Agenda - 06-19-2012 - 5n - Laserfiche WebLink

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ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 19, 2012 Action Agenda Item No. - r) SUBJECT: Valley Forge Road Property Lease Rate for Builders FirstSource DEPARTMENT: Asset Management Services PUBLIC HEARING: (Y /N) 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.