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City council Tuesday rescinded a motion made last month to accept a $1.75 million proposed cash offer to buy the Roanoke Rapids Theatre and after lengthy discussion opted to go with a revised $1.5 million cash offer that the law firm of Wellman and White submitted on behalf of a client who had originally put in an offer that was the subject of the May 22 special called meeting.

The decision by the panel was based on an update presented by City Attorney Geoffrey Davis in which he said Victor Enterprises, which made the $1.75 million offer, had not made its 5 percent deposit which would have started an upset bid process.

“Over the past 10 days, two weeks, I have had several discussions both with Victor Freeman and with his attorney,” Davis said, including a conversation Tuesday. “I received several statements that ‘we’ll have it (the deposit)’ in by a certain date and for whatever reason that couldn’t be done.”

In the Tuesday conversation Davis said Victor Enterprises said it did have the funds for the deposit but they were being held because they had to move money and they wouldn’t be able to pay it until today. “Throughout this conversation I’ve indicated to them that the city has an interest in going ahead and receiving this so we can go ahead with our process.”

(The cash offer proposed by White can be downloaded at this link while the resolution accepting that proposed offer can be downloaded at this link)

Davis said he had originally suggested that the deposit be made by Tuesday of last week. “That didn’t happen. I made it clear to them we have a council meeting scheduled for today. I’m going to update the council and that council could possibly take action on the failure to comply with the deposit. I believe they understand that is the case.”

Davis said he was hand-delivered an offer from Wellman and White who is representing a group of buyers that had made the previous offer. 

While there has been some changes in the makeup of the group Wellman and White is representing, Davis said, “This is essentially the same offer that was on the table tendered by Mr. (William) White on behalf of a group at the special called meeting last time. That offer has been retendered.” 

White had submitted the original proposed offer on behalf of Weldon Mills Properties and other parties.

Davis said White told him that he has in a trust account the initial deposit and that the deposit could be made today.

Receipt of that deposit would then trigger a public notice by the city beginning the upset bid process. “At the end of that 10-day process all bids that have been received are opened and these bids have to come with the deposit. So there’s not going to be a situation when you get to that upset bid process where you could make a bid and then deposit it later.”

The highest qualified bid would be accepted by the city clerk and then another process is started when another upset bid notice is published. “Sealed bids are accepted with deposits. You go through that process until there are no more qualified bids received.”

Once that process is completed the issue would come back to the council which would decide to accept the highest qualified bid or reject all bids.

Councilman Carl Ferebee asked whether the city could be sued by rejecting Freeman’s offer to which Davis replied no. “The most essential reason is that we didn’t specify a timeline (for receiving the deposit),” Davis replied. “If we specified a timeline and we cut it short that would be a different story. Looking at case law with respect to the procedures we’re talking about now … the courts have taken a position that this whole process is to make sure the city gets the highest possible amount for city property. One of the things with this process is there is no way you can get around that competitive bidding process. The reason it exists like this through this 10-day upset bid process is to make sure that … interested bidders have a fair opportunity to tender an offer and to have that accepted and … so that the city gets the most money for that asset as they can.”

The city attorney also discussed the value of the theater today versus the money spent to construct it. “At the end of the day what matters is the fair market value of an asset — not how much money you’ve sunk into it. That’s sunk cost fallacy … Regardless how much money has been spent on it, what matters at the end of the day is how do we determine what the fair market value of this asset is today?  Not how much it cost to build, not how much it would have cost back in 2007 before the economic crash but how much it cost in 2023. The way that’s determined is through this competitive bidding process.”

What matters to a court, Davis said, “Is that the city put it out for bid and the city got the highest possible bid.”

Davis said the offer from White’s group lays out specific details such as the buyer having 60 days to conduct due diligence. “Once council accepts the final highest bidder then we’d have to sit down with that bidder’s attorney and formalize the more formal real estate process.”

About 35 minutes into the discussion Councilman Rex Stainback made a motion to rescind the resolution approved last month on Freeman’s proposed offer. That motion, on a second by Tommy Daughtry, passed by a 3-2 margin with Sandra Bryant and Ferebee voting against it.

About seven minutes after the Freeman proposed offer was rescinded, Councilman Wayne Smith made the motion to accept the proposed offer that was submitted by Wellman and White on a second by Stainback. That motion passed unanimously.

Stainback said his motion to rescind was not an indication he believed the council made a rash decision in accepting the Freeman proposal last month. “We went with the highest bidder. He just didn’t fulfill the terms that we needed. He’s certainly able to submit a bid after tomorrow. We’re ready to move forward with this thing. I think it’s time.”