An Iowa company that leased city-owned Columbus Municipal Airport property in January to build student housing has not made its first rent payment and is five months overdue.
Bluffstone LLC, which was to pay $1,062 per month to the airport’s Board of Aviation Commissioners, will owe more than $6,000 as of next month, Airport Director Brian Payne said.
Payne said he and airport staff knew Bluffstone was not paying rent since the company missed its first payment in January.
Bluffstone is obligated to pay a 15 percent late fee for each month, penalties currently totaling about $798, based on terms of the lease.
Payne said he has drafted a notice he will send to Bluffstone requiring all rent and late fees to be paid immediately.
Kelly Young, director of student housing operation for Bluffstone, which is contracted to build the Villas at Columbus, said the student housing project has yet to find financial backing.
Financing would not have been possible until the lease went into effect, something that is common with similar projects, she said.
“We’re in the process of securing financing,” she said.
She said six months of rent would be sent to the airport within a week, totaling $6,375.
If Bluffstone does not pay its lease, the aviation board has the option of dropping the project and can look for a different company to develop student housing on the site, Payne said.
Students at four Columbus colleges were invited to lease apartments in the $5 million housing project planned for the southwest corner of Ray Boll Boulevard and Poshard Drive.
More than 100 students from IUPUC, Ivy Tech Community College, Harrison College and Purdue College of Technology were expected to live in the Villas’ two-story building near the airport. Forty students have applied for the housing, although no construction has started yet.
The Betterndorf, Iowa-based company delayed the Columbus project in March, citing weather delays. But construction was expected to begin this fall so the facility could be complete by spring 2015, Young had said in an earlier interview.
“It’s unfortunate it had to turn out like this,” Payne said. “We’ve been trying to work with them.”
The lease, signed Dec. 4, 2013, went into effect Jan. 1. It requires Bluffstone to make lease payment on the first day of each month.
Bluffstone entered into a 40-year term with the option of adding 10 years, according to the lease.
Payne said the lease does not have a provision that would require the project to be financed. He said the board was under the assumption that the delay announced in March was solely weather-related.
“We were trying to get the lease done so that they could get the financing in the first place,” he said.
Payne said he didn’t think the board really thought about the financing and just wanted to push the project along after construction had been delayed by winter weather and Federal Aviation Administration reviews.
Because the land is vacant and would otherwise yield no revenue to the airport, there has been more leeway to allow Bluffstone to come up with rent payments, Payne said.
“If it was a building that we had and they were leasing it and they weren’t paying us, then we wouldn’t go a month without sending out notices and then taking more action,” he said. “The problem has been this finance piece.”
Aviation board commissioner Caleb Tennis said with the delayed construction on the project, the 50-year lease the commission signed with the airport is now considered a 49-year lease to banks.
Bluffstone has requested that the board add a year to the lease, making it a 50-year lease that could make financing the project easier.
The board tabled a decision on that request, adding that it would decide on the request once the rent was paid in full.
The airport has as many as 94 leases with individuals and companies using airport property. It has agreements to rent out farmland on airport property, as well as with airpark tenants, anyone who rents an airport hangar and those who use the airport’s Walesboro facilities, Payne said.
Government-affiliated entities, such as IUPUC and Ivy Tech Community College, pay $1 a year, or nothing as they are affiliated with government, and the airport is owned by the city, he said.
Rent payments are due to the airport on the first of the month, although some tenants pay a year at a time each January, Payne said. All money then is deposited with the city’s clerk-treasurer’s office, he said.
On Tuesday, Tennis said Bluffstone had requested that the aviation commission not require rent payments until the project is complete and students have moved into the apartments.
But Tennis said the board would be willing to hold off on canceling the lease only until next month.
“We didn’t want to throw the project away if we didn’t have to,” he said. “We’re past the normal comfort level, but at the same time we’re not out anything yet. Our goal is to be a good landlord.”
This is the second time the city has been involved in a landlord-tenant issue involving non-payment of a lease between the city and an outside company.
In December, the city learned that Commons restaurant tenant Snappy Tomato Pizza had not paid rent for all of 2013 and owed $27,237.52 in monthly payments, additional lease obligations and late payments.
Columbus Mayor Kristen Brown demoted then-parks director Ben Wagner, alleging that he failed to implement financial controls that would have revealed that the restaurant had not paid its lease for a year.