almost trade my cat for a Landry’s in downtown Rowlett. If you have the food and the service, the public will find you.
I once had to make a 4:00 reservation for dinner. I had to get 4:00 because nothing else was available. All tables were full. The restaurant wasn’t in a town. The restaurant was Corina’s in the middle of a ranch near Buffalo Gap, Tx, near Abilene. If you have what the people want, they’ll find you......even if the downtown of Rowlett where it’s located.
Let’s talk a little financing. The developer is going to get the land free if certain conditions are met. With free land, and good credit support, financing might be available to build a small restaurant. However, I don’t think a big restaurant is in the offing. The market isn’t proved up in the Staff Report. The risk could be great. I would like a big restaurant’s input. However, the next two restaurants are proposed to be what? What are they going to be? A decent sized restaurant will cost $1 million to $2 million even with free land, maybe more. Are they the right kind of restaurants? Are they more hamburger restaurants? The proposal is a little quiet about that. I would think I would like to know. Hamburger stores in Rowlett don’t seem to be in short supply.
Now, what if one fails, or two? Now you have empty holes in new businesses downtown. In fact, two special purpose buildings.......restaurants........the number one rated business for failure. Now the plans have gone just the opposite of the desired results. We now have two failed new businesses downtown. It would be disaster time. You simply have to know more than what is on the Staff Report. it’s your job to ferret out the marketing information.
Now, I’ve saved the best for last. When our last city manager resigned, I thought ignorance of financing of real estate and its underwriting criteria had finally retired from our city. I was wrong. It is still among us. I know some banks or lending institutions have made some mistakes from time to time. However, in view of the amount of lending activity in this country, I would have to say these mistakes are minimum in the grand scheme of things. Apparently, the Rowlett “officialdom” still thinks banks are pretty stupid. It is proposed in the subject Staff Report that ownership of the land will return to Rowlett if the developer does not fulfill the duties promised. Let me ask you.........would you loan several million dollars to someone whereby the land under which you made these loans would revert back to someone else in case of default? Your millions of dollars of investment just went with the land. I have confidence in you. You’re not that dumb.........neither are the banks. You would have to sign a subordination agreement and an assignment agreement to allow the banks complete control in the case of the default. You could get the land back if you paid the banks the entire amount of their investment. I doubt the citizens would be delighted with that eventuality. Is that put into the Staff Report to put the citizens at ease? It ain’t gonna happen.
Work on proposing a destination restaurant. That’ll wake up downtown. Seems to me you have a lot of questions to ask........my guess is that the citizens are watching. You have a tough job. Don’t make it tougher by remaining uninformed.
I wish you all well, but I’ll continue to render an opinion occasionally.
Have a good day. Godspeed.
Ron
______________________________________
Nowhere in the above email did I say anything about how to vote. However, I posed several important questions. I trusted our council to use their common sense and conduct meaningful and intelligent inquiries.
I watched the City Council meeting on live feed. I was dumbfounded. I was honestly stunned. I had never witnessed such a bunch of real estate investment misfits in my life.
Carl Pankratz and Debby Bobbitt voted against the proposal for the present time, indicating they wanted more time to investigate additional opportunities. That is exactly the right decision if one doesn't still yet know exactly what they want. The other five voters don't have a clue what they want.
Todd voted for the giveaway because, "they make good pastries." Rick brought up a fact: If you divide $850K by $75K, you get about 11. Now people, that is a fact!! I don't know what else that fact is good for. Rick seemed to think it represented 1100% return on investment. Therefore, the proposal was a good deal. I would like to have been in a room of commercial real estate people when Rick taught us that superb piece of real estate underwriting criteria. The commercial real estate people would still be on the floor laughing. That "fact" Rick stated had absolutely zero bearing on anything real estate. However, it is true if you divide 850 by 75 you get about 11, in fact 11.33. Tammy seemed to be unwaveringly for the deal because Rick was. Michael was classic. His reason seemed to be, "Because I want to." What an enormous real estate talent!! I have no idea why Robbert was for the deal. He didn't say anything. That was the smartest thing I heard.
I just sat and stared at the screen when the vote was taken. I couldn't believe what I just witnessed. I just saw our City Council give away at least $250K of our taxpayer assets without one single intelligent question being asked.
I did learn later that another fact surfaced. I understand the developers really do make excellent pastries. Apparently, they brought pastries to the City Council on Tuesday evening. If our council members are selling their vote for a donut, they're selling themselves too cheap.
