STUART – The City Commission is seriously pondering the sale of a Kanner Highway property the city has held title to for more than three decades.
City Commissioners took up the debate Jan. 28 after Stuart Attorney Michael Mortell told them the current tenant, Integrated Cleaning Systems International, Inc., wanted to purchase the 1.3-acre site that had previously been home to a 7-11 convenience store for 30 years.
“I was speaking with a realtor a month or two ago,” he said. “He contacted the city and mentioned the current tenant is having difficulty in getting some financing because of the inability to secure a lien on the land and wanted to know if the city was interested in selling.”
The previous lease on the property to the parent company of 7-11, the Southland Corp., expired in 2017 and the company decided not to renew the $187,000 annual lease due to changing market conditions. Prior to the company’s removal of the building and the underground fuel tanks that same year, the City Commission rejected a $750,000 offer for the property, opting instead to list the land for lease. Integrated Cleaning Systems first wanted to buy the land but subsequently agreed to a lease that August when the Commission balked at the idea of selling.
“Upon hearing the position of the City Commission, Integrated Cleaning Systems International then made an offer to enter into a 20-year land-lease with the city,” Mr. Mortell explained in the agenda item. “Since then, the tenant has been current on all obligations. However, it is having a very difficult time obtaining financing to build the car wash approved for the site because it cannot provide the real estate as security. ICSI has again approached the city requesting to purchase the property.”
Knowing the Board’s previous aversion to selling the property, the city attorney began his own negotiations with commissioners, basically suggesting a land swap by selling the Kanner Highway parcel and using the proceeds to purchase a bank-owned property on Ocean Boulevard facing Memorial Park. The current tenants in that property would make the deal even sweeter.
“After paying all expenses, the rent received generates approximately an 8 percent return on the investment based upon the asking price,” Mr. Mortell explained. “On the other-hand, if the 7-11 property is worth $1,250,000 and the rent on the property is $85,000 per year, then its return is approximately 6 percent.”
Commissioner Kelli Glass-Leighton wanted to ensure the city was getting top dollar for the land since Mr. Mortell had told them the most recent appraisal had been completed in the last quarter of 2017 before the Southland Corp. had cleared the land.
“Because that appraisal was with the existing gas station and gas pumps, wasn’t it?” she asked.
“The structure was on the property at the time, and I don’t know if they took that into consideration or not,” the city attorney responded. “I know what was mentioned, but I don’t know how much value it gave because it had been built in ’85 and was pretty much at the end of its useful life.”
The easiest way to get an updated appraisal, he informed the Board, would be to express a non-binding inclination to sell, but he insisted Commissioners be earnest with ICSI officials.
“I would get with the realtor, they would pay for an appraisal, they would make a formal real estate offer in the form of a contract, we would set another agenda item, and then as a commission, you would vote on it,” he explained. “I don’t want to make them go to the expense of an appraisal or go through any of the process if five commissioners are absolutely opposed to selling it because I think that would be misleading to the current tenant.”
Commissioner Eula Clarke wanted to know if the city could “carve out” a piece of the land for the city-owned billboard on the property or “cut out a corner here and there to make the fencing for the cemetery better” that lies on the backside of the property. The city attorney shot her down on both requests, advising her and the rest of the Commission that a lease-back deal would be the best way to go on the billboard.
“You can’t carve out a piece -- well you could, you could change the sign code and say that people could put up signs anywhere they want -- but right now the sign code limits signs to on your own property only,” he said. “So, the only way to do it is to lease it back. Right now, they have a 20-year lease on all four corners of the parcel, and we have no rights to modify it at all.”
More and more of the Board then began to express an inclination to consider a purchase offer.
“It’s not doing us any good, it’s an eyesore I would say,” Commissioner Mike Meier emphasized.
Commissioner Merritt Matheson admitted his own outlook was changing on the property in question.
“Typically, I’d prefer the city to own and lease the property -- my thought is we’re in this for the long term,” he said. “That being said, I believe the city should be able to trade property in what it believes is the public’s best interest with said properties. In the future, we’re going to be looking at potentially an acquisition, and selling the 7-11 property to reduce debt services is a very good idea for the public.”
Commissioner Matheson insisted, however, that any proceeds from a potential sale of the Kanner Highway property be limited to acquiring “new, city-owned property.”
“We’re doing this for the next generation and the next generation after that, and as long as we’re just trading land for a better ROI, I think that’s a good move,” he added.
Mr. Mortell also told commissioners they needed to make a decision on whether to negotiation a lease back for the billboard or sell their rights to it to the prospective buyer. The city currently receives $2,500 a month from the owner of the huge, electronic sign.
“They would love to own the billboard because it’s a revenue source,” Mr. Mortell said.
Mayor Becky Bruner appeared to be one of the last hold-outs on selling the property but insisted the money from the sale be designated to the cost of a new City Hall building as she acquiesced.
“The only reason why I would go along with selling the land -- and I would like to sell the billboard, just sell it all to them -- because I would like to see the money go to our new building,” she said. “So, if we need every penny and we’re trying to get money to build or buy an already-built place where we can move our City Hall to, then why not get the money from the billboard also?”
Commissioner Glass-Leighton subsequently made a motion to have “the city attorney pursue this opportunity,” which was seconded by Commissioner Matheson. Mayor Bruner then opened up the topic for public discussion. Long-time city resident Helen McBride was the only one to respond, admitting she remembered the discussion more than 30 years prior on whether or not to buy the land and agreed with the mayor on how to designate the proceeds.
“I think it was an investment that paid off for the city,” she said. “I’m for every penny goes for the new city hall, that would have to be in blood. This is a prime piece of property, but I trust you five commissioners to do what’s right for all of us in this city.”
The Commission then voted unanimously to have the city attorney notify the realtor representing the tenant that the city would entertain an offer on the land. Mr. Mortell said Feb. 4 that he had done just as the Board had directed him but had yet to hear back from ICSI officials or the company’s realtor.