The Facts
3.5 acres
Sale price: $500,000
Appraised value: $2.58 million
Construction time: 18 months
The Project
Medical Office
Building
26,560 square feet
39 jobs promised, with an annual salary of $68,000
Gourmet Grocery Store
23,700 square feet
80-90 jobs promised
Investment
$10.5 million investment by 21St Street Partners,
a partnership between Stanton Partners and Robinson Development Company
$3.5 million build-out of grocery store
Promised Return
$185,000 in yearly revenue
Penalty
If the owners sell the property and leases within two years,
they have to pay the city $350,000; within three years, $275,000; within four
years, $200,000; within five years, $125,000.
The latest news
Norfolk City Council approved the sale of the property to
the partnership for $500,000 yesterday, Tuesday, Dec. 11. City Council Members
Teresa Whibley and Andy Protogyrou voted against the sale.
A Brief Profile of Fresh
Market Inc.
The stock of the high-end food retailer, headquartered in
Greensboro, North Carolina, is traded on
the NADAQ stock exchange under the symbol TFM. Its share price has traded from
a low of $38.16 to a high of $65.69 over the past 52 weeks. The value of its
stock at the close of the market on Monday, Dec. 11, was $40.78 per share.
Lisa Klinger, the company's Executive Vice President and Chief
Financial Officer, resigned, the company announced Nov. 27.
As of January 29, 2012, Fresh Market operated 113 stores in
21 states, including seven stores in Virginia, according to the company’s
annual report. All the stores are leased for a term of 10 to 15 years,
according to the company’s annual report.
Fresh Market operates stores in Williamsburg, Virginia Beach
and Newport News.
We plan to relocate
one store and remodel two stores in 2012, the company said in its annual
report.
Let's do the numbers.
Appraised value of the property = ($2,580,000)
Demolition costs (city pays) =($250,000)
Total =($2,830,000)
Sale price =$500,000
Yearly
return to city = $185,000
Total =$685,000
Balance =($2,145,000)
Based on these numbers, already in the public domain, it
will take 12 years for the city to break even on the deal.
Who will pay for the gas and electric lines?
Who will pay for new sidewalks, street lights and streets?
City officials provided the average annual salary for the medical
office workers. Yet they never provided the salaries for the 80-90 workers
associated with the retail and grocery store components.
I speculate that the developer will do the build-out – for
$3.5 million.
The penalty for selling the property within five years or
less should be based on a percentage of the owner’s profits and not on a fixed
percentage set by city officials (probably in negotiation with the
partnership).
What are the prices per square foot for a lease? They have
never been mentioned. Yet I suspect the partners know exactly how much they can
ask. This is Ghent and the name Ghent has cachet, and cachet is expensive.
The proposed contract with the Partners “the
city shall have received satisfactory proof that the grocery store that is part
of the developer’s property is a ‘gourmet’ grocery store.”
Farm Fresh turned up in a Google search of gourmet grocery
stores in the U.S. Fresh Market was missing from the front page. So what
constitutes a “gourmet” grocery store?
Maybe city officials were vague on that
score in case Fresh Market changed their mind about landing in Ghent. Later on,
they could say, now we’re after Trader Joes or Whole Foods instead.
Will Fresh Market shut down a store in one of the three
cities and open one in Ghent instead, as indicated by their comment?
Does anyone think a traffic study should be done? Here’s the
attitude. Yes, let’s put up the buildings, pave the parking lot and get the
customers. We’ll worry about the traffic later.
Traffic is going to be a cluster f*ck. And why do we need a fourth grocery store when three already exist within a mile?
ReplyDeleteMaybe this store will be truly unique and different. Who knows,
but why does the city have to subsidize it?
The 12 year break-even analysis fails to consider how much the city paid to procure the property in the first place. It also fails to consider lost tax revenues from all the years the city has held this property and kept it off the tax roles.
But hey, it's not like the city leaders are wasting their own money, so what do they care about break even analyis? In their minds, they will have a shiny new bulding in which to buy overpriced, gourmet carry-out that's been sitting under a heat lamp for an hour. They are wasting our money. Again.