Hamilton’s unique development tool: Renting office space in the government tower

Hamilton has lured successful companies to town by leasing them space in the seven-story city government tower, sometimes at discount rates.

It has done that partly because city government has trimmed its number of employees, and reduced the amount of space the others use at the 345 High St. building.

The rents Hamilton receives will be significant in future years: $452,599 or more annually from 2023 through 2030, according to the rental agreements with two companies.

They include cutting-edge indoor-farming company 80 Acres, which is renting space on the building’s top floor and has more than 175 employees, not all of them local. Its international sister company, Infinite Acres, has interest in its projects on nearly every continent.

One former renter in the tower is Darana Hybrid, which assembles package-moving systems for such companies as Amazon, UPS and Walmart. Darana relocated to the city from Tennessee, and it rented space inexpensively in the city tower while renovating a once-abandoned and formerly dangerous warehouse in the Lindenwald neighborhood. Its offices now are in that building.

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Another renter, free of charge on a short-term basis according to city records, has been fast-growing, Spain-based Saica Group, which develops and produces recycled paper for corrugated packages. The company is building a 350,000-square-foot manufacturing plant in Hamilton’s Enterprise Park industrial park, its first facility in North America. Saica uses the building’s fifth story, as Darana had before it.

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ODW Logistics, which has a sign near the top of the tower, fills the building’s sixth floor and soon also will occupy the fifth, when Saica moves out. ODW updated its lease in June 2019 for $156,970 per year in 2020 and 2021, including the sixth and fifth floors, but has not yet occupied the lower level.

City Manager Joshua Smith said the city uses the building almost as a business incubator, with the rent payments used to pay down the debt on the government tower faster.

Saica now has five employees working at 345 High St. and “they need to have upper management in the community during the construction process,” Smith said last year.

“Part of our economic development agreement with Saica was they could utilize unused office space, as they constructed their $72 million building at Hamilton Enterprise Park,” Smith said last week.

For Saica to use the fifth floor, the city needed ODW’s permission, because they had rights to the space before Saica was planning on leaving, Smith said last year.

“The money generated from the leases is to accelerate the debt repayment for the building,” Smith said this week.

He also noted the companies “are also paying their share of real estate taxes, insurance, and maintenance costs.”

Hamilton City Council agreed to sell the city government tower to the Hamilton Community Authority in early 2019 as a way to help finance the gigantic indoor sports complex Spooky Nook Sports Champion Mill, which is scheduled to open late this year, with full operations probably not happening until 2022.

Under the agreement to sell 345 High St. to the community authority, the authority borrowed about $26 million, approximately $10 million of that going to pay off the city building. The other funds went toward grants and loans for Spooky Nook. Some was dedicated to a Gilmore Road roundabout.

Under the arrangement, the city itself pays $1.4 million in annual rent, the same amount it had been paying on what it owed for the tower, which was completed in 2000. The authority in turn used that pledged $1.4 million to borrow the funds promised to the Spooky Nook.

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In 2014, ODW agreed that starting July 1 of that year, it would pay $1 per square foot in the first year of the lease for at least 8,710 square feet and up to 10,000 square feet on the sixth floor. It would then pay $2 per square foot the next year; $3 per square foot the year after that; $4 per square foot in years four and five, and $6 per square foot in years six through 10.

The agreement was expanded to rent out that full 14,270 square feet of the sixth floor, plus the entire fifth floor beginning Jan. 1, 2020 for annual rent of $156,970 in 2020 and 2021; and then $249,725 from 2022 through 2030.

80 Acres, meanwhile, in 2019 agreed to rent 14,270 square feet of the seventh floor for $29,270 in 2020; $44,290 in 2021; $59,348 in 2022; $202,847 in 2023, and slightly larger amounts from then through 2030.

“Over $2 million has been invested in building improvements at ODW Logistics/80 Acres cost,” Smith wrote. “This modernization of our building has made it more valuable.”

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Here are rents the city received in recent years, according to the city’s finance department, along with projections of future rental payments based on leases with ODW and 80 Acres:

2019: $98,740

2020: $138,417

2021: $171,531

2022: $309,073

2023: $452,599

2024: $453,468

2025: $454,379

2026: $455,336

2027: $456,342

2028: $457,397

2029: $458,505

2030: $459,668

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