07-13-15 Common Council Meeting Minutes

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REGULAR MEETING JULY 13, 2015 Councilmember Davis Jr. — Can you repeat that again about the amount of time that they are looking for to leasing and what happens if it doesn't lease? Chris Fielding responded the redevelopment commission would enter in to a five (5) year lease which would be declining. So they would pay 100% of the rent the first year then it would decrease 20% every year up to five (5) years. In the sake of the rent we would start at $2.79 per sq. foot which is noted on the schedule, which would be a great distribution building. In the fifth year we would be paying $0.56 cents sq. ft. on the building. We would feel like we created a deal where there is enough incentive for the developer that they are not making any money on the deal until they get a third party tenant into the building but it also allows us to have a building to attract new businesses, which is one of biggest challenges in the community right now. We also have the petitioners here if you have any questions. Petitioner: Richard Deal, Barnes & Thornburg 100 N. Michigan St., South Bend— I am pleased to be joined with Jeremy McClements from Bradley Company who is assisting GLC Portage Prairie with building projections and market research study for this project as well. As Chris shared two resolutions from GLS Portage Prairie perspective first approval for a Master Lease and second designation of the comer of Dylan Drive and Adams Road as economic revitalization area as purposes of tax abatement. As the Council is well aware, the core aspect of this comes from encouragement from the Indiana Economic Development Corporation, the state, as well as success stories through the state supporting private /public partnerships to build spec buildings to attract tenants to our community who might otherwise be ranking us to go elsewhere. The proposed master lease with your approval tonight is a gross lease. The rent would be paid solely on unoccupied space which is our total gross amount. There is no flow through expenses for maintenance, taxes, repairs, insurance or otherwise. As Chris mentioned the obligation for the lease rate declines 20% per year over the five (5) year period and would only apply to the unoccupied space. We think that this master lease with the abatement is an ideal tool to create an incentive that is attractive not only as a spec building but beneficial to the tenants that choose this as a home for potential growth. We appreciate your support and will answer any questions that you may have. Councilmember Davis Jr. — I go back to my initial question, what is the requirement to filling the building, is there a requirement for filling the building? Petition Richard Deahl responded there is not a requirement. The lease is the master lease, where the developer would master lease this to the Redevelopment Commission with the incentive being to get a tenant as soon as possible. As the project is upside down until that happens. The projections are with the master lease in place and construction under way, this would enable the city to help support this effort and the developer to market the space to aim for pre - leases during construction. The expectations is to have the building fully occupied within 24 months of completion. Councilmember Davis, Jr. replied thank you for that, and I am going to go back to my initial question. We understand the city of South Bend is great on location and infrastructure, that we are prime for a distribution hub. Our airport blends that ability as well as with the federal foreign trade zone. With that being said, why is it so important for the city to get into a lease agreement such as this when the dynamics suggest that it would be a win anyway? Chris Fielding responded we know it's going to be a win. The hardest part for the city and the developers are that banks aren't that confident in speculative building in any market in the country right now, when you need a credit tenant lease. We become that credit tentative lease, the bank was willing to loan their money to Great Lakes Capital, they prefer a ten (10) year lease but we negotiated a five (5) year master lease and those things were acceptable. It is not a matter of the Redevelopment Commission needs to step in because South Bend is not a hot market but it is a matter of getting the banks engaged. That's not a South Bend issue that's a national issue. I also want to point out on your first question, we built into the master lease that the Great Lakes Capital will no longer be allowed to build any custom built suites for another company or move another company into an additional building until they justify why the tenant would not be appropriate for this spec. The motivation is built in to get this building filled and get our lease canceled. Councilmember Davis Jr. inquired what devices are being used to attract these employers to this building. The reason why I ask this as there is a number of buildings that are in that area that haven't been filled in a number of years and are still not filled because they too large. What are we doing? Chris Fielding replied there is 2,400,000 sq. ft. available in the community right now of that 1,000,000 of that is the former AM General plant on the south side. The challenge with that is that distributors do not want low ceilings below 30 foot. Councilmember Davis stated there was another spec building off of 21