NW Packing, a part of Neil Jones Food Co., is troubled by their negotiations with the Port of Vancouver. With their lease up for renewal, a fairly healthy increase has been requested as the port migrates all of their leases to Fair Market Value (FMV).
While both parties earnestly share their mutual desire for the packing plant to stay, the sides remain fairly far apart.
NW Packing would see their lease rates grow from .2 cents per square foot to 4.5 cents per square foot, a difference that Neil Jones Food Co’s. Chief Financial Officer Jim McGovern says will hurt their competitiveness.
Port of Vancouver Chief External Affairs Officer Theresa Wagner counters that the issue is one of fairness.
“The move towards FMV is spelled out in the contract – the same as all of our tenants. It is less an issue about dollars, but more on needing to be fair and consistent. Fair to our other tenants, as well serving as good stewards, reflecting values consistent with the private sector, not undercutting them with our leases,” she said.
McGovern sees it a bit different.
“We aren’t necessarily like other tenants,” he said. “We have different requirements, for example, we don’t need deep water access. Of course we would have different rates.”
According to McGovern, the question is what the intent of the port is.
“If it is to attract investment [into the city of Vancouver], create jobs and subsequent tax revenue and to make some money from the assets then we provide all that.” NW Packing employs the equivalent of up to 500 FTEs.
When the packing plant was wooed to the Port of Vancouver nearly 40 years ago, reasoned McGovern, they wanted to attract a certain type of industry. Favorable lease rates were part of making the port attractive to the food processing business.
Recent negotiations have largely stalled. McGovern asserts that they have complied, bringing industry comparative research to the port, showing the types of leasing arrangements that would keep them competitive.
Wagner sees the data as a bit of apples and oranges, differences in locales and regions naturally having different property value assessments, similar to homes in different markets.
Tom Shimota, a commercial real estate broker with JLL Inc., sees some merit to both sides of the discussion.
“There are all kinds of metrics that can be used to assess value,” he said. “On one hand, if the port can get a higher lease rate from another bonafide tenant, that could trump the discussion. On the other hand, you ultimately do not want to hamstring a tenant where they cannot compete in their marketplace whether on a regional or national stage. A stable, good paying tenant has a lot of merit in real estate.”
Longevity is a factor as well.
“We have been here for 40 years. We would like to be here for 40 more,” said McGovern.
“We would very much like them to stay,” Wagner concluded. “That is why we extended their lease so we could make that happen. We have offered flexibility in timing and how we get to FMV, but is our intent to get there.”
