Archive for Saturday, November 7, 2009
CritiTech leader has stake in lab building
November 7, 2009
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New details emerged Friday about a multimillion-dollar city-county proposal designed, in part, to keep a promising pharmaceutical company from leaving Lawrence.
Officials who put together the deal confirmed that the leader of CritiTech — the promising biotech company — also is a minority owner in the West Lawrence laboratory building that city and county commissioners are being asked to buy with public tax funds for $2.3 million.
Longtime Lawrence investor Sam Campbell is the president and chairman of CritiTech. Campbell also owns a 25 percent stake in the New Oread Group, the partnership that currently owns the laboratory building at 4950 Research Parkway, which the city and county are proposing to buy.
‘Front and center’
That information was not presented when the proposal was publicly unveiled on Thursday. Instead, during a briefing with the Journal-World, the New Oread Group was described as being “predominantly made up of Topeka investors.” That is true. The other 75 percent of the ownership group is made up of Topeka residents and another Topeka-based partnership. Campbell was part of the briefing and confirmed CritiTech leases space in the building, but did not mention that he also was an owner of the building.
“That wasn’t intentional,” Campbell said Friday. “That fact has been front and center from the beginning. We are transparent and have nothing to hide.”
Background
City and county officials who have been working on the deal said they were aware that Campbell was part of the building’s ownership group. Upon further reflection, County Administrator Craig Weinaug said that fact should have been presented in the public information, which was put together for upcoming meetings that the city and county will conduct on the proposal next week.
“I think that fact needs to be publicly disclosed, and it really never was intended to not be part of the discussion,” Weinaug said. “But I don’t think any of that changes how good we think the deal is for the community.”
After being questioned by the Journal-World, City Manager David Corliss’ office added a memo to the electronic agenda packet for Tuesday’s City Commission meeting that details the ownership information of the building. In addition to Campbell, other owners of the New Oread Group are: James Parrish, Topeka, 25 percent; Kathleen Urbom, Topeka, 12.5 percent; and J.F.M. Limited Partnership I, 37.5 percent. J.F.M. is an interest held by the McGivern family of Topeka.
City-county proposal
The city and county are proposing to buy the laboratory building, formerly part of the Oread Labs company, and to spend about $600,000 to renovate the building’s heating, cooling and ventilation system. Without the renovations, city and county leaders have said the vacant space in the 17,500-square-foot building can’t efficiently be rented.
The question of Campbell’s ownership was raised by commenters on LJWorld.com, who referenced a 2002 Journal-World article that identified Campbell as part of a group that bought the former Oread Labs building out of a bankruptcy auction.
But any concerns that Campbell is receiving a back-door incentive to keep CritiTech — which has been lured by Wichita and others — in Lawrence is unfounded, Dever said.
“I’ve evaluated the deal based on face value, and it is a good deal for the community,” Dever said. “I just don’t think any of us consider that (Campbell’s ownership) to be a major issue in the formula.”
The 2002 Journal-World article also said the New Oread Group paid $900,000 for the building as part of the bankruptcy auction. The city and county are proposing to pay $2.3 million for the building.
Campbell said the New Oread Group has put large amounts of money into the building to make it useable as a laboratory.
“We’ve put in well in excess of what we’re seeking to sell it for,” Campbell said. “We will take a significant loss on the building. We won’t walk away with one farthing on the building.”
The building currently is appraised by the Douglas County Appraiser’s office for $1.48 million. But Dever said that appraisal was based on the property serving as a rental property that currently was largely vacant. He said the proposed $2.3 million purchase price is a good one for the community because it is far less than what it would cost the city and county to construct a similar building.
“The estimates I have is that it probably would cost $5 million to build that building today,” Dever said.
City commissioners are scheduled to discuss the proposal at their 6:35 p.m. meeting on Tuesday. County Commissioners are scheduled to discuss the project at their 6:30 p.m. meeting on Wednesday.
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7 November 2009
at 6:32 a.m.
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cowboy (Anonymous) says…
This does not qualify as economic development. The only economy this develops is Sam Campbells personal economy and a small group of folks who are both Criti Tech employees and also employed by quasi government entities i.e. ktec , lrtc .
