Much has been written here about the Port of Coos Bay’s highly unorthodox option to purchase roughly 1200 acres of land on the North Spit from Weyerhaeuser Corporation. In 2006, the Port entered into an option agreement to purchase the land for a total of $25 million and the deal was unusual for two reasons; 1) the Port paid the full, agreed upon purchase price of the land to secure the option and, 2) signed the contracts and procured the funding, $15 million from the state and $10 million from Umpqua Bank, and paid it to Weyerhaeuser without ever having obtained an appraisal or a transfer of title.
After questions were raised by the public the Port engaged Marineau & Associates to place a value on the property and the appraisal came in, coincidentally, at $25,650,000. Sections of the property were valued at $50,000 per acre. However, the public was not satisfied and pointed out several discrepancies with the Marineau valuation, namely most of the comparable sales were either old or from hundreds of miles away and one comparable was actually the Port’s option with Weyco. Another comparable was the underlying agreement the Port had with Jordan Cove for 147 acres where the proposed LNG import facility is sited. In short, the appraisal was based, in part, upon a surmised future value.
As part of this valuation, the Jordan Cove LNG project has in tum signed an option to purchase l47± acres ofland from the Oregon International Port of Coos Bay, and agreed to a 50-year lease on the slip and berth, not yet developed, all preaid, with the $11,000,000 total monetary package representing an effective sales price for the land.
Several complaints were forwarded to the Oregon State Department of Justice and eventually the Weyco land deal was terminated.
One of the comparable sales used in the appraisal was a transaction between the Port of Coos Bay and SouthPort Forest Products in 2004. SouthPort which had a facility in Sumner purchased almost 31 acres and a barge slip on the North Spit for $560,700 with a determined price of $14,960 per acre all within the Bay Area Enterprise Zone. According to a June 19, 2004 The World article, SouthPort required a railroad spur and Mike Gaul then of the Port, believed once a contract was signed it could be built within 12 months.
Gaul said the contract requires Southport to maintain a minimum of 65 jobs for five years and invest a minimum of $15 million in the property over that time. Gaul said Southport expects to invest as much as $20 million in equipment and site development. The deal also requires Southport to put a 25-percent down payment on the property and carry a five-year debt with the port at 6 percent interest.
Gaul said he believes Southport will apply for Enterprise Zone benefits, which would allow the company a partial tax abatement for the first several years.
SouthPort did take advantage of the enterprise zone tax exemptions, which are conditioned upon providing new jobs withing the zone boundaries, and in 2005 thanks to the Oregon Department of Commerce $4.4 million, including $1.3 million in federal grant money, was appropriated to provide the railspur. Again according to The World, “…it was Southport’s commitment to invest up to $1.15 million for the project and the accompanying 300 jobs that truly charmed the U.S. Department of Commerce”. That was in the fall of 2005, by December of 2006, SouthPort was laying off “trimmers, stackers, planers, graders and forklift operators”, twenty workers in all, from its Sumner facility and by March of 2009 had laid off an additional twenty-two full time staff from its North Spit location.
In June of 2009, three months after the layoffs, SouthPort approached the Port about buying an additional 33 acres on the North Spit. Recently, the Port finalized the transaction giving SouthPort a sweetheart deal requiring only $7,500 down on a $1.3 million purchase and 3% interest over twenty years.
Southport Forest Products approached the Oregon International Port of Coos Bay in June 2009 seeking to purchase approximately 30 acres of upland and wetland property adjacent to the company’s existing North Spit industrial operation for development of a whole log chipping facility. The Port subsequently sought a property appraisal from Marineau and Associates of Coos Bay, which determined the upland 23.68 acres were valued at $50,000 per acre and the wetland 6.32 acres were valued at $500 an acre.
Following nearly a year of survey work, property delineation and contractual review, the Port prepared to finalize the sale of the estimated 32.88 acres, with the Port extending financing at 3.0 percent interest to Southport Chip Co LLC for the purchase price of $1,337,100. The Port did not require a business plan from Southport, since the company had previously constructed a sawmill on the North Spit in 2005, and continues to operate that business. The Port however has protected its interests.
To recap, in 2004 the adjacent land was valued at and sold to SouthPort for $14,960 per acre and five years later Marineau and Associates, in a new appraisal dated June 17, 2009, valued the adjacent optioned property at $50,000 per acre. In five years, in a down economy and in the midst of crushing layoffs, industrial property on the North Spit, absent a functioning railroad, increases in value by more than three times! It’s a miracle!
The attached appraisal is incomplete as it does not include any comparable sales to rationalize this price even though the appraisal clearly states that the values presented were arrived at by using a “Sales Comparison Approach” and that the appraiser compared the subject property to the “most recent and relevant sales” and had “identified the most comparable properties”. A request to Elise Hamner of the Port of Coos Bay for the rest of the appraisal met with this response.
