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HomeMy WebLinkAbout5.A.(1) Lease Termination Agreement (SASCO) Redevelopment Commission Staff Report Lease Termination and Settlement Agreement with TCU (410 W. Sample Street) 9/29/09 Since the last meeting several things have occurred. 1. Commissioners may have misunderstood my response to a question about when we last received payment from SASCO. I responded to what I thought was a question about the Redevelopment Loan payments and said not since 2001. I heard some thought my response was concerning the Lease. Accordingly, we have supplied a listing of payments and dates to our Legal Dept. showing all payments due have been received. There is no payment default on the Lease. 2. TCU has submitted a letter exercising the first 5 year renewal option. 3. TCU has informed us they have a signed agreement for the sale of the Studebaker Parts Inventory and related assets. 4. Our Agreement with TCU has been modified to more clearly explain the transaction as a Lease Termination and Settlement Agreement. We could try to deny TCU the renewal option, but it is not clear whether we would prevail. Our Legal Department believes a settlement is appropriate. 5. The Agreement now includes the amount to be paid of $686,000. The Lease Termination and Settlement Agreement allow the Redevelopment Commission to achieve a number of goals. 1. The property at 410 W. Sample St. will be vacated by 2/15/10, allowing demolition to proceed on schedule and combined with Underground Pipe & Valve to achieve cost efficiencies. 2. This will keep Ignition Park on track to be available for new development in 2011. 3. The Studebaker Parts Inventory will be preserved and continue to be available for owners of Studebaker cars. 4. The Parts business will remain in South Bend, the home of Studebaker. The cost of this Settlement Agreement is $686,000. As noted above we could contend TCU’s right to renew the Lease, but the outcome is uncertain. If we did not prevail our conservative estimate of the Economic Value of the Current Lease is $965,680. In addition, the relocation costs could be $700,000 to $1,000,000. This Agreement achieves both ends for a significantly lower amount. Staff recommends favorable consideration by the Redevelopment Commission. LEASE TERMINATION AND SETTLEMENT AGREEMENT THIS LEASE TERMINATION AND SETTLEMENT AGREEMENT (the “Agreement”), is entered into by and between THE CITY OF SOUTH BEND, INDIANA, DEPARTMENT OF REDEVELOPMENT, ACTING BY AND THROUGH ITS REDEVELOPMENT COMMISSION (the "Commission") and TEACHERS CREDIT UNION ("TCU"). RECITALS A.The Commission and Studebaker Autoparts Sales Corp. (“SASCO”) entered into a written Lease Agreement dated January 7, 2000 ("Lease") whereby SASCO leased from the Commission that certain parcel of real estate of approximately 2.8 acres in the City of South Bend, St. Joseph County, Indiana located at 410 West Sample Street (sometimes referred to as 414 West Sample Street), and a structure thereon known as the Studebaker Engineering Building, or Building #92, (collectively the "Premises") for an initial term of ten (10) years, commencing January 7, 2000 and with an option to renew the Lease for two (2) additional five (5) year terms for that rent and other consideration set forth in the Lease. B.TCU provided certain loans to SASCO (the “Loans”) secured by, among other things, a collateral assignment of the Lease (the “Collateral Assignment”) and a security interest (the “Security Agreement”) in certain personal property of SASCO (the “Assets”) (the Collateral Assignment and the Security Agreement are sometimes hereafter referred to collectively as the “Security Documents”). C.SASCO defaulted on the Loans and TCU has enforced its rights pursuant to the Security Documents and has purchased the Assets at Public Sale and taken possession of the Premises. D.TCU is now the owner of the Assets and the tenant under the Lease. E.TCU has provided notice to the Commission of its exercise of the option to extend the Lease for an additional five (5) year period (the “Renewal Term”). F.The Commission has indicated that it wishes to terminate the Lease as of February 15, 2010 in order to demolish the building located on the Premises and may dispute that the Lease can be extended for the Renewal Term. G.TCU has entered into an agreement to sell the Assets to a purchaser who has indicated that it would move the Assets to a different location in South Bend and continue the sale of the Assets as a South Bend business. H.The Commission has been advised that the total cost of the relocation package associated with the move of the Assets and termination of the Lease could far exceed the consideration provided herein. I.TCU is willing to terminate the Lease prior to the expiration of the Renewal Term subject to the terms of this Agreement and the payment of the consideration provided herein. J.Accordingly, in the interest of avoiding the uncertainty and expense of litigation, preserving the Assets in South Bend, and to definitively determine the limit of the Commission’s responsibility and/or liability regarding the termination of the Lease and the relocation of the Assets, TCU and the Commission desire to amicably settle and resolve all matters between them regarding the Lease and the relocation of the Assets. NOW THEREFORE, THE PARTIES AGREE: 1.The above recitals to this Agreement are true and correct and made a part hereof as if set forth verbatim herein. 