ADVERTISEMENT

ADVERTISEMENT

Appareo received incentive to buy vacant tech park building, a deal NDSU president worked to seal

FARGO -- Expectations were high at the 2003 groundbreaking for the Alien Technology building. The microchip manufacturer predicted it would create 1,100 jobs and a $55 million payroll here by the end of the decade.

Appareo Systems purchased the vacant Alien Technology building in the North Dakota State University Research and Technology Park in 2009.Dave Wallis / The Forum
Appareo Systems purchases vacant Alien Technology building in FargoDave Wallis / The Forum

FARGO - Expectations were high at the 2003 groundbreaking for the Alien Technology building. The microchip manufacturer predicted it would create 1,100 jobs and a $55 million payroll here by the end of the decade.

Those hopes fizzled when the California company left Fargo in 2009. The 50,000-square-foot building in the North Dakota State University Research and Technology Park sat empty for years, long enough for mice to nest in the electrical control panels.

However in 2014, a Minneapolis data center firm known as Vaultus sought to buy the Alien building from the group of investors that owned it. And so did Appareo Systems, an electronics manufacturer that already had a building in the tech park.

Appareo CEO Barry Batcheller was a longtime member of the tech park's board of directors. Also a board member was NDSU President Dean Bresciani, who intervened to ensure that Appareo ultimately got the building even though Vaultus was offering more money to the investors, according to emails The Forum recently obtained through public records requests and interviews with tech park officials.

As an incentive to buy the building, Appareo received a $300,000 break on land rent, something that wasn't on the table for Vaultus, said Chuck Hoge, executive director of the tech park.

ADVERTISEMENT

Like with any sale of a building in the tech park, the board had to OK it. With the Alien building idle for so long, the board was highly motivated to find a buyer, and it initially was open to Vaultus as a park tenant, Bresciani said.

"Their bid started out looking really interesting and kind of melted," he said. "Appareo's bid started out looking kind of interesting and got better and better."

Hoge said that in the end, the board approved Appareo because of its track record of hiring NDSU graduates and collaborating with university researchers. Vaultus planned to use the building as a data center, which, Hoge said, would not have generated as many jobs for alumni or research opportunities for the school.

Asked if he felt the incentive Appareo received was appropriate, Bresciani said the incentive appears to be what sealed the deal. The tech park "had to make it work for him (Batcheller), and he was the only certified potential buyer," the university president said.

Bresciani noted that the building was in disrepair and that Batcheller ended up with substantial renovation expenses. "This didn't turn out to be a sweetheart deal for him," he said.

An Appareo representative said the company spent about $400,000 to bring the building up to code before moving in.

Pressing for a deal

In early 2014, as Batcheller and Hoge were driving to a meeting in Grand Forks, Batcheller told Hoge that Appareo's growth would require the company to leave the tech park soon, Hoge said. Wanting to avoid losing Appareo as a tenant and having another vacant building in the park, Hoge and Bresciani later met with Batcheller and convinced him to make an offer on the Alien building, Hoge said.

ADVERTISEMENT

Appareo at first considered offering $4.2 million, according to an email Batcheller sent Art Rosenberg, president of Renaissance Development, the investor group that owned the building.

In his email, Batcheller wrote that Bresciani told him "he was keenly interested in having Appareo stay in the park, but was also sensitive to the needs of the investors in the Alien building. He felt that my offer of $4.2 M would be so low that the investors would probably loose (sic) money on their investment in the building."

Bresciani eventually got Appareo to submit a letter of intent to buy the building from Renaissance for $5 million. "I agreed to do this solely because of my long-standing support of NDSU and at the direct request of President Bresciani," Batcheller's email said.

Bresciani also met with one of the Renaissance investors, Jim Wieland, to explain why the tech park preferred Appareo over Vaultus, Hoge said. "I have to admit that I'd be profoundly disappointed if this good of an opportunity is lost," Bresciani wrote in an email to Wieland. "I'm fearful there won't be another. Thanks for anything you can do to wrap it up."

Wieland replied, "We will get it done."

Vaultus President John Unger said he started eyeing the Alien building in 2012 or 2013 as the potential site of a data center that would rent secure space for other companies' servers. One thing that attracted him to the building was its rugged roof built to endure winds of up to 150 mph. "It could withstand a Category 5 tornado," he said.

In March 2014, shortly after Appareo made its offer, Vaultus submitted a letter of intent to purchase the building for $5.7 million, according to an email Hoge sent tech park board members.

Vaultus' offer included a 5 percent real estate agent commission, so Renaissance would have netted about $5.4 million, compared with Appareo's offer of $5 million, according to Hoge's email.

ADVERTISEMENT

'Politics of the university'

The tech park is a nonprofit organization that receives $250,000 of its $1.2 million annual budget from taxpayers. The park makes much of its money by renting land to companies like Appareo, which own their buildings but not the ground underneath them, Hoge said.

To bridge part of the $400,000 gap between the Vaultus and Appareo offers, Hoge said, he came up with the idea to give Appareo five years of free land rent, worth about $300,000. Consequently, Appareo raised its offer to $5.3 million, leaving it about $100,000 shy of Vaultus' offer, he said.

The same incentive was not offered to Vaultus, which would have had to pay about as much land rent as the Renaissance investors had been paying, Hoge said.

Another perk the tech park gave Appareo but wasn't willing to give Vaultus was the option to buy the lot adjacent to the Alien building, which was designed to be expanded to the south, according to correspondence between Vaultus and park officials. "At some point, it almost felt like they were trying to find ways to not make it appealing for Vaultus," Unger said.

Renaissance initially accepted Vaultus' offer and declined Appareo's, but eventually a majority of the investors voted to sell to Appareo, emails show. Rosenberg and the Renaissance investors declined to comment.

"The politics of the university or whatever played a role because he (Batcheller) had history there and I didn't," Unger said, adding that he doesn't hold a grudge over not getting the building.

Hoge acknowledged that Batcheller probably had an inside track on the deal because he's a tech park board member. Board minutes show that Batcheller recused himself from the board's unanimous vote to approve the sale in December 2014.

Hoge said he feels good about the deal's outcome given the jobs Appareo has created. Batcheller said his company, which now has two tech park buildings, employed 130 people before buying the Alien building. The company currently has about 200 employees, and roughly half of them are NDSU alumni, he said.

Unger said Vaultus would have hired NDSU graduates and employed 25 people at the tech park, plus the data center would have indirectly created another 25 to 50 local jobs at other companies. Though, he conceded that the data center would not have done much research with NDSU.

Batcheller said his goal in buying the Alien building was "not to get a sweetheart deal." Evidence of this, he said, is the fact that Bresciani and Hoge approached him about purchasing the building rather than the other way around.

"The building was not something that was attractive to me," Batcheller said. "I don't have an ax to grind on this thing. It wasn't me against Vaultus."

What To Read Next
Neil Joseph Pfeifer was released Friday, Feb. 3, on $5,000 cash bail.
State lawmakers hear from both sides as parents and educators weigh in on the potential impact of the bill
“We see that when things happen in the coastal areas, a few years later, they start trending toward the Midwest,” said Rep. Ben Krohmer, serving his first term in the House.
Stark County prosecutors prepare for pretrial conferences and jury trials scheduled for March