2016-07-08 / Front Page

Lease deal for marina property near

By Wm. Duke Harrington
Staff Writer

SOUTH PORTLAND — After more than two years of talks between a special city negotiating team and the Soucy family who owns Port Harbor Marine, a new lease arrangement has been reached for the marina facility at Spring Point. The City council was scheduled to vote on the new lease Wednesday night, July 6. That vote came after the The Sentry deadline. However, following a June 20 executive session held to consider the new contract, all indications were that the council would approve the deal.

“We very excited, not just for our family, but for our 45 employees, who obviously are pretty interested in what the vote is going to be, because this is how they provide for their families,” said Port Harbor Marine president Robert Soucy Jr. “Getting this taken care of for them was always a big concern for my brothers and I, because half of them live right here in South Portland.”

It was nearly four decades ago, in May 1980, when Soucy’s father took on what was then a derelict property, a leftover relic of the city’s World War II shipbuilding economy, described by City Manger Jim Gailey as a “blighted industrial site.” Since then, however, Soucy, and subsequently, his sons, have turned the property into what Gailey deemed in a July 6 memo to the city council, to be “a world class marina, accessible to the public, and a landmark amenity in South Portland.”

“Originally, this was a piece of property nobody wanted,” Soucy said. “Nobody knew when the first lease was signed what it was going to become. I don’t think anyone envisioned what it is, which is, we think, the finest marina north of Boston, at least. Well, except maybe my dad, but I think it’s gone beyond what even he had hoped for. It’s gone far beyond what anyone could have imagined.”

The current rent is calculated as a percent of gross sales in addition to a base rent of $20,000. In recent years, Gailey sad, the annual rent paid by the Soucy family has been about $65,000.

According to the Bureau of Labor Statistic’s inflation calculator, $20,000 in 1980 was equal to $58,310 in 2016 dollars. Also, as Gailey has noted, “development of the marina required significant investment by the operator.”

With the original 40-year lease set to expire in 2020, and a 10-year notice needed of any decision to not renew, the city council first looked at the issue back in 2008, eventually deciding at an April 2010 workshop that it preferred to re-up with the Soucys.

For their part, the Soucys would have preferred to buy the property outright, but that was not possible. When General Electric conveyed the site to the city in October 1978, in a deal brokered with the U.S. Department of the Interior and the Maine Bureau of Parks and Recreation, it did so with the deed stipulation that it be “used in perpetuity for exclusively public purposes and never sold or exchanged.”

“In this instance, General Electric has rights of first refusal. I kid you not,” said City Councilor Claude Morgan, a Ferry Village resident who was on the team that negotiated the new lease.

“If the city did sell the property to a buyer, such as the Soucys, we would have to reinvest in a similar piece of undeveloped waterfront, which no longer exists in South Portland,” he said.

In a recent interview, Morgan said he rejects the notion of a sweetheart deal hitherto enjoyed by the Soucys.

“They took an enormous risk on a very unlikely piece of property and turned it into a world-class marina,” he said.

Still, Morgan said, the property clearly is worth more today than it was in 1980. The new lease, he said, recognizes the current value in its lease price.

“Our negotiations were based on a mutually-agreeable foundation that this lease will reflect and follow market rates of similar public-private leases,” Morgan said, citing the example of a private motel in Yosemite National Park.

“I think the citizens will be very pleased,” he said in May, when reporting progress on lease talks to his peers.

In addition to Morgan, other members of the city’s negotiating team include Assistant City Manager Josh Reny, Finance Director Greg L’Heureux, city resident and Cumberland County Commissioner Tom Coward, and special legal counsel Ron Epstein. Former members included now-retired City Assessor Elizabeth Sawyer, Rick Towle, the former director of parks, recreation and waterfront, and former Assistant City Manager Jon Jennings, who led the team until leaving to take the top city job in Portland.

As part of the negotiations, the city hired James Bragg Jr. of Resort Realty Advisors, a property-assessing firm based in Gloucester, Massachusetts.

“The complexities here are that the Soucys have invested private funds that in many cases are now permanent fixtures on public properties, so-called earned possessory interests,” Morgan said in a recent email. “The appraisal tallies all the assets and parses out the possessory interests to determine how much the city would owe the Soucys if we didn’t enter into a new lease and sent them packing.”

Based on that, Bragg determined that a fair market annual rent for the Spring Point property lot in 2014 have been about $250,000.

According to Gailey, the Soucy family “agreed to a base rent calculation of $256,500 as of May 1, 2016.

Until then, with four years remaining on the current lease, the terms will be modified, jettisoning the calculation of marina sales in favor of a fixed rate. That rent will start at $70,000 for the current tax year – a $5,000 hike over last year – and increase by $5,000 per year, hitting $85,000 in fiscal year 2020. After that, the new $256,500 base will kick in, to be adjusted annually for inflation in accordance with the consumer price index. However, that annual rent increase will be not less than 1 percent and not more than 3 percent.

For the first year of the new contract in the 2020-2021 fiscal year, the Soucys will get a $100,000 credit for capital improvements made to the property, resulting in annual rent payment of between $166,915 and $188,693. After that, the annual inflation-adjusted rent could as high as $306,274 in 2023.

The new lease, if approved by the city council, would expire in 2050, by which time the annual lease, at the maximum 3 percent increase per year, could approach $600,000.

Apart from the $100,000 credit, for work to include dredging and replacing fuel pipes, the Soucys “will assume all responsibility to operate and maintain the facility, and shall incur any costs of maintenance and capital improvements that may arise during the remainder of the lease,” according to Gailey’s council memo.

“However, as is the case today, certain capital improvements that will increase the tenant’s possessory (equity) interest must be first approved by the city,” Gailey wrote.

An example of that clause is the permission the Soucys had to get from the council recently to tear down the former Joe’s Boathouse building and built a new restaurant on the property.

On the city side, it has agreed to rebuild the entrance road from Breakwater Drive to the main marina building. Public Works Director Doug Howard has estimated that work will cost about $25,000.

“We think the negotiations went very well,” Soucy said, adding he found Bragg to be “very knowledgeable.”

“He understood the business,” Soucy said. “I think the rest of South Portland will be happy. This will be a (lease) rate that is much different. We recognize that the value of this property has change dramatically.” Of course, the new lease will necessarily shake up the books at the marina, but Soucy says he and his brothers are up to continuing their father’s legacy.

“Just like in my father’s day, it’s going to be a stretch at first, and who knows what will happen, but we feel confident we can continue to make this work, to continue what we believe is the premier marina north of Boston.”

In the end, Soucy said, the classic adage about negotiating applied.

“We didn’t get everything we wanted and they didn’t get everything they wanted, so it must be a pretty good deal,” he said.

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