Port, tenant clash over lease

Fruit processor Northwest Packing says increase will hurt its competitiveness

By Aaron Corvin, September 11, 2014, The Columbian

Northwest Packing Co. and the Port of Vancouver appear no closer to resolving their ongoing landlord-tenant dispute over how much rent the food processor should pay.


The simmering conflict surfaced again during the port board of commissioners’ regular public hearing Tuesday. That’s when Northwest Packing urged the port to maintain the company’s current annual lease payment — $149,439 — as part of a larger 25-year contract renewal. That would sustain the company’s competitiveness in the face of industry consolidation, tight profit margins and global market challenges, company officials said.


“Every cost increase we have is a big impact,” said Matt Jones, president and CEO of Northwest Packing’s parent, The Neil Jones Food Co. Northwest Packing processes a variety of fruits for canning, juices and sauces.


But the port isn’t budging from its position: that Northwest Packing is bound by its current 25-year lease to move to a higher annual lease payment — $372,021 — based on fair market value. The port said it prefers to keep the company, which employs an estimated 400 to 500 full-time equivalent workers, at its 15-acre site on the port’s east side. But terms in the company’s current lease requiring a shift to fair market value “must be carried out,” said Todd Coleman, the port’s executive director.


Northwest Packing’s 25-year lease, which the port extended for three years in 2011 to buy time for negotiations, is set to expire at the end of this year. If the two parties can’t resolve the matter soon, provisions in the current lease will force a conclusion. Those provisions spell out an appraisal process both parties would use to determine fair market value, said Theresa Wagner, a spokeswoman for the port.


Tom Hunt, a spokesman for Northwest Packing, said the company will renew the lease but that its operations will change significantly if the port doesn’t change its position.


“It’s a matter of whether we continue what we have been doing in the area of processing or whether we change functions and use our facilities there for something that requires far less labor,” Hunt said. “So it would change, unless we can get a lease rate that is consistent and competitive.”


Analysis presented

In April, the port asked Northwest Packing to propose lease renewal terms. During the port’s public hearing Tuesday, Jim McGovern, chief financial officer for The Neil Jones Food Co., did so. He proposed maintaining the $149,439 annual payment for another 25 years, with increases in rent every five years based on standard price indicators. The proposal also would give the company the option of renewing for an additional 25 years.


McGovern also presented to commissioners an analysis based on land sales and leases within the food-processing industry, including locations such as Benton County, Spokane Valley and Olympia. That analysis showed annual lease payments as low as $260,400 and as high as $316,200. The industry average: $279,000.


But the annual payment the port wants — $372,021 — is more than double what Northwest Packing pays now, McGovern told commissioners. Robert Schaefer, an attorney for the company, said a fair proposal by the port would be based on what other food processors pay.


Port officials pushed back. Commission President Brian Wolfe said the company’s own analysis, even though it’s based on what other food processors pay, still shows a sizable increase in rent is due. Port officials also said language in the current lease Northwest Packing signed is clear: the company must shift to fair market value based on comparable Clark County appraisal data.


Commissioner Jerry Oliver said he was a real estate broker for some years and that “we never looked at fair market value in Spokane when (we were) dealing with the Portland metro area.”


Northwest Packing has been a port tenant since 1973. Its 15-acre site includes more than 670,000 square feet of space.

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