By Jesse Wood
Update: Oct. 17, 2012. At a special meeting on Wednesday morning, the Watauga County Board of Commissioners approved a motion to accept a bid from Campus Crest Development regarding the sale of the old Watauga High School Property.
The meeting started out with real estate agent Robert Armstrong, who is representing Sanctuary Management, asking to improve its initial bid after it learned that Campus Crest was allowed to do so the previous evening after Campus Crest realized its asking price would net the county less proceeds due to higher commission fees to Rick Miller of Miller’s Properties, the agent representing Campus Crest.
So the board directed the two parties – Campus Crest and Sanctuary Management – to meet privately for five minutes to figure out its best offer – purchase price, commission and inspection day period.
Campus Crest came back with the accepted offer of $18 million offer with a $900,000 commission fee for Rick Miller and a 180 day inspection period. That offer, which was the accepted offer, nets the county $17.1 million.
Sanctuary Management came back with $16.8 million offer and zero percent commission and a 135 day inspection period.
Now the upset process begins. Once the bid is published on the Watauga County’s website, the 10-day upset bid deadline starts and any potential upset bids must be 5 percent of the asking price – roughly $18.9 million. And all upset bids are locked into the 5 percent commission rate.
If the Sanctuary Management offer would have been accepted. All the following upset bids, if that were to occur, would have been locked in at a zero percent commission.
But after accepting the Campus Crest bid, all bids will feature a five percent commission to be paid for by the county to the agent representing the firm of the winning bid.
In the past 12 hours, Rick Miller saw his potential commission cut in half – from $1.7 million (10 percent) to $1.19 (7 percent) and now to $900,000 (five percent). He was obviously distressed yesterday at the commissioners meeting, shaking his head and hunched over at various times, when the topic of reducing commissions was on the table. (Read previous article below this post.)
But $900,000 isn’t too shabby.
Also according to documents filed to the N.C. Secretary of State, Rick Miller has been a client of Paul Miller, Jr. in the past. Paul Miller, Jr. is, of course, Commissioner Chairman Nathan Miller’s father, where the two work at the law firm Miller & Johnson, PLLC, on King Street. Miller & Johnson is the firm that represents Watauga County Schools and has for years.
Acting as lead attorney, Paul Miller, Jr. had the old high school property appraised and was reimbursed for that appraisal without the school board’s knowledge in 2006. That appraisal wasn’t released to the public until the summer of 2011. In the past, Miller & Johnson filed numerous invoices and was reimbursed for those regarding phone call conferences to discuss the potential sale of the old WHS property with Miller’s Property and others, according to school board financial documents.
Robert Armstrong, who was representing Sanctuary Management has been familiar with the old WHS property for years. He was part of a group that submitted a $27 million offer four and a half years ago.
Speaking during a recess, Armstrong said, “Glad we didn’t.”
Miller’s Properties also had submitted two bids before – one for $30 million in 2006 and another for $10 million in 2011.
Read last night’s article for more details on the topic of the sale of the old high school at last night’s meeting, where commission fees was the dominate topic of discussion at last night’s meeting.
Realtor Rick Miller Sees Potential Commission Drop $510,000 on Old WHS Land with $17M Offer to County
By Jesse Wood
Oct. 16, 2012. Rick Miller, who saw potential commissions drop $510,000, shook his head – and not fondly – several times during the Watauga County Board of Commissioners meeting on Tuesday, Oct. 16, during discussions regarding offers for the old Watauga High School property.
Miller is the real estate agent representing Campus Crest Development, which submitted an offer of $15 million for the 75-acre property in late September to build mix-use student housing. That offer, however, included a $1.5 million commission (10 percent) for Miller paid for by the county. For that offer, the county would have only netted $13.5 million from Campus Crest.
Two weeks ago at the Oct. 2 board meeting, the commissioners addressed that Campus Crest offer and another offer by Place Acquisition – which was $15.5 million and included a $930,000 commission (six percent) to real estate agent Tim Hagaman paid for by the county. Place Acquisition’s offer would have netted the county $14,570,000.
At that meeting in early October, the commissioners countered with $16.5 million counteroffer and made aware to the buyers that the bid to net the county the most money would be accepted. So, in essence, the highest bid could possibly lose because a higher priced commission would net the county less money.
Well, at the most recent meeting on Tuesday, Oct. 16, that happened. The board received two offers, but Place Acquisition was not among them.
Campus Crest submitted an offer of $17 million, which included a $1.7 million commission for Miller, and Sanctuary Management, which proposes student housing with the prospects of a 35,000- to 45,000-square-foot grocery store, submitted a $16,600,000 that included a five percent commission to net the county $15,770,000.
So even though, Campus Crest submitted the higher bid on Tuesday, it would net the county less money after it paid Miller the 10 percent commission than would the Sanctuary Management bid.
Officials from Sanctuary Management were not on hand to address the board; however, representatives from Campus Crest were on hand for the meeting and spoke before the board.
After Andrew Young, the vice president of Campus Crest, insinuated that he wanted to negotiate the commission price with Miller so as to make their bid the high-net bid for the county, the board allowed Young and his associates and Miller to step outside of the board room to negotiate while the commissioners addressed other matters on the agenda.
Later in the meeting, Young came back before the board and said Miller had agreed to a seven percent commission on the $17 million offer, therefore making the Campus Crest bid the high-net bid for the county. This offer would net Miller $1.19 million for the realtor commission and the county $15,810,000 for the sell of the old high school.
Chairman Nathan Miller, who is not related to Rick Miller, was ready to accept the bid, however Commissioner Jim Deal was not.
