ACTION REQUESTED:
Title
Communication from the City Manager with a Request to Approve the SECOND AMENDMENT to the LEASE AGREEMENT for the ROCK ISLAND DEPOT located at 212 SW Water Street (1st District).
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BACKGROUND: A Master Lease has governed the occupancy of the Rock Island Depot, City owned property at 212 SW Water Street, since August 1979. The original lessee, River Station Square Company, was succeeded by Mathers Company. In 1998, the lease was amended for the first time. In 2000, with the consent of the City, the lease was assigned to River Station LLC, a local entity managed by Kert Huber. The lease has a 20-year term plus three, 10-year options that are executable exclusively by the Lessee. The original term ended in 1999; the first two options have been executed and the lease currently runs through 2019. If executed, the final option would take the lease through 2029.
Article II of the lease outlines how the City is to be paid for the use of its property. Under the current agreement, the Lessee pays the City the equivalent of 2% of gross sales made within the building, minus certain expenses. This is paid by the tenants (sub-lessees) in addition to their rent to Mr. Huber. Over the past decade, this 2% arrangement has been a considerable barrier to attracting and keeping tenants within the building as well as a complicated process for City staff. Presently, the only tenant is Martini's, a bar located in the northeast corner of the building. The remainder of the building, which is generally divided into two separate restaurant spaces plus a banquet/meeting room, have been vacant since February 2009. According to Mr. Huber, a variety of potential businesses have investigated the building but have declined occupancy because of the 2% provision. By way of example, a fair standard rent for the 2000 square foot restaurant space in the northwest portion of the building would be $12/square foot ($24,000 per year). If a business ren...
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