Klausner Lumber Sawmill

Developer: Klausner Holdings USA

Type of Development: Building of a state-of-the-art Southern Yellow Pine sawmill

Owner: Klausner Holdings USA

Cty and State: Live Oak, FL

Contact Person: Ed Briscoe/Weave Social Finance

Phone: 720.394.2820

Contact Email: [email protected]

Allocation Amount Requested: $30,000,000

Brief Description of Development:

Project Summary

Klausner Holdings USA ( Klausner ) plans to establish a state-of the-art Southern Yellow Pine sawmill in Suwannee County, Florida ( Suwannee Project ).  The Suwannee project will be the company s first investment into U.S. based production and create 350 direct jobs.  After an over four year delay in their expansion plans due to the recession, the company is now hoping to make a significant investment to create quality jobs in this rural community.  Site preparation for the 120-acre Suwannee Project began in December of 2013.  Klausner s investments into lumber production will provide a boost to local forestry industries, the transportation industry, and nearby communities.  The project will receive approximately $19.5 million worth of land, services, incentives, aid, and tax abatements from the state and county governments.  The company has $49.5 million in EB-5 financing in escrow that was released by USICS in early January 2014.  The NMTC transaction will not utilize EB-5 funding as leverage.  All other sources of financing for the project have been secured and are in place.   

The NMTC transaction will be funded via $38 million in cash, contributed equipment, and intercompany loans from the European-based parent company.   NMTC financing is seen as a critical piece of the financing to complete the project and help catalyze these other investments in the project.  It is expected that the construction of the project will be completed within 9 months of closing.  

Qualification

All properties included in the project are located in a non-metropolitan census tract in the underserved state of Florida with a 13.6% poverty rate an area median income of 83.5% of the state.  The project will be qualified based on the  targeted populations  rules for employees.  As a part of the projects CDBG funding, a minimum of 86 employees must be from low to moderate income families.  All employees will be hired through Workforce Florida, which will income qualify every applicant.  It is anticipated that over 50% of the employees will be considered low to moderate income.   

The area was declared a FEMA disaster area in July of 2012.  Most importantly, the area was declared one of Florida s Rural Areas of Critical Economic Concern.  The Klausner project is a marquee  Catalyst  project for the state that will bring significant investment, economic activity, and jobs to this area of the state.   

Economic Impact

The total investment in the Klausner Project will be up to $152 million over a three year period.  The mill will operate 24 hours a day, 7 days a week, using a four shift rotation (85 employees per shift), with an estimated total headcount of 350 full-time employees (FTE) and an average annual salary of $33,000 or more.  The majority of the jobs will not require post-secondary education.  Based on the nature of the lumber business, the indirect impacts of this project will be significant within the timber and transportation industries in particular.  The company expects more than 600 trucks to come and go from the facility each day which will create a significant boost in employment in the trucking industry and transit-oriented businesses and services.   
Site preparation and the development of the facilities are expected to create 827 construction jobs.  

Catalytic Impact

Numerous companies have inquired with the local development authority regarding co-locating with Klausner on the site.  It is expected that three or more companies will locate on adjacent parcels in order to utilize the by-products of this very high volume lumber mill.  This project is expected to demonstrate a significant amount of catalyzed investments as other companies co-locate and create hundreds of additional jobs.   

Projected Sources and Uses

The following are estimated project sources and uses utilizing $30 million in Federal NMTC allocation.

Sources        
One Day Loan         $  17,500,000
Klausner Equity         $   5,000,000
NMTC Funding         $   7,500,000  
Total                 $  30,000,000

Uses        
Equipment Purchase     $  17,500,000
Construction         $  11,800,000
Transaction/Soft Costs     $     700,000  
Total                 $  30,000,000

The Suwannee County, FL Community   

Live Oak, FL lies roughly halfway between Jacksonville and Tallahassee in northern Florida just off of I-10.  This region has traditionally been reliant on agriculture and forestry industries as the engines of the regional economy.  Only 9.8% of county residents hold college degrees, so quality skilled labor jobs are vital to this rural region.  Suwannee County, FL has the following economic and demographic characteristics from the US Census Bureau:

   Average household income was 76.4% of the statewide average.  
   21.9% of county residents lived below the poverty level.  