For one, Deal didn’t receive the documents of the offers until he sat in his board chair on Tuesday night. Nor did the other board members, although the outline of the Campus Crest bid was on the board packet that is on Watauga County’s website, but it didn’t include any monetary values.
The Sanctuary Management bid was not in the online packet but a hard copy was given out at the meeting. (Plus, there was some legalese in the Sanctuary Management bid that County Attorney Stacey “Four” Eggers wanted representatives from Sanctuary Management to address before he would recommend the board to accept a bid from that entity.)
Chairman Miller and Commissioners David Blust and Vince Gable were ready to vote for and accept the $17 million Campus Crest bid with the seven percent commission to Rick Miller.
“This would net the county $15.8 million, which in my opinion is enough for the property. It’s a very large amount and double the appraised value we recently got,” Chairman Miller said. “I can live with that. I believe it’s a good deal.”
Deal was not ready to vote. Deal suggested scheduling a meeting in the near future, so he and the other board members would have a chance to read over both contracts. Miller said that one of the contracts was in the online board packet were blank as far as numbers were concerned and the monetary values were inserted on the hard copies before the meeting, so that other potential buyers would not know Campus Crest’s bid. Otherwise, he added, the Campus Crest contract on the website and the hard copy before them were the same, and that board members had all weekend to review the contract online.
Deal agreed with why the reasoning of why the figures were not on the online documents, however he was adamant for more time to review the documents and wasn’t willing to take Miller’s word for it that the hard copy and digital version were the same minus the purchase price and commission fee.
Plus, Deal was offended that both offers weren’t given adequate review.
“How can we vote on this without even reading all of the offers,” Deal said. “I can’t believe you would act without reading something. That is crazy.”
Deal also had two issues regarding the commission fees. First, Deal suggested having a commission split for the agent that would end up submitting the initial accepted bid and the agent that would close the deal on an upset bid – if those were to be different agents.
This had been done in the past by the previous boards because the thinking was that this would encourage more bids if there was some guarantee for the agents that initially submitted a bid and the agent that closed the deal. In the past, the split was 50/50.
Chairman Miller made it known that wasn’t going to happen on these offers, so Deal made a motion for a 90/10 split. The Republican-controlled board didn’t approve of that either – splitting down party lines 3-2.
(Chairman Miller also advocated for a clause, which the board approved, to be placed in the offer contracts that protects the real estate agents and would not allow Campus Crest Development to make an offer in the future without Rick Miller as its agent; Place Acquisition to make an offer without Tim Hagaman as its agent; and Sanctuary Management to make an offer without its current agent Robert Armstrong.
“So we only deal with originating brokers, so they don’t hire somebody else,” Miller said.”)
The other issue concerning the commission fees that Deal had was that the two bids had different commissioner percentages, which could put the board in a bind if an upset bid were to follow.
The reason being, which Deal pointed out and Eggers confirmed, was that if a bid is accepted then an upset bid could come in later that was higher than the previous bid, but due to high commission fees it could possibly net the county less money.
“That’s a good point,” Commissioner Blust said.
So the board directed Eggers, the county attorney, to amend a paragraph in the proposed offer which would make any upset bids have to have the exact same commission as the initial bid, so the bids could be compared “apples to apples,” as County Manager Deron Geouque put it.
Deal, though, was also adamant about capping the real estate agent’s commission fee at 5 percent, which caused Rick Miller, who already had his commission monies slashed by $510,000 minutes earlier, to shake his head some more.
Deal said a 5 percent commission fee would still net Rick Miller $850,000.
“That’s not an insignificant amount of money,” Deal said.
Deal said paying seven percent commission for this property – as opposed to five percent – would end up costing the at least $340,000 – the difference between five and seven percent of $17 million.
A notice of sale on the county’s website states:
“Watauga County will pay a commission of five percent of the purchase price at the time of closing of the sale by Watauga County, which commission will be divided equally between the real estate agent who presented the initial accepted offer and the real estate agent for the upset bid purchaser.”
In what seems like a rarity during this partisan term, Gable agreed with Deal, (but in the end didn’t; read further down).
“The only problem I see is we lock ourselves into seven percent commission [during the event of an upset bid],” Gable said. “I am not comfortable with seven percent.”
However, Chairman Miller’s stance was that it doesn’t matter what the commission fee is – so be it – as long as the property is sold to whoever nets the most money to the county.
“[Rick Miller’s] buyer knows they will have to put more money than somebody else would,” Chairman Miller said. “The buyer is willing to pay.”
Miller was ready for a motion after lengthy discussion to accept the offer at $17 million with seven percent commission to the buyers agent paid for by the county.
Before a motion was read, though, both Blust and Gable sided with Chairman Miller on their willingness to accept the bid with a seven percent commission.
“I don’t like seven percent,” Gable said. “I like five, but I am willing to go with the upset process to protect us here.”
Before he would be willing to vote on the matter, Deal said, “I want to read both [offers].”
Gable conceded, “My feeling on this is we need to take the evening to digest these offers and meet in the morning and make a decision.”
The board agreed to schedule a special meeting on Wednesday morning at 7:30 in the regular meeting board room to address the offers.
At the end of the meeting, a person that had been in contact with Sanctuary Management during the meeting via text but wasn’t an official with them, spoke up and said that Sanctuary Management would like to submit a new offer since Campus Crest Development was given an opportunity to amend its offer regarding the lower commission.
Members of the board of commissioners made it clear that the offer would need to be in by 7:30 a.m. for the board members to address the Sanctuary Management offer at the special meeting on Wednesday morning.