Mesa to consider MOU with SoulTrust for city-owned Grid site after developer bankruptcy

City staff on Thursday detailed a memorandum of understanding the council will consider Monday that would let a selected purchaser, SoulTrust, buy and redevelop a stalled mixed‑use project known as the Grid at 233 East Main Street.

The city-owned site was developed under a 2017 development agreement but entered bankruptcy in March 2024; a trustee for the bankruptcy ran a process to select a buyer, and SoulTrust Maine QOZB LLC was chosen, staff said. The MOU would be an agreement the trustee negotiated to settle claims against the bankruptcy estate; staff told council the city would execute that agreement if the trustee proceeds.

The MOU lays out construction and purchase options by phases, staff said. Phase 1 will contain “micro” units over commercial and office space; phases 2 and 3 would add townhomes. The developer will lease the land during construction and may exercise an option to buy each phase within 180 days of that phase’s certificate of occupancy, staff said. The overall appraised purchase price for the parcel was stated in the briefing as $2,985,000.

Why it matters

The Grid parcel is city owned and sits adjacent to Benedictine University, which made the council’s role central during the bankruptcy sale. Staff said the city previously required the original developer to escrow $1.7 million as a protection in case the project failed; after the project did fail the city used that escrow to restore right of way, reopen streets and install lighting and landscaping.

Details shown to council

- History and ownership: staff said the city owns the land and that a bankruptcy trustee oversaw sale‑process vetting and selected SoulTrust. Jeff McVay, manager of Urban Transformation, and Stephanie Monge, Downtown Transformation project manager, presented the overview and answered council questions.

- Phasing and program: staff described Phase 1 as including 76 micro units above roughly 9,000 square feet of commercial space and about 10,000 square feet of second‑floor office. Phases 2 and 3 would add a total of 25 townhomes that would wrap parts of the Pomeroy parking garage. The developer may choose to purchase phases 2 and 3 together, staff said.

- Purchase and price: staff said the developer would purchase each phase at an appraised value and repeated that the overall appraised value shown in the briefing was $2,985,000. Under the draft terms, the city would subdivide the property into phase parcels as needed.

- Parking and public improvements: the city would enter a 50‑year parking license for required spaces in the Palmer Garage. SoulTrust requested a $10 monthly parking rate for the first 10 years for the spaces provided under the license; staff said that request is consistent with prior agreements. The city also told council it will not require the developer to complete previously proposed, larger Gateway Park improvements given the project’s scaled‑down program.

- Bankruptcy claims and settlements: staff said the trustee examined secured and unsecured claims, and SoulTrust must resolve contractor and subcontractor claims as part of the purchase. Staff told council the city is waiving certain claims it held against the prior developer and the bankruptcy estate as part of the negotiated settlement; staff described the city’s waived claims in the briefing as “approximately $800,000.” They also said there remain contractor/subcontractor liens against the estate that must be resolved before construction can proceed and quoted a figure in the briefing sequence that was described aloud as “3, almost $6,000,000,” and that the trustee and purchaser have negotiated that amount down (staff said the amount has been significantly reduced through negotiations). Staff said the settlement structure and final documents will be reviewed by the bankruptcy court before they take effect.

Council questions and direction

Council members asked for a site plan and a clearer map of the parcels and phases; staff committed to deliver a map to council members. Council asked whether the city would be “made whole” compared with the project’s bookkeeping since 2017; staff replied the city expects to receive fair market value for the land but noted that accepting the sale and MOU includes waiving the city’s claims against the prior developer and the bankruptcy estate.

Several council members pressed how many competing bids were considered; staff said the trustee received 11 expressions of interest and four qualified offers and that SoulTrust’s resolution with subcontractor/contractor claims and its financial package made it the leading candidate.

Staff said some elements of the original development agreement are changing in the new MOU: courtyard apartments proposed earlier would be replaced by townhomes, the city will lease land during construction with purchase options by phase, and the prior obligation to build the Gateway Park improvements is not being carried forward.

What happens next

Staff said the MOU is on the council agenda for Monday and that the final development agreement and lease will be negotiated after the bankruptcy court approves the trustee’s settlement terms. Staff emphasized the bankruptcy court’s approval is needed before the city can finalize the documents and that the MOU is intended to give the trustee the city’s terms for court consideration.

Ending

City staff framed the MOU as a way to restart construction on a long‑stalled project while protecting the city’s interests during a bankruptcy sale; several council members asked for further materials — a site map, more precise figures on outstanding claims, and confirmatory language showing what the city is waiving — before Monday’s meeting.

Quotes

Jeff McVay, manager of Urban Transformation: “The city will be executing an agreement negotiated by the trustee to settle claims against the bankruptcy estate.”

Stephanie Monge, Downtown Transformation project manager: “Phase 1 will continue to include 76 micro units, above 9,000 square feet of commercial space and 10,000 square feet of office space on the second floor.”