LONGMONT — It’s now the city’s turn to deal with Dillard’s.

After a months-long negotiation between Dillard’s and the owners of the Twin Peaks Mall that reached no agreement, the Longmont City Council — acting as the Longmont Urban Renewal Authority — voted 6-1 on Tuesday night to begin the eminent domain process with the department store. Several council members said that Dillard’s appeared to have no interest in staying in Longmont, and that the drastic action was the only tool left to keep the mall’s redevelopment moving.

“I would love nothing more than to manipulate the universe so that everyone wins,” Councilman Brian Bagley said. “But that’s not possible. … People want the mall redeveloped. This action is the only way we can do it.”

Unique among the mall’s businesses, Dillard’s owns its own building and land. It also has covenants with the mall that allow it a veto on much of the mall’s reconstruction — covenants that would effectively bring the project to a stop, said Allen Ginsborg of NewMark Merrill Mountain States, the mall’s owner.

“There’s been a lot of proposals of ‘Can’t you just work around Dillard’s?'” said Brad Power, the city’s economic development director. “That’s just not possible. Their approval rights on the site extend beyond their own real estate. They extend to the property owned by NewMark.”

No representative for the store chain appeared before the council Tuesday.

Ginsborg has asked for eminent domain in order to keep the mall’s redevelopment on schedule. Under the process, the city notifies Dillard’s that they are now the ones dealing with the store, sends a letter making a final written offer for the property, and then begins its own negotiation with Dillard’s. If the company still refuses to accept an offer, the city can then file suit, asking the court to grant immediate possession of the property and to set the final price.

NewMark Merrill hopes to have most of the project complete and the new mall vendors in place in time for the 2014 holiday season.

Talking and dealing

Opening up the details of the negotiations for the first time, Ginsborg said that in 2012, Dillard’s had decided it didn’t want to be part of the new open-air mall design. In March, he said, NewMark Merrill offered $2,350,000 for the store, more than it had paid per square foot in its $8.5 million purchase of the Twin Peaks Mall. The offer wasn’t accepted.

By November, the city had gotten its own appraisal of what the Dillard’s property was worth: $3,030,000. In December, NewMark raised its offer to $2.85 million. That again wasn’t accepted — but by January, Ginsborg said, Dillard’s had changed real estate directors and there seemed to be renewed interest in remaining with the mall.

In early 2013, the city set a timeline for Dillard’s and NewMark Merrill to reach an agreement by April 1. But the negotiations still remained uncertain. On March 20, Ginsborg said, NewMark offered Dillard’s a multi-pronged “trial run”:

NewMark would provide up to $1 million to remodel the Dillard’s storefront.

Dillard’s would not have any additional costs for maintenance of the mall’s common areas during a two-year trial period; those would be picked up by the city, up to $560,000.

After two years, if Dillard’s didn’t want to be part of the new project, NewMark would buy the store for $4 million.

“That was a 70 percent premium over what we initially offered Dillard’s,” Ginsborg said Tuesday night. “We were willing to stick our necks out.”

On March 27, the offer was turned down. Dillard’s was once again only interested in a buy-out, he said, and was naming a $5 million price.

“They told us they didn’t want to be next door to a movie theater,” he said. “That’s been on the plans since day one.”

NewMark Merrill made one last offer on March 28 — $3.5 million for a complete buyout. It went unanswered, Ginsborg said. Powers said that city staff hadn’t heard from the Dillard’s real estate director themselves since mid-March.

Needed or too far?

For Councilman Gabe Santos, the situation seemed simple.

“It’s obvious one party isn’t interested in the negotiations and isn’t interested in being part of this community anymore,” he said.

But Councilwoman Sarah Levison said she wasn’t comfortable with taking the step toward taking the property. This went beyond a simple land-taking for a highway, she said, and taking land for an economic development purpose was taking the city down a slippery slope.

“I’m really not convinced and not comfortable with this proceeding,” she said.

Robert Duncan, a special counsel for the city, noted that the proceeding was to cure a “blighted area,” a purpose allowed within Colorado law. A purely economic development taking would not.

Bagley suggested that Dillard’s had already given its approval for what was going to happen next, by its absence.

“When I don’t show up in court, I know I’m going to lose,” he said. He indicated the microphone to address the council. “Dillard’s has yet to show up at that podium.”

One resident, Brad Jolly, spoke against using eminent domain. Just about everyone supports rejuvenating the mall, he said, but not necessarily this way.

“This doesn’t respect the private property rights of business owners,” he said.

If Longmont ends up filing a court action, the city will ask for immediate possession of the property. If granted, that would allow the city to take the land before the case is concluded and a final price set.

If Dillard’s were to successfully appeal the possession to the Colorado Supreme Court, that could put things on hold, Duncan said. But possession would not be returned to Dillard’s until the Supreme Court decided to take the case; typically, Duncan said, the court takes three to six months to make that decision. Development could continue until that point.

Ginsborg said he was still willing to negotiate with Dillard’s; Power said he would welcome that as well.

“If Dillard’s wants to re-engage … we would step out of the process,” Power said.

Power said he expected the city to get in touch with Dillard’s before the end of the week.

Scott Rochat can be reached at 303-684-5220 or srochat@times-call.com.