Latest land buy puts Idaho in the storage business

AP News
Posted: Oct 21, 2010 1:52 PM
Latest land buy puts Idaho in the storage business

Residents usually turn to state government for hunting tags or boat licenses. But to store their RVs, motorcycles or boats?

Idaho just paid $2.7 million to buy Affordable Self-Storage in the sprawling suburbs southwest of Boise's downtown, with bays big enough for a Winnebago going for $226 a month.

In a bid to boost investment returns, managers of Idaho's endowment lands that benefit public schools added the 5-acre storage facility with more than 400 units to their stable of properties in August. Other holdings already include offices, a bank building and parking garages in downtown Boise, and millions of acres of grazing and timber land across the state.

"We don't have a whole lot of commercial property," said George Bacon, director of the Idaho Department of Lands. "We see that as an area to build diversity in our land portfolio."

All five members of the Idaho Land Board _ Gov. C.L. "Butch" Otter, Attorney General Lawrence Wasden, Controller Donna Jones, Secretary of State Ben Ysursa and public schools chief Tom Luna _ voted to buy the site Aug. 17.

On Aug. 31, the Department of Land got its business license from the secretary of state. It hired a contractor to run the facility for 12 months, after which Idaho plans to hold competitive bidding.

Bacon said it's the Land Board's obligation under the Idaho Constitution to produce as much income as possible for public schools and other beneficiaries of state endowment lands. A prospect like Affordable Self Storage, with better than 80 percent occupancy, does just that, he said.

Voters in 2000 also approved a constitutional amendment that allows Idaho to deposit proceeds from surplus school land sales into a "land bank," then use them to acquire other property.

Still, not everybody is happy the state entered the storage business.

David Frazier, a Boise activist, is concerned this acquisition puts Idaho in competition with the private sector.

Under state control, the storage property will also no longer pay annual taxes that previously went to Ada County, Boise and the city's public schools.

"The problem I have with it is, the city of Boise, Ada County and the Boise School District are deprived of $2.7 million of assessed valuation," said Frazier, who runs the Boise Guardian website. "We still have to answer fire calls there, police calls and provide the normal city services."

Before the transaction, Idaho had about $2.8 million in land bank from previous sales of state land.

Jane Wright, a strategic business analyst with the Department of Lands, said Idaho had been working with several commercial brokers to find commercial properties that promised good returns for the endowment. This year, one of them, Thornton Oliver Keller, brought the storage property to the state's attention.

Could Idaho eventually become the landlord of other types of properties, like fast-food restaurants or hotels?

Wright said that's been at least considered, but the risk is likely too high.

Burger joints come and go. A storage facility is more stable.

"Our priorities for new assets are to increase net cash flow, obtain all purpose legal access, diversify the asset type and reduce management costs," Wright said. "Our No. 1 priority is to increase net cash flow. This property, based on our financial analysis, did that."