Thumbnail photo: Bayside RV Park at the Crescent City Harbor is one of two that a new limited liability company, Crescent City Beach Village LLC, will redevelop and manage. | Photo by Jessica Cejnar Andrews
A nine-month long courtship between the Crescent City Harbor District and BSD Property Management was nearly derailed over what the investment manager said is standard procedure for a new business.
But after CCHD commissioners Dan Schmidt and Annie Nehmer balked at entering into a lease agreement with Crescent City Beach Village LLC, the limited liability company created to operate the harbor’s RV parks, Daniel Dahan said without trust, the relationship was doomed.
“If you always have to come back and say, ‘Why did you do this? Why is this? Why is that?’ not as an interest, but as a fear, that’s not a good relationship,” he said Wednesday. “That’s not a healthy marriage.”
Three harbor commissioners — Board Chairman Rick Shepherd, Vice Chair John Evans and their colleague Gerhard Weber — approved leasing Redwood Harbor Village and Bayside RV Park to Crescent City Beach Village LLC. Schmidt and Nehmer abstained.
Their vote came about two weeks after Schmidt jumped to the podium to get Dahan’s signature on the lease he and his colleagues approved with BSD for Redwood Harbor Village on June 24.
But on Wednesday, Schmidt said he wanted to know what differences there were between CCHD’s contract with BSD and its new contract with Crescent City Beach Village. Despite assurances from Harbormaster Mike Rademaker and CCHD Fiscal Officer Sandy Moreno that Crescent City Beach Village LLC is the name BSD wants to operate both RV parks under, Schmidt moved to table the lease until he saw an agreement between BSD and Crescent City Beach Village.
“I move that we not proceed on this piece until BSD provides the agreement that it has arranged with CCBV,” Schmidt said, using an acronym for Crescent City Beach Village. “What’s the deal? How does it affect the harbor? We need to know that. We need to see that. It’s not just standard procedure.”
Nehmer said she and her colleagues had discussed the new LLC taking over the RV park leases in closed session on Wednesday. They also heard from CCHD’s attorney Ryan Plotz via text message, according to Nehmer.
Rademaker said he and Moreno know that Dahan is behind Crescent City Beach Village because he “gave us his Secretary of State filings.”
“Anybody who has any concerns about this arrangement, keep in mind this tenant is making all the investment,” the harbormaster said. “We’re potentially risking productive use of that parcel. We’re not risking any capital investment.”
In his staff report dated July 12, Rademaker said if approved, the leases with Crescent City Beach Village would take effect Aug. 1. Each lease is for a term of 15 years with three options ot extend the term for five years each. The monthly rent for Redwood Harbor Village would be $7,500, while the monthly rent for Bayside would be $5,000, according to Rademaker’s staff report.
Under both leases, Crescent City Beach Village would pay a percentage rent equal to 10% of the gross monthly sales.
On Wednesday,Schmidt asked to see a document showing the transfer of RV park management from BSD to Crescent City Beach Village, even though Rademaker said he wasn’t aware of any. When Plotz called in to address Schmidt’s concerns, the harbor commissioner said the LLC is a different entity than BSD and was “created for some purpose that we don’t know about.”
Plotz echoed Rademaker and Moreno by saying that creating an LLC is standard for investors. The model allows for more flexibility for investors, he said.
“If it’s in BSD, BSD owns other assets,” Plotz said. “If it’s a distinct LLC, then investors can be solicited for this particular development project. It’s pretty standard for developers to create subsidiary LLCs both for tax purposes and to allow for funding mechanisms to move forward.”
Dahan told commissioners that he had no problem putting BSD down as the main signer on the contract. But, he argued, a potential guest visiting the park “would not know who we are.”
“Crescent City Beach Village, the main reason this was created is because of the word beach,” he said. “The word beach is the highest recognized word as an SEO (search engine optimization), there’s no higher than that.”
Dahan said the other BSD properties in Del Norte County, White Rock Resort, Nautica Beach Resort and Pelican Beach Resort are their own LLCs. He didn’t object to having BSD be the signatory on the leases with the Harbor District, but said he’d have to run it by BSD’s attorney.
Dahan also didn’t object to BSD filing for a fictitious business name to operate under Crescent City Beach Village, but, he told commissioners regardless of what firm signed the lease, it’s still the same person.
“The money comes to us and goes to a certain project,” he said. “We’ve raised $6.6 million for this project. That money will come in increments — as soon as I need the money, it comes in by $500,000-$700,000 at a time. Whether we create an LLC, in this case for CCBV, or another LLC for BSD, it’s a tax issue, not a marketing issue.”
Evans said he was happy with Dahan’s explanation as well as the advice Plotz provided and motioned to approve the leases with Crescent City Beach Village.
Shepherd pointed out that when he and his colleagues decided to lease the two RV parks to BSD Property Management, it was really a relationship with Dahan himself they were building.
“I think we have to have trust that he’s going to do the right thing for our harbor,” Shepherd said. “I believe this is going to be what’s best for the harbor and it’s going to get us through (to) actually stay solvent and be able to move us forward in the future.”
