'The worst deal I've ever seen in my life': Daytona considers Beach St. building purchase

DAYTONA BEACH — At their July 3 meeting, city commissioners were asked to vote on a contract to purchase a 63-year-old Beach Street building, as is, for $4.4 million.

The asking price was $1 million above an appraisal the city had done a year ago, and the four-story building just north of the post office would also need another $3 million or so of renovation and repair work. That would escalate the city's total expenditure to at least $7.4 million for the mostly empty structure that also might need building code updates, mold and asbestos removal, electrical and plumbing upgrades, and a new roof.

The 28,000-square-foot building's owner wants to stay on the fourth floor, where his construction company has its corporate office, for at least the next three years. Part of the deal calls for renting the top floor to Sun Glow Construction for $100 per month, although the owner says he would offer consulting services during renovations in exchange for the exceedingly cheap rent.

City Commissioner Stacy Cantu said it's "the worst deal I've ever seen in my life."

"This is actually an insult to the commission and our residents," Cantu said. "This is laughable. Do they really think we're that stupid to approve this?"

Commissioners haven't decided yet on the purchase contract or the lease agreement, but if they had voted July 3, there likely would have been at least a few no votes.

"I believe you need to go down another road," Mayor Derrick Henry told City Manager Deric Feacher.

Feacher had brought the purchase opportunity to commissioners with a plan to convert the building into the home of permits and licensing employees and a state-of-the-art one-stop shop for permits.

After allowing permits and licensing funds to accumulate the past few years to an amount not allowed under state law , the city is under the gun now to spend at least $11.4 million by Oct. 4 or risk having to forfeit the money to the state.

The funds have to be spent on permits and licensing functions, so Feacher and his staff have been looking for ways to use the money that complies with state law.

Commissioners shot down a recent proposal to use $1 million of the amassed funds to buy a mobile command vehicle for permits and licensing . It's not clear if Feacher will also give up on buying the building at 230 N. Beach St. that sits on a .93-acre lot.

Digging deeper for information

Cantu walked into the July 3 City Commission meeting angry that she had to do her own research to learn about the 1961 building at the corner of Beach Street and Third Avenue, and the city's behind-the-scenes involvement with it for at least the past year.

Digging through records, she found the asbestos survey Sun Glow had a Tampa company perform on the building in 2015. The survey report indicates the company found asbestos on the second, third and fourth floors in floor tiles, pipe joints, a filler used to seal or fill gaps between building materials, fiberglass wrap and other materials.

City Chief Building Official Glen Urquhart, who's also the city's permits and licensing director, told Cantu "any asbestos removal has already been done." When she questioned him further, he said if the city took ownership of the building it would check to see if any asbestos remained.

Also not included with the City Commission meeting agenda item on the building, which once housed a bank, was any mention of an appraisal the city had Ormond Beach-based Cooksey & Associates Real Estate Appraisers conduct last year.

The Cooksey appraisal came in at $3.34 million, according to the building's owner, Lee Khazraee. He said a bank appraised it at "close to $4 million" in 2015 when he was applying for a loan to purchase the building.

A report on the appraisal was prepared for a city permits and licensing department project manager last year, but wasn't included with the agenda item this month.

The report, which was dated May 2023, noted that "the majority of the building is essentially a shell with renovations in progress." The fourth floor was fully renovated and in use.

Khazraee said he has since remodeled the third floor.

The report also stated that there was no functioning heat or air conditioning on the first and second floors.

What the building's owner has to say

Khazraee said he was out of town during the July 3 commission meeting, so he sent a letter to the mayor and commissioners on July 11 to respond to what was discussed that night.

He wrote that the proposal for him to rent part of the building for just $100 per month for three years would be balanced by his offer as a licensed general contractor and engineer who's very familiar with the building to help the city by serving as a consultant and monitor during renovations in the building.

"If the city does not need our consulting, then we have no problem vacating within a three-month period after closing," Khazraee said in the letter.

He said his company would also be willing to do the first-floor and second-floor renovation and roof replacement for $3 million. He doubts that would need to include mold or asbestos removal.

