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HomeMy WebLinkAbout6A(7)& AJ 6) Sours e`�o Community & Economic Development 1200 County -City Building, 227 West Jefferson, South Bend, Indiana 46601 -1830 Phone 574/235 -9371 Fax 574/235 -9021 To: Redevelopment Commission From: Tamara Nicholl- Smith, Director, Downtown Business Recruitment Subject: Lease Proposal for Imagine That! (Holiday Pop -Up Program Participant) Date: May 5, 2011 Staff in the Community and Economic Development Department has reviewed the lease situation for 117 S. Michigan Street and is recommending the following: Background: • 117 S. Michigan is a 1,100 SFT storefront that has not been rented since the yoga place moved out. • The asking price for storefronts in the Michigan Street Shops building is $11.50 PSF, plus CAM of $4.5 PSF for a total PSF price of $16 plus utilities, however the most recent lease for 131 S. Michigan was signed at a reduced rate of $4.49 PSF for rent plus $4.92 in CAM for a total of $9.41 PSF. • The building currently has 3 unrented spaces 123, 121, and 117 S. Michigan. • Regardless of whether or not 117 S. Michigan is occupied, the city has a fixed cost equal to the CAM $4.50 PSF x 1,100 = $4,950 per year or $412.50 per month). The current proposal below promises to, at the very least, cover the fixed expenses of the building and works towards doing more than this by the end of the lease term. Assumptions: • The building owner will need to pay the fixed costs regardless of whether or not the space is occupied • The goal of the building owner, is not only to make money on the building, but also to help enliven the downtown by bringing the types of businesses that are in line with the retail plan for downtown • The downtown is better off with Imagine That! in the space than without them in the space • Even at paying utilities and 10 %, Imagine That! will need to reach a certain sales threshold to make this venture a profitable one for their business. In this way, the interests of the property owner and the business owner are tied together. What We Do Today Makes A Difference! The Proposal: 1. The terms of this proposed lease are 12 months. 2. The proposed start date is May 1, 2011 3. Imagine That! will pay all the utilities on the space 4. Imagine That! will pay 10% of their gross sales. This 10% of total sales will be considered rent and CAM. There will be no cap, thus while the property owner takes a risk on the low end, the business owner takes a risk on the high end. 5. At the end of the 12 month term, Imagine That! will have the option to continue their lease term at terms no less than the terms for the lease for 131 S. Michigan Street'. 6. Imagine That! agrees that they will work to achieve average monthly sales goal of $4,800 per month (based on approx. $200 per day in 6 days a week in a 30 day month) within the first 6 months of the lease (This will cover the fixed cost of the CAM as the payments would reach $480). 7. Imagine That! agrees that they will work to achieve a monthly sales goal of $7,200 per month (based on approx. $300 per day in 6 day week in a 30 -day month) during the second 6 months of the lease. The payments to the property owner would reach $720 per month. 8. The landlord will understand that sales numbers fluctuate, and will look at the overall picture to see if overall payment has averaged to at least $600 per month. This average will be based on the performance from 10 out of the 12 months. 9. If conditions 6, 7, and 8 are not met, the building owner has the right to terminate the lease with a written letter and 30 -day notice. 10. We can, if the commission desires it, also include a 30 -day notice to vacate clause in the case that the following conditions are met: if, the broker is able to first fill at least one of the two larger available spaces (121 or 123 S. Michigan) and then is able to produce a tenant for 117 S. Michigan that has signed a 2 -year lease and put a deposit down for the space at a minimum of $1,163.14 per month or $13,957.68 annually. Staff seeks approval from the Redevelopment Commission to work through the details of a 12 -month lease based upon the above proposal. ' The space at 131 S. Michigan is approximately 1,530 square feet, which at $9.41 including CAM brings their monthly rent to $1,200 per month or $14,400 annually (includes rent and CAM). If these same terms were applied to 117 S. Michigan this would bring in a minimum of $826.00 per month or $10,0351 annually (includes rent and CAM). The purpose of this clause is not to set the lease rate, but to set a bottom floor, below which we would not negotiate going forward. What We Do Today Makes A Difference!