Here, for Flyer readers to judge for themselves, was Ericson's account of the history of the Pyramid impasse, as well as his last-ditch proposals for resolving it.
- Greg Ericson
April 30, 2008
Shelby County Government
160 North Main Street,
Memphis, TN 38103
This is in response to your letter dated April 25th, 2008, regarding our future involvement in the development of the Pyramid Arena. We find it strange that anyone would be surprised that our financial partners would no longer want to continue with this very disjointed process. Frankly, if I did not have a personal tie to the City and County and a wish to make it better, I would have moved away from this project long ago because of the politics involved.
In regards to questions about our ability to finance the project, I want to remind you and others involved that we have been operating with a severe handicap throughout this process. Bass Pro has been awarded the luxury of three Letters of Intent. However, in the three years since submitting our proposal to the original Pyramid Reuse Committee (PRC), we have never received anything in writing from the PRC, the City or the County expressing interest in or even acknowledgment of our plan (until your letter on Friday).
On June 25th, 2007, our attorney Bruce Kramer, my staff and I met with Mayor Herenton and Robert Lipscomb in the Mayor's Conference Room at City Hall. We had our banking partners on the phone from Florida. The purpose of the meeting was to make a solid presentation to the Mayor that would result in a Letter of Intent for us to develop the vacant Pyramid Arena. And since the second non-binding, non exclusive Letter of Intent between the City & County and Bass Pro (dated September 29, 2006) had expired several months earlier, there was nothing prohibiting this. The Mayor was very pleased and excited with our proposal and at the close of the meeting expressly directed Lipscomb to immediately proceed with a new Letter of Intent between the City & County and Ericson Group. After the meeting Robert Lipscomb declined to act on this directive. It took almost two months and several meetings with attorneys representing the City, County and Public Building Authority to determine that Lipscomb changed the course and entered the City & County into a third Letter of Intent with Bass Pro (which is now also expired).
Later on October 8th, 2007, at the end of our meeting with you and Mayor Wharton, you asked if it would be possible for us to secure our financing without a Letter of Intent. I told you it would be difficult, but we would try. While we had generated interest from more than one traditional funding source, it had always stalled because of the lack of a signed Letter of Intent. In fact it was one of these sources that introduced us to Prosperity International. Within a few weeks we had their backing to invest over a quarter of a billion dollars in the total revitalization of the Memphis riverfront. Most cities would leap at such a rare opportunity. However, as you know, we were met with apathy at best and resistance at worst.
How can you fault my financial partners for being offended by the way they have been treated
throughout this process? While they don't expect to be accepted without review, they did expect Robert Lipscomb to attend the meeting scheduled in response to his request for information and for which they had flown in five employees (including Michael Burgess from Europe) with financial documents for review. They also expected that if Lipscomb's staff who did attend the meeting were not comfortable with the documents they saw that they would make a request for further information. Especially before Lipscomb and Scott Ledbetter went to The Commercial Appeal editorial board and stated that Prosperity International's ability to finance our project was all "smoke and mirrors". This was an unusual comment considering that neither of them had attended the financial meetings, asked any questions or for any documentation, or even made a phone call.
In addition to all of this, at the request of the City Council and County Commission, one of our financial partners again flew to Memphis on March 4th, 2008, with just one day's notice, to show documentation of the financial strength of Prosperity International. At the end of our meeting with Scott McCormick and others, Allan Wade said that he would read what he had and consider what he had seen and then contact us with any additional questions to make him comfortable with our financial capabilities; as of today he has never contacted any of us. This is indicative of what we have been dealing with all along.
I know that's a lot of background information, but I feel it is important to be reminded of the path that led us here when considering the other problems we see in moving forward at this time. The first is that we have been told by numerous government officials with both the City and the County that they not only don't believe that Robert Lipscomb can get the "up to $44 million" from the Federal government that he said he can (during his presentation to the joint committee), but that the City and County won't back him up if he fails. As we see it this would leave the project dead - for both Pyramid Resorts and Bass Pro Shops.
Second, when it was decided that the new six-member committee would be formed, all parties agreed that their function would be to hire one or two independent real estate experts to negotiate the contracts with both Bass Pro and Pyramid Resorts. Then the committee would bring the agreement(s) to the City & County, and the City & County would choose the best option.
Somehow this was changed to looking at the financial capabilities of the two companies before it is known if an agreement can even be reached. We feel this is a potential waste of another $100,000 of taxpayer money. It is a very real risk that a deal will not be reached with either party. Memphis should learn from the fact that Bass Pro has been negotiating with the City of Buffalo for over six years without reaching an agreement.
We feel that there is
a very logical and cost-effective way for this process to move forward. Here are the steps as we
1) The City & County need to decide what they are willing and able to put into the deal:
â¢ Can Robert Lipscomb come up with the Federal funds for the project?
â¢ If he can't come up with the Federal funds, then will the City & County back up the funds?
â¢ If they won't back him up and there is no Federal money, then neither of the now expired proposals will work.
â¢ This step does not
cost the taxpayers anything.
2) The City & County need to negotiate development agreements with any potential partners:
â¢ If they can't reach an agreement(s), then the process stops.
â¢ If they can reach an agreement(s), then the process moves forward.
â¢ This step does not cost the taxpayers anything.
3) Have economic impact study(s) done on any finalized, negotiated projects:
â¢ We feel this is the only impartial way to pick the best project.
â¢ We agree to have the University of Memphis do the study(s) as long as we can ask questions and get back-up documentation. We want to ensure that our offer is compared fairly and that the results of the study are complete, accurate and unbiased unlike previous studies conducted by RKG and others.
â¢ This step would only
cost the taxpayers approximately $15,000.
