The Port of Astoria has finalized a lease agreement for the industrial property at North Tongue Point and will take control of the facility Sunday.
The Port will pay property owner Washington Group of Missoula, Mont., $100,000 for the first year of leasing 30 upland acres and 84 submerged acres at the site. The rent goes up to $200,000 for the second year and $300,000 the third year. Every year after that, the rent will be $350,000 annually. Rent will be paid quarterly in January, April, July and October.
Port Executive Director Jack Crider said the property was appraised at $5.4 million six months ago. The $350,000 lease rate was set to deliver Washington Group a seven percent return on a $5 million property value.
Reduced rent in the first three years was arranged to allow the Port to build up revenues through subleasing the land.
Crider said the $300,000 in revenues from current tenants at the site is more than enough to pay the rent, but there are also about $300,000 in expenses such as utilities, security and insurance.
The list of tenants currently leasing land at the site was included in the lease; the list of additional companies that have expressed interest in subleasing from the Port is confidential.
Port leaders say the lease agreement with Washington Group will prevent others from buying the property while the Port is working toward a possible purchase.
"If the Port expects to grow, this is the direction we need to go," said Port Commission President Bill Hunsinger. "Hopefully this is a short-term fix. We definitely want to buy it. This is going to be good for the economy if we can put all this together. It will also help us get the railroad back to Astoria. That's one of the biggest keys there."
The facility - which includes five finger piers and 140,000 square feet of building space used by the U.S. Navy during and after World War II - doesn't currently generate enough revenue to cover the debt service on a mortgage as well as the costs of operating and maintaining the site.
Port Commissioner Floyd Holcom said the lease agreement is "a step in the right direction," but the economics of managing the site still pose a challenge.
"I think we've got a lot of work to do yet but this is a very good step," said Holcom. "I hope we'll be able to continue the direction toward a purchase."
Another appraisal of the fair market value of the property will be required before the Port can buy the property, according to the lease agreement. The appraisal will include the revenue generated from the site, Crider said, so the Port could drive up the value of the property - and, in turn, its own purchase price - by leasing it out.
"Hopefully we'll be able to exercise that early option quicker, and the value won't go up that much," Crider said. "The only thing we'll be subject to is an early termination fee."
If the Port decides to buy the property before the first 10-year term is over, there will be an early termination fee of 50 percent of the remaining lease value. If the Port makes capital improvements to the site that are worth more than $50,000, they will be deducted from the purchase price, according to the lease. However, all capital improvements must be approved by Washington Group.
Crider said the biggest capital improvement needed at the site is about $500,000 of improvements to the piers, which have missing and rotting fender and cinder piles and do not have utility connections.
The Port applied for state ConnectOregon III transportation enhancement funds to make improvements to the Tongue Point facility, and also applied for federal stimulus money to pay for the purchase of North Tongue Point, but so far it hasn't received any funding. Crider said other state and federal grants or a revenue bond are possible avenues toward buying the site.
In order to approve a revenue bond, however, the Port would need to prove it had enough revenue to pay the debt service on the purchase price.
The Port already has a dozen fishing boats lined up to dock at North Tongue Point, according to Crider. The boats include Alaska tender boats, which transport fish, and king crab boats. Half of them are already at the Port awaiting their new berths. The luxury boat builder Pacific Expedition has already moved into one of the hangars on the property, and another boat builder has expressed interest in leasing space too. Two existing Tongue Point tenants want to expand, Crider said, and there are three large potential tenants that "want to take basically the rest of the facility."
The lease agreement includes a list of the current tenants at the site, which include:
? All Phase Transportation;
? Eric and Rachel Boone;
? City Transfer;
? Clean River Coop., Inc.;
? Deals Only, Inc.;
? Del Mar Seafood;
? Exceller Fisheries;
? McAmis, J.E. Inc.;
? Aran Orme;
? Pacific Expedition Yachts, LLC;
? Pacific Marine Enterprises.