Khazraee said the building owner prior to him undertook asbestos remediation so they could rent to the Early Learning Coalition of Flagler & Volusia Counties.

He said it's his "understanding" that any asbestos remaining is "a very minimal health risk." But he said he'd be happy to hire an independent company to inspect for asbestos, and if any is found that poses a risk he would pay for the cost of mitigation.

He said no drywall was used in the original construction of the building, so there should be nothing to capture moisture and create mold. He said drywall was only recently added to the third and fourth floors.

"As far as we know, the building is mold-free," he said. "We saw nothing in the (2023) appraisal report regarding a mold or asbestos issue."

Khazraee said the building is still in good shape, although he conceded the first floor had about an inch of water on it during Hurricane Ian in 2022. He said if the city gets the building, he recommends the first floor be raised 6-12 inches.

"Please note that this building is solid, first-class construction," he said. "The building is all poured-in-place concrete. All electrical and plumbing was well-built."

If the city decides not to buy the building, he said "we fully understand and will continue improving and leasing up the property."

'We planned on addressing everything'

Cantu was unhappy that the background information city staff provided to commissioners and the public didn't show what comparable Daytona Beach buildings are currently selling for. Documents included with the agenda item also listed different figures for the building's total square footage, and a staff memo said the proposed rent was $1,200 per month while the lease agreement said it would be $100 per month.

Cantu threw several questions at Urquhart about the condition of the building and the types of improvements needed. His replies about the need for a new roof, floodproofing on the first floor, and other work were not included in backup information.

Urquhart said $3 million has been set aside for building improvements.

"We planned on addressing everything if we got the building," he said. "The building has a lot of potential."

Cantu scolded Feacher, who is under the authority of the mayor and commissioners, for not providing the information about the building purchase that has been under city staff review for at least a year. She said commissioners should have been provided with an inspection report and a plan to deal with chronic flooding along Beach Street.

"We're buying something totally blind," Cantu said.

"Your point is well made, and I'm not in disagreement with it," the mayor told Cantu. "What she's saying is valid, just period."

Cantu said she had to do public record requests to obtain some of the information, but Feacher said he would have answered her questions if she had asked. She shot back that the information should have been in the agenda item backup material without anyone having to ask for it.

Cantu said the agreement was "the worst negotiating" she's seen in her years as a commissioner. Feacher said city staff realized it wasn't ideal, but it was the building owner's best and final offer.

Urquhart said there aren't a lot of Daytona Beach buildings for sale now, and other older buildings would also need work. The city also wanted a building close to City Hall, Feacher said.

'Why it's hard to redevelop the core of the city'

Cantu said she understands the city needs to spend the excess permits and licensing money soon, but she said that doesn't mean it has to be used to acquire the 230 N. Beach St. building. She said she would consider supporting buying the building if a lower price can be negotiated.

City Commissioner Monica Paris said she looked at comparable buildings, and concluded the asking price for 230 N. Beach St. was "very high."

The city has already paid $24,000 on a contract deposit, but could still get the money back. Feacher said staff will look at other properties if that's what commissioners want.

But not everyone is against the acquisition.

City Commissioners Paula Reed and Ken Strickland both voiced support to pursue the purchase.

"I'm entirely in favor of the purchase of this building," Daytona Beach resident Anne Ruby told city commissioners at their July 3 meeting. "Since it's not for sale by a distressed buyer, you're going to have to pay a premium price. It's important to understand that as we try to eliminate blight."

City Commissioner Dannette Henry said her biggest concerns are the $1,200 per year rent and having Sun Glow employees staying in the building even after the city bought it. The mayor echoed those comments, adding that "there's a lot of issues with the building" and it would cost a lot to deal with them.

Uquhart said buying other land and building a new structure would cost even more.

"Maybe this will help people understand why it's hard to redevelop the core of this city," the mayor said.

You can reach Eileen at Eileen.Zaffiro@news-jrnl.com

This article originally appeared on The Daytona Beach News-Journal: 'The worst deal I've ever seen in my life': Daytona considers Beach St. building purchase