Here's my full story from spokesman.com:
By Betsy Z. Russell
An eastern Idaho real estate investor is almost $1 million richer, thanks to the state Land Board’s changing policies on real estate investments.
In 2013, Gary Voigt of Idaho Falls sold an eastern Idaho office building to the state for $6.1 million. On Dec. 6, he bought it back for $5.3 million.
State officials say the transaction still was a good deal for the state endowment, because while the endowment owned the Idaho Falls building – which is leased to Battelle Energy Alliance LLC, the contractor that operates the Idaho National Laboratory – the endowment collected $2.9 million in rent, at more than a half-million dollars a year.
“We are actually to the good about $2.1 million,” said state Lands Director Tom Schultz.
“The rental amount is exceptional – I think that’s a pretty good return,” said state Controller Brandon Woolf. Plus, he noted, “It was a competitive bid.”
The property was appraised again for this month’s auction, and its value was set at just $5.175 million. Schultz said that’s because commercial properties are appraised based on their leasehold values. When the state acquired the building, it had seven years remaining on the lease with Battelle. Now, it has just over two years left, creating uncertainty about the future value should the lease not be renewed.
In 2016, the state put the building up for auction with the $6.1 million appraisal, but it failed to draw any bids.
At the Dec. 6 auction, two bidders competed for the property; Voigt was the successful bidder at $5.3 million, $125,000 above the appraisal.
“He did well, yes,” Woolf acknowledged.
Voigt did not immediately return a reporter’s call about the transaction.
Asked if a private party profited at the state endowment’s expense, Gov. Butch Otter, who chairs the state Land Board, said, “Obviously on the surface.” But, he said, “We actually ended up making $2.1 million. … We had made the decision to sell these lands.”
The state endowment, at the advice of investment experts, is transitioning out of commercial property and cabin site investments, and reinvesting the proceeds into timber land, which provides most of the endowment’s revenue, and agricultural property.
“We listened to our experts on that, and the recommendation was to go while the market is hot,” Woolf said.
Idaho Attorney General Lawrence Wasden in November objected to auctioning the Idaho Falls building, saying he was concerned that the state was leaving money on the table. The Land Board is required by the Idaho Constitution to manage endowment lands for the maximum long-term return to the endowment’s beneficiaries, the largest of which is the state’s public schools.
The board then voted 4-1 to proceed with the auction, with Wasden dissenting.
At the time, Secretary of State Lawerence Denney said if Battelle didn’t sign another lease the state could be stuck with an unleased office building, and said the building has special security features, related to federal requirements, that could make it unattractive to other potential renters.
The state acquired the Idaho Falls office building at 595 University Blvd. in 2013 from IW4 LLC, which is headed by Voigt, a longtime real estate developer, businessman and investor from Idaho Falls, as part of a land exchange. Voigt traded the building to the state endowment, which swapped the McCall Outdoor Science School property for it; each of the properties was appraised at $6.1 million.
The University of Idaho then paid Voigt $6.1 million for the McCall property.
The move was controversial at the time, because the local county assessor’s value for the Idaho Falls building was set at just $2.2 million. But the state’s commercial appraisals were based on leasehold value, not the value of the building as it stood.
“That whole transaction was based on the appraisals at the time,” said Kent Nelson, general counsel for the University of Idaho. “The university acquired the property in McCall. The university paid the money for title to the MOSS property.”
Asked what he thought about the final selling price back to Voigt, Nelson said he hadn’t thought about it.
“The university did the transaction when it did the transaction, based upon the appraisals and the information at the time,” he said. “From our perspective, it’s been great. That was something we always wanted.”
Since acquiring title to the McCall property, rather than renting it from the state endowment as before, he said the university has launched “significant renovations” that it couldn’t have done as a renter.
When the state endowment acquired the Idaho Falls building, it noted that the property had far higher earning potential for the endowment than the McCall property; the return from rent in Idaho Falls was estimated at 8.25 percent of the property value per year. It also noted that the building was in excellent shape with no deferred maintenance.
The university had occupied the McCall science school property since 1938, but historically paid less than 2 percent of its value per year in rent. At the time of the exchange, the endowment was charging the university 4 percent of value in annual rent.