Winston-Salem Alliance helped secure

by Keith Barber

Winston-Salem Alliance helped secure properties for ballpark developer

Winston-Salem Mayor Allen Joines signed an agreement with Billy Prim, owner of the Winston-Salem Dash minor league baseball team, to assign Prim’s real estate development company, Brookstown Development Partners LLC, options to purchase 38 properties in the immediate vicinity of the downtown ballpark site on Dec. 15, 2006, nearly a year before the city council approved a resolution to invest $12 million in the construction of a new home for the Chicago White Sox single-A squad. Earlier this month, the city council unanimously approved a deal to secure an additional $15.7 million in financing to complete construction on the downtown ballpark after a lengthy public hearing. The Joines said the Winston-Salem Alliance did not own any properties that were eventually consolidated by Prim for the downtown ballpark project. “We paid for some option monies to help the properties be assembled,” Joines said. “It was to try to assemble the land for the ballpark itself.” Other members of council knew that the option monies had been paid out. “We let the city council know the ballpark was being proposed, and we were trying to assemble land for the ballpark,” said Joines. “The option payments were made by the Millennium Fund and it was simply done to help secure the ballpark to prevent the city from having to pay for options.” Winston-Salem City Councilwoman Wanda Merschel, who serves aschairman of the city’s finance committee, said Joines made her aware ofthe Winston-Salem Alliance and Millennium Fund’s activities regardingconsolidation of properties in the area of the ballpark site on behalfof Brookstown Development Partners. Merschel said she believesJoines informed her of the arrangement with Prim prior to Dec. 15,2006. “I was aware that it was going on…. If the mayor said it was2006, I’m sure he has the date correct,” Merschel said. “We knew thealliance was working as a gap financier. My recollection is thealliance never took title to those properties; my understanding is theytook title to properties further up Brookstown, closer to BurkeStreet.” Merschel said she believes the Winston-Salem Allianceowned properties at the corner of Brookstown and Burke and sold them toPrim’s development company. Merschel said she had no reason tobelieve Joines benefited financially from any transaction withBrookstown Development Partners. Merschel, who represents thecity’s Northwest Ward, said she did not view Joines involvement insecuring options on properties to assist in the development of thedowntown ballpark as a conflict of interest. However, considering themayor has voted on all proposals related to the city’s financialcommitment to the downtown ballpark, she acknowledged that some couldperceive it as a conflict of interest. City Councilman RobertClark, vice-chair of the city’s finance committee, said he was aware ofJoines’ involvement in helping secure options on properties on behalfof the Winston-Salem Alliance prior to Dec. 15, 2006. Clark, whorepresents the city’s West Ward, said he understood the Millennium Fundhad purchased two downtown businesses near the intersection of 4th andBroad streets to make way for another planned development that nevermaterialized. Clark said those acquisitions were unrelated to theballpark. Clark said he didn’t view Joines participation in the securing of properties on behalf of Brookstown Development Partners as representing a conflict of interest. “Idon’t see it because we’re not in the development business and we’renot participating with Brookstown Development,” Clark said. “TheAlliance is not in the development business. I’m sure they would liketo get rid of [the purchased properties].” City Councilman DanBesse said generally speaking, the council was aware that theWinston-Salem Alliance was trying to facilitate the construction of adowntown ballpark in 2006. “I think Allen did a memo to that effect asan FYI that the Alliance is trying to help facilitate on a downtownballpark project,” Besse said. “I think it’s been known for a long timethat Allen’s day job is president of the Winston-Salem Alliance andfrom time to time, there maybe overlap between projects they’re workingon and city projects. He needs to be very careful that those situationsare disclosed and there is no private benefit to him.” Besse said hedid not see Joines’ participation in helping secure properties forBrookstown Development Partners as a conflict of interest. In2002, Joines and the Winston-Salem Alliance introduced the MillenniumFund, a $45 million fund aimed at creating investment in downtownrevitalization and supporting economic development projects throughoutthe city. The Millenium Fund contributed $1 million to the city’sinitial $12 million investment and kicked in $1.3 million in the latestdeal to help Prim secure an additional $15.7 million. Joines said hedid not see a conflict of interest between his role as mayor and hisrole as president of the Winston-Salem Alliance “because there’s noeffort to hide that from the city.” “It was done to save the city moneyto have to pay for options,” Joines said. Financial records of onetransaction between a property owner and Brookstown DevelopmentPartners reveals that CB Richard Ellis, a commercial real estate brokerbased in Greensboro, originally secured the option in 2003 beforeassigning it to the Winston-Salem lliance. A check for $500 made out to the property ownerreflects that the Millennium Fund made the payment. Joines said neitherthe Millennium Fund nor the Winston-Salem Alliance made money on theballpark development project.

