My Eminent Domain
By Ryan Culicerto
Quality Stone Concepts
113A S. Witchduck Road, VA Beach, VA
Part 2 of?
When I look back at these blog posts, I hope that it ends up being the biggest waste of time in my life.
I hope there ends up being no story, and nothing to report. If that is the case, I’m planning on making sure everyone involved gets the credit that they deserve. I’d like to say that I have faith, but lately my confidence has been shaken.
On Feb 20, 2015, we were made aware that “The official decision was made for Parcel 1 to move from a partial acquisition to a total acquisitions in May 2014. The requirements for an additional storm water management facility coupled with the reduced access to the property solidified the need to move forward with Parcel 1 as a total acquisition.”
Even though our property was deemed unaffected by the Witchduck project we learned about the Renaissance Academy, we now understood all the rumors and whispers were actually true.
My Right of Way agent legally introduced himself through a letter that ended: “With your cooperation, it is the City of Virginia Beach’s goal to assist your business in relocation to minimize any inconvenience caused by the move and answer any questions you may have.” I hope to one day let you all know that he was a man of his words.
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Once friends and family found out about our impending displacement the overall reaction was: “You should hire a lawyer.” That was our initial response as well. The truth is, we did have a few initial consultations with a very reputable local law firm, who specializes in eminent domain issues. In summary, we learned that if you don’t own the building, you really don’t have many rights. As a leaseholder, the major rights we were entitled to were “certain benefits from the City of Virginia Beach towards your relocation to a replacement site.” Essentially “legally fighting” the city, was a nonstarter. There is a reason that it’s referred to as “eminent.” Our choices as we understood were:
- Retain a Law firm, and have them help us navigate the process, help us collect what we are entitled to by law, and pay them a percentage of the proceeds.
Or
- Spend 10 of the most boring hours reading Chapter 6, Section 1 of the Rules and Regulations Governing Relocation Assistance, figure out what we are entitled to, and work with the City in obtaining that assistance.
After our initial meetings with the City officials we decided on the latter. Our first meeting was an introduction to our Right-of-Way agent and his boss. We found them to be knowledgeable, informative and overall sympathetic to our situation. We found them to be good local folks who wanted to help us navigate this process. The city was pleased that we decided to work directly through them and not a lawyer, and assured us that this would allow for direct communication which would facilitate the process. We felt like they were genuinely there to guide us along and help us make the best of a bad situation.
As the writing was now officially off the wall and on legal letterhead, QSC started looking for options. My Commercial Real Estate Broker mentioned several times, QSC’s space requirements were tremendously unique. Our search started with looking into our options surrounding purchasing a new property. We met with banks, provided financials and dotted all of our I’s in the hopes of getting approval. Through the request of a friend, we decided to start with Virginia Beach Economic Development. We thought, “who better to have an interest in getting us relocated to Virginia Beach, than the VBED.” We were approaching $3 million in annual homegrown revenue, and had been preliminary approved for $1 million in financing. We thought this was as good a place to start as any.
While our one and only meeting with the VBED was initially polite and informative, we didn’t find it particularly helpful in the long run. To be fair, they were helpful with obtaining an entry level understanding of the myriad of restrictions businesses like ours face while considering parts of Virginia Beach to relocate. Overall, we found that property searches performed on our behalf weren’t consistent with our space and/or logistical needs, and firm understanding of our requirements were never really developed. After a couple of attempts to find available buildings and land, we decided to go in a different direction. In retrospect, I’m not sure what type of assistance I was looking for from VB Economic Development. Even though I didn’t get the hand holding that I needed at the moment, I probably got all of the help they were capable of providing.
We decided that we should probably work through a Commercial Real estate broker, as it appeared that we might be in over our head given the time frame and requirements. We procured the services of Clark Simpson at Commonwealth Property Group (who we highly recommend) and began getting him up to speed with our commercial requirements and the City rules we had to follow. The City was happy that we had retained a commercial broker to assist in our search and recognized Clark as being quite proficient in his field. He met with our Right of Way agents and we formulated a plan.
Interestingly enough, by obtaining the services of Clark, we were also entitled to our first reimbursements for actual expenses. We were curious to see how quickly this would be paid, as any delays in payments/reimbursements might cause a bigger problem down the road. We looked at this reimbursement, as a litmus test on how cooperative and how eager the city really was to “minimize these inconveniences.” More on this later.
