Sweetheart Cargo Hub Deal Exposed In The Big Reveal.
by Alan Halberstadt
“What a joke. It’s a crazy deal for taxpayers, period.”
“In a nutshell, that’s a sweetheart deal. They ought to call in the Mounties.”
“There’s not a developer in Canada who can compete with that.”
The quotes above spilled out of the mouths of aghast professionals intimately familiar with commercial real estate pricing and development in Windsor-Essex after I told them what Federal Express Canada Limited (FedEx) will be paying in annual rent to the City of Windsor as tenants in the 35,000 square foot anchor building of the cargo hub nearing completion on the northwest perimeter of Windsor International Airport property.
The FedEx agreement, signed October 1, 2013 by city officials, including former Mayor Eddie Francis and Chief Administrative Officer Helga Reidel, calls on this multibillion dollar cargo courier to pay a pathetic $4 per square foot in the first year of a 30 year lease when the tenant moves in next year. That equates to $140,000 per annum.
The rent rises to $4.08 per square foot, or $142,800, in the second year, and by approximately two percent per year over the life of the lease, settling at $7.10 per square foot, or $248,018.26 per year, in 2046.
This may sound like a lot of money, but it’s actually picayune. According to my experts, the current triple net market rent for a new plant of 35,000 square feet would be about $7.50 per square foot, plus taxes of approximately $4 per square foot, plus utilities.
That’s already more than FedEx will be paying in 30 years. “FedEx should be paying $297,000 right now per year, plus taxes, plus utilities,” estimated one insider consulting his calculator.
FedEx has clearly fleeced the city in exchange for its world-wide profile, with the hope of attracting multiple logistics firms to create a critical mass at the airport. The city is erecting a 27,000 square foot building across the road from the FedEx palace on speculation that others will follow.
If the air to truck cargo business expands as desired, there is also an incredibly generous option in the agreement for FedEx to ask the city to construct another building of approximately 45,000 square foot with no change to land base rent.