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Chamber Lease Review and Discussion December 7, 2009 Page 2 the tax burden for the leased space shift to the Chamber, the Council could phase this in over two years, thus the rent would increase 4% in 2010 and 4% in 2011, with increases in the ensuing years of the agreement tied to the CPI. Comparable Lease Rates The City has been advertising space at the Community Center at $10 per square foot. In looking at other facilities, $10 per square foot looks quite low, however the spaces at the Community Center are not considered prime, since the offices are very small and they are hidden from view. This is undoubtedly one of the reasons the space remains vacant, that and our limited marketing of the space. Economic Development Specialist Heidi Steinmetz put together a spreadsheet with information regarding other cities which lease space in their community centers. Most of the cities contacted do not rent out space in their community centers, so Mounds View is somewhat unique in that regard. The other two communities are New Brighton and Plymouth, both of which charge more for their space. Ms. Steinmetz also provided some information on non-governmental available office spaces, since it would be these types of buildings that the Chamber would likely consider. The comps are attached, but a summary is provided below by community: Arden Hills: $8 - $19 per square foot Fridley: $8 - $22 per square foot New Brighton: $7 - $20 per square foot Shoreview: $6 - $16 per square foot While there is a wide variety of variables which dictate the cost and value of the office spaces listed above, it seems that average list rates are in the $12 -$14 per square foot range. Clearly, the Chamber could find cheaper space if it so desired, however the lowest of the lease rates advertised are all “net” rates, meaning the tenant agrees to pay all expenses associated with the space, such as utilities, repairs, insurance and taxes. The Mounds View space is presently leased at a “gross” rate, since the City covers all costs, including taxes. What happens if a new lease is not executed before the end of the year? The City and Chamber have been working on a renewal agreement for their leased space at the Community Center, however it appears unlikely that a new agreement will be approved and executed bore January 1, 2010. In that event, Article 23 of the lease would be enacted, which states, “Should Tenant continue to occupy the Premises, or any part thereof, after the expiration or termination of the Term, whether with or without the consent of landlord, such tenancy shall be from month to month and Tenant shall pay landlord the rent last in effect plus three percent.” The Chamber understands this provision would be enacted if such an event were to occur.