Three days after Owens Corning revealed it is considering a move from its seven-year-old world headquarters on Toledo's downtown riverfront, there are more questions than answers about the potential fallout for taxpayers and the Toledo-Lucas County Port Authority.
The building is leased to the Toledo Fortune 500 company by the authority, which put together a $100 million public-private financing package in 1995. The campus-like complex was financed with $85 million in bonds, sold by the authority to insurance companies and other large institutional investors, as well as with other bonds and state loans and grants arranged by the authority.
Most of the money was to be repaid by the port authority from lease payments by OC, amounting to $13.8 million annually through 2015.
But OC said the payments, which amount to more than $30 a square foot annually, are much higher than for other office space in the Toledo area. As a result, The Blade reported Saturday, the company that has been in bankruptcy since 2000 said it will move its more than 1,000 employees to alternative offices in metro Toledo unless a reduction can be negotiated with bond-holders and the port authority.
Port officials have said previously they would have no liability to repay the $85 million in bonds - the biggest chunk of the package - if OC abandoned the Cesar Pelli-designed building.
Brian Schwartz, port spokesman, was unable to answer many questions about the financing package Friday and yesterday but said that it was his understanding the port's liability is “very limited.”
Port authority vice president Jerry Arkebauer, who helped arrange the financing and was most familiar with the package, was said to be unavailable both days. James Hartung, authority president, did not return a call seeking comment.
Mr. Schwartz denied yesterday that the authority has had any discussions with OC about reduced lease payments. But company officials said they've mostly talked with the bond-holders but two weeks ago opened discussions concerning the payments with the port.
“The port has been very responsive and creative in working with us,” said Stephen Krull, OC's chief counsel.
The funding for the headquarters, besides the $85 million bond offering, included $5 million in revenue bonds issued by the port-controlled Northwest Ohio Bond Fund; a $10 million loan made by the state of Ohio to the port authority; another loan, the amount of which was not immediately available, made by the state of Ohio to the city of Toledo for improvements to surrounding streets and bridges; and a $1 million grant to the port from the state.
Two members of the port authority's board of directors said they learned about the OC lease issue from The Blade's weekend story.
“It's disturbing,” complained Jerry Chabler. “This is probably the largest project the port has been involved in.”
Mr. Chabler, shortly after the building products manufacturer filed Chapter 11 to gain relief from multibillion-dollar asbestos liability, expressed concern about potential port liability if OC left the building.
He said he has since been assured “our liability is very limited.” “I hope that is the case,” he added.
Said port board member David Boston, “I haven't personally reviewed the bond documents. But the staff and the port's legal counsel say the port has no legal liability.”
Several real estate experts agreed with OC that lease payments topping $30 a square foot are high for the Toledo market. Similar prime downtown offices rent for $18 to $23 a square foot, and new suburban space rents for $24 a square foot.
However, Harlan Reichle noted that few downtown leases include parking, as does the OC headquarters. That is worth $3 a square foot, he said. Furniture costs, which also are included in the payments, also must be factored in, he added.
“Could they pay less for nice space in Toledo?' he asked. “The answer is `Yes.' Does that mean the space is overpriced? That's another question. Given the entire bundle their building represents, I'm not certain it's correct to say they are overpaying.”