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ST0301-ES070830 ')T o August 30, 2007 CHADICK CAPITAL L.L.P. Steven Chadick, Partner 2019 Northwood Terrace Denton, TX 76209 CITY OF COPPELL Mr. Ken Griffin, P.E. Director of Engineering/ Public Works 255 Parkway Blvd. Coppell, TX 75019 To: Mr. Ken Griffin Mr. David Dodd, Esq. Council for City of Coppell Regarding: City's purchase of R.O.W. easements from CHADICK CAPITAL L.L.P. as well as a "drainage property exchange" between the CITY OF COPPELL and CHADICK CAPITAL L.L.P. Gentlemen, I have not heard any recent updates concerning the land trade (ref. drainage property exchange) and related R.O.W. purchase involving several pieces of our property in Old Town Coppell. This letter [and included documents] will hopefully serve to revisit and explain our position. I also hope this will clarify our reasoning concerning the question of the proposed exchange's parity —which has become the sticking point, as explained to me by City Attorney, Mr. David Dodd when he and I spoke earlier this summer (in May of 2007). As I understand the issue, this most recent proposed trade of equivalent size parcels of land (comprising a portion of Chadick Capital's Tract 3 plus a segment of R.O.W. from our Tract 1, both from J. Vest Survey A -1508 in exchange for the City's Tract 18 of James Simmons Survey A -1296) causes an impasse because we are asking to retain all mineral rights in the above sited exchange.* *See Mr. David Dodd's letter, "Re: Bethel Road Project, Right of Way... ", dated June 5, 2007 Specifically, we are asking to retain all mineral rights from the R.O.W. easements the City requires from us as well as retain the mineral rights on our property being used in the above referenced exchange. Additionally, we want the City to include the mineral rights on the portion of the property the City is trading to us, as well. This latter point becomes important if only for possible future benefits, since we too, think the City's latest proposal is inequitable. In this bargain, the City will have taken more valuable property from us-- certainly without the inclusion of these extra mineral rights in the trade. Mr. Dodd has told me that the State Constitution allows for only trades of equal size to take place and forbids any disparities in this area. He said that our additional request for the City's mineral interest in their property tips the scale inequitably in our favor ...and unless we were to provide documentation otherwise, this would be a problem. I mentioned in passing, during this same conversation, that I could provide valuations to back up my position. In hindsight, I think Mr. Dodd understood me to mean, `appraisals from a certified Appraiser.' This was not the case; my apologies to Mr. Dodd for this misunderstanding. What I do have is strong evidence of property values from Dallas County Appraisal District (DCAD) appraisals as well as my own research of recent sales through the Multiple Listing Services (MLS) combined with my own expertise as a realtor and property manager in Coppell's Old Town area for over fifteen years. {Please note below: I refer to the James Simmons and J. Vest Survey's numerical designations for all the properties involved —not the parcel numbers the City used in some of its correspondence with us) A Brief History: I initially approached Mr. Ken Griffin and fellow Engineer, Ms. Suzan Taylor in the City's Engineering Department in the summer of 2004. At the time, I was aware of the City's need for R.O.W. and drainage easements, having seen City's engineering blueprints for the road and culverts planned for Bethel & Coppell Roads'. I had an idea I wanted to run by the City, which I make reference to later below. Mr. Griffin told me he would have to run our initial trade idea through City channels. We wouldn't meet to discuss a formal proposal until mid 2005. I outlined our offer for the possible exchange of properties in June of 2005 in a letter to Ms. Suzanne Taylor, at that time the CIP Coordinator with the City's Engineering Dept. ** It is with sincere respect, and understanding when I note that Mr. Griffin took our original proposal and came back one year later with the City's counter- - one which looked nothing like our own.*** The City of Coppell's version of the trade based the majority of the exchange on a different parcel of ours, namely Tract 3 (the physical address being 516 W. Bethel Rd.). They designated the western portion of our Tract 3 be the primary piece for exchange, and since it is smaller in size than the City property's square footage- -Tract 3 contained 11,917 sq. /ft. versus the City's (Tract 18) 16,538 sq. /ft., they then projected the difference to be taken from one the most valuable pieces we own in the Old Town area, namely Tract 1 of J. Vest survey. This "remainder" piece – totaling 4,620 square feet, had been designated as part of a R.O.W. easement purchase -- separate from the channel widening project- - and overall, one of several road improvement acquisitions needed from Chadick Capital L.L.P. on Bethel and Coppell Roads. **See Letter to Suzan Taylor, CIF Coordinator ***See Official City Proposal, RE: Bethel Road Project # ST 03 -01, dated August 8, 2006 To reiterate, Tract 1 happens to be the most valuable, undeveloped hard corners and prime frontages we own. The portion of Tract 3 making up the majority of this trade was valued higher as well, at the time of our initial talks in 2004/ 2005.