Grand Forks Mayor Brandon Bochenski: HIVE 'far ahead of schedule'

Yahoo

7 hours ago

Jun. 7—GRAND FORKS — The Grand Forks HIVE building is expected to generate nearly $400,000 in revenue this year before additional contributions from the Grand Forks Jobs Development Authority, less than the $515,000 in expected expenditures for the year.
And while originally not a fan of the purchase, Grand Forks Mayor Brandon Bochenski said the transformation of the former Grand Forks Herald building into a tech accelerator and unmanned aircraft system industry hub has made the facility a worthwhile investment.
A $1.1 million grant from the U.S. Economic Development Administration was "the hinge" for Bochenski, he said, allowing the building to move forward as a UAS-specific tech accelerator.
"All of that came to fruition, so I think we've gotten the most out of the building," said Bochenski, who was not mayor when the city negotiated for the building's purchase.
A profit wasn't expected, said Bochenski, who believes the amount of business growth the facility drives outweighs the cost of investment.
"When you're growing something like this that's unique that nobody else across the country has, it's going to take time to get there," Bochenski said. "But I would say we're far ahead of schedule."
The building has been owned by the Jobs Development Authority since 2019, when the organization purchased it
from Forum Communications for $2.75 million.
The gap between what the building earns and what it costs to run has shrunk since the city finished the first phase of renovations in 2023. The JDA has contributed between $260,000 to $391,000 a year for the operations since the building became the HIVE, an acronym for Hybrid Innovation Venture Engine.
Earlier this spring, the JDA — comprised of members of the Grand Forks City Council and the mayor — voted to open a request for qualifications for a company to take over the management of the tech accelerator and building. Part of the qualification advertisement is to determine how much third-party management would cost — since there isn't a good analogous example from which to pull from — and potentially bring programming to the facility that the JDA is unable to.
"Because the UAS industry is changing so rapidly, to keep up, we do think it's a good time to look at a third-party management company for the HIVE," city human resources manager Haley Rosaasen, who helps with operational management of the HIVE, told the JDA on April 7. "After taking a look at other accelerators, seeing how we're performing, we are trending in the right direction financially."
The city first announced it would purchase the building six years ago, in April 2019. The original idea was to use it for city offices and house other offices for political entities, but that changed when Bochenski took office in 2020.
After the JDA received the $1.1 million grant from the United States Economic Development Administration, it began to renovate the building into a tech accelerator to support technology and unmanned aircraft system start-up companies. While originally geared toward helping start-ups, the HIVE's mission has evolved to focus more on scale-ups rather than true start-ups.
The JDA has spent $4.1 million on renovating the structure, which was built after the Flood of 1997 in 1998. The JDA, while comprised of city leadership and related to the city, is a distinct financial and legal entity, separate from the municipal corporation that is the city of Grand Forks.
Its funds come from economic development dollars from sales tax earnings
and rental income from other JDA-owned buildings
. The funds to buy and renovate the HIVE building came from JDA cash reserves and the $1.1 million grant from the EDA.
The first phase of
renovations was completed in spring 2023
, and the second is now wrapping up. The renovations allowed the JDA to rent out some portions of the building traditionally and other portions as a coworking space model with memberships.
The Herald moved from the HIVE to a south-side office building in 2023.
The entirety of the structure is 32,000 square feet, with around 12,350 square feet of leaseable space. Most of that space is under lease, with only around 2,800 square feet — or about 23% — currently available. The building is estimated to generate around $148,000 a year in rent from its tenants, including:
* Grand Forks Region Economic Development Corporation: 2,900 square feet at $3,153.92 monthly.
* Meadowlark Aircraft: the company rents two spaces in the building billed separately. One 910 square foot space for $1,562.17 monthly and another 1,270 square foot space for $2,180.17 monthly.
* Praxis Strategy Group: 1,150 square feet for $1,974.17 monthly.
* Thread: 2,068 square feet for $1,947 monthly.
* GrandSky: 705 square feet for $1,175 monthly.
* XTI Aerospace: 525 square feet for $875 monthly.
In total, those rental figures equal approximately $154,000. The variance between the $148,000 annual estimate and the potential $154,000 — the sum of all contracts over the year — is due to the way the JDA budgets and the nature of how rental contracts work at the HIVE. Companies can leave or join midway through the year since leases are generally month-to-month.
The HIVE also has a fair amount of flex and meeting space. The "bullpen" is 1,950 square feet of flexible office space. Those who use it pay memberships to the HIVE, but don't necessarily have formal leases with the JDA.
The HIVE offers three tiers of membership. Tier 1 includes use of the flexible office spaces in the bullpen, use of building services, and participation in member events. Tier 2 includes all tier one features and exclusive use of an office. Tier 3 is mainly reserved for those with formal leases and includes all features of Tier 1, minus use of the bullpen, and serves akin to a common area maintenance fee common in many commercial leases elsewhere.
There are 22 companies overall that have memberships (including the six with leases) according to revenue records, and the JDA is estimating $180,600 in membership revenue in 2025. With an additional $53,000 expected in naming rights and sponsorships — $3,000 from general donors, $4,000 from a partnership with O'Leary Ventures and $46,000 in future, yet unrealized, opportunities — the total expected revenue in 2025 is $396,968, before the JDA's contribution.
The roughly $118,000 that the JDA will contribute to the building is 4.7% of the budgeted $2.5 million in local sales tax revenue dedicated to economic development in 2025, or 0.35% of the total expected $33.5 million in sales tax collections for 2025.
What the future has for the facility will likely be informed by the outcome of the management proposal, for which the city is now advertising. The building's operations require around one and a quarter staff to operate, much less than the typical six to seven for facilities like this, according to Bochenski.
Under the proposed timeline, proposals were due to the JDA by May 9 with review occurring throughout the month. After that, it likely will come to the Growth Fund Committee and the JDA sometime in the middle of summer.
"We're unsure of who would quite apply for it," Rosaasen said. "... We are looking for somebody who has UAS knowledge, so it's going to be a tight market."