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Our IVlssion: To work together to responsibly grow our conununity, and to provie quality, cost-effective, an efficient government services
<br />CC Regular Session
<br />Meeting Date: 01/14/2014
<br />By: Jo Thieling, Administrative Services
<br />Information
<br />Title:
<br />Consider Request for Lease Amendment; Request of M & W Holding Company, LLC, Wiser Choice Liquor, 14590 Armstrong Boulevard NW
<br />Purpose/Background:
<br />Purpose: The purpose of this case is to review a request from Wiser Choice Liquor for an amendment to his lease at 14590 Armstrong Boulevard NW, to be
<br />changed to a month -to -month lease basis.
<br />Background: A lease was entered into, effective March 1, 2013, by and between the City of Ramsey ("Landlord") and M & W Holding Company, LLC
<br />("Tenant"). The lease term is for two years, commencing March 1, 2013 and expiring February 28, 2015. The lease states that at any time during the term, the
<br />landlord may terminate the lease upon 90 days prior written notice to tenant after landlord has approved a new road project for Armstrong Boulevard NW and
<br />US Highway 10, requiring the removal of the off -sale liquor store presently on the premises. The lease also states that at any time during the lease term, the
<br />tenant may terminate the lease upon 90 days prior written notice to the landlord upon tenant's receipt of a certificate of occupancy to occupy a newly
<br />constructed off -sale liquor store on any real property owned by the City and sold to tenant or tenant's purchase of an existing off -sale liquor store located in
<br />Ramsey, where tenant will relocate its off -sale liquor store business presently conducted on the property.
<br />The tenant(s), Jeff and Deann Wise, have sent a written request, that on February 28, 2014, at the end of the first year of the lease, that it be changed to a
<br />month -to -month basis. Mr. Wise outlines the following reasons for his request: He understands it is a strong possibility that the Armstrong overpass construction
<br />project may start in the second half of 2014; Mr. Wise is working to acquire a piece of property in Ramsey; however, it is a slow process; and he states that he is
<br />"in dire straits without being able to purchase a piece of real estate from the City of Ramsey, nor being able to purchase an existing off -sale liquor store located
<br />in Ramsey" (as per the lease agreement).
<br />Attached for Council review is the written request/letter from M & W Holding Company, LLC, Jeff and Deann Wise, as well as the Commercial Lease entered
<br />into my M & W Holding Company, LLC.
<br />Observations/Alternatives:
<br />Under the current lease, the tenant is obligated to pay $3,440 per month in rent, plus taxes. Current 2014 taxes are $9,619.56 per year ($801.63 per month). The
<br />City needs to notify the County by June 30, 2014 that the property will be going tax-exempt, or it may be liable for full 2015 taxes.
<br />The potential loss of revenue, and payment of taxes, are the two primary issues if the tenant terminates early. On a month -to -month tenancy, starting February
<br />28, 2014, the tenant could potentially terminate eleven months early with a 30-day notice. If the tenant served notice to terminate April 1, 2014, for example
<br />(worst case), the City would lose eleven months of rent ($37,840), plus would be responsible for nine months of taxes ($7,215). The total loss would be $45,055.
<br />This assumes that the property would not be needed for the road prior to the lease expiring.
<br />Options for the City include:
<br />1) Approve amending the lease to allow a month -to -month tenancy as requested by the tenant.
<br />Comments: This option would give the tenant the most flexibility, but would result in the most revenue loss for the City.
<br />2) Approve a modified termination provision that would allow a 90-day termination, but eliminate the requirement that the tenant purchase city -owned property,
<br />or an existing liquor store in the City. The tenant would need to be responsible for all current year taxes.
<br />Comments: This option gives the tenant additional flexibility, but reduces the City rent reduction by two months and provides for the payment of current year
<br />taxes.
<br />3) Keep the lease agreement in place, as is.
<br />Comments: This option would maximize the potential revenue for the City, but would create the biggest liability for the tenant.
<br />Funding Source:
<br />Lease proceeds are deposited in the City's Public Improvement Revolving (PIR) Fund.
<br />Recommendation:
<br />Staff recommends approval of a modified termination provision that would allow a 90-day termination, but eliminate the requirement that the tenant purchase
<br />city -owned property, or an existing liquor store in the City. The tenant would need to be responsible for all current year taxes.
<br />Action:
<br />Motion to direct staff to execute a modified termination provision of the lease, subject to the City Attorney's approval, that would allow a 90-day termination,
<br />but eliminate the requirement that the tenant purchase city -owned property or an existing liquor store in the City, and make the tenant responsible for all current
<br />year taxes.
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