Last Updated: May 17, 5:56 p.m.
Flagler County Attorney Al Hadeed today sent certified letters to the real estate broker who handled the county’s purchase of the mold-infested Sears building on Palm Coast Parkway, to the building’s former owners and to the engineering company that inspected it, telling all three in stern and unqualified language of the county’s intention to seek damages.
The county discovered only this week, six weeks after closing on the $1.1 million purchase and just days after electing to turn the building over to the sheriff for his Palm Coast operations, that the structure had significant water intrusion and black mold–a repeat of the problems plaguing the Sheriff’s Operations Center in Bunnell, which had to be evacuated for that reason last June.
“The county will be seeking damages against you for your responsibility in this transaction,” Hadeed wrote Sheehan-Jones, citing her alleged “failure to disclose what you knew or should have known with an examination of the property and interaction with your clients.”
“There is evidence that you or those under your direction concealed these conditions,” Hadeed wrote the owners, Andre’a and James McIntyre of Palm Coast. “The County will be seeking rescission of the agreement plus an amount representing its consequential damages for having proceeded into the due diligence, acquisition, and occupancy phases of its activities.”
The letter to Universal Engineering’s Brian Pohl was similarly worded: “The county emphasized in its engagement of your services that its primary interest was to obtain an assessment of water intrusion,” Hadeed wrote. The report pointed to no such intrusion, though from county observations, Hadeed wrote, “It was of long standing and very apparent. You should have discovered the water intrusion with the exercise of reasonable professional care in conducting your inspection.”
Sheehan-Jones had been contacted Wednesday when the Sears building’s issues first broke and the county administrator said she would be among those held to account. She did not return a call. On Friday, a day after this story initially published, she emailed FlaglerLive.
“When I visited the property with several representatives of the County prior to the sale of the Sears store, the store was still operating and the space was full of inventory,” Sheehan-Jones wrote. “I had no knowledge of any issues with water intrusion at the property and the seller did not disclose anything to me that would have raised any concerns. If there was any sign of water damage on the walls or other areas, those were not visible to me or any of the County staff members that were present at that time. It is unreasonable to suggest I had a duty to disclose facts that I did not know about or had any way to discover. The County has staff with construction experience and hired an independent inspector to determine the condition of the property, which is standard practice in commercial real estate transactions. Neither the County staff nor the independent inspector found anything that was cause for concern at the time.” Sheehan-Jones noted that county officials had to “remove walls to discover the issue.”
The record also shows that the county’s responsibility in the building’s acquisition is not nil: the purchase was hurried, its purpose conjured rather than compelled (Sheehan-Jones sought out Coffey to pitch him the sale rather than the other way around, and Coffey then sought out a use for it), and relations between Sheehan-Jones and Tim Telfer, the county land manager in charge of the purchase, grew to resemble more those of associates than of broker and buyer maintaining healthy, questioning distances. The record shows no inquisitiveness so much as accommodation on Telfer’s part, and the inspection appeared to be almost an afterthought.
On Nov. 11, Telfer wrote Margaret Sheehan-Jones: “I’m starting the inspections and due diligence now.”
Then-Administrator Craig Coffey had put Telfer in charge of buying the 8,000-square-foot Sears building after Sheehan-Jones just weeks earlier had offered the building to Coffey. The timing of the Nov. 11 note to Sheehan-Jones was significant: it was just eight days before the County Commission would be asked to approve an option on buying the $1.1 million building, even though by then none of the commissioners knew anything about it.
Telfer himself, according to his own emails, knew little about the building. He asked for building and construction plans only in late November. Sheehan-Jones told him she couldn’t find them. He didn’t press the matter. He conducted a “walk-though” of the property in mid-September (with the tax collector) but had to do it after hours, supposedly because the owners–Andrea and Jim McIntyre of the Darnell Group–didn’t want to “upset the staff,” even though the sale was being publicized: Suzanne Johnston, the tax collector for whom the county was buying the building at the time, was sent Sheehan-Jones’s sales flyer on the property on Sept. 14. The owners hadn’t told employees of their plans to retire and sell.
The consequence was that no interaction between employees familiar with the building and Telfer would take place.