+ Our Original Proposal: In my letter to Ms. Taylor, dated June 5, 2005, we offered a potential trade scenario. We proposed to exchange Tract 5, our property located along the creek at 595 S. Coppell Rd. (which faces directly across from the old Parish homestead) for the City's Tract 18. Though in light of Mr. Dodd's recent letter to us, I understand the City views these parcels as materially unequal (ours being 9,000 sq. ft. larger in overall dimension). At that time, we reasoned that both pieces seemed roughly equal in overall quality: both showed to be partially or wholly in the hundred -year Flood Plain, their main differences being in assessed value as per the Dallas Appraisal District. (see included DCAD docs.) Although we would receive less square footage from this trade, the 9,000 sq. ft. disparity in size was offset by this properties lesser valuation, or so was our contention. The topography, zoning and overall character of these properties matched. Both properties were and still are limited in commercial appeal- -due to the remediation needed to address Flood Plain issues; both are restricted by the drainage creek splitting their boundaries. The City property's valuation seems to have benefited from being linked to the Carter - Crowley property to the south which the City had purchased together from Crescent Properties —but I contend it is no more inherently valuable than our Tract 5, which lies 300 yards northeast on the same drainage creek. Our Tract 5 at least profits from being physically adjacent to our other properties in Old Town (see map of Tract 2), separated only by the drainage creek. Conversely, however, the City's Tract 18 is isolated and non - contiguous to the larger former Crescent property (Tract 15). Tract 18's complete isolation, the fact that one third of this parcel itself is split by the drainage creek that runs through it and coupled with it being situated at least partially, if not mostly within the hundred year Flood Plain (see FEMA map) doesn't add up to it being considered prime property either. By inference, Tract 18 has limited development value to the City. Its value to us is in filling in a void above a panhandle parcel we own (Tract 19) hence making Tracts 17 & 19 a nearly completed rectangle. It might also provide additional parking potential on the parts not located in the flood plain. [Note: Our proposition also served to address an issue raised four years ago during the Old Town Draft Plan negotiations for this area of town — negotiations of which I was involved. Tract 5—a parcel we've owned for years and which was purchased by us for its commercial value— however limited - -was now shown on the Draft Plan as a `green space' buffer on either side of the creek off Coppell Road. Down zoning issues aside, I was told at the time that the City might have to consider purchasing this land from us—I assume to avoid making us the owner's of non - utilizable, hence non - saleable property.] Concerning the FEMA and Army Corp of Engineer's map: Note that the only property discussed above not appearing partially or wholly in the hundred -year Flood Plain, though contained within the contiguous northwest quadrant of properties bounded by the intersection of W. Bethel Rd. and S. Coppell Rd., is a piece of land Chadick Capital owns, namely our Tract 1. Again, this property is also the visible "hard corner" in this commercial district. Although it is hard to tell precisely how much of many of the tracts discussed above are within the Flood Plain, since they lie in an area which the FEMA map shows in limited detail, most of the properties involved in the (City's and our) R.O.W. and drainage negotiations are either partially or wholly within this map's shaded areas (those areas denoting the hundred year flood limits). Also note that in the Flood Code Zone Definitions page included, there once were "B" and "C" designations corresponding to moderate or minimal flood exposure risks respectively, and now replaced by an overall Zone "X" designation. I contend Tract 18 would have shown as a `B" in this chart, having moderate exposure to flood hazard. Again, there was no FEMA/Army Corp of Engineer's detailed Flood Plain mapping for this area in existence at the time of my original meeting with Ken Griffin (one which would include elevation(s) or detailed charts). This area, as far as I know to this day, still does not have detailed topographical mapping. FEMA maps end just one hundred feet or so east of S. Coppell Rd., just north the current Senior Center. There is however, overall strong evidence that the City's property is at least partially within the hundred year Flood Plain. (See FEMA map) More Evidence of Value: Land prices in Old Coppell have begun to rise steadily and steeply during the past two years. First with the sale of 412 W. Bethel Rd. in April of 2005 @ $4.95 sq. /ft. and then 717 S. Coppell Rd. in January of 2005 @ $2.99 sq. /ft. [land portion]. Over the last year, several more sales have occurred: 717 S. Coppell Rd. in November of 2006 @ around $6.25 sq. /ft. [land portion], 501 W. Bethel Rd. in December of 2006 (undisclosed; see former owner), 528 Coppell Rd. in March 2007 @ $10.97 sq. /ft. [ "value in land only "], and 572 Coppell in April of 2007 @ $8.17 sq. /ft. [ "value in land only "], reflecting growing interest in this area. These recent sales, combined with new developer interest in the Old Town area (eg. the just opened Hard Eight Barbecue Restaurant, the newly proposed The Village at Old Coppell's event center complex w/ hotel and retail along S. Coppell Rd., Dr. Swaldi's Old Town Medical Center, as well as the proposed new townhouse addition, "Lost Creek," recently approved by the City and just south of the two -year old Old Coppell Townhomes location) are factors continuing to thaw a