4) The City & County choose the best project with which to move forward:
â¢ At this point the City & County would have an agreement and an economic impact study to help them make a selection.
â¢ This step does not cost the taxpayers anything.
5) Confirm the financial capabilities of the winning project:
â¢ We have said from the beginning that it doesn't matter who has the money if it's not known
what is being built and what is being agreed to.
â¢ In the time it takes to complete the first four steps of the process, the financial situation of
either party can change dramatically. Imagine how drastically the economic status of the
country has changed and look at how the outdoor megastore industry has declined since Bass Pro's financials were reviewed more than one and a half years ago. It is best to review these capabilities as close as possible to when the project will actually begin.
6) All parties sign the final development agreement:
â¢ Dot the "I's" and cross the "T's" and move forward with development.
We feel that this entire process can be done quickly, and if any potential developer fails to respond as requested by the City & County they should be eliminated from contention.
As you know I am very passionate about the City of Memphis and my desire to develop the Pyramid into a one-of-a-kind, world-class tourism destination, but it seems that the people in charge of the process have never intended on giving us a fair shot at it.
Here are a few facts that need to be mentioned:
â¢ The original Pyramid Reuse Committee (PRC) never sent out an RFP.
â¢ Ericson Group went through the original public process established by the PRC.
â¢ Bass Pro did not participate in the original public process established by the PRC.
â¢ We learned through the media that Ericson Group was originally chosen by the PRC.
â¢ Somehow a closed-door deal was made and the project was then given to Bass Pro.
â¢ We feel the first document provided by RKG was correct in stating that the best use for the
Pyramid was as a Destination Lifestyle Center in connection with a themed attraction.
â¢ Bass Pro is not a Destination Lifestyle Center, and the RKG numbers were used falsely by
the PRC and by Robert Lipscomb for over three years to advance Bass Pro's plan.
â¢ Robert Lipscomb's February 19th & 20th presentation document has over 100 inaccuracies, mistakes, omissions and lies regarding the Bass Pro and Pyramid Resorts projects.
â¢ There has never been a feasibility study done on Bass Pro's project in the Pyramid.
â¢ After more than three years and three Letters of Intent, Robert Lipscomb still hasn't been able to negotiate a binding agreement with Bass Pro.
â¢ While Robert Lipscomb has been courting Bass Pro, we estimate that the City and County have spent over $1 million in taxpayer money in pursuit of an agreement with them on items such as travel, legal expenses, outside research and personnel time.
â¢ The City and County continue to spend over $500,000 per month to keep The Pyramid empty.
â¢ If our plan had moved forward at the end of the original PRC process as intended in 2005, Pyramid Resorts would have opened this year. The City and County would be earning over $12 million in additional tax dollars annually, 2500 Memphians would have jobs and the taxpayers would have saved $35 million on debt service and expenses on the building. In addition the City and County would have an enormous economic extended impact from two million new tourists in Memphis.
Our last Pyramid Resorts offer to the City & County was a development agreement that had virtually no risk to the City of Memphis and Shelby County. Once the terms of the development agreement and lease were reached and were signed with Pyramid Resorts we would have moved forward with the following monetary benchmarks:
â¢ Create an escrow account with a stipulation that in the unlikely event we terminated our agreement or if Pyramid Resorts failed to meet any of the agreed target dates, the City and County would have kept the amount currently in the escrow account up to $10 million.
â¢ Within 24 hours of signing the development agreement and Lease, Prosperity International would have deposited $1 million in the escrow account.
â¢ Within sixty (60) days after signing the development agreement and lease, Prosperity International would have deposited an additional $8 million in the escrow account. And they would then have deposited an additional $8 million every month until the construction escrow account was fully funded.
â¢ Within thirty (30) business days of signing the development agreement and lease, Pyramid
Resorts would have selected an independent company to conduct a thorough feasibility study on the project.
â¢ Pyramid Resorts agreed not to take title of the building or land until it completed the development and paid off the remaining building debt.
â¢ The City & County would have been given up to 36 months to secure their promised Federal funds.
â¢ Pyramid Resorts would have also taken immediate responsibility for The Pyramid and would have paid all operational expenses and debt service during the planning phase and construction phase.
With these added safeguards and the knowledge that the citizens of Memphis and Shelby County have voiced their overwhelming support for our project, it should have been an easy decision to move forward with this project.
The bottom line is we feel strongly that we will never get a fair assessment while Robert Lipscomb is part of this process. Immediately after your meeting last week and immediately after he voted to fund the $100,000 for the new studies, Lipscomb stated very clearly to the media that he thinks this is all a waste of time and Bass Pro should be the company selected to redevelop the Pyramid.
How can we hope for an
unbiased assessment with statements like that made by one of the four committee members? And
how can you ask us to continue to invest more of our valuable time and money
when it is clear to Lipscomb the winner has already been chosen? At this point
we have decided it would be prudent to cut our losses in Memphis and we are now
pursuing other projects in other locations.
However, as illogical as it may sound, Memphis is my home, and my first preference is still to move forward with Memphis as the site. But in order to do so, we would need to have a clear view of the entire process in writing, along with assurances that all reports and studies will be conducted and presented without bias, and assurances that if our project is proven superior, then Pyramid Resorts will be awarded the deal.
I am available if you feel you have a solution to this mess. I can be reached any time at 527-7256 or my cell 277-7744.
President & CEO
Ericson Group Inc / Pyramid Resorts LLC
Michael Burgess - Prosperity International
Brad Fain - Prosperity International
Barry Funt - Essex Investments
Bruce Kramer - Borod & Kramer
Jimmy Ogle - Ericson Group Inc
Niki Anthony - Ericson Group Inc
- A model of Ericson's proposed development