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Developers eye investment opportunities

School districts explore options for selling old facilities

There are a number of exciting real estate deals being put together between public school districts and the private sector, thanks to the Mississippi School Property Development Act. The law was passed in 2005 and enables school districts to sell unused buildings and to enter into agreements with developers on property that does not belong to the districts. It gives schools districts a vehicle for generating revenue and constructing needed facilities, along with putting abandoned facilities back on the tax rolls.

“That’s what’s so good about this law,” says Jackson attorney Jim Young, who specializes in educational law. “It has flexibility and creativity and will be of interest to developers and those with creative minds.”

He credits his partner, David Watkins, with pushing the law through the Legislature. At first, the law was enacted for five years with the stipulation that it would have to be reinstated after that time period. The law, however, was amended last year to take out the repealer and to take advantage of GO Zone opportunities.

Watkins gives credit for the law to Mike Peters, a Jackson realtor. “He came to the Jackson School District and wanted to buy the old Duling School building,” said Watkins, the district’s attorney. “We thought there was a lot of magic to have private/public deals like this one. School districts have the option of selling property in exchange for ownership in a development company where it’s a piece of property with growth potential. It takes it off the public rolls and puts it on private rolls.”

Peters, who owns Peters Real Estate, negotiated and worked out an unusual deal with the Jackson School District to purchase the Duling Property with the district as partners.

“We own 80% and they have 20%,” he said. “Every deal is different but what’s wonderful for the school district is: the property is back on the tax rolls; they share our profits; and they got rid of an old property that was costing them to keep.”

He adds that his company got a great piece of property for development and a nice addition to the thriving Fondren area. Demolition of some old houses on the property started recently and asbestos removal has begun in the old school building. Peters has big plans for the development that will include retail, offices and residential space. There will be a mixture of retail that includes art galleries, restaurants and a photography studio.

“We have tenants ready to move in and hope to be in by the end of the year,” he said. “We’re excited and so is the neighborhood. It’s a sturdy building, well built and has beautiful architecture. It’s a good deal for everyone.”

The 4 1/2-acre Duling property appraised for $1.3 million, according to Watkins, and is in a prime development area. A provision in the law allows the developer to take the property and use it to secure a development loan, a selling point for investors.

“It will immediately yield tax revenue and will generate $7 million over the next 10 years,” he said. “It had all kinds of issues, including asbestos, and was not suitable for a school. We took a liability and turned it into an asset.”

The Hinds County School District hopes to negotiate a sweet deal with its unused Byram Middle School, a facility built in the 1930s and re-done in the 1960s.

“It’s a sturdy building but needs some work. It sits at the major intersection of Siwell and Terry roads and is close to many things,” Young said. “We’re trying to offer as many options as possible and are entertaining proposals. Maybe a developer with creative ideas will see the possibilities.”

Dr. Stephen Handley, Hinds County Schools superintendent, says the right proposal will mean the district gets more classrooms for students. “We’re growing so fast and have no place to put our students,” he said. “Money from this transaction will allow us to build and serve our students.”

The district is the 16th fastest growing in the state and presently has 6,500 students and 10 schools. The Byram area has 12 subdivisions and several apartment complexes under construction now that are sure to bring more children to the schools.

The county will begin the bid process in April. An earlier deal fell through and set the school district back at least 16 months, Handley says.

“It would have been complete by now, but we had to go back to square one,” he added. “We can’t build new facilities until we have the money in hand. This is a wonderful piece of legislation and will greatly help us.”

Another provision of the law is being utilized by the Stone County School District. The Horizon Development will bring 7,500 new homes to this South Mississippi county.

“Good schools drive development,” Young said, “and the children that come with a development that size would swamp that school district.”

The developer will put an assessment on lots that will come into the school district every year to defray operating expenses. The assessment will come off once the property taxes are sufficient to cover those expenses. Once a certain number of lots are sold, the developer will lease land and build a school.

“The developer has been excellent down there and understands how this works,” Young said. “We hope other school districts will use this law. There are more applications in high-growth areas, but there are a lot of opportunities that make this viable everywhere in the state.”

He notes that even in slow-growth areas, such as the Delta, there are old school buildings with plenty of possibilities. In the right circumstances, the law allows school districts to do tax increments, adding one more thing to their fiscal tool box.

Watkins points out that the law was passed after the beef plant fiasco and care was taken to make sure no financial problems are created for school districts. “If a development doesn’t make it and it’s foreclosed, the school district is not responsible for that debt,” he said. “They don’t have any of the liability.”

Although word about the law has been slow getting out, he is optimistic that school districts will take inventory of their properties during the next five years and find ways to use under utilized buildings. “Districts build for children in subdivisions and then the children grow up and the buildings are not used,” he said. “We want school districts to look 50 years out and see that buildings can have other uses. We see some good things with this law.”

Contact MBJ contributing Lynn Lofton at llofton656@aol.com.

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