Target Corporation, which made a deal in 2004 with the Liberty County Industrial Authority to buy the land under its Midway distribution center for $1, has filed suit against the authority in federal court to enforce the agreement.
Target is suing for specific performance, breach of contract, and attorney’s fees and litigation costs. The LCIA is also known as the Liberty County Development Authority.
The LCDA’s attorney, Kelly Davis declined to discuss specifics of the case, but added, “All matters with Target I expect to be dismissed after recording the bond termination documents.”
LCDA’s new CEO, Brynn Grant, issued this statement in response to The Current’s request for comment:
“The Liberty County Industrial Authority has been working with Target Corporation successfully for decades. We value our collaboration with them and the other industries we serve in Liberty County. The Authority is committed to ensuring the rights of all companies and the public are appropriately safeguarded. It is our understanding this suit was filed to preserve whatever rights Target may have with respect to its project in Tradeport East Business Center. Though we do not regard it as adversarial, we do take it seriously. All principal, outstanding issues pertaining to the petition have been resolved with counsel for Target. It is anticipated that the petition will be dismissed following recording of the necessary documents.”
The Current also has asked an attorney representing Target for comment and will update with any response.
The dispute seems to stem from two main concerns. One was whether or not Target owed any ad valorem taxes; the other, a series of mishaps unrelated to the deal that affected communication between the parties.
A long string of e-mail correspondence between the LCIA, Target, and their respective attorneys shows several unexpected delays on the LCIA’s end: COVID-19; Davis’ heart attack, surgery, and recovery; and a day-long power and an internet outage in Hinesville after a contractor cut a fiber line. In addition, Target alleges, it did not get several tax bills that the LCIA said the company owed. The LCIA had offered Target “grants and ad valorem tax savings” to build in Liberty County.
According to the civil complaint filed in the U.S. Southern District Court of Savannah on Monday, May 6, Target alleged it had negotiated a Dec. 15, 2004, lease with the LCIA for about 155 acres, as well as the more than 1.5 million square feet in improvements “and related fixtures, furnishings, and equipment.” It also got a break on ad valorem taxes, unless the law changed or the company owed any taxes on “the lease revenues and receipts of the Issuer from the Project which, if not paid, will become a lien on the Project” or a charge in line with “the revenues and receipts therefrom.” As part of the deal, Target had the option to give the LCIA 60 days’ written notice to buy the land for $1 once the lease expired on Dec. 1, 2022.
The LCIA issued a $100 million revenue bond to pay for the project, and Target built the distribution center on the land, opening in 2007 for distribution to its stores reaching from Miami to South Carolina. At the end of September 2022, Target sent written notice that it planned to exercise the $1 purchase clause.
In a Dec. 27, 2022, e-mail, Target alleges, its lead real estate paralegal, Jude Hockley, “sent another email to [the LCIA] asking for the status of the conveyance and stating, ‘It is important to Target that the closing occur prior to December 31, 2022′.” Target alleges the LCIA replied the same day that it would send the paperwork the next day. But on Dec. 28, Target alleges, “counsel for Defendant sent an email to Target stating that the documents were drafted but would not be sent to Target until an undisclosed matter was addressed by Defendant.”
The next day, Target alleges, Davis emailed the paperwork, but said the company allegedly owed the development authority and the county money, specifically “PILOT [payment in lieu of taxes] payments and ad valorem personal property taxes” on the leased equipment.
Davis wrote, “Target’s original 5-year tax abatement on Leased Equipment was extended through 2017. During the last four years of this extension, i.e., 2014, 2015, 2016, and 2017, Target Corporation was required to pay to the authority a stipulated percentage of the ad valorem taxes otherwise owed but for the abatement (and being 20%, 40%, 60% and 80%, respectively). Beginning in 2018, Target Corporation was required to pay ad valorem personal property taxes on the Leased Equipment to the Tax Commissioner. This obligation is memorialized in the Amendment to Bond Documents Extending the Leased Equipment Tax Abatement, dated as of December 31, 2012.” He added that LCIA was trying to calculate how much Target owed “but may need assistance from your office in obtaining tax returns or schedules of value and depreciation regarding the Leased Equipment.”
However, Target says it never got the tax bills, and asked the county to produce them in February 2023, noting that “Target has been paying all assessed tax payments directly to the County. Once Target has received all the information necessary to confirm what payments may be due to [Defendant], any payments due will be processed.”
On April 17, Target again emailed the LCIA, demanding the authority “promptly convey the Project to Target” and insisting it “believe[d] that we have paid all financial obligations and have no indication that we have not done so.”
Davis promised a response on April 18, then sent an e-mail on April 19 “that the conveyance should be completed ‘early next week.’” It was not.