Meanwhile our search for a new property had stalled. “Too big, not enough time to move the existing company out, APZ restrictions, can’t have a showroom, too expensive, property located at the far end of Suffolk” etc etc. We heard it all. The search for a new building had become all-consuming. By far the biggest obstacle in relocating in Virginia Beach was to overcome the APZ-1/APZ-2 restrictions surrounding Oceana. Our Right of Way agent, and VBED were VERY helpful in educating us on what we couldn’t do. However, finding a building that worked from a structural stand point and also allowed us to have a showroom proved to be very challenging. After several months of fruitless searching, on Sept 17th, we realized we had two choices:
- Leave Virginia Beach all together
- Break up our company in 2 or 3 different companies and find smaller individual spaces that worked for each individual business unit.
Neither of these choices were particularly appealing, however in Subpart D of our Payments for Moving and Related Expenses, we noticed that there were provisions for ”Storage of the personal property for a period not to exceed 12 months, unless the Agency determines that a longer period is necessary.”
In a complicated industrial/retail move like ours, finding a storage solution seemed like the easiest piece of the puzzle. On September 17th, we alerted our Right of Way Agent that we were having a tough time finding an all-encompassing solution and that breaking our company up into 3 physical units was going to be a real possibility. We told him that we were going to switch gears and focus on finding a temporary storage solution in accordance with the rules and regulations provided. We even sent him an email with an example warehouse and inquired about what we needed to do to procure a similar site. To which he replied:
Ryan,
We can only pay for storage of the personal property for up to one year. You would have to move it into a permanent storage after that. We do not particularly care in regards to the type of storage you chose to acquire. It could be an open space for the materials you currently store outside.
When I asked about what needed to be done logistically to acquire the lease he said:
Ryan,
To acquire a storage site, we would need a copy of the signed lease showing the terms compatible with the time requirement.
Even though you’ll probably not find “take ½ of your company and move it into a warehouse” in any textbooks at Harvard Business school, we were relieved to have a strategy moving forward. Procuring storage become the cornerstone of our search.
With a major obstacle seemingly out of the way we chose to focus on a place to do business. On September 25th we found a restricted opportunity on London Bridge Road. Once we expressed interest in the property, the representing broker reached out to VBED to clarify any naval restrictions. Once again VBED informed us of the restrictions surrounding that property, however at this point we had realized that we are not going to find an optimal solution and were just interested in moving forward.
As with most real estate transactions, there was one major problem. There was a tenant in the building and according to their broker wouldn’t be able to move out until 2-28-15. In a deal this complicated we thought for sure we would be able to work these details out with the city. I reached out to the Right of Way Agent again and his response was the following:
Ryan,
Your Possession Agreement with the City expires on November 24. You may be entitled to one 30 day extension upon application to the City’s Facilities Management Department.
Unfortunately, based on the terms of the agreement it may not look like a viable option given the time constraints.
Thank you very for the update and please let me know if you have any other questions.
I was shocked and disappointed at the City’s inflexibility. However, we decided to move forward nonetheless. At this point, the time was ticking and December 24th was looming, and now it appeared that the very small pool of adequate properties just got smaller as we need to add “must be immediately vacant” to our search criteria.
After another month of looking at how to split the company into 3 separate pieces, we had our first stroke of good luck. A property on Reliance drive opened up, and there was immediate availability. As luck would have it there were no naval restrictions, there was adequate warehouse space (however, no outside storage). There was even 9500 sf of onsite warehouse available. Needless to say, we were thrilled and looked to execute the warehouse/storage lease to alleviate that aspect of the move. We still had to work out details with the potential landlord as our business requires industrial manufacturing that not all landlords would approve (i.e. we are very messy and tend to sprawl).
On Oct 22nd we were provided our 30 day notice to vacate. This infuriated Clark because, even though this notice was 2 days early, Clark had not yet received his check for his services a full 45 days after he submitted his original invoice. Our Agent apologized for “letting his payment fall through the cracks” and his check was cut and received on November 7th.
