TRAVERSE CITY -- Northwestern Michigan College officials didn't negotiate or look elsewhere before deciding to pay $1.15 million for a shuttered industrial building owned by a college trustee's friend and business partner.
The college board on Feb. 2 approved the purchase of a 30,000-square foot building on 8.5 acres, a property on the verge of foreclosure and whose owner owed hundreds of thousands of dollars in taxes and other debts.
The college board hadn't planned an expansion, nor budgeted for a property purchase. College officials called their deal with local businessman Frederick W. Sorensen "happenstance" that benefits NMC during a period of expanding student enrollment.
Sorensen is a lifelong friend of NMC Trustee Robert Brick, a local real estate agent who listed the property and initiated contact with NMC. Sorensen and Brick also are partners in a 40-acre plot in Leelanau County, on which they planned to develop a wind energy project.
College President Tim Nelson said he wasn't looking to buy a building when he first visited the property across the street from the college's Aero Park Drive campus around the end of October.
"This purchase was not driven by going in to save someone's friend," Nelson said. "We're out of space out there, and we're fortunate this property became available adjacent to that campus."
Brick asked Nelson to meet with Sorensen, owner of Acra Inc., who closed his plastic injection molding operation at 2525 Aero Park Drive as the state's automotive industry declined.
Brick wanted Nelson to see if he could help Sorensen find grants or investors, including NMC, to help him shift into the Light Emitting Diode business.
Brick said he never suggested or discussed a purchase of the building with Nelson or any trustees.
"It wasn't about the building, it was about that lighting business Fred was in," Brick said. "It was just one of those happenstance, chance things."
'Opportunity here'
Nelson said it's not uncommon for business owners to seek his counsel because he's heavily involved with local and state economic development organizations. He couldn't find any investors for Sorensen, but said he immediately saw a potential new home for the college's growing green construction and renewable energy programs.
"I thought: 'There's some opportunity here,'" Nelson said.
He assigned college employees to investigate the building and determine if it could work for educational purposes. Staffers recommended the purchase and Nelson took it to the college board at the end of November for consideration in a closed meeting.
Brick did not participate in discussions and said he did not take a commission on the sale.
NMC's board recently authorized its staff to begin putting together a master plan to develop new classroom space on 54 acres it owns north of its main campus. It had not discussed or planned to expand its Aero Park Drive campus.
But NMC board Chairman K. Ross Childs said he wasn't surprised by Nelson's request to purchase Sorensen's property.
"We know we have a need for space, but it wasn't anything we knew about," Childs said. "This was a brand new idea, but it matches our plans for where our campuses are."
College officials never considered other properties, including a smaller parcel with a similarly sized building for sale five lots away from NMC's holdings on Aero Park Drive.
Nelson assigned Ed Bailey, director of campus services, Cathy Jones, vice president of finance and administration, and local attorney Chuck Judson to negotiate the purchase. They hired a certified appraiser, Mark J. Faucher, who determined the property's market value at $1.2 million.
Faucher noted in his report that industrial properties can take more than two years to sell in the current market, and that "it's reasonable to assume prices will be reduced more sharply in the future."
Motivated seller
Sorensen, meanwhile, met the definition of a motivated seller. He accrued close to $150,000 in liens for unpaid taxes and was in default on a $250,000 loan from the Grand Traverse County Economic Development Corporation. Fifth Third Bank, which held a $970,000 mortgage on the land, had started "friendly" foreclosure proceedings and an orderly liquidation of the firm's assets.
The college opted not to low-ball its bid or get into back-and-forth negotiations, Jones said.
"We looked at multiple factors, market value, comparable properties, the appraisal, closing costs and attorney fees," she said. "Then we set a price ... we felt was the true value of the property to NMC.
"Based on their instant reaction of 'yes,' that was the settled amount," Jones said.
The purchase price and an estimated $800,000 needed for renovations will come from the college's $4.9 million capital improvement fund reserve.
The college did its due diligence for taxpayers and students by obtaining the property for less than its appraised value, Jones said.
Childs said the college isn't overspending and called it a "heck of a deal."
Nelson said he discussed with the board the option of waiting to see if the property went into foreclosure, but didn't recommend that path.
"Anytime something goes into default you don't know what will happen or where it will go," Nelson said.
Foreclosure also can be a lengthy process that can delay building occupancy, Judson said.
NMC expects to have the new building up and running for the fall semester with an open, flexible floor plan they can change with program demands.
The Aero Park facility also will house the college's shipping and receiving department, freeing space in the automotive center to begin offering instruction on hybrid technology.
The college's greatest need is general classroom space, Nelson said. He expects general studies classes eventually will have to be scheduled away from the main campus.
Nelson said he's not concerned the state's declining population will leave the college with more building than it needs.
"Michigan has been in a single-state recession for the eight-and-a-half years I've been here, yet we've grown considerably," Nelson said. "I believe we're smart enough to make it work."