I have two more points to make on issues that were brought up in this boondoggle. Several times I heard that because this project would comply with form based codes, nothing could go wrong. This is propaganda introduced by our last regime. Let me tell you something. No one on council even knows how it works. I do. It can get you into a lot of trouble if you don't know what you're doing. The reasons take more time to relate than I have here, but maybe later. In any event, we don't have anyone on council that has a clue about form based codes. Form based codes grants the city authority to design the exterior of buildings the way they want them. That can be good. It can also be terribly, terribly bad. It requires really experienced and knowledgeable staff with good common sense. Have you seen any of this around here lately. Actually, if you have really talented and experienced staff, they don't need form base codes. Our people must be working on all that commercial development in North Shore.
Another point is that the developer will be paid the price of the land after certain achievements are met, notably they must still have a heart beat and pulse rate. The money given to the developers comes from a 380 Grant. Do you know who puts the money in the 380 Grant? You betcha. You're getting smart. It was funny when Jim Grabenhorst presented the deal and quietly said the 380 Grant money would reimburse the developer. He skillfully avoided saying where the 380 Grant cash came from. You can't tell. There just might be a citizen watching that knows what the hell is going on.
The city is selling the land to the developers. Of course, the city is giving them the money to buy the land thru 38o Grants. The 380 Grant money is your money. That fact seemed to not come up. I guess that's what is called an inconvenient truth.
And, who could miss the overwhelming real estate expertise of our Mayor pro tem. It was like an advanced real estate discussion conducted on Sunday morning after a really bad Saturday night. The brilliance was xxxxxwhelming. However, he was ably assisted by Rick. Rick estimated the value of the land we gave away at $50K-$75K.........but the developer was putting in $850K, 11 times that amount. He said our return on investment was outstanding. First of all, the land is worth much more than that. You can't buy a house lot in Rowlett for $50K. The land in questions is in downtown Rowlett, across the street from a developing 225 unit apartment complex. Do you think Rick stated the value of the land a little low? Why? I would suggest #200K to $300K right now, and $600K within three years. It doesn't matter. City Council just gave it away......maybe for a donut.
All I wanted was for the council to think and ask intelligent questions. The developers in the proposal may very well be the partners the city needs, however you will not know it from the circus I watched. If they build all three restaurants, they can sell them in three years and take out the land profit. The restaurants may, or may not, survive. No one knows anything about the business plan.
I have now learned a little bit more about our city council. I am saddened. Collectively, they are not good stewards for the citizens of Rowlett. There is an election in about 18 months. If the citizens of Rowlett tolerate the above behavior from their elected officials, then the fools aren't in office.
This has been a sad time. Rowlett is screwing up its only chance to become a really neat place to live. We must be a laughing stock to the towns around us.
.
Therefore, I wrote an email to the City Council and the City Manager. It is reproduced below in it's entirety.
__________________________________________________________
From: "Ron Miller"
Date: Oct 15, 2014 9:58:41 PM
Subject: Fw: Millennium Road Holdingsthe
To: "RON MILLER" <ronm145@verizon.net>
From: Ron Miller Sent: Monday, October 13, 2014 6:11 PM To: citycouncil@rowlett.com Cc: Brian Funderburk
Subject: Millennium Road Holdings
Dear Council Members and City Manager--
I hope you are having productive and pleasant days. You earn them, that’s why you get the big bucks.
I wish to discuss a proposal that’s now before you. It is the development of the reported three new restaurants in downtown Rowlett. As we all know, the proposed developers are Serge and Jennifer Faucon. As far as I know, they may be the finest people in the world. I know nothing bad about them nor do I suspect anything bad about them. They may be excellent partners for the City of Rowlett. Individual council members may know the Faucons personally. Therein lies the problem. Most citizens know nothing about them. It is your job to vet the deal on behalf of the citizens of Rowlett, not any private personal relationships. You may know the Faucon’s as excellent people, but you must engage as stewards of the people and let the public know your findings.
I would like to draw a parallel between City Council and most loan committees I know. In this proposal, City Council operates almost like a loan committee. For example, a typical loan officer (say, Jim Grabenhorst,) brings a deal that he wants to propose to City Council (say, loan committee). Jim feels strongly about the deal. He wants to “do the deal.” It’s his job to push for it....to sell the deal. That’s okay. That’s the way it’s supposed to work. It is the loan committee’s job (city council) to find something wrong with the deal. They should challenge the proposal. If Jim can successfully defend his proposal against city council, the deal is made. If he can’t, the deal fails. No one is enemies of one another. Each is just doing their job. It’s the way it works. I never got all my deals approved, but I got a lot thru. I was never enemies with members of the loan committee. We were all friends with different jobs. Everyone understood.
