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MILL OWNER CHALLENGES GREENSBORO OVER SOUTH ELM REDEVELOPMENT FUNDS

by Jeff Sykes

jeff@yesweekly.com | @jeffreysykes

The owner of the rehabilitated Old North State Flour Mill filed a lawsuit earlier this month claiming the City of Greensboro reneged on promises to fund environmental cleanup at the site as part of the larger South Elm Redevelopment Project.

At issue is more than $1 million in environmental cleanup money that the Mill’s owner, QUB Studios, believes it was promised by city officials. Eric Robert, owner of the Mill and QUB, is represented in the lawsuit by attorney J. Scott Hale of Boydoh & Hale.

The lawsuit, which was filed on May 5, outlines the contentious history between Robert and City of Greensboro officials that began once Robert bought the Mill in 2006. Robert bought the Mill property, located at 816 S. Elm St., during the time in which the city was piecing together the properties that now constitute the South Elm Redevelopment Project. The project is home to the Union Square Campus, currently the only component project in the city’s larger redevelopment plans.

“Almost immediately upon QUB’s acquisition of the Mill, Greensboro began threatening QUB and Mr. Robert that Greensboro intended to take the Mill from QUB, invoking the power of eminent domain if QUB and Mr. Robert would not transfer the Mill to Greensboro voluntarily,” the lawsuit states. “QUB and Mr. Robert objected to and rebuffed Greensboro’s threats to take the Mill and refused to capitulate to Greensboro’s repeated demands that QUB transfer the Mill to Greensboro.”

During interviews for a recent YES! Weekly cover story, Robert provided a glimpse into the process, outlining demand letters and aggressive enforcement of certain regulations pursued by the City of Greensboro. The city’s posture seemed to ease once it became clear Robert would not sell the Mill. In March 2012, Robert met with then Mayor Robbie Perkins, and interim City Manager Denise Turner Roth, and secured what he felt at the time to be an agreement to be included in future funding of environmental cleanup at the South Elm project site.

Assistant City Manager Andrew S. Scott wrote to Robert in April 2012 to confirm the details of the meeting. The city agreed to reimburse Robert for expenses related to installing a fire hydrant, and to “suggest that certain improvements to the Old Mill be included in the next round of financing for the South Elm Street Redevelopment Project.” Scott suggested that the funds could be available in late 2013.

Robert had asked in an earlier letter to be included in proposed financing for the South Elm site in order to upfit potential tenant spaces at the Mill.

Such funding, Robert wrote, would “enable me to compete with incentives offered in the rest of our downtown as well as the upcoming developer.”

At the time of the request, Robert said he had already invested more than $1 million in the rehabilitation of the Mill. His initial vision called for assistance with $346,000 in additional costs to finish remodeling nine possible tenant spaces.

It was a conservative estimate, Robert said, because he “would not want to waste any funds that could benefit others in the neighborhood.” The estimate could be as low as $250,000 if the city managed the streetscape, sidewalks and additional fire protection needs. This would “suffice in completing the desired destination for our city and further complement the South Elm Street redevelopment.”

Attorney Hale referenced Scott’s letter from April 2012 when he sent a final demand for payment to the city last month. The city had secured $6.6 million in grants and loans for the South Elm Redevelopment Project, Hale wrote. “The City of Greensboro represented to the parties that provided the funds and to QUB that a proportional amount of those funds would be used for the benefit of QUB’s property,” the letter states. The Mill property takes up about 15.6 percent of the South Elm Redevelopment Project.

Hale’s letter to Greensboro City Attorney Tom Carruthers is dated April 16, and claims that “the City’s authorized representatives repeatedly confirmed that QUB was an intended beneficiary of the funds the City had applied for and obtained by representing that the Mill would be a beneficiary of the grants and loans received by the City. Thereafter, Mr. Robert was repeatedly assured that the funds would be forthcoming.”

Recent conversations between Robert and city officials, however, make it appear that “the city has directed funds received for QUB’s benefit to other sources and no longer intends to pay the funds to QUB.”

The letter demanded payment of no less than $1,037,166, which is 15.6 percent of the total funding the city secured for the South Elm Redevelopment. Hale asked for an amicable resolution to the issue within 19 days of his letter. Short of that, he said, QUB stood ready to pursue its claim in court.

Hale received his answer on May 1, from attorney Patrick M. Kane of Smith, Moore, Leatherwood. The city denied any contractual obligations stemming from Scott’s letter.

“It is the City’s position that any litigation instituted by your client with respect to these non-existent obligations would be frivolous,” Kane wrote.

Hale filed the lawsuit on May 5, claiming breach of contract (third party beneficiary) and negligent misrepresentation by the city. The lawsuit claims that the City of Greensboro secured funding from at least five sources for the South Elm Redevelopment.

The lawsuit claims that the City of Greensboro specifically included the Mill in at least two applications for funding from the federal government to support the South Elm Redevelopment.

An application to the US Department of Housing and Urban Development for a Brownfields Economic Development (BEDI) grant included “rehabilitation of the North State Mil complex for studios or housing (to) begin as soon as the building is cleared of asbestos and lead paint (within 1 year).”

A second HUD application for the department’s Section 108 Guaranteed Loan program included “rehabilitation of a mill building for 22-30 studio, office and/or residential units.”

Because the city has not released any of the funds to QUB, Robert and QUB have financed remediation and rehabilitation of the Mill site out of pocket.

“Additionally, the value of the Mill property owned by QUB has been diminished as a result of Greensboro’s breach of contract,” the lawsuit states.

The second claim in the lawsuit, for negligent misrepresentation, is based on what Robert claims are repeated assurances he received from City of Greensboro officials, including former Mayor Perkins, interim City Manager Turner-Roth, and Assistant City Manager Scott.

Robert relied on their statements when he proceeded with work at the Mill. Additionally, Robert waited several years to begin the work, “expecting Greensboro to provide funding, thereby losing rent and other income as a result of their reliance on Greensboro’s false representations.”

The lawsuit also refers to the city’s written response to Robert’s April 16 demand for payment. Attorney Kane dismissed the claim as “frivolous”, which came as a surprise to Robert.

“Greensboro certainly never told Mr. Robert prior to last month that it believed the use of the South Elm Street Redevelopment Funds for the benefit of the Mill was frivolous,” the lawsuit states. “Rather, Greensboro repeatedly has lead Mr. Robert to believe that the money received for the South Elm Redevelopment was still intended to be used for the benefit of the Mill.” !

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