BELLINGHAM - Port of Bellingham commissioners have approved the $4.1 million purchase of the Bayview Center office building at 12 Bellwether Way, next to the Hotel Bellwether.
The vote at the Tuesday, Dec. 18, meeting of the three commissioners was unanimous, but Mike McAuley said he had a few misgivings.
"On its face it looks like pure real estate speculation," McAuley said.
But McAuley also saw one big plus: a chance to put the lightly used ground floor ballroom area to more productive uses.
That part of the deal is complicated. The current owner, Bellwether Harbor Investments LLC and its principal owner, Andre Molnar, retain the right to use the ballroom four times per month for the next 10 years, in exchange for a $480,000 reduction in the purchase price.
Molnar also owns the hotel and uses the ballroom occasionally for hotel-related events.
Port Real Estate Development Manager Shirley McFearin told commissioners the port would have to reimburse that $480,000 at the rate of $4,000 per month if the port decides to step in at some point in the next 10 years and convert the ballroom to other uses such as office or retail.
McFearin said the building is now 85 percent leased, and a possible deal is in the works for the remaining 15 percent. She also told commissioners that two appraisers valued the building at $5 million, and the market for prime office space appears to be rebounding.
At 85 percent occupancy, McFearin estimated the port's return on its investment would be about 4 percent, a figure that could be higher if occupancy rates rise or maintenance costs are lower than estimates. She also estimated that the rate of return could rise above 6 percent in later years.
The purchase money comes from a port fund that contains proceeds from the sale of port real estate in Sumas, and the lump-sum lease revenue from the Bellwether Gate development undertaken by David Ebenal.
Port Executive Director Rob Fix said that money has been earning about one-eighth of 1 percent annually in the state-managed investment pool for public funds.
Based on that information, Commissioner Scott Walker said he didn't see the Bayview Center purchase as speculative.
"It doesn't make any sense in today's market to have $4 million collecting an eighth of a percent interest," Walker said. "There isn't much risk in this building."
The revenue from leasing the building can be plowed back into waterfront redevelopment projects, Walker added.
Bellwether Harbor Investments purchased the Bayview Center as well as the hotel from original developer Peter Paulsen in 2007. In was built in 2001. Molnar's group still owns the hotel.