When measuring eco devo we must also look at alternatives. Do you fund an investment that has a 25 year payback with 3 million of taxpayer dollars or can that money be better spent.
Tell me you're bringing 100 jobs to middle to lower middle class and I'm all for you. Jobs for 14 executive professionals and well , NOT.
Dever , recuse yourself
7 November 2009
at 7:50 a.m.
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merrill (Anonymous) says…
If this is a promising pharmaceutical company Sam should have no problems gathering private investing money from around the world.
If CritiTech should leave Lawrence taxpayers will be money ahead.
Everybody in the pharmaceutical industry has a promising cancer cure.
This is someone wanting a free lunch from Lawrence taxpayers. NO way jose'.
Why didn't owners and investors update their own building? A building improvement loan for a private business. There are a ton of banks in Lawrence,Kansas.
WE got assistance for home improvements for our home yet we have to pay back. It is known as a loan. AND the city has a second lien on our home.
This is setting a bad precedent. I know certain city commissioners have said we need to take risks.
Why do taxpayers need to gamble? We don't. From the looks of Wall Street there is plenty of private investment
money floating around.
The answer is no. This is a private business. Go to the bank to get a business improvement loan.
Taxpayers are tired of reckless spending while older infrastructure is rotting away.
7 November 2009
at 7:54 a.m.
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mae (Anonymous) says…
I don't see any reporting on how this benefits Lawrence to buy this. Getting another building just because it may or may not be cheap doesn't seem like good government.
Add the $2.3mill and the $600k and the initial investment is double tax appraisal. If the purchase of this is referencing what we get back through taxes then someone should at least make sure it's tax value is not $1.4 million off.
It may cost $5mil to build that building today, but why would we? We don't need this or the few jobs in there.
“But any concerns that Campbell is receiving a back-door incentive to keep CritiTech — which has been lured by Wichita and others — in Lawrence is unfounded, Dever said.”
exactly the point!!! What are we going to do with this building when CritiTech takes these incentives and moves right after the sale?
7 November 2009
at 7:59 a.m.
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just_another_bozo_on_this_bus (Anonymous) says…
“But Dever said that appraisal was based on the property serving as a rental property that currently was largely vacant.”
Since when are appraisals based on whether the building is rented or not? If the county appraisal is incorrect, then get some independent appraisals. As it stands, paying any more than $1.48 million is just wrong, especially considering that it will immediately need $600,000 in improvements.
7 November 2009
at 8:35 a.m.
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GardenMomma (Anonymous) says…
Things that make you go, hmmmm?
7 November 2009
at 9:32 a.m.
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parrothead8 (Anonymous) says…
This is ridiculous. The building is privately-owned and needs $600,000 in improvements to be habitable, so the city/county is expected to BUY the building and do the improvements? That would be like me saying, “My home needs improvements, so the city should buy it (at a price that allows me a 60% profit over what I bought it for seven years ago) and do those improvements.”
NO. If the current ownership group wants to make money off the building, they should pay for the upgrades themselves. If CritiTech is such a promising tenant, then those upgrades will pay for themselves over time.
Oh, and someone tell me why a building worth $900k only seven years ago is worth $1.5M in a down economy even though the building now needs $600k in improvements. The math doesn't add up.
NO.
7 November 2009
at 11:15 a.m.
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Boston_Corbett (Anonymous) says…
“Weinaug said that fact should have been presented in the public information…”
__________
duh….
7 November 2009
at 11:58 a.m.
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just_another_bozo_on_this_bus (Anonymous) says…
There are two separate issues here, with several questions attached to each.
The first is what the current value of the property really is. Is it worth more than the current county appraisal, and if so, why?
The second is whether the city and county should become de facto investors in this company. If the answer is yes, the question then becomes how much? If the city and county pay what appears to be a significant premium to purchase this property, renovate it, and then rent it back to Criticare for less than cost, what guarantees do the city and county get that Criticare (and their hoped-for high-paying jobs) will stay for the long haul? And if the company goes belly up, are the city and county totally stuck with a building paid possibly $1 million too much for? As part of this deal, could some of Criticare's fixtures and equipment be put up as collateral for what appears to be a sweetheart deal?
