Idaho plans to buy Hewlett-Packard’s entire Boise campus on Chinden Boulevard and use part of it for state offices.
The state Department of Administration has signed a nonbinding letter of intent to start talks with HP Inc., Gov. Butch Otter’s office said Thursday a news release. The state estimates the purchase price at $110 million and plans to budget an additional $16 million for renovations.
HP Inc. would lease back the space it needs. It was not clear what, if any, effect the deal would have on the future of HP operations’ and employment in Boise. Otter said in a statement that “a great employer is reinforcing its commitment to Idaho,” but state officials declined to provide details, referring questions about HP to the company, which did not return calls and an email.
An HP spokesperson told Fortune magazine that “this decision will ensure HP is able to maximize the value of its real estate investments and create future growth at the Boise campus.”
George Iliff, owner of the Colliers International commercial real estate agency in Boise, said he is surprised HP appears willing to sell.
“I have to think this is a smart thing for the state,” Iliff said. “It just makes me worry about HP’s future in Boise.”
The state leases more than 800,000 square feet of office and warehouse space in Ada County at an annual cost of $12.2 million, the governor’s office said. The HP property would give the state roughly twice as much space. It includes eight buildings with about 1.3 million square feet of office space and 200,000 square feet of warehouse space.
HP would lease back more than half the office space for an initial seven-year term. The state would use 152,000 square feet of office space at first, expanding to 366,000 square feet in 2020 as existing third-party leases on the campus expire.
The Legislature is considering a concurrent resolution to authorize the state to start negotiations.
Keith Reynolds, deputy director of the Idaho Department of Administration, said the state would initially relocate the Tax Commission to the campus. Space for other agencies “will be evaluated based on lease expiration and the cost of renewing their existing lease,” he said.
The property has an assessed value of about $105 million, according to Ada County Assessor’s Office records.
The state has not yet appraised the property, Reynolds said. He said due diligence, including an appraisal, will be conducted through the Idaho State Building Authority. The $110 million value was established “based on internal staff experience and input received from local brokers while using the Ada County assessed value as guides,” he said.
The initial 152,000 square feet is enough for the tax commission and “perhaps another small agency or two,” Administration Director Bob Geddes said.
“[The migration] would be very slow, very planned and very coordinated,” Reynolds said.
The Tax Commission, Department of Finance and Department of Fish and Game are now housed in the Washington Group Plaza office complex on the east edge of Downtown Boise.
St. Luke’s Health System signed a contract to buy the complex in October. The sale is scheduled to close in April 2018. The hospital system said it will honor existing leases.
The state sought proposals for space where the Tax Commission and other agencies might go. It received 46 responses.
“This provides the State of Idaho with a long-term solution to our Boise-area facility needs at a reasonable price,” House Speaker Scott Bedke said. “It’s a sound and responsible investment that will help us maintain our commitment to living within the people’s means.”
Iliff said the state would likely consolidate offices now strewn around Boise into a single location for efficiency.
He worries that HP’s apparent willingness to sell may signal a change in the company’s long-term plans.
“Plenty of people have tried to buy the excess land that HP has,” he said “People have tried to buy individual buildings. This is a pretty significant change in their property philosophy.”
Senate President Pro Tem Brent Hill said lease prices are rising in Boise, and it would cost twice as much to build new offices for state agencies.
Rep. Janet Trujillo, R-Idaho Falls, disclosed the purchase during a House Revenue & Taxation Committee hearing earlier Thursday.
Trujillo’s comment came in discussion of a bill that would curb the budgeting capacity of cities, counties and other local taxing districts. She said the state should avoid increasing the tax burden on Ada County residents when the HP buildings come off tax rolls.
“We need to be able to remove that [the HP property] completely from the tax structure,” she said, according to The Spokesman-Review of Spokane.
The Ada County Assessor’s Office said HP paid about $1.5 million in property taxes on the campus last year.
Iliff said there’s enough demand for offices in Boise that the market could absorb vacancies created by migrating agencies.
“If I’m a landlord with a state tenant in it, I’m going to be concerned,” he said. “But over a period of time, the market is strong enough that the space will be absorbed with nonstate tenants.”
HP built the 92-acre HP campus at 11311 W. Chinden Boulevard beginning in 1980. HP’s printing unit used part of the site for manufacturing at first but eventually phased that out. In recent years HP consolidated its remaining operations and personnel into fewer buildings and began renting out space to call centers and other businesses.
HP split in two in 2015, creating HP Inc., which sells printers, ink, toner and personal computers; and Hewlett-Packard Enterprise, which sells data storage, software and servers. Both companies have employees at the campus, though HP Inc. has the most.
The company has repeatedly declined to say how many workers it has in Boise, though the presplit company employed nearly 4,000 people here in 2014.
The Washington Group Plaza was built more than 40 years ago as headquarters for the defunct Morrison-Knudsen Co.
Zach Kyle: 208-377-6464, @ZachKyleNews