Three weeks later, on May 12, Target wrote, “Despite [Davis’ and LCIA’s] repeated promises to provide the information you believe is necessary to complete the transaction, you have not done so, and the conveyance has not yet occurred,” and setting a May 19, 2023 deadline to complete the transfer to avoid further legal action.
The suit alleges that Target never got a tax bill until July 21, 2023, “over six months after Defendant claimed Target owed money for ad valorem taxes.” And it wasn’t until Aug. 25, Target said, that it finally got the paperwork for the land transaction — a limited warranty deed, a bill of sale, a cancellation of bond security instruments, and a lease termination agreement.
On Oct. 5, 2023, the suit alleges, Target’s attorney sent the LCIA’s attorney revisions to the paperwork, then “attempted to follow up… via email on October 17th, 26th, 31st, November 3rd, 6th, 13th, 28th, and December 1st, 2023.”
Finally, Target sent the LCIA an ante litem notice on Dec. 29, 2023. Target says the LCIA “at no time has alleged or implied to Target that Target does not have the right to exercise its option to purchase the project.”
Timeline
The Current reviewed emails between Target and the LCIA from September 2022 to December 2023 that were included as exhibits in the court filing.
— On Sept. 30, 2022, Target’s vice-president of real estate, Laurie Mahowald, notified the development authority that the company wanted to exercise the $1 purchase. In an e-mail to Cole and Davis, Hockley noted that he had emailed the notice and also would be faxing and FedExing it overnight to LCIA.
— A Nov. 28, 2022 e-mail from Jude Hockley to Cole and Davis read in part, “You have acknowledged that Target Corporation has properly exercised its option to purchase the Project for the purchase price of $1.00. You have agreed that the term of the Lease is automatically extended from December 1, 2022, to the date of the conveyance of the Project to Target Corporation by Liberty County Industrial Authority,” and that he understood “from Carmen that [Davis] will be drafting the conveyance documents by December 31, 2022.”
— On Dec. 27, Target’s senior real estate portfolio manager, Eric R. Johnson, asked Hockley, “Have you heard from Carmen [Cole] or Kelly since your email to them below back in November? Are we still on track to close 12/31/2022?” That afternoon, Cole told Hockley, “I apologize for the delay, but due to COVID and the holidays we are running behind. Kelly will have the documents out tomorrow. Please let me know if you have any questions.”
— On Dec. 29, 2022, Davis sent Target the documents, writing, “In reviewing the Bond Documents to ensure that all obligations of the parties have been fully performed, it was discovered that Target has not paid PILOT payments and ad valorem personal property taxes in connection with the Leased Equipment as required under the Lease. As you may know, Target’s original 5-year tax abatement on Leased Equipment was extended through 2017. During the last four years of this extension, i.e., 2014, 2015, 2016, and 2017, Target Corporation was required to pay to the Authority a stipulated percentage of the ad valorem taxes otherwise owed but for the abatement (and being 20%, 40%, 60%, and 80%, respectively). Beginning 2018, Target Corporation was required to pay ad valorem personal property taxes on the Leased Equipment to the Tax Commissioner. This obligation is memorialized in the Amendment to Bond Documents Extending Leased Equipment Tax Abatement, dated as of December 31, 2012 (a pdf of which is attached).”
Davis noted that “Carmen Cole with the Authority is attempting to calculate the amounts owed, but may need assistance from your office in obtaining tax returns or schedules of value and depreciation regarding the Leased Equipment. By this email, I am asking that she reach out to obtain whatever information is needed. Also, and so as not to cause an undue hardship, the Termination Agreement provides for repayment of the PILOT Payments over a 5-year period. If a payment schedule is needed with the Tax Commissioner, please let me know and I will do my best to assist. While the obligation of payment needs to be honored, I’m certain that everyone will cooperate so that the obligation is manageable.”
— On April 17, 2023, Target’s director of real estate counsel, Alexander Tselos, wrote Davis: “This email serves as notice that expects that the IDA will promptly convey the project to Target in accordance with the enclosed documents. I note that despite repeated requests that we have not received the information requested from Carmen. However, it simply doesn’t matter whether or not such information is provided by the IDA or not. Target has never been in default under the Ground Lease and Target properly exercised our rights to purchase the property under Section 11.2(b) of the Lease.”
Tselos added that there was “no basis for any of the additional language” the IDA sought in proposed changes and that “Target expects that IDA will deliver the documents as provided for in the existing documents. Even if there was a basis to withhold the IDA’s conveyance of the property it should be solely as to Bill of Sale as this issue has nothing to do with land or building improvements. Furthermore, both the Limited Warranty Deed and Bill of Sale as well as the Bill of Sale have explicit exceptions for ‘those liens and encumbrances resulting from the failure (if any) of Grantee to perform or observe any of the agreements on its part contained in the Lease or other Bond Documents.’ Furthermore, Target believes that we have paid all financial obligations and have no indication that we have not done so.”
