Could Town-EDA disagreement over dynamics of Afton Inn sale kill redevelopment plan?

During the Asset Committee report at Friday’s Front Royal-Warren County Economic Development Authority meeting, the Town of Front Royal, specifically through its legal department, was accused of “obstructing” the closing process on the sale that would allow redevelopment of the historic Afton Inn site to proceed at the head of the town’s Historic Downtown Business District.

“2 East Main, the contract purchasers of the Afton Inn, continues to work toward a settlement by the end of December. The Town of Front Royal, via their legal department, has begun obstructing this process by not cooperating with requests made by both 2 East Main and the EDA,” Asset Committee Chairman Greg Harold stated in his December 4th meeting agenda written report.

Greg Harold during the Dec. 4 EDA Board virtual meeting. His Asset Committee report highlighted a recent email exchange between potential Afton Inn developer 2 E. Main St. LLC and Town Attorney Doug Napier expressing the opinion the EDA cannot finalize the sale without written Town approval, which apparently has not been given. Royal Examiner Photos by Roger Bianchini

Harold’s Asset Committee report on the status of the Afton Inn sale that would facilitate redevelopment observed, “The EDA’s sole ambition in this sale is to remove it from our asset book by selling it to a private developer that is qualified and capable of rebuilding this historic structure to the benefit of the entire community, including the Town Administrative Offices that sits adjacent to this currently dilapidated building.”

Royal Examiner called Harold following the 10:40 a.m. adjournment of Friday’s EDA Board of Directors meeting to seek more information on the impasse between the Town and EDA over the sale and redevelopment of the Afton Inn property. Harold referred us to Board Chairman Jeff Browne as point man on the EDA’s effort to solicit cooperation from the Town of Front Royal governmental apparatus to facilitate the long-pending sale to redeveloper 2 East Main Street LLC.

Contacted by phone, Browne explained that the 2 East Main Street development partnership and its title company had sought legal assurance from the Town that it agreed to the pending sale. The Town Attorney’s November 30th email reply to 2 East Main and the involved title company – the EDA was not copied in Napier’s response, Browne noted – disputed the EDA’s ability to sell the property to the development group without the Town’s written consent, consent apparently not yet given. Napier referenced a 2014 Land Exchange Agreement (LEA) and Memorandum of Agreement (MOA) in making the assertion, Browne said. That was a condition of the referenced 2014 MOA, he explained.

With Town Hall’s proximity to the derelict Afton Inn, one is left to wonder why the town council would not have already endorsed the EDA sale for redevelopment.

In response to this assertion the EDA Board of Directors is preparing a response to town officials, including the mayor, council, and town manager, seeking a meeting of all involved parties as soon as possible to resolve the impasse to everyone’s mutual benefit, Browne told Royal Examiner. The EDA and 2 East Main Street LLC hope to have the sale closed by the end of the calendar year.

Town perspective

In an email response to our inquiry on the matter, Town Attorney Doug Napier explained his and apparently the town council and its governmental apparatus’s stance.

That stance is that the EDA has simply been a real estate broker for the Town in dealing with the Afton Inn property. “The EDA itself never had any skin in the game. The Town was never about to ‘give’ the EDA a million-dollar piece of property in the form of Old Town Hall for nothing, that would be insane,” Napier wrote, perhaps highballing the 2014 assessment a bit in referencing the eventual EDA-enabled 2014 swap of the old Town Hall building the town government had outgrown, for the Afton Inn in order to facilitate its marketing and redevelopment.

The town attorney and interim town manager at a recent council meeting. Questions may have risen through EDA Board discussion as to whether there are sufficient communications between staff and council and the mayor on the status of the EDA’s attempt to sell the Afton Inn for redevelopment.

Perhaps coincidentally, that swap was bitterly opposed by then citizen Matt Tederick who repeatedly appeared before the town council to berate the swap idea. That idea was hatched to get the Afton property out of the hands of its owner, Northern Virginia developer Frank Barros. Barros let the property languish for several years, refusing to take calls from the Town about the property after the town council had alienated him, in part by suing its own Board of Zoning Appeals to overturn its code exception granted to allow Barros’s elaborate Afton Inn redevelopment plan to increase the height of the building to about 10-feet above the height of the County Courthouse across the street. Building above the height of the courthouse was and remains against Town Code.