If the building really is worth more than $1.4 million, as part of this deal, the assessment should be retroactively raised back to the point where the supposed improvements were made, and the current ownership should pay any back property taxes due.
7 November 2009
at 1:31 p.m.
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merrill (Anonymous) says…
Here's the deal.
That's $2,300,000 - low income homeowners cannot afford to have their tax dollars spent this way.
This does only benefit a very very few people which makes this an unwise investment aka reckless spending.
GO to the bank and seek out wealthy investors who see this cancer treatment as wayyyyyyyyyy better than any other coming on the market.
A more sensible investment would be to offer this investment to homeowners of low to moderate income at super low interest rates.
At $35,000 per home = 66 homes of taxpayers who generated the $2.3 million. This money must be applied to new bathrooms,kitchens,windows,energy star HVAC and insulation…. all of which increase the value of homes.
This application puts the money where it is needed and increases the value of 66 properties. Increasing the value of 66 taxpaying property owners = fiscally responsible use of tax dollars = increase in the property tax cookie jar.
So I say to the city commission it's time to instruct city hall to begin the application process. This program would be in addition to the existing home improvement program.
The “bio science” buzz phrase is being used to manipulate the public. Dicephera recently received a bunch of tax dollars. The state is blowing tons of tax dollars at the buzz phrase “bio science”.
I would rather have the city build a wind and solar farm to make us independent and living off a cleaner source of energy. This would be a taxpayer investment which benefits ALL taxpayers with cleaner and less expensive energy. Then Lawrence could truthfully boast about wind,solar and hydro power. These three investments would create a bunch of secure jobs.
7 November 2009
at 1:51 p.m.
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Moderate (George Lippencott) says…
This whole things smells. There are repeated references to benefits for the city but there is a distinct lack of details as to what they are. The general notion of “Jobs” is not a benefit that taxpayers should be asked to fund! If this is such a good deal why is private financing not available? Is this about “beating” Wichita and we do not care about the costs? If the taxpayers of Wichita want to pay for it-let them!
Let us see if we get 14 high paying jobs until the product is ready for production (lets say three years-when it goes off shore for production) then we are paying about $200,000 per job. If all 14 live in Lawrence in houses not already on the tax roles, we might make a grand total of $500,000 in tax intake. Of course, they probably will not all live in Lawrence and those that do probably will live in houses already on the tax roles so just what are we the tax-payers getting for our investment?
We really need a new model for economic development where the return is in hard cash that we can count (and for which we can hold elected officials accountable). We are just plain stupid to fall for the notion that unspecified numbers of jobs for an unspecified period is justification for our money being invested. I want a real ROI that is returned within a few years and I want somebody accountable for that ROI. This deal is just a gift to one set of elites by another set of elites using our stupidity to get away with it.
You know we seem to have a similar problem with the federal stimulus. Defendable and trust worthy data is hard to come by but it sounds like we are paying at this point over $200,000 per job saved/created. It would be much cheaper to just give money to the unemployed while we retrain them for a meaningful job. Are we going to have to do this every year? Mao’s red book talked to teaching people to fish rather than giving them a fish. Maybe we should learn from the Chairman!
7 November 2009
at 2:08 p.m.
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tomatogrower (Anonymous) says…
“This does not qualify as economic development. The only economy this develops is Sam Campbells personal economy and a small group of folks who are both Criti Tech employees and also employed by quasi government entities i.e. ktec , lrtc .”
Don't you know that's what the economy is all about? Making the rich even richer? All the rest of us are just suffering from class envy. The last 30 years has finally lost us our government. The corporations have control of everything, and I'm not even sure if Obama will do anything. Has he started to punish companies who took jobs out of the US by taxing the heck out of them? I know our local government could care less about the people who need jobs. They just want to make their buddies and contributors richer. But you all just keep on not voting at local elections. That's what they are counting on.