I am responding to your request for additional information in relation to the 2009 appraisal report concerning the Southport Forest Products property sale. At the time the port solicited the appraisal, it opted to purchase a Restricted Appraisal Report format. The agreed upon scope of work and format did not include the sale data and analysis as part of the narrative. The port can request that additional information, which is considered Marineau & Associates’ proprietary information. However, to receive it, we would have to pay for it. The cost to the port, which we would charge you, is an additional $3,500. I can order the report for you, but you would need to pay the fee in advance. Let me know how you would like to proceed.
As to the appraisal information for like properties, it was relevant to the entire 33 acres (not just 24) of port property sold because the acres are contiguous. A new appraisal was not necessary.
When combining the incongruity of a such a dramatic property value increase in these dire economic times with the unbelievably favorable terms afforded to SouthPort for the purchase it is very hard, especially considering the Port’s unwillingness to provide any evidence to the contrary, that this deal isn’t an attempt to manufacture a comparable sale to justify the earlier Weyco deal. Rather than play cat and mouse with the Port any longer I have filed a complaint against Marineau and Associates with the Oregon Appraiser Certification and Licensure Board, who if they investigate, will hopefully tell me I am wrong.
The link posted by JM where Jeff Bishop explains Weyco land option modifications was not very convincing concerning the zero cost to the POCB. What about the labor hours of all the staff involved in anyway with the Jordan Cove Project, what about all the time that Martin Callery was paid with tax dollars to argue with the public in favor of this deal, and all the studies involved (directly or indirectly), paid by tax dollars, Explain to us again where this project was not funded by tax payer dollars.
Trust me on this one. See private message in e-mail to sent in a few minutes. During more than 40 years of paid and pro bono contract management related services to the largest of the large companies and the smallest of Silicon Valley start ups, the transaction discussed above was the first time that I had heard of an option to purchase being granted by one party and the option price being paid in full by the other party without the option to purchase being exercised or the property being sold. What the Port held for a while, and paid to have, were the sleeves from Weyco’s vest – there are none. Also, I recall some agreement with South Coast that requires the Port not only to have built that spur but to maintain an active rail road from the North Spit – all with attendant penalties.
Something tells me, Gene, that the $3,500 market analysis will prove less than orgasmic. Just sayin’
That is interesting, Pirate
It is amazing, isn’t it JM, how these properties can increase in value by 40% when everywhere else in the state the reverse is true? If the Port would just share the proof without putting the public through an obstacle course in order to receive what should be public information, much suspicion would be averted
Facts, the enemy of corruption. Friends of friends, maybe.
Using the six degrees of separation analogy, I wonder how far Marineau and Associates are separated from SCDC/port/coc/boc/gov.
More spreading of tax dollars to the crazy 88.
If their work must be bought twice (the 3,500 fee) + ( initial contract), then it should be wrapped in a pretty bow, so the public will feel like its their wedding night.
You have pretty much laid it out here Mary. There clearly is something wrong. The Weyerhaeuser property was not worth $25 million and one does have to wonder why the state and Umpqua bank loaned the Port money on property without an appraisal being done first?
One also has to wonder how the Ingram Yard Property in this down economy and absent a functioning railroad went from $10 million to $14 million? That seems rather suspect also, but was stated to be the case by Jeff Bishop at the January 20th 2011 Port meeting – http://www.youtube.com/watch?v=gGZL18t-XqU
Thanks for putting all this together.
Millions of taxpayer dollars manipulated by blithering idiots. Doesn’t anyone on these boards understand their actions? Is this why no one ever asks a question during Board meetings? No wonder Coos County attracts such dubious development deals. We must be known far and wide in the corporate world as ignorant hicks waiting to have our pockets picked by the big boys.
Wellll. . . Isn’t that interesting.
The same Marineau and Associates did the appraisals for Bandon Biota / State Parks land swap to make the land values equivalent. They took adjacent land and valued it at $4400 a acre when it was State owned and at $7200 an acre when it was Bandon Biota owned.
http://mgx.com/blogs/2011/07/08/bandon-dunes-looks-to-swap-210-acres-with-bandon-state-natural-area/
Now they show up again with a final value as requested supported by “proprietary” information.
Just my amateur opinion but, me thinks a subpoena might clear things up a little.
It made my head spin just reading this.
I’ll try again in the morning. Unbelievable and probably deliberately so.
How dare We The People have the gall to ask these fine people what we’re getting for our money. This gets dirtier every year, or so it seems. What do I know, I live in a cave . But I can smell sheet BEFORE I step in it now, and I smell something !!