Fairbanks landowner to receive $3 million building gift

rmauer@adn.comAugust 6, 2013 

A Fairbanks businessman is poised to receive a $3 million gift of buildings and improvements to his property courtesy of the U.S. Department of Agriculture even as another federal agency says it could save money by taking over the facility.

The USDA's Agricultural Research Service sank the money into constructing the facility on leased land across the street from the University of Alaska Fairbanks campus, but it's abandoning the site to the landlord due to budget cuts.

The agency had occupied its new offices, labs and greenhouses for only about nine months, then failed to notify other federal agencies of the surplus property through the General Services Administration before giving notice to its landlord, Fairbanks businessman Jerry Sadler.

Now the U.S. Fish and Wildlife Service says it would save hundreds of thousands of dollars in Alaska if it could move to the USDA site. But it's too late.

While the USDA would have transferred the buildings to the Fish & Wildlife Service, landlord Sadler won't allow the USDA to rescind its notice terminating the lease to the land beneath it. Sadler is apparently within his legal rights and has every incentive not to restore the lease. The land, with its taxpayer-paid improvements, reverts back to Sadler's Airport Equipment Rentals by September, five years before the lease was actually up.

That rankles Mike Spindler, manager of Kanuti National Wildlife Refuge, a 1.6 million-acre preserve astride the Arctic Circle about 150 miles northwest of Fairbanks.

"Mr. Sadler stands to gain $3 million of taxpayer-created infrastructure for free," Spindler said. "Why not transfer? I think everyone is willing to transfer it to us, but the land it's under, it's not willing to be leased to us."

Spindler is also facing budget cuts. He said he could save $300,000 a year by moving his offices to the Sadler property from the Fairbanks Federal Building, where he pays rent to the GSA, the federal landlord. The federal building houses U.S. courts and the Justice Department, which require far more security than is needed by the Fish and Wildlife Service, he said.

"If there was a landowner willing to continue the lease as it was, we would get the federally owned building transferred from USDA to Fish and Wildlife and we would continue the land lease, and then our only cost would be the land lease and the utilities, which would be about a fifth as much as renting the office space now," Spindler said. "If we continue to lease our expensive space, we may have to lose employees, or lay them off, or transfer them elsewhere."

A copy of the lease between Sadler and the USDA shows this year's rent for the bare ground is $42,448.

Sadler's company rents heavy equipment in Fairbanks and four other towns and cities in Alaska, including Anchorage. He also owns commercial real estate. His spokesman, John Cook, declined to be interviewed about the USDA lease and said that Sadler wouldn't be available either. Messages left for Sadler at Airport Equipment Rentals were not returned.

The situation started in the mid-2000s, when the USDA's Agricultural Research Service was sharing space on the UAF campus and officials decided it needed its own facility with greenhouses, said Carol E. Lewis, recently retired dean of the School of Natural Resources & Agricultural Sciences. A search uncovered the vacant lot own by Sadler on Geist Road across from campus. The National Park Service was leasing an office building from Sadler on the adjacent lot.

While agriculture isn't a key part of Alaska's economy, the research service had developed the varieties of barley grown in Alaska and Canada and studied pesticides, insects and weeds, Lewis said.

On Aug. 29, 2008, it signed the 10-year lease for Sadler's empty 1.6 acres. The government guaranteed it would pay rent for the first five years but could give a year's notice if it wanted to cancel after that.

"The construction process took quite a while, and part of that was a very large hole they had to dig to get below the permafrost and the wet ground," said Greg Dudgeon of the National Park Service, who watched from his window. "We were all amazed by this process and how deep this hole was to the point where the ground was going to be stable. The construction probably took a year and a half, maybe more."

Lewis said the contractor had to dig 16 feet to find stable soil.

But by December 2011, according to Agricultural Research Service spokeswoman Sandy Miller Hays in Beltsville, Md., the agency was set. It had two new greenhouses, a "head house" attached to them for plantings and research, several offices, a conference room and two modular buildings with labs brought there from campus, Lewis said.

The next year, Alaska became one of about 10 states in which Agriculture Research Service facilities were ordered to be closed.

"We fought that, and (Sen. Mark) Begich helped us, but to no avail," Lewis said.

On Feb. 1, 2012, just a couple months after it occupied the facility, the USDA alerted the University of Alaska that it, and one in Palmer, were available. Federal law authorized the USDA to give its surplus property to land-grant state universities like UAF for free.

Miller Hays said UAF initially applied for the site but by June had withdrawn its request. Lewis, the retired professor, said the facility wasn't quite right for the university and would be too expensive to operate year to year. The university laid claim to the movable modular labs, and Lewis grabbed equipment and specimens for her students and the university's museum.

Around that time, Spindler, the Kanuti refuge manager, was visiting the Park Service building and learned that the USDA was leaving the place next door.

"We asked about it and everybody said, 'They're going to give it to the university.' So we just forgot about it," Spindler said.

But after UAF turned down the facility, USDA gave its one-year notice to the landlord and moved out its employees. The official letter to Sadler was sent Sept. 25, 2012, Miller Hays said.

A final date for the transfer back to Sadler hasn't been set yet, Miller Hays said. Closing documents still need to be signed by the Secretary of Agriculture, she said.

Last month, Spindler was back at the Park Service. That's when he learned UAF had turned down the property the year before.

"We started asking questions," Spindler said. "USDA was willing to give it to us, GSA was willing to do the paperwork to transfer it to us, and the landowner wasn't willing to negotiate with us."

With the property due to be returned to Sadler, Stephanie Kenitzer, spokeswoman for the GSA, said the matter was brought to its attention way too late to manage a transfer.

"We were not part of any of that process. It's not our property, we did not negotiate the lease," she said. "We felt that we were unable to help them meet that timeline, so we declined that report of excess, so in essence turned it back to them and said unfortunately we will not be able to help you."

"Once they terminated the lease, the building was more or less going to go to Sadler," added Doug Campbell, the Fish and Wildlife Service's realty division chief in Anchorage.

But he was also surprised the USDA invested so much money in a property with such a short lease.

"A $3 million investment on a 10-year lease is just unheard of," he said. "You want enough time to amortize your investment." Twenty or 25 years would have been better, he said.

Nevertheless, Campbell said, he still tried negotiating. Sadler declined to talk, directing him instead to Cook, his representative.

"I said that we'd be interested in leasing the land from you and taking possession of the building. And he said, 'We might be interested in that, let me call up the owner and I'll get back in touch with you.' "

A few days later, Cook called back.

"He said, 'No, we're not really interested, we are going to take possession of the building.' "

But Cook also had a counter offer. Once Sadler took the building back, he might agree to a new lease -- for the land and the building.

"He didn't quote me a price," Campbell said.

Campbell said he and Spindler are frustrated by the whole process.

"It would have been really great to be able to take possession of the building," Campbell said. "We would've been willing to pay Mr. Sadler fair market-value lease rates for his land and gone into a long-term lease with him. Not that he necessarily did anything unethical or illegal. In these days of budget cuts and sequestration, it's going in the wrong direction."

Reach Richard Mauer at rmauer@adn.com or 257-4345.

 

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