Like a loan committee, you are making an investment. You expect a return on investment. The obligation of the developer is not to repay the city money that is loaned, but instead to repay the city with certain economic achievements that are promised. A deal is still a deal. I have read the Staff Report on the above referenced project. When I put my loan officer hat on, a number of things occur to me.
1. Why is the Chamber of Commerce a party to this deal? The land belongs to the tax payers, not the Chamber of Commerce. I have nothing against the Chamber, but they don’t own my undivided interest in the land.
2. No tax relief is mentioned. Is there any ad valorem tax relief offered by the City of Rowlett in this deal? You should tell us.
3. You really owe the citizens of Rowlett an explanation of 380 Grant funds. To keep this information away from the citizens is “squirrelly.” It’s clear it’s intentional. The citizens see this. They don’t like it.
4. I have visited the Millennium Road Holdings web site. I like the stated goals on the web site. However, have they ever done it? Do they have any experience in this type of re-development? Have the developers ever managed more than one restaurant and any one time? If they have, it should be discussed. Management of multiple sites is different than management of a single site. What type of restaurants did they manage? Were they hamburger stands or sit down $35/plate stores?
5. What does Rowlett want downtown? Do you want low traffic, boutique type restaurants, or do you want a destination restaurant? I don’t know many people that would drive across town, or from another town, for a dish of ice cream. I know they must exist.......but I don’t know any. I know people that would drive a very long way to sit down at a Daddy Jack, Rex’s, Poppadeaus, or Aw Shucks. I would almost trade my cat for a Landry’s in downtown Rowlett. If you have the food and the service, the public will find you.
I once had to make a 4:00 reservation for dinner. I had to get 4:00 because nothing else was available. All tables were full. The restaurant wasn’t in a town. The restaurant was Corina’s in the middle of a ranch near Buffalo Gap, Tx, near Abilene. If you have what the people want, they’ll find you......even if the downtown of Rowlett where it’s located.
Let’s talk a little financing. The developer is going to get the land free if certain conditions are met. With free land, and good credit support, financing might be available to build a small restaurant. However, I don’t think a big restaurant is in the offing. The market isn’t proved up in the Staff Report. The risk could be great. I would like a big restaurant’s input. However, the next two restaurants are proposed to be what? What are they going to be? A decent sized restaurant will cost $1 million to $2 million even with free land, maybe more. Are they the right kind of restaurants? Are they more hamburger restaurants? The proposal is a little quiet about that. I would think I would like to know. Hamburger stores in Rowlett don’t seem to be in short supply.
Now, what if one fails, or two? Now you have empty holes in new businesses downtown. In fact, two special purpose buildings.......restaurants........the number one rated business for failure. Now the plans have gone just the opposite of the desired results. We now have two failed new businesses downtown. It would be disaster time. You simply have to know more than what is on the Staff Report. it’s your job to ferret out the marketing information.
Now, I’ve saved the best for last. When our last city manager resigned, I thought ignorance of financing of real estate and its underwriting criteria had finally retired from our city. I was wrong. It is still among us. I know some banks or lending institutions have made some mistakes from time to time. However, in view of the amount of lending activity in this country, I would have to say these mistakes are minimum in the grand scheme of things. Apparently, the Rowlett “officialdom” still thinks banks are pretty stupid. It is proposed in the subject Staff Report that ownership of the land will return to Rowlett if the developer does not fulfill the duties promised. Let me ask you.........would you loan several million dollars to someone whereby the land under which you made these loans would revert back to someone else in case of default? Your millions of dollars of investment just went with the land. I have confidence in you. You’re not that dumb.........neither are the banks. You would have to sign a subordination agreement and an assignment agreement to allow the banks complete control in the case of the default. You could get the land back if you paid the banks the entire amount of their investment. I doubt the citizens would be delighted with that eventuality. Is that put into the Staff Report to put the citizens at ease? It ain’t gonna happen.
Work on proposing a destination restaurant. That’ll wake up downtown. Seems to me you have a lot of questions to ask........my guess is that the citizens are watching. You have a tough job. Don’t make it tougher by remaining uninformed.
I wish you all well, but I’ll continue to render an opinion occasionally.
Have a good day. Godspeed.
