HomeMy WebLinkAboutItem 06.nDecember 9, 2014 Item No.
APPROVE LEASE AMENDMENT WITH HERITAGE COMMONS, LLC
FOR LAKEVILLE LIQUOR STORE HERITAGE
Proposed Action
Staff recommends adoption of the following motion: Move to approve a lease
amendment with Heritage Commons, LLC for Lakeville Liquor Store Heritage.
Passage of this motion will result in a four year extension of our existing lease that is
due to expire July 1, 2015.
Overview
The Lakeville Liquor Store Heritage lease agreement with Heritage Commons, LLC is
due to expire on July 1, 2015.
The staff and the Liquor Committee worked diligently in pursuing a favorable four year
lease extension. This agreement reduces our base rent by $33,456 annually, provides
the city the one month of free base rent, caps the CAMA costs to no more than a 2%
increase annually, and provides $36,000 for tenant improvements.
Staff is recommending approval of this four year amendment to our Heritage Commons,
LLC lease agreement.
Primary Issues to Consider
Compared to the current lease agreement, what will the anticipated savings
be in the four year period?
Why is the amended lease extension for a four year period?
When will the tenant improvements take place?
Supporting Information
• Lease analysis over the four year term
: - A...A J -A-, .0� � 0 .' r -
Brenda Visnovec, Liquor Operations Director
Financial Impact: $(176,559) Budgeted: Y/N Y Source:
Related Documents (CIP, ERP, etc.):
Notes:
STAFF ANALYSIS OF PRIMARY ISSUES
APPROVE LEASE AMENDEMENT WITH HERITAGE COMMONS, LLC
FOR LAKEVILLE LIQUOR STORE HERITAGE
• Compared to the current lease agreement, what will the anticipated savings be
over the four year period?
The lease analysis attached, reflects an anticipated savings of $176,559 over the four
year period. This total is inclusive of the one month free base rent as well as the
$36,000 tenant improvement allowance.
• Why is the amended lease extension for a four year period?
City staff felt that a short term lease would provide adequate time to analyze the market
and prepare for the possible construction of a liquor store at the County Road 70
location. The four year term will also provide time for the City to analyze all available
needs and opportunities within the downtown vicinity.
• When will the tenant improvements take place?
While the lease amendment is not effective until July 1, 2015, City staff requested and
was granted a revision in the amendment that would allow tenant improvements to
begin immediately following execution and Council approval of the amendment.
February is typically a slower time of year for the Liquor Operations and a good time to
receive favorable bids from contractors seeking interior work during the winter months,
making this the most opportune time for remodeling.
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LL a
FIRST AMENDMENT TO LEASE
(City of Lakeville — Heritage Commons)
THIS FIRST AMENDMENT TO LEASE ("Amendment") is dated effective and for identification
purposes as of December 15, 2014, and is made by and between HERITAGE COMMONS, LLC, a
Minnesota limited liability company ("Landlord"), and CITY OF LAKEVILLE, a Minnesota municipal
corporation ("Tenant").
RECITALS:
WHEREAS, Landlord and Tenant entered into that certain Agreement of Lease dated February 16,
2000 (the "Lease"), pertaining to the premises currently comprised of a total of approximately 8,859
rentable square feet of space ("Premises' ), located at Highway 50 and Dodd Boulevard, Lakeville,
Minnesota within the Heritage Commons Shopping Center ("Property"); and
WHEREAS, Landlord and Tenant desire to enter into this Amendment to extend the term of the
Lease and provide for certain other matters as more frilly set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein,
the parties agree that the Lease shall be amended in accordance with the terms and conditions set forth
below.
1. Definitions. The capitalized terms used herein shall have the same definitions as set forth
in the Lease, unless otherwise defined herein.
2. Extension. The parties hereby acknowledge and agree that the term of the Lease expires
on June 30, 2015. However, Landlord and Tenant desire to extend the term of the Lease on the terms and
conditions set forth herein. Accordingly, subject to the terms and conditions set forth in this Amendment,
the term of the Lease is hereby extended for an additional period of forty-eight (48) months ("Extension
Term"), commencing on July 1, 2015, and expiring on June 30, 2019. The parties hereby acknowledge and
agree that Tenant shall have no further options or rights to renew or extend the Lease. Except as otherwise
specifically stated herein, Tenant hereby accepts the Premises in its present "as -is" condition.
3. Base Rent. During the Extension Term, Tenant shall pay to Landlord Base Rent in full
and without offset or demand, provided that such Base Rent shall be payable in monthly installments as
follows:
Dates Monthly Installment
07/01/15 — 07/31/15 $ 0.00*
08/01/15 — 06/30/19 $11,812.00
* Such abatement shall apply solely to payment of the monthly installments of Base Rent and shall not be
applicable to any other charges, expenses or costs payable by Tenant under the Lease or this Amendment,
including, without limitation, Tenant's obligation to pay its pro rata share of Operating Costs, real estate
taxes, and its utilities. Landlord and Tenant agree that the abatement of rental and other payments
contained in this Section is conditional and is made by Landlord in reliance upon Tenant's faithful and
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continued performance of the terms, conditions and covenants of this Amendment and the Lease and the
payment of all monies due Landlord hereunder. In the event that Tenant defaults under the terms and
conditions of the Lease or this Amendment beyond any applicable notice and cure period, all
conditionally abated rental shall become fully liquidated and immediately due and payable (without
limitation and in addition to any and all other rights and remedies available to Landlord provided herein
or at law and in equity).
