Ice House – The offer

In light of today’s N&R article on the subject, I thought it might be a good idea to explain the offer that is on the table to purchase the Colonial Ice House as my feeble mind understands it. This is complicated, so bear with me and excuse any typos, I’ve not had time to edit…

Let’s say you and a group of investors own an old house, a rental house, in an emerging section of Greensboro.  You purchased the 30,000 sq ft house and the 1 acre lot it sits upon three years ago for $300,000. 

Now this property has problems.  It sits upon contaminated land.  It abuts a Norfolk Southern mainline which limits the site’s future development.  Two thirds of the structure has been deemed ‘beyond repair’ by your staff and is slated to be demolished for a parking lot for your company’s vehicles.  The remaining structure, although structurally sound, is in need of extensive repair… as a matter of fact, a tree is growing through one of the building’s walls.

However, because the house is deemed an historic structure, the majority of your investors have instructed you to work to find a buyer that will rehabilitate the building as a catalyst for further development in the area.  It should be noted that your same group of investors owns another large tract of land that is contiguous to the new purchase.  This adjoining property’s current use is for a maintenance facility and vehicle parking, but current plans are to move the existing facility to another property owned by the group within the next year and free the property up for private or public/private development.

Over the ensuing two years since the purchase, changes have been made to the property.

The back two thirds of the the original 30,000 sq ft structure have been demolished leaving only a 10,000 sq ft building.  During the demolition process, some damage was done to the remaining structure that furthered its deteriorated state because no one ever made the trip to the hardware store to buy a tarp to keep the elements out.  That tree kept growing which eventually weakened one corner of the building.  The roof, which leaked when you bought the building, is leaking like a sieve two years hence.

But another change in the ensuing years severely hampered the marketablility of your property: the 1 acre lot, which originally provided vehicular access to both Friendly Avenue to the north and Market Street to the south, was divided down the middle to expand your adjoining maintenance facility.  This subdivision resulted in limiting access to the property to a one-way street heading east.  To travel west from the remaining, for sale, property, a car would now have to travel under a railroad bridge, go through two left stop-light turns (Murrow Blvd.), and then travel back under another railroad bridge at Friendly Avenue.

A few buyers came forward during your low intensity efforts to sell the remaining property, but all were rejected as not being in the investors’, or the property’s, best interest.  Finally, this past December, another buyer came forward with low offer – fully expecting a counter offer from you and your investors - and was told the property was no longer for sale. 

So now, three years after purchasing the property, a majority of your investors have given you ten days to either sell the remaining property – for a price that is within 10% of the original $300,000 – or contract to have the remaining, historic structure, demolished. 

But remember: the lot is now one-half its original size, the structure is now one third it’s original size, the remaining structure is in far worse shape than when originally purchased, and vehicular egress and ingress is severely impaired because the lot was halved. Add to this the fact that the entire property is known to be contaminated. But still… some appraiser opines that the remaining lot and building are worth $298,000.

Enter a last minute buyer. 

But, there’s a catch… this buyer’s assumption going in was that the current owners are still committed to saving what is left of the historic structure – and his offer will do just that.  Another thing; the offer is for the original tract of land, not just half of it, because he believes that any future occupants will be greatly inconvenience by the current traffic pattern.  His offer is $300,000 – the original purchase price; but it gets a little complicated after that.

His proposal stipulates that the investor group take his $300,000 and plow it back into the building to repair and preserve it per the originally stated goal.  The buyer would then provide additional funds required to place the building back into service at whatever level was deemed appropriate by the seller.  This investment would to help spur additional development in the area – including the adjacent land that the investors still own.

In turn, the new buyer would lease the property back to the investor group for a long period of time – say 5 to 10 years – at less than one-half the market rate.  (The buyer’s financing bank requires this lease as collateral) During this period of time the original owners could either occupy the newly renovated building at the below-market rate or sub-lease the property at current market rates to recoup their initial $300,000 investment after the building was rehabbed.  As an additional incentive to the original owners, by purchasing the contaminated land, liability for any costly future remediation would be transfered to the new owner.

And so it is with the Colonial Ice House:  A plan is in place to save the building and recoup the taxpayer’s original investment in the property.  Sure, it is a complicated solution, but it is a solution.

Engineering head Butch Simmons has dismissed the offer out-of-hand and was quoted in this morning’s N&R as saying , “…in essence, the city would have been giving the property away“.

Well, that’s one way to look at it, but here’s another:  The city is apparently expecting some buyer to come forward and ignore the fact that its property, by its own actions and inactions, has been rendered unmarketable at anywhere near the appraisal price of $298,000. (Especially since we have already squandered $50,000 of the original purchase price).  You simply can’t buy a decrepit and contaminated property, allow it to become more so, tear down 2/3′s of the original structure, sell off half of the original lot, strangle the property’s vehicular access, and expect some dumb, starry-eyed buyer to wander in three years later and re-pay your original investment in full without some creative financing.

The offer on the table is far from starry-eyed, it is real-world, and repays the taxpayers over time.  However, as I stated earlier, it assumes that the city’s first priority is to save the building and some of Greensboro’s history.  We’ll see if that is still the case.

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6 Comments

  1. Posted September 19, 2006 at 9:05 am | Permalink

    In a nutshell – you have defined the process that our city government handles property. Had there been some sort of government office located in that building, there is a chance more would have been done.

    At some point in time, we must force the government to set aside funds to maintain everything they are building and own, or we will have the “Great Ruins of Greensboro”.

  2. Posted September 19, 2006 at 9:11 am | Permalink

    Yeah, Don… but this time its personal.

  3. Posted September 19, 2006 at 2:19 pm | Permalink

    I’ve enjoyed reading the “Ice House” saga… Chapel Hill has its own issues but nothing (yet, at least so far this year,…) rising to this G’boro boondoggle.

  4. Spyderbonez
    Posted September 19, 2006 at 3:07 pm | Permalink

    The powers that be had originally planned to use the property for a parking lot so that’s probably why nothing was done to prevent the building from becoming worse than it was.

    They plundered and got what they want out of it, priced it too high, and fully expect no one to pay that price soo they can tear it down.

    It’s a damn shame, but David, I believe you are fighting a lost cause.

    The building will be demolished.

  5. Posted September 20, 2006 at 4:59 pm | Permalink

    I truly hope you are wrong about the demolition, Spyder.

    They don’t need it for parking anymore because the bus facility is being moved south of town and the city is abondoning that block. ( a recent development so you are forgiven for not knowing)

    However, there may be other plans in the works for that block and the one adjoining it accross Friendly. Big plans. If the Ice House property is parcel to those plans, then that is what will doom it… not a parking lot.

    I’m used to lost causes, BTW, but someone has to champion them.

  6. Spyderbonez
    Posted September 20, 2006 at 9:22 pm | Permalink

    Sorry I didn’t know.

    Good luck. I hope you can save it.

3 Trackbacks

  1. [...] David Hoggard’s take on local politics and life in general from Greensboro, NC « Ice House – The offer Ice house – the offer as presented to City Council September 20th 2006 @ 6:38 am Greensboro Politics, Preservation [...]

  2. [...] There is a meeting today between the party with the $300,000 offer and a business-savvy member of our City Council.  We’ll see how it goes. -dhoggard no comments trackback this article comment on this article [...]

  3. [...] The potential buyer then went on to outline the rough parameters of his not-so-uncommon ”lease buy back” proposal that got laughed at during Tuesday night’s council meeting.  The council member in the room, however, was not laughing and gave the proposal due and serious consideration as the sincerity and possibilities contained in the offer were recognized. [...]