Business VII –
By Keith Burton and Royce Hignight Filed 9/28/04
The latest edition of GCN’s Slippery Business series of reports on the Harrison County Development Commission:
Since its inception, the Harrison County Economic Development Commission’s Biloxi Commerce Park has become a prime focal point of economic development in Harrison County. An examination of land purchase records show a remarkable sequence of events where speculators are building offices for sublease, with a mix of medical and strip office complexes constructed. It is a commercial land development park that competes with the efforts of non-governmental developers and has little to do with industrial development or job creation. It is economic development for a few.
Readers may recall that in GCN’s “Slippery Business VI - An Agency in Crisis-Taxpayers Losing Out on Sales of HCDC Property,” discussed how approximately 1/3 of the developable property from the 107 acre Biloxi Commerce Park was sold before it was even platted, much less before it was officially open. One of the early buyers was BancorpSouth which bought a prime site at the corner of the new road (Tommy Monroe Road and Popp’s Ferry Drive).
The article also established that the current President of HCDC is an employee of the Bank at another branch. In addition, BankcorpSouth has received a great deal of the financing business from other properties being developed in the Park.
Slippery Business VI also noted that Medical Park Drive, which provides access to the Biloxi Commerce Park, appears to have been built on private property. More on this road later.
Royce Hignight, a retired FBI special agent interested in pubic policy issues on the Coast, has looked into the land purchase records of the property for the Biloxi Commerce Park. Hignight, along with others, have long sought reforms in the HCDC. (See GCN Slippery Business Archive)
The records compiled by Hignight for GCN show that before the HCDC purchase, the property it was on the market for far less than the HCDC paid for it.
According to land deeds, on July 11, 1996, the 107 acres that comprise that is now the Biloxi Commerce Park was sold by the Collins family of Biloxi to Westport Holding, L.C., a Texas Limited Liability Company. The Warranty Deed reflected that the property was made up of five parcels. The Deed further reflected that, “The Grantors (Collins) and Grantee (Westport) further acknowledge herein that portions of the above described property which is secured by said Deed of Trust (DOT) shall be released upon specified payments as set forth more fully in the Land Deed of Trust (DOT). The Grantee herein agrees to provide to the Grantors access, by way of a public road accepted for maintenance by the City of Biloxi built in conjunction with the development of the 10 acre portion of the above described property fronting on Popps Ferry Road and in conjunction with the development of each subsequent parcel released from the Deed of Trust.”
The salient points of the above paragraph are that the Collins family owner- financed the sell of the property; secondly, the purchaser was to build a road to the specifications that would enable the City of Biloxi to accept the road for public maintenance. Now, the terms of the Deed of Trust will be revealed
The Collins accepted a Deed of Trust (DOT) on the Property for $750,000 for the entire 107 acres. The terms were minimum payments of $250,000 annually beginning one year from July 10, 1996, the date of execution of the DOT plus interest. Parcels were to be released commensurate with the principal payments.
The DOT reveals that a partial release was made to the DOT on July 25, 1997, for 15 acres @ $15,000 per acre or $225,000 total. The next partial release was July 17, 1998, for 20 acres @ $12,500 per acre or $250,000 total. Therefore, a total of 35 acres at a total price of $475,000 had been released during the two year period that Westport had the property. The DOT reveals that the DOT was fully satisfied September 4, 1998. This is an important date because other events of some import happened prior to September 4th.
TURNING A PROFIT
On July 16, 1998, the Harrison County Development Commission passed a resolution to purchase the property from Westport for $2.3 million. This was two years after the Westport Company bought the property from Collins for approximately $1 million. The terms were that Westport was to be paid $1.3 million at the closing and Westport was to carry a $1 million note payable one year from the closing.
It appears that Westport grossed approximately $1.3 million profit in just two years.
According to the closing documents, HCDC and Westport closed the purchase on August 14, 1998, approximately three weeks before the Collins fully released the DOT on September 4, 1998. The sum of $251,109.58 was paid to the Collins family at closing from the HCDC payment. David Crane, then an attorney with Allen Vaughn Cobb & Hood, the same company that represents the HCDC, was the closing attorney.
The land purchase with the HCDC was brokered by Paul Richard, a Louisiana realtor, of the Latter & Blum realty company, who has been with Latter & Blum’s Commercial Investment Division since 1989. The real estate commission on the transaction was $160,000, according to the records. In an online biography on the Latter & Blum website, Richard added the Gulf Coast to his area of specialization and later was selected as a member of the Gulf Coast Who’s Who in 1996. He has worked exclusively on investment opportunities, value enhancement of existing assets and on the positioning of land for development in the area.
