Ridgefield, Wash.– A shifting industrial development market that plays to the Port of Ridgefield’s business model, coupled with new funds availability, led the Port’s commission on Aug. 12 to authorize the repurchase of 10.5 acres of industrial-zoned land at S. 11th Street in Ridgefield it sold just a year ago. The site is in the Ridgefield Industrial Park.
The vote approved the purchase contingent on a due diligence outcome that is anticipated to be successful. There purchase price will be the original sales price of $1,271,952 plus $150,000 in pre-development costs incurred by the seller for a total of $1,421,952. The pre-development work includes site planning and design the Port would be on the hook for had it not already been completed.
In May last year,ROK Ridgefield Industrial LLC, whose managing member is Elie Kassab, president of Vancouver-based Prestige Development, purchased the property from the Port with plans to construct an approximately 100,000 sq. ft. building.Contract stipulations required “significant progress” toward development by September 2016 or ROK would risk a $1 million non-performance penalty.
When Kassab’s prospective tenants failed to execute lease agreements and near-term development opportunities cropped up in other marketsegments, Kassab expressed an interest in selling the property back to the Port.
Port of Ridgefield CEO Brent Grening noted that had the Port been in the financial position it currently enjoys, with recent financing capacity secured through Banner Bank, the Port would not have sold the property in the first place.
“We didn’t want to sell that parcel, but we needed the funds from the sale last year to develop the road to our other property at S. 11th Street,” Grening said.
While the repurchase abolishes the potential revenue from a non-performance penalty, Grening explained the Port received something of even greater value.
“With demand shifting to larger industrial building sites,we now have the opportunity to get this property back and combine it with our current project on the north side of 11th Street. This puts us in an improved strategic market position to attract a strong employer,” said Grening.
Grening also noted the value of the repurchased property has likely increased in the last year with the Port’s addition of the new road that now serves the two properties.
“Essentially our investment in road construction increased the value of our existing property and the piece we’re buying back. So we’re getting the 10.5 acre piece at its lower value before the road was built,” said Grening.
In addition to the productive strategic and financial elements of the deal, Grening said developer realities need to be taken into consideration.
“Port Authorities and other municipal entities do not gain by turning a blind eye to the challenges developers face when market conditions change. The Port enjoys a reputation as an organization that practices integrity in all of its business dealings. Strong-arming our partners into building something that doesn’t pencil, or penalizing them when another solution is a win for us as well, works against that reputation. Our goal is to draw quality-focused development partners to Ridgefield, and we believe our approach is the correct path to achieve that goal.”
The Port expects to its due diligence process to be completed by August 21st. If the outcome is successful, the repurchase agreement will be executed by month’s end.