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Bank tells Legislature it must honor illegal office lease or get sued

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published May 11, 2016

A Florida-based bank is threatening to sue the Alaska Legislature for as much as $27.5 million over lawmakers' now-invalidated lease for their Fourth Avenue office space in downtown Anchorage.

In a letter sent to the state Tuesday, Bob Hume, an Anchorage-based attorney for Everbank — which says it loaned $28.6 million to the office space's developers, Bob Acree and Mark Pfeffer — demanded that the Legislature reaffirm that the lease is still in effect, and told lawmakers not to leave or look for alternative offices.

Anchorage Superior Court Judge Patrick McKay ruled in March that the Legislature's no-bid, 10-year lease extension was illegal and invalid, saying that because renovations to the building were so extensive, the extension should have been subject to competitive bidding requirements.

Hume's letter says the Legislature needs to honor the $3.4 million-a-year lease anyway, based on a document signed by Rep. Mike Hawker, R-Anchorage — the legislator who negotiated the lease — that Everbank says it relied on in making its loan.

The document is called a "subordination non-disturbance and attornment agreement." Hume's letter references a section of the agreement in which the Legislature — represented by Hawker — acknowledged that the lease was "in full force and effect," and that the state's obligations under the lease are "valid and binding."

The letter was first reported by the Midnight Sun, a political blog.

Hume said in a brief phone interview Wednesday that Everbank isn't asking the Legislature to disregard McKay's ruling — it's simply asking lawmakers to honor the agreement that Hawker signed.

"The loan was made in reliance on the state's representations that the lease was legal," Hume said. "The bank is an innocent party here — it had no dealings on the lease. It just provided the money based on what the state told them."

Hawker didn't respond to messages Wednesday.

After McKay's ruling that the lease was illegal, a committee of legislative leaders, the Legislative Council, voted to purchase the building for $32.5 million. But Gov. Bill Walker said he would veto a purchase, and since then, lawmakers have been considering whether to buy a building in Spenard owned by Wells Fargo.

A new version of the Legislature's capital budget released Wednesday includes $12.5 million to purchase the Spenard building, in spite of a request made by the Anchorage Assembly on Tuesday to keep lawmakers' offices downtown.

In a prepared statement about Everbank's letter, a spokeswoman for the Fourth Avenue offices' developers, Amy Slinker, said, "We trust that the state will review this matter with the high level of care and caution that it warrants."

But the letter won't affect the Legislature's search for alternative space, said Sen. Gary Stevens, R-Kodiak, who succeeded Hawker as chair of the Legislative Council. "We've got to find a resolution to this," Stevens said in a phone interview Wednesday.

"Staying in that building without a contract and paying $4 million a year simply makes no sense at all," Stevens added, referring to lawmakers' full annual costs for their existing space when operating expenses are included.

Devin Kelly contributed reporting to this story.