AN APPEALING APPRAISAL
The HCDC had the 107 acres appraised by Sidney L. Cullifer, Jr., a licensed state certified general appraiser. Cullifer’s appraisal report was furnished to HCDC’s Director Michael J. Olivier by letter dated August 7,1998, with the certificate dated July 31, 1998.
Cullifer appraised the 107 acres for $2.4 million. That is $22,600 per acre. However, 37.42 acres were wetlands and 70.03 non-wetland acres. Therefore, the price per usable acre would have been approximately $32,857.142.
Cullifer noted in the appraisal report, “It is my understanding that the subject property sold July 11, 1996 for $1,000,000. The seller was Collins Building Service, Paul J. Collins, and Francis X. Collins. Purchaser was Westport Holding, LC. It is my understanding that there presently is a letter of intent to purchase by the Harrison County Development Commission for the subject property. The offer is in the amount of $2,300,000.”
Remarkably, Cullifer knew the property was sold for $1-million just two years earlier and sees the value increasing. The area is a prime growth center for Biloxi and now the same property is worth far, far more. But as shown in Slippery Business VI, the HCDC continues to sell the property at rates far below market value. Still, all of the early buyers in Biloxi Commerce Park, have seen a significant, if unrealized, gain in their property value.
An HCDC press release in 2001 reflected that:
“The Biloxi Commerce Park represents an investment of more than $5 million. Approximately half, or $2.5 million, is paid for with funds generated by the Development Commission from land sales in its other industrial parks. $1 million of the project is funded through a low-interest loan from the State of Mississippi to the City of Biloxi and the Harrison County Board of Supervisors. The remaining cost, $1.5 million, utilizes the bond proceeds authorized in 1994 by the Board of Supervisors and supported by a one-cent fuel tax.”
GCN has to date found no documentation in the land purchase records to show how or on what the HCDC spent the additional $2.2 million.
The information in GCN’s “Slippery Busines VI” outlined that the Biloxi Commerce Park appears to be a commercial speculative development in which several individuals, companies, and partnerships were given the chance to purchase the property at bargain prices before it was developed with taxpayer funds. The Commerce Park has little or nothing to do with industrial operations or job development, which are HCDC’s primary missions.
Hignight’s property records research shows that the some of the same attorneys that represent the HCDC also frequently represented the banks involved in the transactions.
1. Lots 3& 4 filed 10/2/00 by Pringle & Roemer to Joseph N Salloum; Richard P Salloum; J&R Properties; J Salloum Properties Inc; R Salloum Investments Inc; Deed of Trust (DOT) to Hancock Bank-Harry Allen/ Trustee.
2. Lot 5 filed 10/31/00 by Pringle & Roemer to Joseph N Salloum; Richard P Salloum; J&R Properties; DOT to Hancock Bank-Harry Allen/ Trustee.
3. Lots 27-28 filed 3/13/01 by Allen Vaughan Cobb & Hood to Terry Smith C MD; No DOT
4. Lots 25-26 filed 3/14/01 Allen Vaughan Cobb & Hood to Edmond and Dianne Nazaretian; DOT to BancorpSouth Bank-J Patrick Caldwell Trustee.
5. Lot 40 filed 4/19/01 by Allen Vaughan Cobb & Hood to Cedar Lake Medical Plaza L.L.C. no Trustee cited.
6. Lots 17-18 filed 6/21/02 by Allen Vaughan Cobb & Hood to Seymour Land Development L.L.C.; DOT to BancorpSouth- J. Patrick Caldwell-Trustee.
7. Lots 1-2 filed 8/23/02 by Allen Vaughan Cobb & Hood to BancorpSouth.
8. Lots 6-7 filed 8/29/02 by Page, Mannino, Peresich & McDermott to Social Security Building Partnership (Lyle Page, Fred Mannino, Ronald G. Peresich, Stephen G Peresich, Michael B. McDermott; DOT to BancorpSouth- J Patrick Caldwell-Trustee.
9. Lots 15-16 filed 1/29/03 by Allen Vaughn Cobb & Hood to Gulf Coast Oral Investments LLC; DOT to BancorpSouth-J Patrick Caldwell-Trustee.
10. Lots 29-30 filed 10/22/03 by Allen, Vaughan, Cobb & Hood to B & G Climate Control; DOT to BancorpSouth-J Patrick Caldwell-Trustee.
11. Lots 8-9 filed 10/27/03 by Allen, Vaughan, Cobb,& Hood to JP Group of Biloxi LLC; DOT to Suntrust Bank-Eric Wooten(Allen Vaughan Cobb & Hood)/Trustee.