Ron
______________________________________
Nowhere in the above email did I say anything about how to vote. However, I posed several important questions. I trusted our council to use their common sense and conduct meaningful and intelligent inquiries.
I watched the City Council meeting on live feed. I was dumbfounded. I was honestly stunned. I had never witnessed such a bunch of real estate investment misfits in my life.
Carl Pankratz and Debby Bobbitt voted against the proposal for the present time, indicating they wanted more time to investigate additional opportunities. That is exactly the right decision if one doesn't still yet know exactly what they want. The other five voters don't have a clue what they want.
Todd voted for the giveaway because, "they make good pastries." Rick brought up a fact: If you divide $850K by $75K, you get about 11. Now people, that is a fact!! I don't know what else that fact is good for. Rick seemed to think it represented 1100% return on investment. Therefore, the proposal was a good deal. I would like to have been in a room of commercial real estate people when Rick taught us that superb piece of real estate underwriting criteria. The commercial real estate people would still be on the floor laughing. That "fact" Rick stated had absolutely zero bearing on anything real estate. However, it is true if you divide 850 by 75 you get about 11, in fact 11.33. Tammy seemed to be unwaveringly for the deal because Rick was. Michael was classic. His reason seemed to be, "Because I want to." What an enormous real estate talent!! I have no idea why Robbert was for the deal. He didn't say anything. That was the smartest thing I heard.
I just sat and stared at the screen when the vote was taken. I couldn't believe what I just witnessed. I just saw our City Council give away at least $250K of our taxpayer assets without one single intelligent question being asked.
I did learn later that another fact surfaced. I understand the developers really do make excellent pastries. Apparently, they brought pastries to the City Council on Tuesday evening. If our council members are selling their vote for a donut, they're selling themselves too cheap.
I have two more points to make on issues that were brought up in this boondoggle. Several times I heard that because this project would comply with form based codes, nothing could go wrong. This is propaganda introduced by our last regime. Let me tell you something. No one on council even knows how it works. I do. It can get you into a lot of trouble if you don't know what you're doing. The reasons take more time to relate than I have here, but maybe later. In any event, we don't have anyone on council that has a clue about form based codes. Form based codes grants the city authority to design the exterior of buildings the way they want them. That can be good. It can also be terribly, terribly bad. It requires really experienced and knowledgeable staff with good common sense. Have you seen any of this around here lately. Actually, if you have really talented and experienced staff, they don't need form base codes. Our people must be working on all that commercial development in North Shore.
Another point is that the developer will be paid the price of the land after certain achievements are met, notably they must still have a heart beat and pulse rate. The money given to the developers comes from a 380 Grant. Do you know who puts the money in the 380 Grant? You betcha. You're getting smart. It was funny when Jim Grabenhorst presented the deal and quietly said the 380 Grant money would reimburse the developer. He skillfully avoided saying where the 380 Grant cash came from. You can't tell. There just might be a citizen watching that knows what the hell is going on.
The city is selling the land to the developers. Of course, the city is giving them the money to buy the land thru 38o Grants. The 380 Grant money is your money. That fact seemed to not come up. I guess that's what is called an inconvenient truth.
And, who could miss the overwhelming real estate expertise of our Mayor pro tem. It was like an advanced real estate discussion conducted on Sunday morning after a really bad Saturday night. The brilliance was xxxxxwhelming. However, he was ably assisted by Rick. Rick estimated the value of the land we gave away at $50K-$75K.........but the developer was putting in $850K, 11 times that amount. He said our return on investment was outstanding. First of all, the land is worth much more than that. You can't buy a house lot in Rowlett for $50K. The land in questions is in downtown Rowlett, across the street from a developing 225 unit apartment complex. Do you think Rick stated the value of the land a little low? Why? I would suggest #200K to $300K right now, and $600K within three years. It doesn't matter. City Council just gave it away......maybe for a donut.
All I wanted was for the council to think and ask intelligent questions. The developers in the proposal may very well be the partners the city needs, however you will not know it from the circus I watched. If they build all three restaurants, they can sell them in three years and take out the land profit. The restaurants may, or may not, survive. No one knows anything about the business plan.
I have now learned a little bit more about our city council. I am saddened. Collectively, they are not good stewards for the citizens of Rowlett. There is an election in about 18 months. If the citizens of Rowlett tolerate the above behavior from their elected officials, then the fools aren't in office.
This has been a sad time. Rowlett is screwing up its only chance to become a really neat place to live. We must be a laughing stock to the towns around us.
.
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