I say tell Campbell if he takes his company out of Lawrence, then we will triple the taxes on any property he owns, I'll be there's more than this building. If he invests in his own company and takes his own risks, like capitalism is suppose to work, then we won't raise his taxes. Why not use the government to force capitalism?
7 November 2009
at 2:49 p.m.
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merrill (Anonymous) says…
“Those Hit Hardest Get No Bailout”
http://www.democracynow.org/blog/2009…
7 November 2009
at 2:59 p.m.
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merrill (Anonymous) says…
“But you all just keep on not voting at local elections. That's what they are counting on.”
That's exactly why Lawrence is in this pickle.
That $2.3 million could repair/replace a lot of sidewalks which again would benefit hundreds upon hundreds of homeowners.
It would easily build pedestrians/cyclists 6 feet wide lighted safety ways on Tennessee and Kentucky using existing sidewalk right of ways. Build on the east side of each street from 7th to 19th streets. This could benefit thousands of users easily.
7 November 2009
at 3:20 p.m.
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Moderate (George Lippencott) says…
Not doing this could reduce our taxes and make Lawrence more competitive. High tax rates do not draw willing citicens unless they perceive a return on those taxes. Giving their money to others (rich or poor) just doesn't cut it!
7 November 2009
at 3:23 p.m.
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Moderate (George Lippencott) says…
see:
http://www2.ljworld.com/weblogs/loyal…
7 November 2009
at 3:43 p.m.
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beobachter (Anonymous) says…
Tell Campbell to pack up and leave. Then the city can buy the property cheap at foreclosure.
7 November 2009
at 5:11 p.m.
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BigPrune (Anonymous) says…
$5 Million for a 17,500 square foot building with lab space? Seriously? That equates to a little over $285 per square foot to build from scratch. Seriously?
7 November 2009
at 5:31 p.m.
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honestone (Anonymous) says…
Let me understand this…
We (the people of Lawrence) will buy a building that needs a lot of work done to it and the economic benefit is what?????
7 November 2009
at 6:15 p.m.
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tomatogrower (Anonymous) says…
High tax rates do not draw willing citicens unless they perceive a return on those taxes. Giving their money to others (rich or poor) just doesn't cut it!
Let's give it to the rich instead. There's only one thing that trickles, and it's not money or jobs.
7 November 2009
at 6:23 p.m.
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Godot (Anonymous) says…
Chad, please ask Dever to produce evidence that the property valuation of any other commercial building in Lawrence was based on the nature of the business of the tenant. My guess is, he can't produce. I call BS on this.
7 November 2009
at 6:47 p.m.
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merrill (Anonymous) says…
Why buy a bad real estate deal with taxpayer dollars?
It is not the responsibility of Lawrence taxpayers to bail out bad investments. Riverfront Mall,parking garage etc etc are two examples.
Millions of foreclosures on the horizon so I hear on radio news everyday. The market is flooded and will be more so.
Prices for property will continue to dive.
When 10 million are back to work then and only then will there be hope. Wall Street type spending does not create jobs and neither do tax cuts for the upper 1%.
Invest in real jobs that put thousands upon thousands back to work such as new energy sources.
7 November 2009
at 7:02 p.m.
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Godot (Anonymous) says…
Merrill, please, we all know we need “jobs.” Jobs are not created out of thin air. They are not wished, dreamed, hoped into existence.
What we need are factories that produce goods that people in other countries want. And we need lots of them.
7 November 2009
at 7:23 p.m.
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Moderate (George Lippencott) says…
tomatogrower (Anonymous) says
I wrote rich or poor. In this case we are giving it to the rich. In my referenced blog we are doing the same. Why?
7 November 2009
at 7:30 p.m.
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Moderate (George Lippencott) says…
Godot (Anonymous) says…
OK and how do we price our goods given income expectations and needs in this country so that they will be competitive in other countries.
They are building factories faster than we are and they are doing it in part with American investment. Our elites continue to stick it to us! They will quickly satisfy their own markets and undersell us here-they already are.
