Fraught With Fillable Factories
SAN FRANCISCO—Wouldn't it be convenient if someone had clear, intelligent answers to most of your CRE-related questions? Problem solved. Nina J. Gruen, a.k.a. Ms. Real Estate, a.k.a. the principal sociologist overseeing market research and analysis at Gruen Gruen + Associates, is here to answer readers' questions.
Have a question for Ms. Real Estate? Click here, and it may appear in a future column.
Dear Ms. Real Estate,
I am the Economic Development Manager of a mid-size city in the Midwest. During the recent Great Recession, we experienced the closure of two factories. Our unemployment rate is hovering slightly over 10%. We have put the word out that the City will help with the financing of companies that will consider moving into one of the closed factories. We have received replies from several companies, inquiring as to whether the City will pay the costs for restructuring and upgrading the closed factories.
What facts do you think I need before I bring one or more of these prospects before the Mayor and City Council?
—Fraught With Fillable Factories
Dear Fillable Factories:
As is the case when contemplating marriage, it’s important to ask the right questions and obtain reasonable and believable answers before walking down the aisle at the Council meeting.
First, find out from the applicants what the City can expect to gain from the move, in terms of local employment, incomes, fees and taxes. Then nail down the “ask” to fix up their new home. Have an objective analyst from your team verify the likelihood of the answers. Stick with dollar and cents benefits, and be sure your analyst checks out the reality of any “multiplier” effect the potential enterprise may include in their estimate of jobs and income benefits. Turn a deaf ear to the applicant’s tales of how much their products benefit the environment and how much presence of their company will add to your town’s prestige. We all know of at least one example of a solar company going belly up and departing a factory built to their needs with public tax dollars.
If the returns in benefits promised by the applicant seem to warrant the municipal investment that will bring the company to town, move on to the most critical part of your job – structuring a deal that will protect the City should the promised benefits not be delivered or, worse yet, the company leaves town before your investment has paid off. Ms. Real Estate does not know if you considered a pre-nuptial agreement before considering a walk down the church aisle, but she strongly recommends you bring a tight prenuptial contract to your Council before you put in the request for the municipal dowry. That contract should include a collateral-backed reimbursement if the promised benefits fall short of amortizing the dowry after a specified time, or should there be the business version of a divorce and the plant closes prematurely. You may be able to obtain collateral for the marriage contract from federal or state economic development funds, but whatever the source, make sure the sweet talk of the romance between you and the company does not keep you from locking in the benefits to be delivered after the honeymoon is over – and rest assured, all honeymoons do end.
To sum up, there are couples who fall in love and get married soon after their first meeting. There are others who spend many months getting to know each other, as well as each other’s family members and close friends. While some of the fast-moving couples do live happily ever after, it would be wise to place one’s bets on those who do their homework before tying the knot.
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