He then detailed issues Target had with various changes the LCIA had asked for related to the deed and bill of sale, adding: “Target has now been patiently waiting for over four months and it is time for the IDA to convey the property to Target. We look forward to the IDA fulfilling its contractual obligations.”
That day, Davis replied to Tselos: “I will confer with Carmen tomorrow regarding any outstanding financial obligations. I know that she was recently able to confirm certain payments to the tax commissioner, but was needing additional information. To the extent any additional review is needed, I will expedite the same. In any event, I will provide an update tomorrow.”
— In an email that did not show the date it was sent, Tselos wrote Davis: “It has been over three weeks since I sent you my last email with real estate documents necessary to complete Target’s properly exercised option with respect to the acquisition of our distribution center. Despite your and Carmen’s repeated promises to provide information you believe is necessary to complete the transaction, you have not done so, and the conveyance has not yet occurred. Target expects that the [Industrial Development Authority] will convey the Project (as defined in the lease) to Target not later than May 19, 2023, in accordance with the real estate documents I delivered on April 17, 2023. I’ve also copied my colleague Katherine Graf, who is Director Counsel in charge of Target’s real estate litigation, so that she can prepare to take the necessary steps if the IDA does not convey the Project to Target by that date.”
— On April 19, 2023, Cole replied, “I apologize for not getting back to you earlier, but unfortunately our area was impacted by a significant internet and cell service outage yesterday and early today which caused us to have very limited access to files, emails, and calls. I am currently reviewing the information previously provided, and anticipate having a response back to you no later than close of business Friday. While we appreciate your understanding and patience during this delay, we understand the need to complete the documents expeditiously and expect this can be done by early next week.” The outage happened when a Comcast contractor “accidentally cut a fiber line near Hinesville,” according to a statement from Comcast at that time.
— On June 30, 2023, LCIA invoiced Target $185,367 for annual PILOT payments from 2014 through 2017, payable to the General Fund.
— On Aug. 28, 2023, Davis e-mailed the changes to Cadle, adding, “Give me a call to discuss whenever you would like.”
— On Oct. 5, 2023, Cadle wrote, “I’ve attached my client’s changes to the proposed documents with redlines. These changes were made to make the Ground Lease and the conveyance documents more congruent. I have more explanation I could offer but these changes seem so limited to me that I think it may be easier to handle any special concerns you may have on a case-by-case basis. Give me a call if you’d like to discuss. We look forward to hearing from you.”
— On Oct. 17, 2023, Davis e-mailed Cadle: “My apologies, Ivy, but I’m on medical leave (recovering from a heart procedure). Although I’m not scheduled to return to the office until Monday, I’ll try to get it back to you in the next couple of days. Thanks.“ Cadle replied, “I hope it all went well. Appreciate the response. Thank you!” Davis responded, “Thanks, it was a tough one but all went well.”
— On Oct. 26, 2023, Cadle e-mailed Davis: “Just following up on this again. Any chance you can send these over this week? For you convenience, I attached my original email that has the track
changes. I hope you will be able to see that the changes were not very extensive.”
— On Oct. 31, 2023, Cadle e-mailed Davis: “I hope you are doing better. I’m pinging this again. It would really help me if I can get something back to Target this week.”
— On Nov. 3, 2023, Cadle wrote Davis: “When I updated my client, this was the response. ‘It has been over a year now since we were supposed to acquire the property, so if we aren’t going to get an answer soon, I think we need to start consider taking some sort of legal action.’
I hope to hear from you soon.”
— On Nov. 6, 2023, Ivy Cadle, an attorney and CPA for Baker Donelson, emailed Davis: “I left a message at your office and I’m pinging this again here. Could you get something to me today?”
— On Nov. 13, 2023, Cadle again e-mailed Davis: “Can you send me your comments on the docs? Is there someone else in your office who can help? The email with all the docs is attached and the changes are not that extensive. I’m expecting Target to ask me to draft a complaint any day now. I hope to hear from you soon.”
— On Nov. 28, 2023, Cadle e-mailed Davis: “Following up on this so we can get agreement on the attached revisions and finalize settlement docs. You can find the proposed docs with redline attached to the email attached hereto. As I mentioned, Target has asked me to investigate a lawsuit for specific performance. My instructions to start drafting that could come at any time. I regret we could not connect last week. I hope your doctor’s appointment went well. I look forward to hearing from you soon.”
— On Dec. 23, 2023, Cadle sent both the LCIA and Chairman Donald Lovette an ante litem notice, accusing the LCIA of having “inexcusably delayed the conveyance for more than 11 months” and that Target had suffered “monetary damages….from the Authority’s breach of contract and tortious actions related to the Authority’s inexcusable delay in honoring the option to purchase.”