Agenda - Council Work Session - 05/14/2024

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2. 2. CC Work Session Meeting Date: 05/14/2024 Primary Strategic Plan Initiative: Not Applicable Information Title: Anoka County License Center Lease Amendment Purpose/Background: Information The City of Ramsey began leasing space to Anoka County for the License Center July 1, 2010 for a five-year term. The lease included a tenant option to renew for a five-year term and then two mutual additional five-year terms,bringing the final termination date as late as June 30, 2030. The financial terms of the lease include an annual base charge on 2,220 sq. ft. of office space that increases by 2% annually thereafter. For the 2023-2024 lease year, this equals $36,991.92 or$16.81/sq. ft. Additionally, CAM charges are applied against the office space and 466 sq. ft. of shared space for operating expenses. CAM is adjusted annually as determined by the City. For the 2023-2024 lease year, this equals $26,375.92 or$9.89 per sq. ft. The County is requesting an amendment to the terms of the lease regarding the length and financial terms, along with some signage requests. The signage is at the County's expense,but they expressed concern about visibility due to the transit skyway blocking existing signage. The following represents the other proposed lease amendments: •Extend the lease out to June 30, 2040 through five mutually agreed three-year terms. Their other lease agreements include three-year terms, and they would like consistency across their leases. •Reset per sq. ft. base rent to $14/sq. ft. or$30,800 annually, then escalate annually by $0.25 thereafter. The basis of the request largely relates to the fact that no improvements have been made since the build out was done. •Accepting the proposed base rent reduction would equate to a$6,191.92 revenue reduction. Future increases would be nearly 2%the first year,but then the percentage increase would be lower thereafter. •Eliminate pro rata share of CAM charges on the shared lease space(466 sq. ft.) CAM would remain on their 2,200 sq. ft. of office space. The current CAM rate is $9.89/sq. ft. or$26,375.92 annually. •Accepting the proposed CAM charge reduction would equate to a$4,609 revenue reduction initially, but be larger as costs increase in the future. Lastly,the County has expressed more informally a desire to see the flooring replaced due to wear and tear and some minor safety improvements regarding the door way leading back to the staff side of the counter. A suggestion has also been shared to add a handicap push button door opener to their space. Some general retail space leasing costs in Ramsey are $19.50-25/sq. ft. with CAM typically at$12-15/sq. ft. Under our scenario, as a tax-exempt parcel, the CAM is estimated at$8-12/sq. ft. Some recent new construction lease rates in Ramsey are closer to the $40/sq/ft. total including CAM charges. Reactions •Having the License Center in Ramsey brings visitors to the City and offers a necessary service in close proximity to our residents and businesses.