12. Lots 13-14 filed 11/25/03 by Allen Vaughan Cobb & Hood to Rickey Chance; DOT to Hancock Bank-Harry Allen/Trustee; DOT to Peoples Bank-Lyle M. Page-Trustee.
13. Lot 24 filed 2/19/04 by Allen Vaughan Cobb & Hood to Infinity Homes Inc.; DOT to Regions Bank-Charles Parrot-Trustee.
14. Lot 36 filed 3/29/04 by Allen Vaughn Cobb & Hood to Mavex LLC/Maverick LLC; DOT Coast Community Bank-David Wheeler/Trustee.
15. Lot 12 filed 4/29/04 by Allen Vaughn Cobb & Hood to Schonowitz LLC/Schonowitz Properties LLC; DOT and Assignment of rents to Hancock Bank-Harry Allen/Trustee.
16. Lot 21 On 7/26/04, Board of Supervisors approved of sale to DOM Properties,LLC upon recommendation of HCDC.
17. Lot 33 On 7/26/04, Board of Supervisors approved of sale to Steven K. Minor upon recommendation of HCDC.
Number 16 & 17 were each sold to Doctors, one a medical doctor and one a dentist.
As can be seen from the above, of the 27 lots sold, BancorpSouth had Deed of Trusts on 10 of the lots on five DOTs; Hancock Bank had DOT’s 6 lots on 4 DOTs; Sunburst Bank financed 2 lots on 1 DOT; Regions Bank had 1 lot on 1 DOT; Coast Community Bank had 1 lot on one DOT.
On several of the transactions, it Allen Vaughn Cobb & Hood represented the HCDC as well as the financing banks.
The Martindale-Hubbell Lawyer Locator reflects that the Hancock Bank is a client of Allen Vaughn Cobb & Hood, whose office is in the Hancock Bank Building. The Bank of Mississippi, the predecessor of BancorpSouth Bank, is also listed as a client of the firm. BancorpSouth and Hancock Bank are listed as references for the law firm. It should also be noted here that the HCDC’s offices are in the Hancock Bank tower in Gulfport.
The HCDC said in a press release when the Biloxi Commerce Park was opened that the City of Biloxi built the two access roads in the park. However, records provided by the city show only that one road, Medical Park Drive, was paid for by the city.
Medical Park Drive does not run on HCDC property, but along private property just east of the Biloxi Commerce Park. And while the land appears to be part of the Commerce Park, it is not. It is actually owned by several others. Thus, Medical Park Drive benefits private owners, and the HCDC.
When the Biloxi Commerce Park opened, the HCDC announced that it was the City of Biloxi that built the roads. However that is not the case. The records by the City show that it was the HCDC that constructed the road with the authorization of Harrison County, and the city reimbursed the HCDC after the road was built. The records show that the HCDC was to build Medical Park Drive on land donated by the property owners to the City of Biloxi.
But GCN has yet to find any documentation that the property owners ever actually deeded the land to the city. A GCN search of county land records online failed to locate any records showing that the property owners deeded the land for the road to the city.
In GCN’s first document request August 6, 2004 to the City of Biloxi, the city provided over 95 pages of documents regarding the city’s dealings with the Biloxi Commerce Park and the HCDC. None of the documents provided proof of the city receiving the road right of way property even though the city passed a resolution saying the land had been received.
To clarify the right-of-way issue for the road, a second document request filed August 18, 2004 was made. The City responded saying they had no additional records. However, Medical Park Drive is on a city-approved subdivision plat, which could be interpreted as sufficient documentation to show that Biloxi owns the road.
The City records do show several additional interesting elements.
In the initial subdivision records, the HCDC was to provide part of the Commerce Park land that are wetlands and adjacent to the Tchoutacabuffa River as a public park. In the final contract between the city and the HCDC that element was removed in the resolution approving the contract voted on by the Biloxi City Council.
A park with public access by land to the river would have been a tremendous benefit to the city’s residents as no such access is currently available.
Under the terms of the contract, the City of Biloxi used public funds to repay the HCDC for the costs of building Medical Park Drive. And on December 19, 2000, the city cut a lump sum check to the HCDC for $376,175.94 for the construction costs of the new road.
The HCDC is currently searching for a new director, a new deputy director, and a new marketing director. The Harrison County Board of Supervisors has voted to conduct independent performance and compliance audits of the HCDC.
Partly as a result of the information in this story, Harrison County supervisors are now questioning why the HCDC is involved in a commercial land development project such as the Biloxi Commerce Park. They question what the taxpayers are getting in return for their investment. Supervisors, September 23, sharply cut the HCDC’s budget, particularly for capital projects pending changes in how the HCDC operates.
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