Developer would get $215,000 in cash incentives for Beaufort project. Here are the details

More than $200,000 in cash and other incentives are being offered to a Columbia-based developer to construct a $7.2 million industrial building in the Beaufort Commerce Park in what one critic is calling a “sweetheart deal.”

The city and Beaufort County Economic Development Corp. defend the plan, arguing that the use of public incentives has been necessary to prove to developers that Beaufort is a viable place to invest.

One building that’s already been constructed in the park, they point out, which also received subsidies, has led to 80 new jobs, with the public’s assistance equating to about $5,200 per job.

“I stand by that work,” John O’Toole, BCEDC’s executive director, told City Council members this week, “and I stand in front of you quite proud.”

Under the proposal, the city would sell eight acres to Columbia-based Magnus Development Parnters. Magnus, in turn, would build a $7.2 million, 72,000 square-foot building it would lease to companies or sell.

For its part, the BCEDC would provide $215,000 in cash incentives to Magnus to help cover its development costs.

But while city and BCEDC officials have touted the jobs and investment related to the spec buildings, Graham Trask, a Beaufort real estate investor and developer, is raising questions to City Council members. “Taxpayers are funding this deal,” he wrote in one email.

Since the city bought the commerce park, Trask told the Beaufort Gazette and Island Packet, not much development has occurred.

“And the way they buy their way out of the problem is they are giving sweetheart deals for a company to put up a warehouse,” Trask said. “What about all the people who are doing economically viable things to bring jobs to the city and the county? So the city is out competing with the private sector. How can I compete with that?”

The incentives are needed, Trask contends, only “because the private sector won’t do it themselves because it’s not economically viable because otherwise the private sector would have done it.”

Here’s what’s known about the deal:

Beaufort Commerce Park

The 196-acre park, near the intersection of U.S. Highway 21 and SC Highway 116, is owned by the city of Beaufort. It can accommodate large-scale commercial and industrial operations. More than 168 acres of property are for sale.

The city is promoting “clean” industry and businesses. The city bought the park out of foreclosure for $1.8 million in 2012 from S.C. Bank and Trust. The park was owned by the Lowcountry Economic Network before it went bankrupt.

The land sale

The eight acres have been appraised at $30,000 an acre but the city would agree to sell the land to Magnus for $25,000 an acre. Under the agreement, Magnus would pay the city $1 in earnest money and $5,000 when the certificate of occupancy for the building is issued. Then each year thereafter, up to 40 years, Magnus would pay the city $5,000 until the entire $200,000 is repaid. If Magnus sells the land, however, it would need to repay $200,000, or what remains, immediately.

“We anticipate the city will get full compensation well in advance of 40 years,” O’Toole said.

Two additional perks are included in the agreement. Until Magnus has closed on the sale of the building, or leased 75%, BCEDC won’t offer the same incentives to other developers for the construction of a speculative industrial shell, manufacturing or warehouse building. And the city will grant Magnus the right to purchase another parcel in the park with the same terms.

Other assistance

The BCEDC, which is funded by Beaufort County and cities and towns, will pay Magnus $215,000 in cash incentives to help cover pre-development and site preparation expenses, and also handle the cost of mitigating wetlands. The BCEDC also has agreed to cover, if needed, Magnus’ operating and carrying costs until the building is leased, for five years, with a cap of $1.6 million. That is insurance, O’Toole said, in case Magnus can’t lease the building.

Magnus completed a $6.1 million, 64,000 commercial spec building in the park this year. It has been leased to Norman USA, a La Palma, Calif.-based company that manufactures and distributes window blinds and other windows treatments, and Critical Role, a multi-platform video gaming company headquartered in Los Angeles. Both will use the building for distribution.

Because Magnus had the first spec building leased within a year after it broke ground, it reduced the BCEDC’s liability for the operating and carrying cost payments, which potentially were $1.6 million, to less than $80,000, O’Toole said.

O’Toole also expects the second building to be leased quickly, limiting what will be paid in operating and carrying costs. “Once it’s leased,” O’Toole says, “we’re off the hook.”

‘A pretty sound bet’

Beaufort Mayor Stephen Murray and O’Toole say that the public investment is paying off and they point to the first building Magnus constructed.

In total, O’Toole said, the BCEDC invested $432,000 in the first spec building that Magnus constructed. Between tenants Norman and Critical Role, 82 jobs will be created. Norman, O’Toole says, is now planning to build another building in the park, investing $16 million to $22 million.

“So in terms of tax base expansion and return on investment,” Murray said, “it’s a pretty sound bet.”

For many years, O’Toole said, the Commerce Park “sat there kind of fallow. No one was investing,” until 2019 when Magnus responded to a request for proposals by the BCEDC that included incentives.

Incentives are needed, O’Toole said, to sway investors on the “great value Beaufort County has to offer.”

Besides the incentives, O’Toole also credits the recent successes with bringing infrastructure in the park up to “competitive standards.”

“I think it’s all about having momentum,” O’Toole said, “and being able to demonstrate for developers that Beaufort County as a whole is open to business and can help people who are looking to invest with a simple swift process with good outcomes.”

Public subsidies for projects in the park, O’Toole says, will gradually decline as development increases.

What’s next

The City Council voted 5-0 to OK the land sale and development agreement with Magnus on Tuesday. Final approval is on the council’s Oct. 24 agenda.