previously stagnant market trend in this part of town. It is interesting to compare the City -owned 616 Coppell Rd., Tract 68 Senior Center's total land and improvement which is valued less than the City's Tract 18 `land only' on the 2006 tax roll: $3.00 per sq. /ft. for the Senior Center's land and improvement (none of which by the way, shows to be in the Flood Plain) versus the current assessment of Tract 18 at 511 W. Bethel Rd., at $5.00 per sq. /ft. Also note that the previous tax year 120051 showed Tract 18's valuation at only $1.00 per sq./ft. The year before that [2004] was $3.00 per sq. /ft... The above cited fluctuations prove the limitations of DCAD's assessments as an appraisal device but there are inferences one can make from them. Most likely after buying the property from Crescent Realty in 2004, the City inherited a valuation which hadn't changed since 2003's and because the City probably never had to report the actual sales figure —in likelihood, this property was bought directly without either party having to disclose the sales price (as per the "for the sum of $10.00..." section on purchase price in the contract) which would partially explain its extremely low valuation the following year in 2005. But even if the City's property valuation now nears the base norm - -this new base value, established by 412 W. Bethel Rd's 2005 sale at $4.95 sq. /ft., is what many Old Town properties began to be assessed at after that sale occurred and is probably still at the lower end of the spectrum compared to the most recent sales figures, all things being equal} —the City's property would clearly be less valuable than other commercial properties not located in the Flood Plain but valued at the same $4.95 valuation as set by DCAD in 2006. Finally, please note the information supplied on Tract 19 owned by Chadick Capital. This property forms the panhandle referred to before and is valued at $2.50 per square foot as per DCAD. This tract also connects directly below Tract 18's southern boundary, resembling a slightly narrower version of the City's property in size and shape. It might be contended that our Tract 19 is isolated and without frontage — though it shares access to Bethel Road with our Tract 17 as well as Hammond Street's cul -de- sac providing possible access to its southwest corner. This piece does appear to be clearly outside FEMA's Flood Plain boundaries, unlike Tract 18. To Summarize: The City's version of this property trade is predicated on 1.) exchanging their Tract 18 for the more valuable of the two possible properties it has available to choose from —a portion of our Tract 3 versus our Tract 5 and 2.) directs the remainder of the `shortfall' to come from one of the most potentially valuable frontage pieces we own in the Old Town area —Tract 1. Interestingly enough, this appears convenient on another level because the City is then only responsible for paying on the remaining lesser valued R.O.W. easements - -not on the most valuable R.O.W. piece since is it is being utilized in the trade. Please also note: we offered to freeze our asking price for all R.O.W. needs the City had during our more formalized negotiations in 2005. We said we would base the property values on the then current 2005 tax year, an offer we thought showed good will. I don't think I'm being cynical when I say the wait seems to have benefited the City's property (Tract 18) over the following three years. It appears that their land had to reach favorable valuations comparable to more highly assessed properties in the area before the City became ready to offer a contract. That wait didn't seem to benefit our Tract 5; its valuation in those subsequent two and a half years has not increased at all —if one is to ascertain values only from DCAD. Please recognize I'm in a no -win situation when I argue for realistic market value versus DCAD assessments. These two types of valuation are often quite incongruous —as any realtor, appraiser or property owner would attest. We are certainly are not arguing for higher assessments, having been long time owners of these properties in the Old Town area. We are asking for fair market considerations in this exchange & R.O.W. purchase agreement though, especially since the City now - -in theory -- benefits from the DCAD assessments in relation to our trade. In lieu of the above changes re- brokered by the City, I don't think we are being unreasonable when we ask for fair compensation -- though the City may consider it additional compensation —in the form of these mineral rights from Tract 18 - over what the City has offered in the exchange for the drainage easement/ R.O.W. purchase contract. For us, it evens out the value problem we have with the City's proposed exchange. The City of Coppell's Contract might make sense for the City of Coppell, especially in light of Mr. Dodd's contention about the State Constitution's equal size trade policies, but is wholly insufficient to us; land parity in square foot terms does not correspond to parity in value. In closing, as the representative for Chadick Capital L.L.P., our intention is not to be contentious. We have enjoyed a good relationship with the City of Coppell and have worked fairly and in good faith with different administrations and departments within the City for years now, whether in past R.O.W. purchases, or other projects and sales. We are asking the City to please review what we have put forth to be fair compensation for what exists as an inequity in the initial contract presented to us. Thanks for your consideration of this issue, 4 Steven R. Chadick, Representative for CHADICK CAPITAL L.L.P