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Business Observer Thursday, Jul. 14, 2022 2 months ago

Developer of Farmer Joe’s property sues Fort Myers after sale agreed to in 2018 is again delayed

Johnston & Johnston has sued the city after council members blocked the deal as it seeks new appraisal.
by: Louis Llovio Commercial Real Estate Editor

After being rebuffed by Fort Myers City Council, a developer looking to close on the purchase of a city-owned property slated for a Farmer Joe’s Market has turned to the courts to finalize a deal in the works since May 2018.

The local developer, Johnston & Johnston, is asking that a judge force the city to close on the deal for a 36.64-acre property at 5600 Lee Blvd. that’s lingered for more than four years because of a number of issues, including questions about mineral rights and ownership.

The issue now, according to the suit, is city council’s decision late June to put off closing on the sale in order to get a new appraisal. This despite a seventh addendum to the contract that changed the terms of the agreement and the sale price, both benefiting the city.

The piece of property in question is on Lee Boulevard and off of Buckingham Road in Lehigh Acres. Johnston & Johnston have told city officials that Farmer Joe’s intends to take up to 10 acres for its second area store and employ up to 400 people. As part of the commitment to bring the grocer, the developer has agreed to make traffic improvements to the area.

The original sale price, agreed to in 2018, was set at $2.5 million, but Johnston & Johnston agreed to increase that to $2.75 million as part of the seventh addendum that was to be voted on. Johnston & Johnston also agreed that it would pay the full sale price at once rather than in three instalments as originally agreed to.

The issue that kept the majority of council members from approving the addendum and setting a date to close the sale was that the most recent assessment of the property was completed in 2016, long before the recent land boom. That appraisal came in at $3.17 million, several hundred thousand dollars below the previous and updated sales price.

The concern among the majority of council members is that given the current prices for land, the city isn’t getting the fair market value for the property. “We’re just leaving tons of money on the table,” Darla Bonk, who represents Ward 6, said at the June 21 meeting.

In its 42-page lawsuit, Johnston & Johnston argues that there is a contract in place that has been amended several times over the years and always approved by council. The city, it says, has to honor that. And, the developer maintains, the move to get another appraisal is a way for the city to find a new buyer, one who will pay more.

The city, according to the lawsuit, has already received an offer for $3.1 million.

Johnston & Johnston “clearly believes that, in accordance with the law adopted in the state of Florida, that an enforceable contract exists between” it and the city of Fort Myers, the lawsuit says. The city “apparently by its actions in failing to close and requesting a new appraisal, to arguably sell the property to a third party, believes otherwise.”

The developer, in the lawsuit, goes on to say that it has a “valid and enforceable contract” and has met all the terms of the deal while the city “has interpreted the contract in a different manner and refuses to close the transaction.”

“As such, (Johnston & Johnston) needs a judicial declaration of their rights that it is a viable buyer, (has) full contractual rights under the contract and (it) has demonstrated that it is ready, willing and able to close the transaction, but for the actions taken by (the city).”

City officials did not respond to a request for comment.

While it’s easy to focus on the drama at the June 21 Fort Myers City Council meeting, the fact is that this sale has been troubled since shortly after the sales contract was signed May 16, 2018.

Johnston & Johnston, which has been leasing the property since November 2004, says that much of the trouble causing delay was the fault of the city.  The problems, the developer claims, began when the city was unable to provide a “good, marketable and insurable title” as required by the contract.

The issue was that the title contained “underlying oil, gas and mineral rights, together with entry onto the property for exploration and retrieval of those oil, gas and mineral rights.” That led to the first addendum to the contract, extending the closing date in a good faith effort to allow the city to fix the issues with the title.

That addendum was unanimously approved by the council and was signed Nov. 8, 2018.

“Unfortunately,” the lawsuit alleges, the city “was unable to correct the title defects during the initial time period in the first addendum.”

This led to a second addendum to the contract that again extended the closing date. It too was unanimously approved by council and signed March 2019, according to the lawsuit.

Over the next couple of years, even as the COVID-19 pandemic stopped development and shut down in-person government work for months, the city and Johnston & Johnston continued to work through the complicated process of clearing the rights and the parties continued to discuss how to move forward on the sale.

Eventually, concessions were agreed to, with the developer agreeing to accept the title and take fiscal responsibility for clearing the rights as well as paying $83,518.43 in rent between the end of due diligence and the closing.

That created the third addendum to the contract, according to the lawsuit. Fort Myers City Council took up that addendum at a June 7, 2021 meeting. It was at that meeting that Johnston & Johnston told the council members about Farmer Joe’s taking 10 acres and bringing the 300 to 400 jobs.

A public hearing was held and the board, again, unanimously approved the latest addendum, according to the lawsuit.

Everything was looking good until Johnston & Johnston found, during its due diligence, that the original description of the property was incorrect. Lee County, it found, “through a condemnation action” had created a 30-foot wide “gap” between the property and the Lee Boulevard right-of-way. This meant the property didn’t have access to Lee Boulevard.

Once again, the city could not convey a “good, marketable and insurable title.”

“The representatives of (Johnston & Johnston) and (Fort Myers) met and again, in good faith and consistent with their intent to close and consummate the transaction, indicated that (the city) would take steps to resolve the defect existing in their own title,” according to the lawsuit.  

“At no time did (the city) ever indicate that they would not close the transaction nor take steps to correct the title.”

A fourth addendum was created and unanimously approved by city council August 19, 2021.

In the ensuing months, the complications continued to mount, leading to a fifth addendum, which was unanimously approved Nov. 8, 2021, followed not long after by the sixth addendum approved Dec. 12, 2021.

Between the approval of the sixth addendum, the creation of the seventh addendum and the June 21 meeting, Johnston & Johnston on May 6 paid the city the agreed upon $83,518.43, according to the lawsuit.

On that same day, a lawyer for the developer received an email from a city staffer reading that the “contract dates may be expired and we have a ‘challenge’ by an attorney saying the contract expired. Please give me a call. What is the deadline date for closing in your opinion?”

Johnston & Johnston moved ahead with preparations to finally close the sale, not wavering in the belief that the city staff was working toward the same goal.

Then came the June 21 meeting.

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