VARCO claims San Benito trying to ‘rob’ Resaca Village

SAN BENITO — City officials are trying to “take over” San Benito’s first resaca-side commercial development, failing to give its developer more time to complete construction, an attorney said Thursday.

John Adams, a Dallas-based attorney representing Brownsville-based VARCO real estate, said city and Economic Development Corporation officials are failing to honor agreements extending the developer’s construction timetable for the completion of the Resaca Village project.

On Thursday, City Commissioner Tom Goodman said working with VARCO has been “challenging.”

Last week, commissioners and EDC board members met in closed session, holding back on taking action on an agenda item regarding the “performance agreement and ground lease agreement with extension option with VARCO Real Estate San Benito LLC.”

While the EDC board approved a fifth amendment to VARCO’s performance agreement last November, commissioners have not ratified that agreement.

“We’ve had challenges in working with VARCO,” Goodman said in an interview. “We want everyone — businesses and individuals — to succeed and thrive in San Benito, but that requires sometimes selfless efforts and the ability to work together, but are confident that we can move forward.”

Meanwhile, Adams said officials are trying to “rob” VARCO.

“The concern is that the EDC is trying to take over the shopping center without compensation to my client,” Adams said in an interview. “My client’s concern is the Economic Development Corporation signed those written agreements that extended the time for VARCO to complete construction and now they don’t want to give us the time to finish.”

“My client’s concerned about what’s going on. They’ve invested all this money. The shopping center is nearly completed,” he said. “The Economic Development Corporation has repeatedly signed documents to extend the performance agreement and now it seems they want to go back on what was agreed to in writing. (VARCO’s) very excited in getting this project completed.”

After months of holding off on approving VARCO’s fifth amendment to its performance agreement surrounding the completion of the Resaca Village project, Commissioner Pete Galvan said officials want the developer to speed up the plaza’s leasing and construction.

“We’re just looking to work with them, get this project moving a little quicker to the expectations of the commission and the EDC,” he said in an interview.

Galvan noted a new city commission and EDC board have been overseeing the project since the May 2023 election flipped the commission’s majority.

“There’s a new commission and a new EDC board of directors,” he said. “They’re moving along but we’d like them to move a little faster.”

Galvan argued VARCO is leasing Resaca Village suites at rental rates higher than local market leases.

“My major concern is the rental rates and being able to lease it out quicker and making sure they meet their end of the performance agreement,” he said.

On Thursday, EDC President Alex Salinas declined comment, referring questions to the agency’s staff and attorney Michael Pruneda, who did not respond to messages requesting comment by deadline.

Last November, the EDC’s board approved a fifth amendment to VARCO’s performance agreement, setting the completion date for Resaca Village’s third and fourth phases for May 1.

However, city commissioners have not ratified the agreement VARCO originally proposed to the EDC in November 2022, attorney Paul Serafy, representing VARCO Investments, said Thursday.

The agreement states, “VARCO acknowledges and agrees that the proposed lease and potential conveyance of the EDC tract and the provision of the incentives … are fully conditional on and contingent upon VARCO’s timely performance of each and every one of the following obligations:

“Commencing construction by May 1 (2023) or sooner and completing construction by May 1, 2024 [date of substantial completion] of phases three and four …,” the agreement states.

“VARCO will agree to offer an option of a three-year lease term to new tenants which do not require any build-out by VARCO,” it states.

Under the clause “delay damages,” the agreement states, “VARCO understands that if the date of substantial completion established by this agreement is not attained because of a delay caused by VARCO (including contractors and subcontractors under control of VARCO), the EDC will suffer damages which are difficult to determine and accurately specify and VARCO shall pay the owner $500 as liquidated damages and not as a penalty for each day that substantial completion extends beyond the date of substantial completion.”

Since VARCO launched San Benito’s first resaca-side commercial development in late 2019, city commissioners have granted the company four extensions.

Under its 2019 contract, VARCO was planning to invest $3.6 million to develop the project’s four phases spanning 30,000 square feet of commercial real estate, originally set for completion in December 2022.

After VARCO launched the project, the coronavirus pandemic broke out in March 2020, sparking a national economic slowdown.

In November 2018, the EDC leased VARCO 9.8 acres along the resaca off Business 77.

As part of an incentive agreement, VARCO is paying the EDC 10% of the development’s property taxes for 15 years.

After the 15-year period, the contract gives the developer the option of buying the property for $1.