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l -7 <br /> MEMORANDUM <br /> DATE: July 15, 1996 <br /> TO: Mike Mornson, City Manager <br /> FROM: Roger Larson, Finance Director <br /> ITEM: SAV H LEASE ANALYSIS <br /> Per your request, I have reviewed the lease proposal from the Schoening Group for SAV H. <br /> I have attached a copy of my analysis which outlines the options and indicates the savings for <br /> contributing $100,000 or $200,000 in HRA Project Funds. <br /> Based on my review, I have listed the different alternatives of the proposal and rated them from <br /> a financial prospective. <br /> • Most Favorable <br /> Base rental agreement with a $200,000 contribution for Leasehold Improvements. The rent <br /> reduction totals $390,000 and a net savings of $190,000 over the life of the lease. In addition <br /> to savings in rent, it allows St. Anthony to lock in rent costs which are close to the amount of <br /> rent that SAV II is paying now. <br /> If inflation and the Consumer Price Index continues to climb, a look at these costs per square <br /> foot in ten years would most likely be viewed as extremely low. <br /> Considerably Favorable <br /> Base rental agreement with a $100,000 contribution for Leasehold Improvements. The rent <br /> reduction totals $180,000 and a net savings of $80,000 over the life of the lease. As with the <br /> previous option, the locking in of these rent costs between $8.00 to $9.00 per square foot will <br /> undoubtedly be looked at in ten years as very low. <br /> Somewhat Favorable <br /> Base rental agreement (Option - B) allows for a reduction of rent costs in the early years of the <br /> • lease and increases in years 6 - 15. The implementation of higher rent payment during the later <br /> years of the lease has less affect on profits as inflation usually rises sales in equal proportions. <br />