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Home My WebLink AboutAgenda - 02-16-2021; 8-d - Designation of 401 Valley Forge Road, Hillsborough, NC as Surplus Property 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: February 16, 2021 Action Agenda Item No. 8-d SUBJECT: Designation of 401 Valley Forge Road, Hillsborough, NC as Surplus Property DEPARTMENT: Asset Management Services (AMS) ATTACHMENT(S): INFORMATION CONTACT: 1) Aerial View of Property Steven Arndt, 919-245-2658 2) 2017 Lease Modification PURPOSE: To: 1. Approve the designation of 401 Valley Forge Road, Hillsborough, NC as surplus property; 2. Approve the selection of Marcus & Millichap Real Estate Investment Services to market and solicit offers necessary to sell this property; and 3. Authorize the County Manager to sign a contract with Marcus & Millichap Real Estate Investment Services. BACKGROUND: The County owns a 12.68 acre property located at 401 Valley Forge Road in Hillsborough. The property is zoned general commercial and contains a 105,000 square foot warehouse and distribution facility. The property was acquired in 1997 as the result of the retirement of revenue bonds owned by the Orange County Industrial Development Corporation. The intent of the purchase was to foster economic development and job creation. Attachment 1 provides an aerial view of the property. The property and buildings were subsequently leased to Builders FirstSource, Inc., a Fortune 500 company that is a manufacturer and supplier of building materials. The company is headquartered in Dallas, Texas and is the largest supplier of building products, prefabricated components and value-added services in the US. Builders FirstSource, Inc. has continuously operated from this location since 1997. A lease modification was approved by the Board of County Commissioners in 2017, providing a ten year lease extension with two, five year renewal options for the County. The lease has an expiration date of September 30, 2027. Exercising the two renewal options would extend the lease until September 30, 2037. The rent for the current ten year lease period is $24,500 monthly, $294,000 annually, with a full term value of $2,940,000. A copy of the lease modification is provided at Attachment 2. Approximately 90 people are employed at the facility. 2 In late October/early November 2020, the Asset Management Services Department received two unsolicited contacts from national commercial real estate firms that specialize in this industrial niche of the market. Both firms inquired as to Orange County's potential interest in selling the Builders FirstSource site and provided brokerage price opinions that placed the value of the property between $4 and $5 million dollars. This information was then shared with appropriate members of County management and a decision was made to pursue the sale of this property. The County Attorney's Office was consulted as to the process by which the County might proceed with the sale. Staff advised that the first step would be to declare the property as surplus. A review of general statutes indicated local governments can then sell surplus property by an upset bid process (G.S 160A-269). The statutes do not preclude the use of a commercial real estate brokerage firm to facilitate the sale, and it is staff's opinion that the utilization of a commercial real estate brokerage will result in the highest possible bid for the property, and in the shortest amount of time. In order to help expedite the sale process, a Request for Proposals (RFP) was issued on January 29, 2021 to seek a Real Estate Firm to market and facilitate the sale of the property. Proposals were received and reviewed on February 8, 2021. Marcus & Millichap Real Estate Investment Services was determined to be the most qualified, responsible bidder. It is proposed that the Board approve beginning the process of selling 401 Valley Forge Road, Hillsborough, NC. County staff would return to the Board to approve the sale upon receipt of the highest responsible bid at the conclusion of the upset bid process. A preliminary schedule of the sale is as follows: • Board Approval of Surplus Designation: February 16, 2021 • Board Approval of Commercial Real Estate Firm: February 16, 2021 • Preparation of Marketing Materials/RFP: February 17 — March 1, 2021 • Post RFP/begin 30 days marketing property: March 2, 2021 • RFP Due date: April 2, 2021 • Begin 10 day upset bid process: April 5, 2021 • Conclude 10 day upset bid process, round 1*: April 15, 2021 • Board Approval of Highest Bid: April 20, 2021 • Due Diligence: April 21, 2021 — May 14, 2021 • Escrow/Inspections/Closing: April 21, 2021 — June 11th, 2021 * Assumes only one round of upset bidding The terms of the sale would stipulate that the buyer honor all aspects of the existing lease, including rent schedule, term length, and extension options. FINANCIAL IMPACT: The sale of 401 Valley Forge Road, Hillsborough, NC is projected to net approximately $4,000,000. These funds will be utilized to offset projected budget shortfalls associated with current economic climate. SOCIAL JUSTICE IMPACT: There is no Orange County Social Justice Goal impact associated with this item. ENVIRONMENTAL IMPACT: There is no Orange County Environmental Responsibility Goal impact associated with this item. 3 RECOMMENDATION(S): The Manager recommends that the Board: 1. Approve the designation of 401 Valley Forge Road, Hillsborough, NC as surplus property; 2. Approve the selection of Marcus & Millichap Real Estate Investment Services to market and solicit offers necessary to sell this property; and 3. Authorize the County Manager to sign a contract with Marcus & Millichap Real Estate Investment Services to market and facilitate the sale of the property, upon final review by the County Attorney's Office. 4 Attachment 1 Aerial View of Property 401 Valley Forge Rd, Hillsborough, NC 27278 1 % T ' Return after recording to: Orange County Asset Management Services, 131 West Margaret Lane, Hillsborough, NC 27278 LEASE MODIFICATION THIS MODIFICATION OF LEASE, and entered into this 19'h day of September, 2017 by and between ORANGE COUNTY, NORTH CAROLINA (hereinafter"Lessor" and/or"Landlord"and/or "County"),and BUILDERS FIRSTSOURCE—ATLANTIC GROUP, LLC, as successor by conversion to Builders FirstSource—Atlantic Group, Inc. (hereinafter"Lessee" and/or"Ten ant"); WITNESSETH Recitals: Whereas County and Tenant entered into that certain Lease Agreement dated June 3, 1997, in connection with certain premises situated and being in Orange County and the State.of North Carolina being more particularly described in said Lease Agreement; and Whereas Tenant has leased the Property known as 401 Valley Forge Road, Hillsborough containing 105,000 square feet and the associated site area which Lease Agreement has an expiration date of September 30,2017; and Whereas, County and Tenant desire to extend the Lease Agreement by amending its Terms; Now,therefore,the County and Tenant hereto hereby agree as follows: Terms: 1. The recitals to this Modification are hereby incorporated into and made apart of this Agreement. 6 2. The expiration date of the Lease shall be September 30, 2027. 3. The Rent for the premises for the Lease period shall be as follows: Monthly: $24,500 Annually: $294,000 Full Term:$2,940,000 4. Subject to County approval the Tenant will have the right to execute two(2)consecutive renewal options for a Term of five (5)years each for consideration to be mutually agreed upon by the County and the Tenant at a time preceding the contemplated renewal period: Renewal option ❑ne (1): October 1, 2027—September30, 2032 Renewal option two (2): October 1,2032—September 30, 2037 5. The Tenant will ensure a facility roof replacement is completed no later than September 30, 2020 in accordance with the Lease. Specifications for the roof replacement will be reviewed and approved by the County prior to replacement; approval will not be unreasonably withheld. 5. In all other respects said Lease Agreement shall remain in full force and effect unchanged and shall not be altered in any way by this modification. (SIGNATURE PAGE TO FOLLOW] 7 IN WITNESS WHEREOF,the County and Tenant hereto have executed this Modification of Lease the day and year first above written. LESSOR TENANT ORANGE C U TY BUILDE S FIRSTSOURCE—ATLANTIC GROUP,LLC By: By: ` Chair, Board of C mmissioners Title NORTH CAROLINA ORANGE COUNTY I,.��]CJ MA-,- - Notary Public of Orange County, North Carolina certify that Mark ❑orosin,Chair of the Board of Commissioners of Orange County, North Carolina personally appeared before me this day and acknowledged the due execution of the foregoing instrument. Witness my hand and official stamp or seal this ay of 2017. tary Public My Commission expires "• 'NOTARY ;•� s5 I USLIG t STATE OF -DQx L 4-, COUNTY ��pkeHN+�n.rit!►��P a Notary Public of _ro_ �_f County, �"C`e•�C�S certify that personally appeared before me this day and acknowledged the due execution of the foregoing instrument. Witness my hand and official stamp or seal this a1 dray of S,pert 7 1�Q 2017. Notary Public My Commission expires : L L g '�1]1 C1 Trade Johnson �utpry 11obRr,Suite orierys 1ry� [onmirinn p 131t�.;t(,!1 � Expires:ti�tslzat