Abbotsford city council works to revise real estate contract

By Neal Hogden

An agreement between the City of Abbotsford and commercial realty company NAI Pfefferle was under the microscope at the city’s council meeting on January 3.

The city chose to take a closer look at the contract after local buyers had approached the city about purchasing land in the marketed lots and the council had felt that NAI Pfefferle didn’t deserve to be paid in full for commission on parcels that were sold to local buyers. The current contract, which expired at the beginning of the year, says NAI Pfefferle would receive 5% of the tax assessed valuation projected when the developers agreement start date activity is fulfilled.

For example, if a developer wanted to build a building worth $1 million on a lot that was marketed by NAI Pfefferle, the city would have to pay the realtor $50,000 in commission. An issue the city has run into is its willingness to sell land for $1/acre for certain developments. At the time the above agreement was made, the city had planned to sell the lots in the industrial park for $60,000. However, the city has found that developers are much

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more receptive to buying land and developing it if there is a significant incentive in buying the land.

The lack of profit for the land means the city would pay more in commission than the land was sold for. However, that money would be recouped over time in tax revenue, especially if the parcels are a part of the city’s TIF districts.

T.J. Morice of NAI Pfefferle represented the firm in the discussion with the city council on January 3.

Morice could sense that the city was growing impatient with the fact that lots have been for sale for a lengthy period of time but said to bring in commercial investors takes time. “Commercial deals take a long time,” Morice said. “It took me over 30 months to get Amazon in Wausau and you guys need to know that that property was on the market for over a decade before it happened. So some of this stuff takes a long time.”

Morice went on to say that the lot that Dollar General currently sits on had been for sale for two years before the deal came through. Morice also said that the marketing firm does a lot of behind-the-scenes work that appeals to potential buyers all across the country.

He sited a Google study that said 87 percent of commercial real estate sales happen online. Along with the study, Morice provided the council with various correspondence via emails or messages with prospective buyers that haven’t panned out to prove that he has been working on marketing the lots.

Morice told the council that although the city may have personal relationships that help them sell land to local buyers, the signs for the property that NAI Pfefferle has on the lots could be the reason they approach the city asking to purchase land. He said the two sides do not get to know whether a buyer saw a sign and that’s why they chose to pursue purchasing the property or whether they approached the city on their own volition.

Morice addressed an elephant in the room in the form of the city’s developer’s agreement with Straight Shot Investments. Straight Shot Investments purchased lots in the city’s TIF District and planned to put up 51 town homes in the Schilling subdivision. The investor was brought in by NAI Pfefferle and a developer’s agreement was signed in May of 2021 in which the city sold the lots for $1/acre for 11 acres. This deal netted NAI Pfefferle $22,000 in commission paid for by the city.

The Straight Shot Investments deal has since fallen through as owner Noel Felix III said he didn’t have the funds to begin construction on the project in a meeting in spring of 2022. Therefore, the city’s investment in a developer, which was brought in by NAI Pfefferle, who ended up building nothing has netted the city a loss of $22,000.

City Administrator Josh Soyk said technically, Felix has until May 2024 to have the buildings built but that timeline would be next to impossible at this point. He said he will have an item on the next council agenda but he expects the city to just ride out the terms of the development agreement with Straight Shot Investments in which case the city would get the lots back in May.

Morice addressed the concerns saying the unfortunate issue with Straight Shot Investments was the reason the city’s contract with NAI Pfefferle was amended.

“I know there’s a little bit of a frustration because I had brought somebody for that initial development and the apartment thing,” Morice said. “He didn’t fulfill what he had committed to you guys and I think there’s a little irritation from that. That was nothing personal, and we redid the agreement based on what I thought you guys wanted.”

Morice told the council he wasn’t against reworking the agreement but the version the city had drafted was concerning.

“I’m open to facilitating something fair, but there’s some concerns with what is being shared tonight.”

Morice said he wouldn’t be opposed to reducing the firm’s commission rate for local buyers, however, he would need to check with higher-ups within the company to ensure anything put in writing was acceptable.

Council member Roger Weideman said he would prefer to run the contract through the city’s attorney and ensure that any upcoming decisions were properly vetted by the city’s legal counsel.

Council member Mason Rachu said he wouldn’t want the city to put a clause in that depends on where or how the buyer heard about the purchasing opportunity because he felt that put the city and NAI Pfefferle in a grey area and opened both sides up to litigation down the road.

Morice agreed that no one really knew how to measure whether a potential buyer saw NAI Pfefferle’s marketing or has a personal relationship that facilitated a deal and asked that he speak to his legal counsel about how to word a contract based on the locality of the buyer.

Despite the negotiation and confusion, Morice said he would prefer to get the contract figured out sooner rather than later in order to save on costs for taking down and putting back up signage at the sites if a marketing agreement between the city and firm were to continue.

Ultimately, the two sides decided to explore options with each other’s legal advisers before presenting a solution at the city’s January 17 council meeting.

Other business

n The council approved a developer's agreement with Cole and Natalyn Jannene to build a storage facility on the corner of 11th Street and East Linden Street in Abbotsford. The facility will be 32 units in total with various sizes and eight drive through bays measuring 10’ by 30’ in size.

n The council approved the hiring of two new police officers and approved the purchase of a new police vehicle.

n The city issued two sewer credits to Abbotsford addresses after it was found that people have been turning on the exterior water faucets at the addresses. The council was warned that this has been an increasingly prevalent issue and to turn off exterior water sources during the winter, if possible.

n The council also debated about an adjustment to the points system for alcohol infractions by Class B liquor license holders within the city. The council noted that La Botana Bar has had repeated issues with alcohol infractions and likely would have had its liquor license already revoked if the ordinance had been followed properly.

The council voted to approve the liquor license for La Botana Bar but said they would need to keep an eye on the bar to ensure the new manager fixed existing issues the city was having at the establishment.