Port Financing Land Purchase For Microsoft Malaga Expansion

The Chelan Douglas Port Authority is moving forward to help Microsoft expand its planned data center campus in Malaga.

Port commissioners this week signed off on a plan to shore up an additional 173 acres for about $8.5 million.

Port CEO Jim Kuntz says the land will be used for a possible phase 2 of the campus.

"The goal is for Microsoft, to give them an opportunity to expand beyond three buildings," said Kuntz.

An option to buy deal the port has with the tech giant requires Microsoft to reimburse the port for about half of the $8.5 million cost of the land upfront.

Microsoft has 10 days from Tuesday's agreement among port commissioners to pay $3.7 million to the port, with the second payment due Feb. 20, 2024, at $476,223.

Both those payments are nonrefundable.

The other half is contingent on Microsoft closing the deal once the land is rezoned.

"Roughly the $4.2 million is half of our actual cost to acquire the property," Kuntz said. "We're doing a 50-50 with Microsoft."

The port is taking a risk it won't be reimbursed the full purchase price if rezoning fails.

Kuntz said the risk is lightened by the fact that the numbers work out that the port would only have to resell the land at $24,000 an acre to break even. He said the acreage cost would be a bargain in Chelan County.

There’s also confidence the rezoning will not be problematic.

Port attorney Pete Fraley told commissioners at their Tuesday meeting that the port and other property owners already sent a rezoning application to Chelan County, which is under consideration.

In addition, the county is looking to form an Urban Growth Area (UGA) in Malaga. Fraley said If the UGA is formed, rezoning the land from residential to industrial would be easier.

The port could close on the 173 acre sale to Microsoft by February or March if the port's rezoning application is approved. Fraley said it would take at least a year if the county formed the UGA.

He said the case for rezoning is made stronger with both processes working simultaneously.

Microsoft has agreed to reimburse the port for all other costs in the many purchases the port has made for the planned data center campus.

The port has already secured land for three buildings on 102.5 acres in Malaga as part of Phase 1 of the data centers.

Construction of the first building will start next year.

The port is also preparing a water cooling system for the data centers, building out Malaga Water District’s system. Microsoft has also pledged to reimburse for those costs.