“TheMillennium Fund and the Winston- Salem Alliance are both non-profitorganizations that cannot make money on projects,” Joines said. “Theyare set up to assist in economic development projects like this one. Wehelped with the downtown research park, we helped with the GolerClinic. Because these are non-profit projects, no one on the boards orthe Alliance or the Millennium Fund can benefit personally from anyproject. It actually costs the organization money to do theseprojects.” Joines described the Winston-Salem Alliance’s roleas that of facilitating the consolidation of property in the downtownarea in and around the ballpark site. He said all funds paid byBrookstown Development Partners flowed directly to the property owners. In many cases, the purchase of property in the Brookstown areaof the city meant a big financial windfall for some property owners. Countyland records indicate that property owners James Burleson and Yvonne G.Shore bought a house at 937 Watkins St. in October 2002 for $17,000. InFebruary 2007, they sold the property to Brookstown DevelopmentPartners for $247,000. Joines said the only properties theMillennium Fund was interested in acquiring were properties related tothe ballpark itself and parking areas, and that Prim made a decision tobuy more properties outside the scope of the stadium on his own. Clarksaid it’s understandable why the mayor and Prim would be careful aboutinformation leaking to the public about a big development in thedowntown area. “People might begin to believe their property valueswere going up,” Clark said. David Helms, a realtor with WeichertRealtors in Winston-Salem, agreed that real estate development dealsare normally kept hush-hush.

“Companiesare formed for the purpose of buying land because if word leaks out,the price would quadruple overnight,” Helms said. “They buy it withassignable contracts because at that point in time, they don’t know ifthey’re going to build a development there.”

Helmssaid North Carolina real estate law does not require a broker todisclose to a seller if what kind of development is planned for an areaat the time they option the property, but there are exceptions. “Ifthe person who’s doing the assembling is licensed as a real estatebroker and they’re going to be doing the buying, they have to disclosethat fact,” Helms said. Prior to the city council’s vote on Prim’sproposal June 17, a public hearing took place in council chambers. Dueto the high number of speakers that signed up, the hearing wascontinued from June 15. Don Flow, chairman of the Winston-SalemAlliance, and Nathan Tabor, president of the Forsyth County Young

Republicans,both spoke during the public hearing. Tabor voiced his opposition toPrim’s proposal during his remarks to the city council. “Thisissue is about personal responsibility,” Tabor said. “If this was aprivate business you would be bankrupt; you would’ve cost everyon theirjobs.” After learning of the Dec. 15, 2006 agreement between Prim andJoines on Monday, Tabor said Joines vote in favor of Prim’s proposalrepresented a “clear and distinct conflict of interest.”

“I’mnot accusing anyone of any wrongdoing at this time, but it’s theappearance of lack of transparency that’s troubling,” Tabor said.“There’s always so much distrust in our public figures, so let’s clearthe air and show there was no wrongdoing here.” The public’s call forgreater transparency and accountability led to the city making severalrevisions to Prim’s original proposal, City Manager Lee Garrity said.Garrity told the council during the June 15 meeting that Prim and hispartners had agreed to increase the debt service reserve for the city’sloan to $1 million. Also, the city increased the interest rate chargedto Prim to 5.5 percent; required the developer to pay 25 percent of netrevenues from an office building to be constructed on the ballparkproperty; and stipulated that city funds could only be used for landpayments and hard costs related to construction. The revised dealstrictly prohibits city funds from flowing directly to Prim or any ofhis partners, past or present.

Therevised deal also stipulates the city must receive title to the landset aside for a parking lot, and that arrangement supersedes a lien onthe property by Regions Bank. The new deal requires public disclosuremonitoring of how the city’s money is being spent and the formation ofa citizen oversight committee. All payments of city funds must beapproved by the citizen oversight committee and must go through alending institution. The developer must make regular reports and thosereports must be made public record. In addition, the developer mustprovide the completed stadium free of charge for two public events ayear; Prim and his partners must commit to using local and minoritycontractors and vendors and they must recognize the historic WatkinsStreet neighborhood and Winston-Salem baseball legend Ernie Shore withdisplays and plaques. Also, if Prim sells or moves the team,he will be considered in default on the city’s secured loan, Garritysaid. In return for its investment, the city gets the title to the landimmediately and will own the stadium at the end of the loan’s 25-yearterm. The agreement also stipulates that Prim secure a separate bankingconsortium loan of $15 million to go toward total construction costs. Thatloan would be secured through stadium revenues and personal guaranteesof Prim and his investors. Don Flow, chairman of the Winston-SalemAlliance, also spoke at the June 15 public hearing. He stronglyencouraged the city council to continue the construction of theballpark. “If the financial system did not have a nuclearmeltdown, we wouldn’t be here tonight,” Flow said. “Billy Prim is not abad, greedy person that’s trying to take advantage of the system. Instead of everyone trying to find fault and blame everyone, we need to complete this stadium for the future of our city.”

Karen Kovacs contributed reporting for this story.

‘Welet the city council know the ballpark was being proposed, and we weretrying to assemble land for the ballpark. The option payments were madeby the Millennium Fund and it was simply done to help secure theballpark to prevent the city from having to pay for options.’— Winston-Salem Mayor Allen Joines