“For many years the Town had been trying to get the owner of the Afton Inn to fix up that building, but could get nowhere with the owner,” Napier wrote in his December 4th reply to our inquiry on the current sale impasse, adding, “Town Council had an idea to exchange Old Town Hall for the Afton Inn, but it is difficult for local governments to do real estate investment deals on its own under the Code of Virginia, a big reason EDAs exist in the first place … The title company doing the real estate closing agrees with me. It’s the law, as well as the facts of the case. There is no real controversy here at all.”

No real controversy here?

However, the EDA Board of Directors and its legal counsel do not agree.

The 2014 Land Exchange Agreement and Memorandum of Agreement referenced above by EDA Chairman Browne were attached by Napier to his reply to us to bolster his contention the EDA does not own outright and cannot sell the Afton property without the Town’s written authority.

However, Harold pointed us to a December 1st email from EDA attorney Sharon Pandak in response to Napier’s November 30 reply to 2 East Main Street LLC and its title company seeking the Town’s signing off on its purchase contract with the EDA. In the letter, Pandak counters Napier’s conclusion and the developer’s title company’s concurrence with it. – The short version:

1 – the 2014 MOA, which came after the LEA, was never signed by an EDA representative; and

2 – the Town was not a party to the Lease Exchange Agreement in which Barros’s Afton Inn LLC conveyed the Afton property directly to the EDA.

The complete explanation of the EDA stance penned by the EDA attorney elaborates:
“As I indicated to you … previously, we do not believe that 2 East Main LLC’s current title company’s (Chicago/Champion Title Company) position is meritorious. The EDA can convey “good and marketable fee simple and unencumbered title” to the Afton Inn for the following key reasons:

1 – The conveyance to East Main is not for a required “future purpose” under the Memorandum of Agreement between the Town and the EDA, dated June 23, 2014 (MOA). The MOA, if operative, relates to future use of the Afton Inn, and is not a limitation on the EDA’s ability to convey the property. Therefore, the MOA, if operative, simply does not apply.

2 – The MOA was signed by the Town after the conveyance of the property by the Town to the EDA (June 11, 2014). The agreement is not signed by the EDA.

3 – The Land Exchange Agreement (LEA) between the EDA and Afton Inn, LLC conveyed the Afton Inn to the EDA. The Town was not a party to LEA, and the land never passed through Town ownership to get to EDA ownership. There are no restrictions on the EDA’s use or future conveyance in the LEA. The LEA precedes the incomplete MOA,” Pandak wrote. But she wasn’t finished countering the Town stance.

Two perspectives of March 2019 Town-permitted work on the Afton Inn related to the 2 E. Main St. LLC redevelopment plan. If the Front Royal Town Council finally authorizes the EDA sale to the developer, within a year or so the site might be worth a second look from the town trolley.

“There are other reasons for believing that the Town Attorney’s recently expressed opinion is not well-taken which include: The Town has already issued permits to 2 East Main for some work on the Afton Inn and the Town has implicitly approved 2 East Main’s proposed redevelopment by including it in its VDHR (Virginia Department of Historic Resources) grant application (resulting in the Town’s Community Development Block Grant – CDBG award from the State). These actions indicate a Town approval of the ‘future purpose’ by 2 East Main for the Afton Inn, if the MOA is operative. Mr. Napier also does not acknowledge that the EDA gave the Town notice of its Purchase Contract with 2 East Main on June 16, 2020, directly and through him.

“The Title Company’s requirement to have the Town of Front Royal provide consent to the transaction is not well-grounded for the reasons set forth above,” Pandak concludes.

Delaying sale to what end?

Asked what investment the EDA has made in marketing and moving the Afton Inn property toward redevelopment since acquiring it in 2014, Brown and Harold both pointed to $478,000 in various legal, closing, and developmental costs, including masonry work to shore up the crumbling building as its sale and redevelopment have stalled. The sale price if made this month will be $345,000. Had it been made by September it would have been $325,000. So, the EDA is not looking to even recoup its total investment in the property, which means the Town would not be eligible to collect any proceeds from the sale according to the disputed MOA were it ruled to be enforceable without an EDA signature on it.

Bullet point 5D of the MOA states the “EDA shall be entitled to retain from the sales proceeds an amount equal to any sum it has paid without reimbursement from the Town during its ownership, management, maintenance, repairs and marketing for sale or lease of the Afton Inn property.”

So, one might wonder why the Town is stalling on endorsing the EDA’s sale to 2 East Main Street LLC after past permitting of work related to the 2 East Main Street development plan and referencing that plan in its CDBG application.