Should Obama be using tax dollars to built factories that can produce products that will compete with products from elsewhere. Remember our treaty obligations require us to let the cheaper goods in. As long as they come in most of us can not win from a job stand point
7 November 2009
at 7:37 p.m.
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Moderate (George Lippencott) says…
merrill (Anonymous) says…
Thanks for the history lesson. I though we invested in that mall-before my time. Don't we have investment in the mall out by 70 in North Lawrence? Didn't we subsidize the upscale national chains near the Eldridge? Did any of these produce what was promised? Hey Chad-sounds like a good story!!
7 November 2009
at 10:07 p.m.
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Godot (Anonymous) says…
George, I will reply to your post in the thread that follows your blog.
7 November 2009
at 11:38 p.m.
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BigPrune (Anonymous) says…
If the City/County buys this property, will the property be assessed for property taxes?
7 November 2009
at 11:41 p.m.
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BigPrune (Anonymous) says…
Moderate, the mall up north, the mall downtown and the national chains near the Eldridge didn't get anything subsidized. The only thing that can get subsidized is manufacturing or industrial. It's state law.
8 November 2009
at 1:16 a.m.
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cnk0330 (Anonymous) says…
CritiTech — the promising biotech company? Are you kidding me? It is anything but promising. This company won't survive long no matter whether it is in Lawrence or somewhere else. If the company wants to move out, then let it go, Why would the city buy this expensive property? It doesn't make any sense.
8 November 2009
at 7:39 a.m.
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in123 (Anonymous) says…
cnk - you have it right. If it was that promising there would be no problem raising money, even in today's economy.
This deal does nothing for CritiTech. They still need more money to stay in operations and Sam Campbell knows that. It will probably be out of business within a year.
In these deals follow the money. The New Oread Group gets $2.3M and out from a building with only one tenant that is high risk. Even though they say they have improved the building, it still needs $600K of work. I think that is a nugget hanging out there for some locals to benefit if they support the deal.
Quit saying this is about saving CritiTech — it only bails out The New Oread Group.
8 November 2009
at 7:45 a.m.
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in123 (Anonymous) says…
There should also be an investigation into why the appraised value of this building has been kept so low when it now appears to be a lot more valuable. We have been subsidizing the taxes for this group by an artificially low appraisal.
8 November 2009
at 9:49 a.m.
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Moderate (George Lippencott) says…
BigPrune (Anonymous) says…
Does the limitation apply to tax abatement? How about the use of urban renewal funds to create a desirable infill location? Seems to me that there are other ways for our city to “invest” beside direct funding.
8 November 2009
at 8:38 p.m.
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in123 (Anonymous) says…
Rob Chestnut, if you are the business person and finance person that you say that you are, here is your opportunity to show people how ridiculous this deal is. Tell them how this does not affect the balance sheet of CritiTech. The only balance sheet it affects is The New Oread Group.
8 November 2009
at 9:12 p.m.
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doesnotplaywellwithothers (Anonymous) says…
dosn't the governmental units know that commercial real estate is in the dumps. Evidently the county appraiser in a previous article alleged values have returned to normal, contrary to every national statistic or just walk down the streets of Lawrence and see the for sale signs and comparable sales.
At least have the integrety to acknowledge falling values and be above board and raise taxes rather than acknowledge lower values and face the consequences from the electorate.
In this case their are too many conflicts of interest in the parties. At least do what any practical person does and negotiate the price to reflect current values and alternatives.
8 November 2009
at 10:18 p.m.
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doesnotplaywellwithothers (Anonymous) says…
Another point on values.
A tenant expects the unit to be habitable. The air conditioning works and the improvements to meet tenants needs are priced into the value of the building.
In other words if it is worth $1,000,000 based on current rents (which meets the tenant's needs) and needs $500,000 in deferred maintence to meet tenant's needs it is not worth $1,500,000 just the $1,000,000.
To overpay for a building from an owner (who is also the tenant) bring it up to date and then lease it back to them at below market rent should set off alarms.
if you buy a house with a roof that needs to be replaced you do not pay as if the roof is new and then pay additional money to have it replaced.