On November 3rd, we submitted our lease for the storage units, to the city for their approval. We were still working with the landlord about the buildout of the new property, but the lease for the 9500 sf feet of storage space was finally in the hands of the city. One Nov 12th, as we were performing our initial walkthrough with our Right-of Way Agents and the 3 commercial movers, we were told by our Right of Way agent to “SIGN THAT LEASE AND GET IT BACK TO US SO WE CAN CUT YOU A CHECK TO HELP WITH THE INITIAL EXPENSES.” I immediately called our Broker and instructed him to sign the lease. What happened next is actually still being disputed and is not resolved as of 11-23-15.
My Eminent Domain – Part 1
By Ryan Culicerto
Quality Stone Concepts
113A S. Witchduck Road, VA
In the last month alone, the City of Virginia Beach hasn’t received a lot of good press. In the VA Pilot alone, there have been allegation of an unfair bid process for the Cavalier Hotel project, Mayoral and City Council investigations, budget shortfalls and one of my business neighbors is even accusing the City of not making good on the promises to help him relocate as a result of the city’s Witchduck expansion project. If you were to also include the polarizing topics of the light rail and the city’s most recent stadium proposal, it’s never been a tougher time to say “I work for the city of Virginia Beach.”
This blog post is not meant to accuse anyone or state my political viewpoint. We at Quality Stone Concepts, understand that there are always two sides to every story, which I why we’ve decided to share our story as it unfolds.
As you may or may not be aware, on July 17th, 20015, the city acquired the approximate 4.2 acre parcel located at 71-129 known as Witchduck Exchange. Quality Stone Concepts was a tenant on the Property and was using approximately 11,935 square feet and 70 parking spaces to use and display our granite inventory. They purchased this property under eminent domain laws, which stipulate that governments have the right to take public property for public use.
We were legally notified on May 28th, 2015 by our Landlord that the “City of Virginia” is planning on acquiring all of the land and improvements known as Witchduck Exchange under threat of condemnation. The letter served as a Notice of Termination, effective July 6th, 2015, and according to the letter, we were to “remove any and all personal items, broom-clean the facility and remove all trash.” As you could imagine, prior to the termination there were plenty of whispers and gossip about how and when this was going to go down, but nothing concrete by any city officials. Since you generally don’t pick up and move 30 tons of granite inventory on a rumor, our decision was to keep our head down and continue to work hard, service our customers and grow our company. However, on May 28th, we were now confronted with the very real possibility that our business would be “homeless” in less than 36 days.
If you’ve never had the opportunity to buy me a beer, or had the unfortunate experience of asking me, “how’d you get in the granite business” you may not know the story of QSC. Since you didn’t buy that beer, I’ll do my best to summarize it for you. In April of 2007, my business partners, Tony Pirrone and Terry McClaskey (both locals and Cox high school graduates) and I scraped together $11,000 each, signed legal documentation, and wrote a sales and marketing plan from our kitchen tables. With our initial investment we procured inventory, bought our first saw off an eBay auction for $200, and signed our first lease for 600 sf of empty warehouse space (with no lights) on Boland Parkway in VB. Our first year, while working out of my house, we installed over 50 kitchens with only hand tools. Most of this work was performed in our customer’s front yards, and thankfully it provided us with the revenue needed to grow into a “real warehouse” and buy a real bridge saw. As any growing company will attest, we were starving for liquidity, but because we had no real tangible assets banks were no help at all. Even though in 2006, we started to see the beginnings of the real estate crash, we decided to self-fund our own growth. Through supplier financing, credit cards and prudent cash flow management, we never missed a payroll or failed to pay a supplier and quickly grew to a $1 million in REVENUE. As builders were going out of business left and right, or decision to stay small and lean and work with only remodelers proved to be a stroke of good luck as we continued to grow while our competitors were struggling with their massive overhead. Our decision to become the first local “granite” company to offer a complete bundled solution (countertops/cabinets/sinks/faucets) also proved to be trendsetting, and helped us grow into a larger space on Quality Court.
In 2011, we decided to take the plunge. We were busting at the seams on Quality Court, and our cabinet business wasn’t reaching its full potential because of space restrictions. Plus we needed more outdoor space than Quality Court was willing to provide. In June of 2012, we decided to open up the city’s first retail granite and cabinet company at 113A – S. Witchduck Road.