“Their stonewalling this sale only hurts them and the community,” a perplexed Harold told Royal Examiner. Following conversations with 2 East Main principals Alan Omar and Jim Burton, the EDA Asset Committee chairman said, “I am fully confident 2 East Main Street wants to move forward and are willing to develop the property to the betterment of the community in a way that will make it a cornerstone of historic downtown Front Royal. We are willing to broker communications and we’ve both tried to work with the Town to realize this project since September.

“If this sale can’t occur because of obstruction by the Town we are going to execute any leverage we can to covey the property if this falls thru,” Harold said of the EDA, including acquiring a demolition permit “to keep all available options at our disposal”.

Harold’s written report to his board Friday morning added a call for public action to add another dimension to EDA Board Chairman Browne’s effort to bring all involved parties to the table for a mutually beneficial resolution before the year’s end.

“The community should start lobbying Town Council to allow this sale to commence without further delay or disruption. This is critical both from a safety standpoint as stated by Town Attorney Doug Napier and from an aesthetic standpoint being the corner of historic downtown Front Royal. Delaying the sale and settlement places additional unnecessary risk to public money in the maintenance and public security of this building which has been previously stated by the Town Attorney as the responsibility of the Town taxpayer.”

The EDA Board of Directors hopes a new face and perspective on the scene, new Town Manager Steven Hicks who begins work Monday, Dec. 7, might mean a new day in the EDA-Town relationship. Hicks was lauded by the council for his work in Selma, N.C. on a redevelopment project.

During subsequent open meeting discussion Friday morning, board member Tom Pattison suggested “reaching out” to new Town Manager Steven Hicks, who begins the transition from Interim Town Manager Matt Tederick on Monday, December 7, in an attempt to re-establish a meaningful relationship with the town government. That relationship has deteriorated into expensive hostile civil litigation and an absence of communications under Tederick and the current town council majority over the past year-plus. While a spot for a “Town Manager’s Report” has remained on the monthly EDA Board meeting agenda, as has been the case for much of 2020, no town manager or designee was present virtually to deliver that report Friday morning despite the Town’s continued legal partnership with Warren County in the operational oversight of the half-century-old joint County-Town EDA.

EDA Board Chairman Jeff Brown and the five-member quorum present virtually concurred with Doctor Pattison’s notion of attempting to restore a meaningful relationship with the town government with the coming personnel change at the head of the Front Royal Administrative network.

While we didn’t get a call back from Mayor Tewalt, we did reach Vice-Mayor Bill Sealock about the EDA board discussion of “Town obstructionism” in finalizing the Afton sale to 2 East Main Street. Sealock said his last recollection of council discussion of the proposed sale to 2 East Main Street LLC group was when the September option date was missed.

The vice mayor also expressed disappointment council and the mayor wasn’t included in the EDA communications with town staff over the project. “I’m very upset – we’re the ones who would decide these things,” Sealock said of Town approval or endorsement of the sale.

Above, in the wake of his proactive work bringing council and the Save Happy Creek Coalition together could Vice-Mayor Bill Sealock find himself at the point of helping correct another possible communication breakdown in Town affairs? EDA Board Chair Jeff Browne, below at Friday’s virtual EDA meeting, hopes to aid in bridging any communications gaps between the council, the EDA, and the Afton Inn redevelopment group.

“I’d be happy to do that,” EDA Board Chairman Browne said when told of Sealock’s observation, adding that he had personally been involved in several “reach outs” to council and the interim town manager in past efforts to resolve issues surrounding finalization of the Afton sale. And as reported above, he is planning to have a letter to all involved parties, including council and the mayor out by early in the coming week.

And he noted that the recent email exchange with the town attorney came from 2 East Main LLC and its title company’s direct effort to seek assurance the Town would endorse the EDA sale of the property, not from an EDA inquiry.

So, it seems the EDA, the Front Royal Town Council, and mayor, and 2 East Main Street LLC principals and staff will have an opportunity in coming weeks to sit down and get on the same page philosophically and legally to the joint benefit of the entire community. Will they be able to pull it off?

Stay tuned as the Afton Inn redevelopment project perhaps reaches a point of no return if a sale is not finalized within the next three weeks.

Can council reach a quick consensus that an EDA sale of the Afton Inn property to 2 E. Main LLC for redevelopment is a good thing for the community? One might wonder why that consensus hasn’t already been reached.