An attorney for the bank that financed the Anchorage Legislative Information Office building made it clear in a May 10 letter that the Legislature will not walk away from the building without once again going to court over the matter.
Jacksonville, Fla.-based EverBank wrote through its local legal counsel Robert Hume of Landye Bennett Blumstein LLP that it will sue the state for violating the subordination, non-disturbance and attornment agreement signed by an internal attorney for the Legislature, Rep. Mike Hawker and the bank in December 2014, just after the LIO construction project was completed.
Mark Pfeffer, managing partner of the building owner group 716 West Fourth Avenue LLC, also signed the agreement, or SNDA. Hawker chaired the Legislative Council at the time.
The bank contends the SNDA is its contract with the Legislative Affairs Agency that binds the agency to its obligations associated with the building regardless of extenuating circumstances.
EverBank made its $28.6 million loan to 716 based on the assurance that the Legislative Affairs Agency would honor the 10-year lease it signed to rent the downtown Anchorage office space. It would not have made the loan if the agency had not entered into the SNDA, according to the letter.
The Legislative Affairs Agency handles business and legal matters for the Legislature.
With a year-plus of the lease paid, EverBank estimates it would seek $27.5 million from the state.
“In addition, if EverBank is required to institute an action to recover damages from the state, under the SNDA EverBank is entitled to recover its litigation costs,” the letter states.
On May 2, the Legislative Council voted to negotiate a purchase of Wells Fargo’s Midtown Anchorage office building for up to $12.5 million on the grounds that Gov. Bill Walker said he would veto a $32.5 million purchase of the Anchorage LIO that was included in the state capital budget.
The amended capital budget released May 11 included $12.5 million for the Wells Fargo building and removed the funding for the LIO.
Walker said it is inappropriate for the Legislature to spend millions of dollars on an office building while the state is cutting services to reconcile its $4 billion budget deficit.
“EverBank demands that the (Legislative Affairs Agency) reaffirm and establish that the tenant lease is in full force and effect, valid and binding on the state, and cease any and all efforts to invalidate the tenant lease, vacate the property, or secure alternate lease premises,” Hume wrote.
“This is a serious matter,” Hume concluded. “Please give it immediate attention.”
The Anchorage Assembly also weighed in on the matter May 10, passing a resolution urging the Legislature not to relocate its Anchorage offices outside of downtown because the move would conflict with the city’s land use plan, and by extension, could potentially violate state law requiring agencies to abide by local planning and zoning ordinances.
Legislators first took action to move out of the LIO in December after bowing to public scrutiny over the $3.3 million per year lease to occupy the offices that were custom-built for the Legislature. At that time, the Legislative Council passed a motion to move to the nearby state-owned Atwood Building unless a cost-competitive solution to stay could be found.
In its motion for reconsideration filed May 6, the Legislative Affairs Agency argues that if the lease is deemed invalid, the court would also need to consider whether the Legislature is entitled to get back some or all of the $7.5 million in tenant improvements it agreed to pay as part of the deal the Legislative Council negotiated with 716 in 2013.
• Elwood Brehmer is a reporter for the Alaska Journal of Commerce. He can be reached at elwood.brehmer@alaskajournal.com.