For the first year, we were focusing on getting settled and adjust to the new economics of our space. We built out and expanded our granite and cabinet shop while slowly building our showroom through cash flow and barter arrangements. In time, our showroom became the largest in Virginia Beach and currently has 9 kitchens, custom made stone displays and became the competitive advantage we currently enjoy. At the end of 2014, we were proud to report that in 7 short years, we had grown a local start-up company from $11,000 in seed money to a company that had generated over $10 million in revenue. In the meantime, the whispers and rumors of the city’s plans with the property began to pick up steam.
After months of rumors, we were invited to a city planning meeting at the Renaissance Academy for the city’s plans for expansion of Witchduck Road. At that meeting we were shown a map that indicated which business in the area that were going to be affected by the project. We were told that bids were going to be let by October 2014 and construction to start “afterwards”. However, in the City plans that were provided, 113 A. South Witchduck, as well our existing warehouses were to be left alone, and the only encumbrance to our property would be an easement into our parking lot during the expansion and the turning lane in front of our building would be closed. We were annoyed that access to our parking lot was going to be even more restricted, but at the same time relieved that the buildings we had just leased and improved were going to be left alone.
The public information from the City did not satisfy many of the tenants in Witchduck Exchange buildings, as many people felt “the writing was on the wall” and that it was just a matter of time before the project would grow in scope and effect all businesses on the corridor. Rumors among tenants persisted and grew in volume. There wasn’t much we could do about this news, and we again made the decision to stay put and wait for more concrete information.
Even though we did pick up and move, to say that we were ignoring these rumors would be incorrect as well. We reached out to our landlord on numerous occasions and were made aware that “something was happening” but again hard details were tough to come by, as he had a vested interest in keeping his space rented. On separate occasions we reached out to two different Virginia Beach City Councilmen. Their concern was genuine, and helpful in easing our nerves, as the information that was obtained from those requests included packets of information and drawings that reiterated our findings at the Renaissance meetings and excluded 113A. S. Witchduck Road from the major inconveniences and condemnation that were pending. The rumors persisted and now we started noticing that other tenants were starting to leave.
At that point we started the process of speaking to a local law firm who specialized in eminent domain cases to see what our rights were. Even the law firm wasn’t completely clear as to what the city was going do and how many business were going to be affected, they had become aware of the situation because many local brokers were aware that something was going to happen they were involved at a very high level.
There are probably 10-15 more instances where I could detail the general confusion surrounding this situation, but I’m getting bored just typing them. Let’s just say that we were left in limbo, and that everyone else knew something that we weren’t privy to until the official word came in on May 28th, 2015.
On July 27th we received a letter from our Right of Way Agent from the City of Virginia Beach stating that the City of Virginia Beach is buying the right of way for the Witchduck Road, Phase II Project, and that the property I am occupying will be affected by the construction. We were assured we would be eligible for relocation benefits as specified by law.
Even though it took approximately 1 year to move into the buildings and our business effectively doubled in size, the city stated that they wanted to give us “adequate time to relocate.” The City assured us that we would have 90 days from the receipt of the letter to vacate the premises. On October 27th 2015, Quality Stone would officially be eminent domained (is that even a word).
So now that you know who we are and how we got here? This blog moving forward will focus on the promises made in the last sentence in my eviction letter:
“With your cooperation, it is the City of Virginia Beach’s goal to assist your business in relocation to minimize any inconveniences caused by the move and answer any questions you may have.”
Over the next 30 days we plan on documenting and letting the citizens of Virginia Beach know how this process really works. Eminent domain is a tremendously boring process of legal notices, bureaucratic reimbursements and constant navigation of red tape. We do believe that eminent domain, while unfortunate, is a necessary evil in terms of a city meeting it progress goals. I’m not here to complain about “being in the wrong place at the wrong time” however I am here to document this process and hopefully help future business owners through this cloudy process. We have been well educated by our Right of Way agent (who have been very helpful) and there have been plenty of verbal and written offers of “assistance by the city.” However, as you can imagine there is a lot of murky legalese in the documents provided and not to mention the ever-present term “at the City’s discretion” which always seem to find its way into the explanation of the term “reimbursement.”
As I’m writing this as of 11/17/15, I currently have 37 days until my existing lease with the city expires. My hope is that by December 31th (my new move out date), the reader can decide by the details provided here in my blog, that the City of Virginia Beach has been in fact, been the partner that they have promised. As a true local success story that was born and grew through this latest recession, we want to ensure that when the book is written on Quality Stone, we are not just another small business that just happened to be in the way of public progress.
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