Aggressive last-minute price cutting did the trick for Clinton’s South Pointe Business Park in the competition to become the new home of the Mississippi Department of Revenue, the state says.
The selection came down to price, with representatives of the former WorldCom headquarters presenting a lease offer too attractive to pass up, said Kevin Upchurch, executive director of the state Department of Finance & Administration, the entity that serves as the state’s property manager.
South Pointe beat out downtown Jackson’s Landmark Center and the Ergon Diversified Technology complex in Ridgeland to become new headquarters for the 500-employee Mississippi Department of Revenue.
The selection of South Pointe came through a Request for Proposals process that began in late fall. A five-member committee made up of two representatives of the Department of Revenue and the remaining from the Department of Finance & Administration recommended the office complex situated just off Interstate 20.
The Department of Finance & Administration had final say on the selection, however. The selection won a formality vote from the state Public Procurement Review Board earlier in the week.
The DFA says it determined that, on the basis of receiving the highest evaluation score, the Mississippi Department of Revenue should execute a 20-year lease agreement with Duckworth Realty for the relocation of its offices to the South Pointe complex. The initial annual cost to the state would be $2,878,000, resulting in a total cost of $41,428,492 (net present value) for the term of the lease agreement. This offer represented the lowest total cost to the state, DFA said.
The proposal submitted by Duckworth includes 187,511 square feet of office space, 600 parking spaces, tenant improvements, security and janitorial services. The lease term would begin July 1, 2014. The winner may have to spend around $50 a square-foot to make the selected building compatible with DOR’s needs, state officials say, putting the cost at around $8 million.
The Hertz Investment Group, representing the Landmark Center, which the commercial real estate firm has a purchase option on, came in with a final lease offer of $51,684,393. That price reflects the repairs and upgrades the building would have needed to meet DOR’s needs.
Diversified Technology submitted a final lease offer of $52,150,315.
Upchurch said the selection process was comprehensive. “The main objectives of this process were the cost to the taxpayers, ease of access for citizens, and securing a more permanent, functional facility for MDOR employees. I am satisfied that this location meets all of those objectives,” he said in a press statement.
Upchurch just last year endorsed a Cushman & Wakefield study that recommended the purchase of the Landmark Center on the basis of both cost and operational effectiveness. Upchurch, in an interview Monday morning, said the situation had changed since the Cushman & Wakefield study, especially the eagerness of the South Pointe landlords to make a deal. “South Pointe was very aggressive in providing a good cost to the state,” he said, describing South Pointe’s final offer as “the better value by far.”
Duckworth Realty whittled its lease price considerably after the call went out for final and best offers, based on a comprehensive “test fit” of facility needs by Allred Architectural Group of Ocean Springs, a firm hired by the DFA for the testing. The firm had submitted an early offer of $51.4 million.
South Pointe was not the top ranked property before the state made its request for final offers, said Upchurch. That distinction went to Hertz with an offer of $48.5 million for the Landmark. Diversified Technologies had offer of $53.4 million.
Rejection of the fully vacant Landmark Center at 175 E. Capital St. is a severe blow to the downtown Jackson office market, which is believed to have a vacancy rate above 35 percent. The Landmark had received high- profile support in recent weeks, including an endorsement by former Gov. William Winter on the letters to the editor page of the Clarion-Ledger and a half page newspaper ad touting the Landmark signed by Jackson business leaders Leland Speed, John Palmer and Jim Barksdale. Palmer is a telecom pioneer and former ambassador to Portugal. Barksdale, a technology entrepreneur, and Speed, a commercial real estate investor, are former executive directors of the Mississippi Development Authority, the state’s economic development arm.
The Legislature has been involved as well. The day before a bill to put the DOR headquarters in the Landmark Center via a $7.6 purchase passed the Senate on a 48-2 vote, House Speaker Philip Gunn successfully pushed a bill through the House on a 71-43 vote that would move the HQ to South Pointe.
Gunn killed an effort last year to move the agency from Raymond into the now-vacant Landmark by preventing a House vote on a unanimously passed Senate bill.
Clinton Mayor Rosemary Aultman called a press conference in February to voice support for South Pointe and call for an end to political wrangling over the DOR issue.
Aultman said that if the DOR moved to South Pointe, she wanted her town to win the competition on its merits – not through political muscling at the Capitol.
“Let’s make the process work,” she said, referring to the RFP competition.
For Clinton, gaining 500 employees of the DOR offsets the loss of several hundred ADP employees whose jobs have been shifted from the South Pointe complex to Augusta, Ga.
Neither the representatives of South Pointe nor the Landmark Center are commenting. Breck Hines, a principal of Duckworth Realty, would say only that the firm accepts the terms of the deal and will move forward. Jim Ingram, a senior VP of Hertz Group, said he could not comment until he examined the side-by-side comparisons of the competing lease offers.