HomeMy WebLinkAboutNS Lease Valley Forge Road Property Least Rate for Builders FirstSourceORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: June 19, 2012
Action Agenda
Item No. 5 y
-SUBJECT: Valley Forge Road Property Lease Rate for Builders FirstSource
DEPARTMENT: Asset Management Services PUBLIC HEARING: (YIN) No
ATTACHMENT(S):
Original Lease
INFORMATION CONTACT:
Pam Jones, 919 - 245 -2652
Jeff Thompson, 919 - 245 -2658
PURPOSE: To consider approving a tiered renewal lease rate schedule of $2.50 per square
foot for 24 months (months 1 -24) and $2.75 per square foot for 36 months (months 25 -60) for
property owned by the County at 401 Valley Forge Road, Hillsborough and leased to Builders
FirstSource.
BACKGROUND: In 1997, the County acquired property at 401 Valley Forge Road,
Hillsborough, as a result of the retirement of revenue bonds owned by the Industrial
Development Corporation. The Orange County Economic Development office successfully
negotiated a lease with Builder's Supply & Lumber, Inc., whose name was changed and the
lease assigned to Builders FirstSource effective December 31, 2000. The lease terms set the
initial term for ten years, with two automatic 5 year renewals.
The original lease rate was set at $1 per square foot, significantly below market rate, to
recognize the significant capital investment needed to make the building suitable for use by
Builders FirstSource. The lease automatically renewed on October 1, 2007 at a $2.50 per
square foot lease rate for the first 5 year renewal period as approved by the Board of County
Commissioners. This rate was based upon market comparables from local commercial real
estate firms and the Orange County Economic Development office. This lease rate also
acknowledges the acreage of the property, but does not separately assess a rate for the land.
This is a common practice for valuation of leases.
FINANCIAL IMPACT: Staff has negotiated a tiered second renewal period lease rate of $2.50
per square foot for 24 months (October 1, 2012 through September 30, 2014), followed by a
lease rate of $2.75 per square foot for the following 36 months (October 1, 2013 through
September 30, 2017). Current market comparables for this type of property within the Triangle
area range between $2.50 per square foot and $3.00 per square foot. The lower lease values
apply to larger properties while higher lease values relate to smaller properties.
Builders FirstSource will also continue to pay all maintenance costs for the property, as well as
taxes in lieu assessed at the tax rate set annually by the Board of Commissioners. Taxes in lieu
paid in FY2012 were $47,313.
Annual lease income for the first two years of the lease renewal would be $262,500. Annual
lease income for years 3 -5 would be $288,750.
RECOMMENDATION(S): The Manager recommends the Board approve the tiered renewal
lease rate schedule of $2.50 per square foot for 24 months (months 1 -24) and $2.75 per square
foot for 36 months (months 25 -60) for property owned by the County at 401 Valley Forge Road,
Hillsborough and leased to Builders FirstSource.