The Port of Walla Walla has fine-tuned a land purchase and lease agreement that could enable a new owner for Martin Archery to take over by the end of this month.
Port commissioners will convene in a special meeting Monday to consider the terms of the agreements. The meeting begins at 4 p.m. in the Port’s administrative office, 310 A St.
In a special meeting two weeks ago, the three Port commissioners unanimously authorized the purchase of 4.67 acres of Martin Archery property off Heritage Road for $1.3 million.
The intent was to pave the way to buy the property and lease it to a new owner, a limited liability company that will be created by Los Angeles-based private equity firm, Diversis Capital LLC.
The deal is expected to infuse life into a languishing Martin Archery, which has been on the brink of closure in the last year after reigning for decades as one of archery’s most renowned manufacturers.
In the last two weeks, Port Executive Director Jim Kuntz said a few details have been tweaked. He wanted to bring the proposal back before commissioners, who are expected to vote on the proposed lease agreement.
“It’s a big enough transaction and there’s enough public interest,” Kuntz said. “This will show what the final document looks like.”
Through the acquisition, a strapped Martin would be able to pay off its debt on a real estate loan to Banner Bank, according to a presentation by Kuntz during a recent Port Economic Development Advisory Committee meeting.
Martin Archery Inc. would continue to have substantial supplier debts and would likely file for bankruptcy, according to the presentation.
The Port had initially tried to persuade Diversis Capital to purchase the property — a 58,284-square-foot manufacturing, warehousing and office, plus 1,280-square-foot single-family residence on 4.67 acres.
However, the company wants to focus its initial investment in increasing the company’s profitability rather than a real estate acquisition.
Martin, a designer and maker of recurve and compound bows with more than 60 years in Walla Walla, has 20 employees. That’s a 50 percent cut from just a few months ago and just 20 percent of the work force it had during peak years.
Kuntz said Diversis believes it will need to return to 40 employees at the time the company takes over ownership of the manufacturing operation.
Martin Chief Executive Officer Tim Larkin has said previously the business has returned to the black in recent months.
Under the proposal to be considered Monday, the Port would enter into a 10-year lease with Diversis. The lease includes two five-year renewal options and an option to purchase the property at any time.
The first year’s rent — $88,000 — will be required in advance as a surety deposit, Kuntz said. That rate, which is the same in the second year, is a “favorable” price to foster the company’s survival.
“We want the new owner to get the chance to turn the company around,” Kuntz said. “The last eight years (of the lease) are more reflective of fair market value.”
In the third and fourth years, the lease rate would increase to $104,000 each year. That figure would jump in the fifth and sixth years to $120,000 each year.
Every year for the final four years the annual lease rate will be $136,000, under the proposal.
Although the Port’s purchase of the property takes the land off the tax rolls, a 12.84 percent state leasehold tax on rental income will be assessed. Under a projection of 1 percent in property tax increases per year, the tax collected on the property would have been $191,935. With the state leasehold tax that amount is $149,970. It’s a difference of $41,965, but it’s not a total loss, Kuntz said.
In the presentation made during the Economic Development Advisory Committee meeting, Kuntz said allowing Martin to proceed with bankruptcy without the Port’s assistance would have risked the company’s future in the community. Apart from the immediate loss of 20 jobs, there would have been no assurance that equipment and machinery would have stayed in Walla Walla. The company, he explained, has orders to be filled.
If the new model is not successful, he said the Port would sell the property and attempt to recover the public investment.
Kuntz said the Port is shooting for an Oct. 22 closure date on the purchase. Under the proposal, the lease would take effect the next day.
Vicki Hillhouse can be reached at firstname.lastname@example.org or 526-8321.