2.The Commission shall pay to TCU, upon execution of this Agreement, the sum of Six Hundred Eighty-Six Thousand Dollars ($686,000.00) (the “Settlement Payment”). 3.Upon execution of this Agreement and the payment of the Settlement Payment, TCU agrees that all of its rights, benefits and/or privileges relating to the relocation of the Assets shall terminate and TCU hereby releases the Commission from any further liability regarding same. 4.Upon execution of this Agreement and the payment of the Settlement Payment, the parties agree that all rights, benefits and privileges accruing to both TCU and the Commission pursuant to the Lease shall terminate as of 12:00 o’clock midnight, local time, February 14, 2010 unless extended in writing by both parties (the "Termination Date") and, providing the conditions hereof are satisfied, TCU and the Commission shall each be relieved of all respective liabilities and obligations under the Lease upon the Termination Date. 5.TCU agrees to quit, surrender and vacate the Premises on the Termination Date. TCU shall deliver the keys to and relinquish any right of possession of the Premises and the Commission shall accept same as of the Termination Date. 6.In partial consideration of this Agreement, (i) all defaults of the Lease occurring prior to the date of the execution of this Agreement shall be deemed waived by the Commission; (ii) TCU shall have no obligation to pay rent accruing prior to the Termination Date; and (iii) any renewal and notice of renewal required pursuant to the Lease to assure occupancy of the Premises by TCU until the Termination Date shall be deemed to have been appropriately and effectively made. 7.Also, as partial consideration of this Agreement, TCU commits to using all commercially reasonable efforts to market and sell as much of the Assets comprising the Studebaker parts inventory and related materials as can be reasonably accomplished prior to the Termination Date. 8.TCU shall otherwise comply with all obligations owing to the Commission under the Lease through the Termination Date except as otherwise specifically set forth herein, and further subject to the following: (i) TCU shall have no obligation to construct, or make repair of, any improvements at or to the Premises; (ii) TCU shall have no obligation to comply with - 2 - building, zoning, health or fire codes, laws, statutes or ordinances if the conditions which would otherwise be the source of such violations existed on the date of the execution of this Agreement; and (iii) TCU shall assume no liability including, without limitation, environmental liability, arising from any condition existing on the Premises on or before the date of the execution of this Agreement. 9.The Commission shall be defended and held harmless by TCU from any liability or claims for damages to any person or any property in or upon the Premises arising from the actions of TCU, its agents, employees or invitees unless caused by the negligent or willful acts of the Commission or its agents, employees or invitees. TCU shall pay all expenses incurred by the Commission in defending any such claim or action including, without limitation, the attorney’s fees of the Commission and any judgment or court costs. 10.The parties acknowledge and agree that time is of the essence of this Agreement. 11.Except as provided herein, all other terms, conditions and provisions of the Lease shall remain in full force and effect until TCU quits, surrenders and vacates the Premises and delivers the keys thereto upon the Termination Date upon which event the Lease shall terminate, become null and void and be of no further force and effect. 12.Upon the Termination Date and TCU having quit, surrendered and vacated the Premises, the Commission shall have free and full access to the Premises and shall be entitled to use or dispose of any property or fixtures remaining within the Premises as it, in its sole discretion decides, all without obligation of any sort to TCU. 13.This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assignors. - 3 - IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date written next to their respective signatures below. “COMMISSION” CITY OF SOUTH BEND, DEPARTMENT OF REDEVELOPMENT ______________________________ Signature ______________________________ Printed Name and Title South Bend Redevelopment Commission Dated: ____________________________ ATTEST: ______________________________ Signature ______________________________ Printed Name and Title South Bend Redevelopment Commission “TCU” TEACHERS CREDIT UNION Date: By: Its: SBDS02 MDH 394692v5 - 4 -