Concerns about the Lease:
From an attorney with 42 years experience negotiating and reviewing leases there are a few defects that at quite concerning:
1) First and foremost section 4.10 allows the lessee to make improvements, alterations and additions to the leased premises without the State’s approval after the lessee has completed the rehabilitation work. Customarily landlords maintain the right to review and approve material modifications to the premises throughout the lease term. In this case, it opens the possibility that the lessee could build a new addition to the hotel and conference center on the land now designated as the pool, parking area and culinary garden and the State would have no right to stop them. The addition could be as large and as high as the majority of the Kenmore City Council would allow in its zoning of the property. The only limitation in the lease is that the new building would have to be used for Permitted Uses that include hotel (lodging), conference center and related activities such as spa and restaurant. If the hotel and conference center business is successful a very large addition for those uses could become a reality in the future. I recommend that the construction of new buildings, except for a below ground parking garage and a one story building to replace the pool structure be strictly prohibited and that 4.10 be modified to require State approval of material alterations throughout the lease term. (62 years)
2) There are no provisions in the lease to assure that the lessee will provide adequate parking for its operations or that there will be any access by park users to new parking built by the lessee. Indeed, one could argue that since the discovery pass fees and a parking fee of $3.00 for non-hotel guests is being passed through to the State, that these guests should be able to park in the parking area for park users and that ticketing them for parking there would be unlawful. A comprehensive section should be added to the lease to address parking.
3) I think Parks is exceeding its statutory authority in leasing 0.5 acres for a culinary garden and that area should be removed from the lease. RCW 79.05.025 restricts parks to leasing for up to 62 years only the three designated buildings and parking area and “associated property immediately adjacent”. The intent of that language is to allow the lease to include immediately adjacent land that may be necessary for the maintenance of the exterior of the buildings. The proposed culinary garden area includes a much larger area which is associated with the picnic area and volleyball court uses and not the seminary building and pool.
The volleyball court is listed on the National Registry of Historic Places.
If the Commission wants to go forward with the proposal, they should send the lease back for further negotiations to correct these three fatal flaws.
Observations by a pro bono Washington State Real Property Attorney who read the Daniels/State Parks lease 12/26/17.
Packet by Parks staff includes 62-year lease as is/where is:
Lodge at Saint Edward State Park is a new, single purpose entity. Loan by entity that has worked for Daniels before will lend $25M and Daniels raises $20M - how? Does the single purpose entity have money? Missing info. When is a guarantee that $45M total funding going to happen? Missing info.
There is an appraisal; there is no proof of the cost to Daniels to purchase the McDonald property, which is the real value of the property. Missing info.
1.4 State will grant access to premises, including actual pedestrian and vehicular access across such portions of the Park as is reasonably necessary for the "Permitted Use" -- defined 2.1. What does this mean? A new entry, a wider road? Permitted use is very broad; it could mean anything considered as “lodging and conference center with the amenities of health, spa, fitness and recreational related amenities, incidental surface and structured parking, restaurant, lounge.” Missing precise definition.
2.1 "Permitted use" has no tight definition meaning basically whatever Daniels wants. “Operation of a lodging and conference center ….. Legal definition of Lodging is very broad including living places from overnight stay to permanent residences. “amenities incidental thereto….” Is broad so once signed Daniels can do anything listed with no regard to the impact on the Park or State oversight. Missing.
2.4 Public Access: This is peanuts. Daniels decides what is open to public regarding buildings and contiguous areas; even outdoor access is determined by Daniels.
3.1 Rent: "promise to make necessary investment . . ." by when? "McDonald Property and…rehabilitate the Seminary Building shall constitute full payment of the entire rent….for the Term” Rent based on appraisals that include rent increases. Appraisals not included. What is the actual cost Daniels is paying for the McDonald property? Missing information.
4.1 including associated cultural landscape -- consistent with "permitted use," which is not limited. He can do anything. Already Daniels is ignoring the park elements on the National Register replacing with the formal garden to which he can limit access. The elements of the park on the National Register are not named in the lease. Instead he uses "cultural landscape," much more loosely defined that what is on the National Register. (Words in italics added by Ann Hurst, who wrote the narration that nominated the park to the NR.)
4.6 Language is mushy: Public access related to structures. He may modify or re-build but there is no promise. Daniels prepares and Commission approves. Exhibit C; Daniels may make further changes to plan, if adding factors. "Rehabilitation" is what Daniels decides. He can make further changes, once this lease is signed, so in future, Commission has given up control: Daniels is in control and as yet with no skin in game. Missing future plans.
4.6 continued, Daniels can do anything, Exhibit C -- what does he have in mind regarding "land clearing"? Page C-2 on clearing: "Lessee will follow the clearing, leveling and erosion plans as submitted to and approved by the State and in accordance with such plans, drawings and/or specifications as the State has approved, which approval shall not be unreasonably withheld, conditioned or delayed." What has the State approved? This is missing from the lease.
4.6 continued, Exhibit C: Proposed costs are outlined in schedule A; Schedule of Completion dates outlined and anticipated in Schedule A -- Schedule A is not attached. Missing.
4.10 After Daniels has finished "rehabilitation," his definition, he can make further changes in future, WITHOUT CONSENT OF STATE, so Commission has given up control. So broad, he can knock over the building and? See number 1 on page 1
5. State access, use of conference room, 2 offices, total 1,000 square feet or 1.11% of the building square footage. State must give 90 days notice to use. Will the space be finished, heated, allow access to restrooms? Once lease is signed, the deal is done. Missing benefits to public.
5.6 Road maintenance: Lessee shall not construct except for maintenance "required" by whom? Permitted? Parks has given power to Daniels to build roads or an easement.
7.4 If building burns down, all of the insurance money goes to Daniels' lender. Lenders require “Builders Risk Insurance”. Who will remove the rubble?
13.1.2 Inconsistent with 7.4 "terminate" or "repair" and assigned proceeds by State.
17.1 Department of the Interior (Secretary) and National Park Service not included in appendices. Where is the approval, the communications from these national organizations? It says in the lease that approval is condition of lease. Missing.
Exhibit C: What has the State approved for clearing? Missing.
Exhibit C: Schedule A is missing, which purportedly includes project costs outlined in schedule A? No date, no firm commitments purportedly in Schedule A, is missing.
Exchange agreement between Daniels and McDonalds was not included in agenda items at time of review; therefore it has not been reviewed by pro bono attorney. Actual value of land is missing. If lease is signed and Daniels does not do the exchange and commence "rehabilitation," what happens? This lease does not protect the public; definitions, terms are too broad. This lease is not ready for signing.