UPDATED: November 11, 2016 11:41 AM — Faced with the prospect of losing their businesses due to the I-4 widening project, restaurant owners in Crossroads at Lake Buena Vista across from a Walt Disney World entrance are stuck in an expensive state of limbo.
"It is just a waiting game, which is why a number of restaurants are not responding yet," attorney Brendan Lynch told GrowthSpotter. A shareholder with The Lowndes law firm, Lynch specializes in eminent domain cases and represents Pizzeria Uno at Crossroads.
The Florida Department of Transportation has targeted the popular 29-acre dining hub for a Right-of-Way (ROW) taking to accommodate the redesigned I-4/S.R. 535 interchange. Under the recommended plan, a new exit road would bisect the property, and the rest of the site would be used for stormwater ponds.
The 155,000-square-foot shopping center is home to the last Gooding's supermarket, Pirates' Cove mini golf and 20 national restaurants that are among their chains' most profitable locations in the nation.
I-4 Beyond the Ultimate Project Manager Beata Stys-Palasz has said the agency will make a final recommendation on ROW sites in late 2017. The project is not funded for construction or ROW acquisition, but MetroPlan Orlando in September moved it to second place on the planning agency's priority list.
David Gabbai, managing director for retail services at Colliers International Central Florida, said that leaves the restaurants with a dilemma: Knowing that every other tenant in Crossroads is in the same position, do they give up their most profitable location now to beat the competition for a scant few comparable sites?
"That's the conversation I've had with my clients," Gabbai said. "When do we start to look? They can start scouting locations today, but we know it's a mature market. And let's say they find a site, they're still obligated to a lease, and it's probably a very expensive lease. There's nothing in place that gives them any timelines, so it becomes a waiting game."
They can hold tight and keep making money until the wrecking ball comes -- or hold out hope that FDOT will select a different interchange design that leaves the shopping center intact.
"On the flip side you don't want to wait until the last minute, and then you're left in the dark and have to shutter your business," Gabbai said.
FDOT has estimated the ROW costs for that segment at more than $428 million, the bulk of which would go to pay for Crossroads.
In cases of 100-percent taking, neither the property owner nor the tenants can sue for damages.
"Under Florida law, business damages are only allowed by statute," eminent domain attorney Jay Small said. "You have no constitutional right to business damages. You do have a constitutional right to be paid for your land."
Small, a shareholder at Mateer Harbert, represents property owners who would be impacted by the I-4 project, but none currently at Crossroads. He said the FDOT would likely use an income approach, as well as similar sales, in its appraisal process for Crossroads. It could end up being the single most expensive ROW taking in Florida history.
Attorney Lynch said TIAA, which bought the center from Disney Development Co. in 2005 for $54 million, could be in for a one-time windfall. But the Crossroads tenants are only eligible for relocation assistance.
"It's bare bones," Lynch said. "They're not required to buy another space or pay for a buildout. The tenant is not even entitled (to be compensated) for the remaining years on the lease. (FDOT) is only obligated to pay for the actual move and a few related expenses, like printing new letterhead."
Tenants who are forced to relocate could be eligible for "rent additives" if the new location charges higher rental rate than Crossroads. But FDOT doesn't guarantee rental assistance for the full term of a lease.
Pirates Cove General Manager Fred Bailey said he doesn't see a solution for his nearly 30-year-old attraction. There isn't an undeveloped site in the area large enough to accommodate them.
"It will put us out of business," he told GrowthSpotter. "We've got 5 acres. If they found us a 5-acre site on I-Drive, we could make the relocation work. But I don't see that happening."
Lynch said at this point, Pizzeria Uno is going to stay put and hold out hope that FDOT reconsiders the design. "There's no urgency just yet to find a location unless it's a once-in-a-lifetime opportunity," he said.
GrayRobinson shareholder Mike Tomkiewicz, who is representing Noodles & Company, told GrowthSpotter his firm hired traffic engineers to submit an alternative interchange design. Their plan would have required a partial taking of Crossroads, but would have left the strip-center portion intact.
The GrayRobinson proposal also would have required a taking of undeveloped Disney property for drainage ponds. Tomkiewicz said FDOT engineers ran a traffic analysis and gave it a failing grade.
"They can avoid paying the business damages by wiping out the whole business and doing a full taking," he said. "In reality, they're looking at the cost of the claim -- and it's not right. Their rationale for it is the businesses can just go somewhere else. But wherever they go is not going to be as good."
For now, Noodles is focused on getting FDOT to reconsider the design, he said.
JLL Vice President Justin Greider, listing agent for Crossroads, said he and his client have been proactive in dealing with FDOT. He's confident the shopping center won't be affected.
Lynch isn't as confident. "We've asked them to look at every possible viable alternative," he said. "I don't think DOT, despite what we've told them, really understand the financial ramifications of what these restaurants will lose."
He said hundreds of employees could lose their jobs if the tenants aren't able to reopen elsewhere. And Orange County would lose more than $490,000 a year in property taxes if the nine parcels of Crossroads fall off the tax roll.
Lynch recognizes that the recommended design was the only one of three interchange designs that received high grades for traffic operations, and rated well for constructability.
"That location is a disaster, traffic-wise," he said. "I think the next question is whether that's a most important factor."