12/18/2015 - Landlord Offers to Sell LIO for $10 Million Less Than Appraised Value (Press Release from Landlord)
Recognizing the State of Alaska is in a very different situation today than when the renovation to the Anchorage Legislative Information Office (LIO) was authorized, the owners of the renovated building have offered to take a dramatic step to forge a pathway to savings for the state.
“We’re in a different fiscal environment now than we were then. In the interests of the long-term health of the state’s economy, we’re willing to work with the state to find the best way forward,” building coowner Mark Pfeffer said.
716 West Fourth Avenue, LLC has offered to sell the refurbished LIO to the State of Alaska for less than $38 million, at least $10 million below the building’s value, established by an appraisal that was ordered by the State that established the building value at $48.5 million. 716 West Fourth Avenue, LLC is a special purpose entity whose members are Alaskan developer and building co-owner Mark Pfeffer and longtime property owner Bob Acree.
A total of four independent appraisals have been completed on the building:
1. Northrim Bank, construction lender, October 2013: $44 million
2. Wells Fargo completed its own appraisal review, and partnered with Northrim on construction loan, December 2013: $44 million
3. Alaska Housing Finance Corporation, valuation for the State, June 2014: $48.5 million
4. EverBank of Redmond Washington (headquartered in Jacksonville, Florida), long term financing, December 2014: $44 million
Legislative Council is considering breaking the lease and moving the Legislative Information Office into the State of Alaska-owned Atwood Building. However, financial experts have issued stern warnings indicating that choice could have long-term, far-reaching impacts on the state.
In a letter to Senator Pete Kelly, Representative Mark Neuman and the Budget Conference Committee,
dated April 8, 2015, the Alaska Banking Association – which includes every Alaska bank – wrote, “We alert you that this action will likely impact the State’s credit worthiness and the cost of borrowing in the future.”
Bond expert Thomas F. Klinkner of Birtch Horton Bittner & Cherot said, “…depending on the
circumstances involved in a lessee’s decision to not appropriate, this risk could be reflected in that entity’s other debt ratings, including its general obligation and other tax-supported debt.”
And the State of Alaska’s Commissioner of Revenue, Randy Hoffbeck, was quoted regarding seeking the legislature’s commitment to stand behind “Subject-to-appropriation bonds” in the Alaska Dispatch News this week saying, if they are not committed “we don't want that kind of noise going into the market when we try to sell bonds."
The full letters are attached.
The Legislative Information Office renovation was NOT a “No-Bid Deal.” It was the result of 12 separate procurement efforts since 2002, over 35 separate proposals. None of them were deemed acceptable. Then in 2013, the state issued one last attempt at alternatives (its 13th attempt) and determined that the 716 West Fourth Avenue, LLC proposal was the only one that met its criteria.
The agreement, which included a lease extension and renovation started two years ago. It was approved unanimously by the 14 legislators on the Legislative Council on multiple occasions, and then agreed to by the full legislature through the first year’s lease appropriation.
The Landlord and the project team delivered the project that the state asked for --on time and within budget.
“Lawmakers on legislative council have suggested an independent, in-depth fiscal analysis of the LIO,” Pfeffer said. “We agree with the idea and want to encourage this step. We will gladly provide all the necessary information for valuation of this building.”
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