Except as otherwise set forth herein, Base Rent shall be payable pursuant to Article 3 of the Lease. During
the Extension Term, Tenant shall continue to pay any and all additional rent, including, without limitation,
Tenant's pro rata share of Operating Costs and Taxes, and other amounts due and payable under the Lease.
Notwithstanding the foregoing, Tenant's pro rata share of Operating Costs for the first year of the Extension
Term shall not exceed Twenty -Four Thousand Eight Hundred Eighty -Eight and No/100 Dollars
($24,888.00). In addition, for the purpose of determining Tenant's pro rata share of Operating Costs,
"controllable" Operating Costs shall not increase by more than two percent (2%) per year on a
cumulative and compounded basis (for example, if controllable Operating Costs are $3.00 / rsf in year
one of the Extension Term, then they shall not exceed $3.06 in year two, $3.12 in year three, $3.18 in
year four and so on). It is understood and agreed that controllable Operating Costs shall not include
snow, ice and trash removal, utility expenses, taxes, management fees that are based on a percentage of
revenue or expenses (to the extent such percent is not increased), insurance premiums, extraordinary
repairs, costs incurred to comply with any governmental requirements, improvements relating to energy
conservation or environmental initiatives, and any other cost beyond the reasonable control of Landlord.
The foregoing cap shall not be applicable during the first year of the term during any extension or
renewal of this Lease (i.e., such cap shall be "reset" during any further extension or renewal of this
Lease).
4. Brokers. Tenant hereby represents and warrants to Landlord that Tenant has not dealt with
any real estate brokers or leasing agents, and Landlord hereby represents and warrants to Tenant that
Landlord has not dealt with any real estate brokers or leasing agents in the procurement or negotiation of
this Amendment. No commissions are payable to any party claiming through Tenant as a result of the
consummation of the transaction contemplated by this Amendment. Tenant hereby agrees to indemnify and
hold Landlord harmless from any and all loss, costs, damages or expenses, including, without limitation, all
attorneys' fees and disbursements by reason of any claim of or liability to any other broker, agent, entity or
person claiming through Tenant and arising out of or in connection with the negotiation and execution of
this Amendment.
5. Refurbishment Improvements. Tenant may make certain mutually acceptable
leasehold improvements to the Premises pursuant to Article I 1 of the Lease at Tenant's sole cost and
expense ("Refurbishment Improvements"). Landlord shall reimburse to Tenant the lesser of (i) Thirty -
Six Thousand and No/100 Dollars ($36,000.00) or (ii) the actual cost of the Refurbishment
Improvements ("Refurbishment Allowance"), To qualify for reimbursement, such Refurbishment
Improvements must be constructed and a written request for reimbursement must be delivered to
Landlord before December 31, 2015 (and any remaining portion of the Refurbishment Allowance shall
be deemed to be forfeited). Tenant many begin constructing the Refurbishment Improvements and
drawing upon the Refurbishment Allowance upon mutual execution of this Amendment. In the event that
Landlord constructs the Refurbishment Improvements, Tenant hereby agrees to (i) allow Landlord, its
agents, employees or contractors to the Premises in order to construct the Refurbishment Improvements,
(ii) move furniture and other items so as to allow Landlord to construct the Refurbishment
Improvements, (iii) accept any and all disturbances in connection with such construction by Landlord or
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Landlord's agents, employees or independent contractors and (iv) pay any cost overages of the
Refurbishment Improvements on demand. In the event that Tenant constructs the Refurbishment
Improvements, Landlord shall reimburse to Tenant the Refurbishment Allowance (or applicable portion
thereof) within thirty (30) days following Landlord's receipt of a written request therefor, which request
shall include applicable lien waivers, fully paid invoices, "as built" drawings (to the extent applicable)
and any and all other documentation as Landlord may reasonably require.
6. Energy and Environmental Initiatives. Tenant shall cooperate with Landlord in any
programs in which Landlord may elect to participate relating to the Building's (i) energy efficiency,
management, and conservation; (ii) water conservation and management; (iii) environmental standards
and efficiency; (iv) recycling and reduction programs; and/or (v) safety, which participation may include,
without limitation, the Leadership in Energy and Environmental Design (LEED) program and related
Green Building Rating System promoted by the U.S. Green Building Council, as well as the Energy Star
program promoted by the U.S. Environmental Protection Agency and the U.S. Department of Energy.
7. Miscellaneous. With the exception of those matters set forth in this Amendment, Tenant's
leasing of the Premises shall be subject to all terms, covenants and conditions of the Lease. In the event of
any express conflict or inconsistency between the terms of this Amendment and the terms of the Lease, the
terms of this Amendment shall control and govern. Except as expressly modified by this Amendment, all
other terms and conditions of the Lease are hereby ratified and affirmed. This Amendment may be executed
in any number of counterparts, and delivery of any counterpart to the other party may occur by electronic or
facsimile transmission; each such counterpart shall be deemed an original instrument, but all such
counterparts together shall constitute one agreement. An executed Amendment containing the signatures
(whether original, faxed or electronic) of all the parties, in any number of counterparts, is binding on the
parties. The parties acknowledge that the Lease is a valid and enforceable agreement and that Tenant holds
no claims against Landlord or its agents which might serve as the basis of any other set-off against accruing
rent and other charges or any other remedy at law or in equity.
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IN WITNESS WHEREOF, the foregoing First Amendment to Lease is dated effective as of the date
and year first written above.
LANDLORD:
HERITAGE COMMONS, LLC,
a Minnesota limited liability company
By: —
Name:C-
Title:
TENANT:
CITY OF LAKEVILLE,
a Minnesota municipal corporation
By:
Name:
Title:
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