TPG Steel working to acquire building

As the regular meeting of the Waseca County Commissioners on January 17 came to a close, county administrator Michael Johnson informed commissioners that TPG Steel, the new manufacturing company seeking to come to Waseca, hoped for an audience. Board members agreed to officially recess their meeting until the afternoon to accommodate TPG Steel's day-to-day timeline.

TPG Steel is trying to purchase the old Brown Printing building in Waseca and has an agreement with the current owner that it will purchase the building and honor current tenancy contracts, leaving unrented areas for their own use. As a relatively new company, however, TPG Steel does not have the credit history to get the best loan terms without some form of underwriter. The company is asking the county to enter into a lease guarantee, which will allow them to save about 2% in interest costs on the loan.

Chris Sigfrid and Sean Athey, of TPG Steel, intended to attend the afternoon portion of the meeting remotely but found themselves traveling through poor weather conditions when the time came. They did submit a written document answering several questions Johnson had for them about the situation. In attendance remotely was Justin Erickson of EsseX Capital, LLC, a company which aids commercial clients with site selection for their projects. The TPG Steel team connected with Erickson last fall. Erickson emphasized to the board that his work is not to advocate for TPG Steel directly, but to act as a third party between them and the community while trying to find an agreement that works and makes sense for all parties involved. “The worst deal is not the one that doesn't get done,” he said “It's the one that gets done and then implodes.”

Erickson said that from what he's seen of TPG Steel, the company has a solid plan for business in Waseca. The only trouble he identified for the board is that the labor market is difficult, which he explained is true no matter where a business looks, but that the quality of the jobs TPG will offer and its proposed pay scale should allow the company to be competitive. Sigfrid and Athey provided the board with a “conservative” estimate of sales between $25 and $35 million Their request for a public entity to enter into a lease guarantee is “atypical,” according to Erickson, but not impossible. Sigfrid and Athey previously approached the City of Waseca for this type of help. Erickson told the commissioners that the city council felt unable to enter the lease guarantee, but not for lack of interest, and that approaching the county was the next and possibly last plan in Waseca.

The site that Sigfrid and Athey hope to purchase for TPG Steel in Waseca is unique, according to Erickson. Existing industrial sites over 500,000 square feet are already rare; Waseca's has the added benefit of proximity to both the railway and four-lane highway for shipping. Erickson knows of  “few, if any'' sites nationwide that compare. The purchase price TPG Steel has agreed upon with the current owner, who was not identified to the board, seems high at first glance according to Erickson, but building a similar site could easily cost $60 to $70 million without factoring in any premiums for land in such an advantageous location.

The board's main concern regarding the request was financial protection for the county in the event that TPG Steel failed or chose not to further pursue business in Waseca. In their written statements to the board, Sigfrid and Agey gave three assurances. First was that the lease guarantee would be contingent upon closing the purchase of the building. Second, that money would be held in escrow for emergency situations so that the county would not have to write a check to their financier. Third, that structuring the contract as a lease guarantee instead of a loan guarantee means that if TPG Steel is unable to pay its loan, the consequences fall on them instead of the county. The third assurance caused some confusion among the board, since if the financier has no recourse to pursue the county for payment, none of the commissioners understood what security the lease guarantee would provide them. No concrete answer to this question was offered, leading board members to concluded that loans “often work in mysterious ways,” and that if an option which minimized the county's risk also satisfied the financier they wouldn't complain any further. Sigfrid and Athey's written statements also said that TPG Steel would seek to have the loan guarantee removed after twelve to eighteen months of operations and growth, freeing the county entirely from any obligations. Erickson told the board that a guarantor seemed to be the last thing holding back an official terms sheet for the purchase of the building. He recommended to the board that if they chose to move forward they include a satisfactory terms sheet as a contingency and get all forms of risk mitigation in writing.

The board clarified that the next step would be for TPG Steel to submit a written contract for the lease agreement to the county for review by the county attorney's office, a process that they expect to be very quick once the contract is received. Once approved, the contract would then come to the board for a vote. Erickson agreed to pass this on to Sigfrid and Athey.

In discussion, commissioner DeAnn Malterer said that they as the board want area manufacturing facilities to be put to use, and that with the scenario discussed the decision to support TPG Steel seemed easy. Commissioner Doug Christopherson said that he believes if legal language can be structured to adequately protect the county and satisfy the financier, they'd all agree to the lease guarantee. None of the commissioners voiced disagreement with Christopherson's statement. According to Commissioner Blair Nelson, bringing TPG Steel to Waseca is “a once-in-a-generation opportunity.”