The Fitz For Dummies

That’s a little condescending.  The fact of the matter is that the players, entities, LLCs, government entities, and history makes this one of the most complex situations I’ve ever come across.  You will  be hearing a lot more about Fitzgerald’s in the coming weeks.  Permits have been pulled for renovations.  An emergency meeting of the Planning Commission was called to consider the special use permit for the project.  The Reno Redevelopment Agency is considering a motion to sell the garage (land lease) to the Fitzgerald’s current ownership, while at the same time the City Council has authorized suing the same party for missed rent.

All technicalities count. Who owns what, who leases what, who is responsible for what, and who signed for what will be come critical issues.  Just saying “Fernando” or the “Fitz” or even “Reno” doesn’t cut it anymore – it is much more complex than that.

There will be some holes and some documents missing in what I’m trying to put together.  This is a work in progress, and your input and links to fill in those holes are important to making this post worthwhile.  So comment away and add to the discussion.

 

 

Here are the pieces:

– The Fitzgerald’s Parking Garage, APN 11-370-52.

–  The Fitzgerald’s Hotel Casino structure as you think you know it, APN 11-051-25.

–  The Oppio Property, APN 11-051-07.  The corner of Virginia and Commercial (the Blarney Stone) is actually a land lease to the Fitz.

–  The  Old Reno Casino, APN 11-051-02.  Damn if I can figure this one out with certainty, but I have a few guesses.

–  The Old Masonic/mercantile building at Sierra and Commercial, APN 11-051-01.  Cooties.

– 251 N. Arlington, APN 11-026-01, a parking lot inherited in the transaction.

STOP thinking in terms of personalities and property generalizations.  I’ll try to divine the legal structure of each entity and show their interconnection, but many are in fact legally independent of each other (nudge, nudge, wink, wink).  But the details matter.  Financially, they may matter a lot.

The most important thing to remember is that the Fitz Garage is in fact 2 pieces:  a land lease from Southern Pacific RR, and the ownership of the “lease hold improvements”, the physical garage structure itself.  Who owns the land, the land lease, and the improvements on the land (lease) is politically very important.

The land lease between George Wilkinson and Southern Pacific RR dates to September 1979.  The original land lease  is an attachment to the Staff Report from a 31 January 2007 city council meeting (I’ll talk more about that meeting later).  There is also a pretty detailed chain of title outline in the staff report.  It looks to me like by 1990, the Land Lease was owned by G & S Investments (Lake Trust, George and Sharon Croom) and the Improvements were owned by Scout Development.

There is a reference to a 1999 agreement for Fitzgerald’s Reno, Inc.  (the casino) to purchase the Land Lease and the Garage, but this was never consummated.  On 1 February 2000,  Scout Development sold the Improvements to Fitzgerald’s Reno, Inc. and took back a $2,250,000 deed of trust.    In December 2000, Fitzgerald’s parent company filed for bankruptcy protection.  The Old Reno site has a nice write-up on the history of Fitzgerald’s (with some not-so-nice commentary on the current ownership!).

Along came the ReTrac project to lower the train tracks in downtown Reno.  ReTrac needed an easement on the Land Lease to underpin the garage structure in order to build the trench, and G & S wasn’t interested in granting it.  The underpinning analysis is in the Reno ReTrac Archives, and is an interesting geek read!  On 8 September 2005, the final order of condemnation taking the Land Lease was filed, and G & S received a payment of $4,700,000  The City of Reno was now the owner of the Land Lease, and title to the land itself was transferred to Reno as part of the ReTrac deal with Southern Pacific.

In late 2006 and early 2007, Reno raised a $7M bond issue through Depfa Bank (or $6.7 or $6.1 – sources vary) using the garage lease and revenue string as collateral.   The Land Lease was extended for an additional 20 years at that 31 January 2007 Council meeting to meet the demands of the bond issue.  This money was spent to buy the old RTC bus station for $6.6M and for the Virginia Street narrowing and refurbishing project. 

It is important to remember  that all of this happened before Fernando Leal had any interest in the Fitzgerald’s Properties. 

On 31 October 2007, the umbrella entity DRW Fitzsgerald’s LLC purchased the Fitzgerald’s property out of Bankruptcy for $9,640,000 with an $11,000,000 loan from Bridgeview Bank and a $2,000,000 carry back from the Fitzgerald’s estate.  The hotel casino is held by DRW Fitzgerald Real Property LLC, the Garage Improvements (including the land lease with Reno) by DRW Virginia and Plaza LLC, and an orphan property at 251 N. Arlington by Fitzgerald’s Reno LLC.  On 22 January 2008, the Reno Redevelopment Agency sold the Old Reno Casino to Fitzgerald’s Old Reno LLC in a deal to included release of some street easements around the garage from the original land lease with SP, and release of air right for the Rainbow Bridge.  I can’t really tell from the document who paid what to who.

When DRW Fitzgerald Virginia and Plaza LLC stopped paying rent on the Land Lease in October 2009, the terms of the bond issue on the garage with Depfa Bank went technically into default.  As part of their forbearance agreement, Depfa put a gag order on the City!

DRW Fitz has been negotiating for over a year to purchase the land under the garage from the City for its current appraised value of $2.5M.  Whether the snag in the deal has been with the City or Depfa bank is up for discussion, but the resolution to sell the land has been added and dropped from the Redevelopment Agency agendas several times over the last few months.  It is currently scheduled yet again for the 2 March 2011 meeting.

In away, the sale of the land is a giant short sale by the City.  They leveraged the land they condemned for $4.6M up to $7M in the bond sale, bought the RTC property for $6.6M and it might be worth $2M today.  Though the city is current with their payments under the bonds, there isn’t any underlying equity, and Depfa is tightening the screws and want’s concessions from Reno.

The City Council is in the incredibly awkward position of defending the bond issue,  threatening to sue DRW Fitzgerald Virginia and Plaza LLC over a half million in late rent and terminate the land lease, and also while cheerleading the CommRow project which is technically a different entity (wink).  I’m not sure if CommRow is viable without controlling the garage, so it is an interesting stand-off.  I think the sale will go through, and the back-rent issue will be solved by a partial payment and deeding the Old mercantile / Masonic building to the city.  That building is the real albatross DRW inherited with the Fitzgerald’s purchase – too historic to tear down and too expensive to renovate.

So that’s how we got to this point and the cast of characters.  Moving forward should be just as interesting!