Mason City council approves amending downtown hotel agreement to potentially cut ties with developer

MASON CITY — The City Council in Mason City last night approved amending their development agreement with the developer of a downtown hotel and conference center on the Southbridge Mall site so it can cleanly cut ties with the developer if he doesn’t move forward with the project by the middle of next month.

The city has been pursuing the construction for several years with MCCCH LLC and SBMC LLC, both headed by developer David Rachie, as part of the River City Renaissance Reinvestment District project. Things have come to a crossroads after the city back in December was required to make a $42,600 payment of a bank loan on the mall due to non-payment by SBMC, which was a portion of the larger guaranty of the total loan on the mall committed to by the city to facilitate the transfer of the property and to secure the ownership of the Multipurpose Arena.

The payment of any amount on the loan by the city triggered provisions including the ability to take over ownership of the mall. After discussions with legal counsel, it was decided in January to give the developer 120 days to rectify the situation or have the city move forward with another developer.

City Administrator Aaron Burnett says the council’s action last night solidifies that May 11th deadline in the development agreement.  “This action will allow us to have a clean break with the developer should they not meet that 120 day deadline that they had agreed to back in January, and that the city can move on and work this project with a different developer to execute on the vision of the River City Renaissance.”

Burnett says after litigation involving a previous hotel developer as part of the project, the city wanted to make sure that didn’t happen again if the May 11th deadline comes without any action.  “If you remember the last iteration of the project, we had outstanding litigation for almost two years that we had to mention every time we went out for a bond rating, we had to mention it in our filings. That litigation was a substantial claim, but in the end that was dismissed without prejudice, so that case is no longer out there, but that cast a long shadow over the project. I think it affected which developers were interested in the project, and I think that it obviously was at cost and staff time to get free from that lawsuit.”

The council unanimously approved amending the development agreement. If the developer does not meet that May 11th deadline, the council will likely have to hold a special meeting to make a final decision on moving forward with the project.