What appeared to be a happy marriage between the Effingham County Industrial Development Authority and a nationally-renowned development firm is ending in an amicable divorce.
The IDA and Reno, Nev.-based DP Partners announced they have severed their relationship, which was to have built and developed the IDA’s sprawling holdings along I-16 near Meldrim, with a termination of a contract approved at the IDA’s meeting Thursday.
DP Partners and the IDA were within weeks of closing on the 150 acre south tract, which is owned with no strings attached by the IDA, CEO John Henry said. DP had a six-year option on the much larger northern tract, which would have been taken several years to fully develop.
“We are always evaluating the viability of any project,” said DP’s Southeastern regional manager, Jeremy Merklinger. “The driver behind the decision for the Effingham/1-16 project was the national economy.”
Said IDA Chairman Chap Bennett: “Over the last four months with the changes in the market and especially with the big box market, it doesn’t surprise me at all.”
But without DP Partners, the IDA has to find suitors and tenants. According to Henry, that might not be a problem. In fact, the IDA now has land it didn’t have before to market to potential investment.
Last November, Henry and project manager Ryan Moore were handling seven different prospects worth an estimated
$1.5 billion in investment. But they had virtually nowhere to put them.
“It sounds like we’re going to have a site-ready pad,” Henry said. “The only thing that changes is that DP is not the buyer for the pad. We can diversify the use. Hopefully, it will be better in the long run.
“We have had the dilemma of not having inventory. We were four years away from having new inventory.”
At the IDA’s strategic planning session last month, Henry asked the board members to think about the property in case the deal fell through.
“There are a lot of good projects out there that do not involve a lot of resource consumption or pollution,” he said.
“We’re seeing Effingham County being skipped over because we don’t have sites ready. That property is very valuable for projects we’ve had looking at Effingham County. We need a site we can locate someone now. When the state calls with another half-billion-dollar project, we don’t have to scramble for land.”
Said Merklinger: “This should not be construed as a negative for Effingham County.”
The IDA and DP Partners also grew leery of the speculative building market. DP Partners’ modus operandi is to erect the building and then market it. But the speculative building market also has taken a turn south. So instead of a “build it and they will come” approach, it’s become a “build it and hope they come,” according to Merklinger.
“They may not be coming in the near future,” he said.
National trends aren’t favorable for “big box” warehousing of more than 500,000 square feet. But Merklinger added that DP Partners hopes to continue to be a player in Effingham’s economic future.
“We still look forward to the opportunity to attract a build to suit prospect,” he said. “We still believe in Effingham County as a build-to-suit market. There is still opportunity for DP to be a player.”
The IDA financed $7.3 million to buy the northern tract and planned on using the capital generated from the sale of the southern tract to DP Partners to back the infrastructure work needed on the northern side.
Merklinger also praised the efforts of the county and the IDA in working with DP Partners over the last year and a half.
“We truly appreciate all the work done by John Henry and his staff and the IDA board and the county to get the land ready for development,” he said.
Though DP’s investment is going away — for now — the planned infrastructure improvements won’t be. The water deal hammered out that provided needed water for the project and also alleviated state Environmental Protection Division restrictions on Springfield is still intact, as are the planned improvements at the I-16 and Old River Road interchange.
The well the IDA was going to put in on the north side may now go in on the south side. A planned $3.5 million wastewater treatment plant, also to be built on the north side, could be shelved. The IDA has received all its necessary state EPD permits for it but may wait to build it until it’s necessary.
“That’s a big chunk of money we don’t have to spend,” Henry said.
DP Partners pegged its investment in what is going to call the LogistiCenter at Savannah at $200 million when the firm signed the sales contract in May 2007. The purchase of the land itself was estimated to be about $41 million.
DP signed a letter of intent in September 2006 and planned to take the land down in three phases, beginning with the south tract. The takedown of the northern tract would have been done in the subsequent two phases.
Its investment in work at the I-16 site is “hundreds of thousands of dollars,” Merklinger said. He added the company would not stand in the way of a manufacturer coming in there and if a competitor wanted to start a speculative development there, DP Partners would work with them to make sure the work it’s done there is compensated.
“The due diligence they have done on that site is very valuable,” Henry said.