Carrabelle highlighted its first city commission meeting inside its newly constructed City Hall by taking a big step that could lead to several new jobs, and new homes, coming to the county.
After going back and forth over conditions of a four-year lease for most of the now mostly vacant 61,000 square foot building that once housed the Hexaport factory, commissioners voted unanimously to agree to a deal with Little Custom Homes, out of Wilson, Arkansas, a maker of “comfortable little houses that have the right amount of living space and quality craftsmanship,” according to its website.
The city still wants to review more detailed financial statements from the company before signing on the dotted line. But with Mercer Asset Partners, a real estate investor out of Titusville, New Jersey, having come on board a few months ago, and bringing with them capital investment, the trio who negotiated the deal - City Attorney Dan Hartman, Mayor Brenda La Paz and City Administrator Courtney Dempsey - signaled they were not expecting any new information to spoil things.
The commission heard entirely from Sal Gaglio and from Justin Massimo, Mercer’s founding principal. Sitting in the audience but not addressing the commission were Bill Joe Denton, founder of Little Custom Homes, and Kip Kane, who introduced the company to the city a year ago.
Talks had moved slowly between the parties over the last year, but by all indications, Mercer’s representatives were eager to strike a deal Thursday night.
Hartman opened the agenda item with a report on the lease, noting most all the conditions had been agreed to save for the terms of the ramp-up, the opt-out, and the deposit.
He said the lease terms called for $3,500 a month for the first two years, and then $4,500 a month in year three and four, to begin April 15, 2019.
For the ramp-up, which would be rent-free months as the company gets its footing, ”we started off at three months, they asked for a year,” Hartman said. “We moved up to four months. They said they could do six months as long as they had a 60-day early termination option in first year. We provided originally a 120-day early termination.
“Also we asked for a $15,000 security deposit. They would be willing to put up a $9,000 security deposit,” he said.
After Dempsey said she had not received credit check and financial background information from the company, La Paz raised concern over what she had seen so far.
“The financial statement seems to be on a template. There’s no indication it was done by a CPA or an accounting firm so it’s hard to for me to understand the facts on the financial statement,” she said.
Gaglio said he had not received a request for the complete financial information, but that was understandable given that he had only come on board within the last two months. Both he and Massimo reassured commissioners they would provide the needed information, including their Social Security numbers.
Gaglio said the company’s request for favorable lease terms in the first year was based on it wanting to see first-hand if the project would work.
“We are going to make an investment here, and we want to make sure we have the time to get it done. We think it will take nine months to see (if it will work),” he said. “Four- month notice (for early termination), we found that difficult to work with. We’re willing to come back from 30 days to 60 days.”
Gaglio also said that two-month security deposit was fairly standard.
“We’re excited to be coming here,” he said. “Our goal is to try and establish ourselves in Carrabelle and provide an affordable home for people.”
Together with La Paz, Commissioner Tony Millender led the questioning of the company, and it was he who eventually moved, with Frank Mathes seconding, to agree to the lease terms.
“We have a nationwide team here. We believe in the community of Carrabelle,” said Massimo. “It’s our goal to make sure we can go about this at the right speed, and we’re successful and you don’t have a tenant that leaves halfway through the lease.”
“I want you to succeed,” said Millender. “We need to make sure we’re protected here. I’d like to see us try to move forward.”
The agreement calls for the same proposed monthly lease amounts, with rent abated for the first six months, and the security deposit upped to $12,000. The company could terminate the lease with 60-days’ notice within the first two years, after which it would rise to 120 days. In addition they would bear the cost of insuring the property for $2 million, as well as holding general liability, workers compensation and surety bonding.
“It sounds good to me,” said Mathes.
“I think we’re pretty well protected and covered there,” said Cal Allen.
Hartman estimated that Little Custom Homes would use about 56,000 of the total 61,000 square feet of the building, with boat builder Martin Ben-Baruch continuing to lease the remaining 6,000 square feet. The commission left it up to the two parties to work out how best to share the space and parking, and afterwards they shook hands and chatted amiably.
Earlier in the meeting, commissioners confirmed changing the zoning for the property to include 17 acres with a primary use of industrial, which will enable Ben Baruch to have dry boat and RV storage.
“We have a very high demand for boat and RV storage right now,” said Ben Baruch. “We have a waiting list pretty much. I do have people waiting to put there.
“I tell them there is no way they can stay in the RV while it’s stored there,” he said. “It’s not going to be an RV park. Dry storage period.”
Massimo touts quality of homes
In his presentation, and in an interview later, Massimo touted the quality of the homes that Little Custom will be making. He said they’ll meet all hurricane codes, and be built to site-built standards, with amenities that range from stainless steel appliances to butcher block counters.
“I’ve seen where housing stock was either destroyed or falling apart, with people spending excessive amount of money to rent or own,” he said.
“As we start getting the manufacturing process in line and starting with the hiring and think about strategically, it’s helpful to be on site for a lot of those things,” he said, defending the need for the ramp-up period.
“There’s a lot of stuff that needs to get put in place,” he said.
“We believe in the market and the demand is there,” Massimo said, pointing to the hurricane as well as to talks with local real estate people. “Obviously there’s been a terrible natural disaster and some demand is related to that. We’re very confident that there’s demand there and we’ll be there for a long time.”
He said the three models they will offer could rent from between $600 to $1,000 a month. “If we see opportunity to acquire land and become a customer from Little Custom Homes, that’s another opportunity.”
Massimo said that in addition to partnering with developers, he hopes that with the ability to secure long-term mortgages, something not typically offered with mobile homes, he sees individuals buying the units, which could range from $80,000 to $120,000, not including land costs.
He said the building could in time employ upwards of 40 to 65 people, based on the success the company has had in Mobile.
“They’re carpenters, mechanical trades, anything required to construct the home,” he said.
Gaglio said the company plans to start out by marketing within a 100-mile radius, and then branch out based on success.
“Our goal is to increase the radius as far as possible,” he said. “Our primary designs are built in factory and secured on a permanent basis on site.
“It’s all about affordable housing without government subsidies,” added Massimo.
He said the company might modify the existing building by placing a small showroom with windows, or enlarging the doors, at their own costs, to make it easier to get completed units out of there.
“We talked about overhead cranes but at this time I don’t see any need for it,” Massimo told commissioners.
“Our goal is to find developers here and we provide discounts to people who buy in bulk,” he said. “We’ve simplified the offering to five models to try to make the house more affordable.
“We’ll pay very good wages for the right people to work in our factories,” Massimo said. “Everyone tells us there’s a demand, which is why we’re willing to take the move.”