From the Editor: A Day Late, But Not A Dollar Short
In the last issue of The Business Journal, we reported on the circulation of at least two different sets of plans for the Cabela’s retail location at The Falls development in Bristol, Va. You may recall that we shared our editorial deadline for that issue with Bristol city leaders but they declined to meet with us on four separate occasions.
The questions we wished to ask were germane to the issue of whether the revenue bond issue Bristol was planning would accurately state the size of the store in order to properly fund the development. Our concern was, as it has ever been, for the taxpayers, businesses and investors.
The day after our extended deadline, we received an email from the office of Drew Trivette, Bristol, Va., assistant city manager. Attached to that email was a letter from Cabela’s Director of Real Estate Steve Krajewski, which we subsequently posted on our website, bjournal.com.
In the letter, Krajewski said, “this letter is to confirm that the Bristol Store as currently designed will contain 82,003 gross square feet of interior building space, including approximately 5,000 square feet on a second level (initially used for stockrooms).”
Since one of the Cabela’s plans we had seen was for a single-story 77,000-square-foot building, this made perfect sense. Had Krajewski’s letter arrived by our deadline, our last issue would have looked much different.
We asked for clarification again this month when we saw the preliminary offering memorandum for the revenue bond issue dated Nov. 13. We were surprised to see that on page F-23, Cabela’s is described as being 107,747 square feet.
A call to Stifel Nicolaus, the underwriter of the bonds, received an immediate return message from Laura Radcliffe explaining that 82,003 square feet of that total would be indoor selling space, while, “107,747 square feet includes 25,744 feet of outdoor sales space.”
The bond offering document states that while Stifel elects Cabela’s to generate $43 million in estimated stabilized sales, only $35 million of that will be eligible to help fund the bond offering, as “All-terrain vehicles and boats are not subject to sales tax in Virginia.”
When one does the math, $35 million in taxable revenue divided by 77,000 square feet of interior sales space gives you $454 sales per square foot. According to Cabela’s CEO Tommy Milner, “new format stores averaged sales per square foot of nearly $460,” for the 12-month period ending third quarter 2014. The Cabela’s store in question is a new format store.
Some may quibble with the numbers. Counting all 82,003 square feet of building interior when Cabela’s has stated that 5,000 will be upstairs stockroom space might be pushing the envelope, but the restrooms on the main level get counted, too, so how fine a point do you want to put on it?
Also, the Falls revenue bond will not generate the $38 million Bristol leaders had hoped for, so the city itself is putting up $6,430,000 in revenue bonds of its own. This too raises eyebrows.
But the bottom line in regard to the questions we raised last issue is this: Those questions have been answered. Cabela’s is building on the property it now owns the at the site and the revenue bond sale that will fund Cabela’s $17.5 million incentive package is expected to close in mid-December.