The Port of Grays Harbor is inching closer to an agreement to bring a new tenant to the NewWood facility at Satsop Business Park. The deal may include the Port’s purchase of the industrial equipment and intellectual property related to the business, including the NewWood trademark, although a private company would operate the facility.
“It fits with the mission of providing jobs,” Port Executive Director Gary Nelson said. “It’s a little bit outside what we normally do, but we think we’ve evaluated the pros and cons and that’s why we’re bringing it to the commission.”
“For us it means we would have an anchor tenant, which is something we’ve been working toward,” said Satsop Business Development Manager Alissa Shay.
The NewWood Corp. attempted to turn wood waste and recycled plastic into a composite wood called NewWood. It had production difficulties and financial problems that forced it into receivership.
A special meeting has been set for Tuesday, Nov. 5, to consider allowing Nelson to sign an asset purchase agreement with the court-appointed receiver for the NewWood Corp. The Port commission will also consider borrowing $1.3-million from Ilwaco-based lender Craft3 to facilitate the deal and signing a letter of intent between the Port and the potential tenant who would operate the new business, NewWood International, a separate company from the one that ran the business earlier.
New Wood International is affiliated with Triventas, the company that made its first official inquiry to the Port back in June. Triventas is a Pittsburgh-based private investment firm focusing on green building projects. It said in June it hopes to expand its West Coast holdings with NewWood; its operations primarily are in Pennsylvania and South America.
“We’re excited about this. We think it’s a great community, we think it’s a great plant. We’re going to work very hard to succeed,” said Christian Echavarria, one of Triventas’ owners.
“We have a corporate vision in the construction industry to do more of the assembly of components that go into a building,” he said.
To do that, “We need a West Coast hub,” Echavarria added, and that could be Satsop if the intitial venture is successful.
The 275,000-square-foot facility has been shuttered since 2012.
The new company would look to continue to make the product, but with an eye to streamlining the process to avoid the production delays that plagued its predecessor Nelson said.
The Port owns the building that houses the manufacturing plant, but not anything inside it. The equipment has been valued at $2 million.
Despite several entities expressing some interest in the equipment, mostly for scrap value, no deal has been reached on a sale.
“We talked to the receiver and the (creditors) and said that’s probably not in the best interest of our community to lose the facility entirely,” Nelson said. “The deal was to create jobs, not to strip the facility and make it a shell and then we’ve got to find a new business to go in there.”
If the commissioners agree to borrow the money and the purchase the mill assets, the risk would be that the agreement with Triventas falls through after the purchase of the equipment is made, or that the venture fails.
“We will continue to own the building,” Nelson said. “Owning the assets gives us a little more control in the future. If, god forbid, they’re not successful, we can liquidate (the assets) ourselves. We don’t have to wait for the bankruptcy process.”
The loan from Craft3, a non-profit lender that specializes in support for sustainable job creation in rural areas, would be paid back over 5 1/2 years or transferred to Triventas’ NewWood International if the company decides to buy the equipment and intellectual property outright. Otherwise, the Port would lease those to the company over a longer period. The loan may be paid back more quickly.
“They want to reserve their capital for startup and running,” Nelson explained. “What we’ve done is we’ve offered them an option.”
On buying the equipment and trademarks all at once or over time, Echavarria said, “It really becomes a financial decision for us. We still need to finalize the decision, but it’s very helpful that we have that alternative.”
No payments will be due on the loan in the first six months, so if the tenant decides to buy in that time, there will be no payments by the Port. Even if the company decides to buy them through a longer lease, Nelson said the payments would more than cover the loan and interest.
If the commission approves the plan Tuesday, the sale would need to be approved by the bankruptcy court.
“Once the court approves the asset purchase agreement, then things will move fairly quickly,” Nelson said, with the facility possibly up and running as quickly as 6-9 months after that.
The property tax liens would be paid out of the $1.3 million the Port would pay for the assets. According to the Grays Harbor County Treasurer’s Office, those total $156,302.
NewWood’s secured creditors would also be paid out of that purchase. According to receivership papers as of earlier this year, Craft3 was the chief secured creditor, owed nearly $4.8 million. Unsecured creditors include Grays Harbor PUD, which at that point was owed about $215,000, and the Satsop Business Park, owed about $412,000. Other smaller businesses that worked with NewWood may also be owed unsecured debts.
“It’s always hard on our local companies and vendors,” Nelson said.
If a new tenant re-starts the company, Nelson hoped those businesses would at least have the opportunity for new business.
Shay noted the NewWood equipment hasn’t been run in a year, so it may take some work to get things humming again.
“Everyone recognizes there are some kinks that are going to need to be worked out,” she said.
“What that really means is we need to look at each bearing, we need to look at each pump and each motor and make sure every part to make sure everything is in prime condition to restart the plant,” Echavarria said.
He estimated that process would take two to three months, and require the help of about a dozen skilled workers. Once the plant is operational, he expects about 20-30 workers to run it in the near-term.
“These are all brand new jobs from the local community, and we hope we can hire mostly from the local community,” he said.
That could ramp up depending on production but to start, Echavarria said, “We want to keep the plan real simple, we want to make sure we succeed doing one thing before we do something else.”
Echavarria said the company has already approached about seven to eight “very knowledgeable employees we’re hoping we can get back” from the old NewWood operation. “Their focus wasn’t to bring people in. Their focus was on the skilled labor already in the community, which we obviously liked,” he said.
The lease agreement is still being negotiated, but will likely be a 20-year lease with some option for the new company to get out of it in the short-term if the business isn’t successful, Nelson said.
The company would pay nothing the first six months, then months 7-12 would pay what the former NewWood paid, $48,000 per month.
“It will slowly ramp up to what we believe to be fair market value, which would probably be in the $70,000 a month range,” Nelson added.
Satsop offers cooling water, which Shay estimated would cost another $5,000 a month if NewWood International needs it. Its potable water, sewer and electricity would be paid separately from its lease cost.
The special meeting is scheduled for 9 a.m. Tuesday at the Commissioners’ Meeting Room at 111 South Wooding St. in Aberdeen.