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Lawsuit: Chodur claims Mason City Chamber shifted favor to Gatehouse

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Courtyard by Marriott

Artist’s concept of a Courtyard by Marriott, the proposed hotel that is the private expenditure linchpin of the Mason City downtown redevelopment plan.

MASON CITY | A San Diego developer who failed to build a downtown hotel has filed suit against Mason City and the Chamber of Commerce Foundation, claiming the city was in breach of contract.

The petition for the civil suit was filed in Cerro Gordo County District Court July 18, along with "Exhibit A," G8 Development's agreement with the city.

The petition names Chamber Director Robin Anderson and her alleged role in the interference. Anderson was unaware of the filing and limited her comments to the Our River City Renaissance Project.

Mason City Administrator Brent Trout said Wednesday he wasn't aware of the lawsuit as the city has not been served. 

The city is seeking up to $10 million in state funds through the Iowa Reinvestment Act for the project. That money would leverage a $36 million plan that includes a hotel, an ice arena/multipurpose center and a music pavilion. The hotel is a critical factor because it fulfills a state requirement of $10 million in private investment in the overall project. 

In the lawsuit, Philip Chodur of G8 Development makes several claims against the city and the chamber, including a claim that the chamber intentionally interfered with the contract. His agreement with the city fell through late last year when he failed to meet deadlines for starting construction.

The City Council approved May 11 a pre-development agreement with Gatehouse Capital to build the hotel for the project. There will be a public vote Nov. 7 to allow or prevent the city from entering into a lease agreement with Southbridge Mall to build the arena and lease it to the city for 20 years for an amount not to exceed $18 million.

If rejected, it will kill the plan.

'Secret' meetings

“Upon information and belief, the Chamber intentionally and improperly interfered with the Development Contract by, among other things, Robin Anderson, in her capacity as Director of the Chamber, having ‘secret’ meetings with certain members of the City Council and encouraging them to terminate the G8 Development Contract in favor of another proposal being offered by an entity known as Gatehouse Capital," the petition states. 

G8 Development claims that the interference and alleged “secret meetings” caused the city to terminate the development contract, affecting the company's ability to perform and complete its obligations under the contract. 

As a member of the Chamber of Commerce, G8 Development said the organization should have been following its mission, working for the success of its members. 

Anderson said she couldn't comment on the lawsuit, but told the Globe Gazette she was surprised to hear that the chamber was listed as a defendant.

"It’s not really our practice to say 'no comment' because we want to work with the media, but we are completely unaware of this," Anderson said Wednesday. She said the chamber was a "cheerleader" for G8 Development's project and does not "support one member over another."

The chamber has supported the Renaissance Project throughout the process. In March, board members heard proposals from Gatehouse and G8 but limited the chamber's support to the project and not a specific developer.

After the city terminated its deal with G8, Anderson said she met with three developers who contacted the chamber. Anderson said she also made a similar pitch to a "consultant representing G8’s lender."

“When (G8 Development's) contract was terminated, any hotelier who contacted us, we tried to sell them on Mason City, and referred them to Brent Trout,” Anderson said. 

She said the chamber encouraged the city to consider hotels with a request for qualification offering a 500-plus meeting space to fill the gap since the Clarion Inn was demolished. 

Breach of contract

In its claims of the city's breach of contract, the developer lists several demands the city imposed that it claims were not part of the contract. 

“During the negotiation and pendency of the Development Contract, the City continually sought to impose upon G8 artificial and extra-contractual obligations that were not in good faith and that were not part of the Development Contract,” the petition states.

Court documents show the obligations include:

  • Altering the long-expected scope of the project to satisfy the requests the city had to meet to receive state grant funding, including as related to a mixed-use requirement imposed by the state.
  • Requiring requests for proposals, that the city suggested to G8 Development were only perfunctory, and that would not affect the company's rights under the eventual development contract.
  • Imposing arbitrary deadlines related to the submission of construction drawings.
  • Imposing arbitrary deadlines related to construction lending and loan commitments.
  • Arbitrarily delaying G8 Development's ability to meet its obligations under the development contract by misplatting the site, requiring G8’s architects and engineers to rearrange its site plan on the existing lot lines.
  • Requiring the City Architectural Review committee to approve new site plans. 

G8 Development claims that the obligations shortened the timelines within the development contract and hindered performance, making it impossible to complete its project. 

When the city terminated the development contract, G8 Development claims the termination was not in good faith. At that time, the city said the developer had defaulted on the project. 

“It was the artificial and extra-contractual obligations the City imposed upon G8 that were responsible for the delays,” the petition says. 

Similar lawsuit

Chodur filed a similar lawsuit alleging the city of Vista, California, breached its contract with him on a condominium, commercial and office space project, according to an article published in the San Diego Union Tribune in October 2015. The suit claimed the city changed agreements for the project. 

The project was to include 80 condos and 31,000 square feet of commercial and office space, according to a 2008 development agreement. 

After six years and "no work visible at the property," the council canceled the agreement, the Union Tribune reported, saying Chodur had "moved too slowly and was unable to answer questions about financing for the project."

Chodur filed a claim with the city for $3 million, which was rejected. He then filed a suit for breach of contract, which is still pending. 

The property was since been sold to another developer in December 2015, according to the Union Tribune, who planned to build a five-story building with shops, apartments and underground parking. 

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