In the same Nov. 11 email to Sheehan-Jones, Telfer wrote: “We’re hiring Universal Engineering to perform a building inspection. Nobody has any concerns about the structure but with recent press we’re spending more to cover ourselves. So I need to get Universal access to the building. Can you reach out to the owners and see when they prefer to have the inspection done?”
Nobody has any concerns about the structure, Telfer was reassuring Sheehan-Jones. It is odd that the county land manager responsible for the due diligence would feel compelled to reassure the real estate broker in the deal. But in the context of their frequent, even giddy email exchanges, it wasn;t odd but routine. When the second appraisal report came in at $1.1 million, Telfer again reassured Sheehan-Jones that even after the two appraisals’ values are averaged, she would still get her $1.1 million: “Normally the values don’t change so we’re likely good.” (See: “How Flagler Government Bought the $1.1 Million Sears Building Nobody Wants, With Scarce Money Needed Elsewhere“.)
But it is not clear how Telfer, who had been granted only limited access to the building, could have concluded that nobody had concerns about the structure. The email implies that the hiring of the inspection company was more pro forma than an authentic investigation of the building–that it was being done “to cover ourselves.”
As it turned out, the cover was short-lived.
Universal’s inspection report was dated Dec. 12. “The Property Condition Assessment for the property was performed based on non-intrusive, non-destructive general observations of the accessible major building systems including roof, frame, foundation, walls, HVAC, plumbing, and electrical systems,” it stated. “The Property Condition Assessment Report is not a safety, regulatory or environmental compliance inspection.” It found the roof in good condition. “There is no evidence of moisture intrusion or physical damage to the roof,” the report stated.
As for the exterior walls and structural frame, “All bolts and connectors that were readily accessible were inspected and appeared to be in acceptable condition. No damage or corrosion on the connections was observed,” an assessment county officials, based on their photographic evidence, disagree with.
But here was Universal’s more controversial assertion: “There is no evidence of moisture penetrations but repairs are necessary to prevent further
deterioration. The steel sheathing areas are in stable condition with no evidence of moisture infiltration or deterioration. Minor physical damage is present” as shown in various photos included in the report. “The exterior walls of this structure have a typical useful life of 50 years.” Universal recommended replacement of the air conditioning system and found damaged insulation, but “no evidence of excessive deterioration” of interior elements. Pohl and Building Department Manager Mike Navarra signed the report.
The county commission never heard of the building purchase or its timetable until early March, when the item was again on the commission’s agenda–not to approve or reject the sale, but to approve the manner of financing it. By then, Coffey had been forced to resign. Johnston was no longer interested in the building. Nor was the county. Commissioner Dave Sullivan wanted to get rid of it. So did other commissioners, though Sullivan was most forceful against the buy. But the window to reject the sale had closed: the county was legally bound to go through with the purchase, even though the sale hadn’t closed yet. Commissioners voted against the particular financing method presented in early March, but at their next meeting, they voted 4-1 (with Joe Mullins in opposition) to accept a different financing method, sealing the deal. The purchase closed on March 29.
In his letter to Sheehan-Jones, the broker who’s handled almost all of the county’s major real estate deals for the last half of Coffey’s tenure, including the very controversial purchase of the old Memorial Hospital that became the Sheriff’s Operations Center, Hadeed emphasized the context of the Operations Center debacle. “It is inconceivable to the county that this context would have escaped your attention,” Hadeed wrote Sheehan-Jones. “It should have alerted you to the need to present only properties to the County, including this one, which are suitable for consideration for public use.”
At the Jan. 9 special meeting of the commission where Coffey resigned, only a few people spoke in support of Coffey. One man in particular offered a long defense of the administrator. He said he’d had the pleasure of working with Coffey, “consulting” for the county since 2009 when he retired here from 42 years in Orange County government. He spoke of working with him at 20-hour stretches during Hurricane Matthew. “I watched Craig very closely,” he said. “He was outstanding.” He spoke of Coffey being “maligned over this hospital deal,” referring to the old Memorial hospital that became the operations center, “which he didn’t vote for.” He did not mention that his wife had brokered the deal, and described Coffey as “a good man, an honorable man.”
It was Larry Jones, Margaret Sheehan-Jones’s husband.