Parent Company

Klausner is a third generation, privately held company that started with the opening of a small sawmill in 1918 in St. Johann/Tyrol in Austria.  Fritz Klausner, the present owner, inherited the sawmill in his early 20 s and in 1992 saw an opportunity in the newly merged Eastern German area to build a modern sawmill using the Linck system, which is designed to enable maximum product flexibility so that all requested sizes can be made while simultaneously dramatically increasing production throughput and recovery.

By 2005, the company had expanded to 5 fully productive mills and was the second largest sawmill company in Europe and number six worldwide.  In 2008, approximately 50% of all production was destined for the United States.  The downturn in the US economy, coupled with its financial and housing crisis, required Klausner to realign capacities by selling 2 sawmills to a Russian company and a third sold and relocated to Sweden.  The two remaining mills are located in Germany and are running at full capacity.  With just two operating mills, the company continues to hold its unofficial rank as second largest sawmilling company in Europe.

The Klausner mills sell their lumber products to Europe, the Middle East, the U.S., Asia and Africa.  Klausner produces standard sawn and planed timber products that are used in the construction, furniture and packaging industries.  Due to the Linck technology employed, Klausner mills also produce custom-cut lumber for customers in all markets.

The Company maintains its headquarters in Tyrol, Austria and Klausner operates two sales offices:  Klausner Trading International GmbH (KTI) and Klausner Trading USA, Inc (KTU).  KTI s offices are located within the Company headquarters and KTU is located in Myrtle Beach, South Carolina.  Additional sales offices were added in Beirut, Lebanon, Shanghai, China and New Delhi, India.

All US companies are owned by Klausner Holding USA, Inc., a Delaware Corporation.  Klausner Trading USA, Inc. was formed in 2006 as a Virginia based C Corporation and has been engaged in active operations since formation.

But-For Statement:

The Klausner Lumber One (KL1) project has been under consideration since 2007.  Arranging the financing for this project has been a long and complex process.  Klausner began pursing NMTCs to help launch the projects in late 2011.  They had been offered a total of $19.5 million in land, site preparation, and training support from Suwannee County and the State of Florida to locate their mill in Live Oak, FL.  The state sees Live Oak as an ideal location to create an employment hub for this rural region of the state.  They had committed to build the project in Live Oak, but had not yet determined how to fully finance the project.

The company pursued credit facilities from larger US banks numerous times but did not receive positive feedback regarding getting bank financing for a project of this scale during the start-up phase.  The company then pursued project finance bonds for the project; however, the cost of that financing was too onerous to support a viable long-term facility.  A combination of EB-5 financing along with NMTC funding would provide a needed boost to help make the project viable.  Klausner has $49.5 million in EB-5 financing.  Throughout the EB-5 fundraising process, investors have seen the additional support of NMTC financing as a meaningful aspect of the project that will fill the final gap in needed funding.

Klausner is a European company with a long history in the industry and global marketplace.  Klausner is a privately held company, and the US operations will be financial separate from the parent company.  Through the downturn, the company sold several facilities in Europe to solidify their balance sheet, which has also freed up equipment and cash to support their expansion into the US.  The company had been pursuing three sites in the US but has narrowed down to two sites based on the level of subsidies available at those sites and the overall economics.  The state and local governments in Florida have gone to great lengths to attract the company to Live Oak and provided significant financial support to help make the project happen.

The company has pursued these projects for many years.  The projects were originally pursued to take advantage of the surge in lumber prices in recent years; however, due to the lack of available capital for the company, the construction of the projects has been delayed well past the original target dates.  EB-5 financing and NMTCs are the critical pieces of financing necessary to move this project forward.  We have targeted $6 million in net tax credit equity funding through the NMTC program.  Weave in collaboration with Klausner has targeted this amount as the true gap financing necessary to move the project forward in 2014.  

 

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