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05. Balsco Lease - PECDD Building► fifi a I► Il O u 1 Incorporated 1892 Planning, Economic & Community Development Department P.O. Box 1997 Kalispell, MT 59903-1997 TO: Bruce Williams, City Manager FROM: Lawrence Gallagher, PECDD, Director DATE: April 20, 1995 248 Third Avenue East (406) 758-7740 (406) 758-7739 (office fax) (406) 758-7758 (City Hall fax) SUBJECT: PECDD Office Space Lease with BALSCO - REQUEST FOR COUNCIL CONSIDERATION AND AUTHORIZATION TO NEGOTIATE OR APPROVE The lease on 248 Third Avenue East expires April 30, 1995. The owner is "willing to accept" $9.00/SF/yr. for the main floor, and $2.00/SF/yr. for the basement storage. This represents a monthly lease payment of $2,272.16 or an annual lease payment of $27,266.00 for 1995/1996, increasing to $2,390/mo. or $28,689.00 annually beginning May 1, 1996 through April 30, 1997. The following table shows the history of the City's lease with Balsco. The primary term was for two (2) years, commencing on May 1, 1991, and ending on May 1, 1993. TERM FIXED RENT/MO. FIXED RENT/YR. %CHANGE 1991/1993 $1,570.83 $18,850 1993/1994 1,665.00 19,980 5.99 1994/1995 1,715.09 20,581 3.01 Proposed: 1995/1996 2,272.16 27,266 32.48 1996/1997 2,390.75 28,689 5.22 BALSCO has proposed that should the City decide to exercise an option to extend the lease, that rent would escalate by six percent of the prior fixed rent for the primary term. Thus, the rent for a third year would be $30,410, and escalate each year at 6 % unless a new lease term was negotiated. Because of the BALSCO proposal for a dramatic increase in the rent, I reviewed the history of the lease and the measurements used to compute the original rent. According to PECDD records the area of the building was computed on a Gross Square Foot basis using outside wall dimensions. The Gross SF calculation was 2,858.25/SF which translated to a lease rate of $6.59/SF. Utilizing this area computation, current rent computes to $7.20 (not $7.24) per year. M taJ?c.�, Is.; BALSCO LEASE MEMORANDUM April 20, 1995 Page 2 I asked our Building Official to measure the basement area and to remeasure the main floor area on a net usable basis utilizing inside wall dimensions. A schematic is attached indicating there are 2,687 square feet on the main floor and 687.24 square feet in the basement storage area. Utilizing these areas at the proposed rents of $9.00 and $2.00 respectively, the rent would compute to $24,183 and $1,374.48 or $25,557.46/YR. This is $1,709 less than the Balsco's calculation. In any event, I believe the City should negotiate both the rate and term of the lease for a lower rate and a term for only one year with an option to extend. I also recommend the City explore options for future space needs. I cannot recommend that we execute the lease without further discussion and negotiations. When I called for Randy Ogle today, I learned he was out of town for the next three weeks. Everit Sliter was also out of town. I'll attempt to contact Dana Christensen to determine if he can negotiate for the BALSCO partnership. In the interim, the City will be without a lease and will be on a month to month basis. +ti try j111+r1 • ,� �._..�......-...._. ii f 4:. ..n _� .. +.. .:�:1 �t �'..•. Yt10• Y� ,.:-}'ti p .,,'..Ji./ ' d• ,t ._ .-..... �•''N � .• •f• �' r +! ,' .j. /+�i ".�• .1/''. •ins;' �, • �'1] '• t �. �.� ,` 1. _ :'• •�t;i !i_,�•tr �� � t �j;�, ,. •i' , .- 6` e-� _ ..-.� .� - ��`�^'4'/'•C- r . `, flit .�%i. /} il,:'t ,{ i i :,t ;�.� •� �-'i i �'• iy tt ,. ,. ' . � �._.�-_.. �••:._..1 � :!. .;;'. ��,.:• _:' :-��r ,� h';�., .. is " • + '�. - � P t"'-"_"_�'T'1': """'�'� JM . t i �i i ♦ .w�r: r 1 7 /. . i . 'r t 'r .. 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N v co 6- --1 OG N r i.l _,[ C. i x p c� Jt I I 11 t IB�I LINEXHIT . ;;AA 'Crl to 0 cli it It CO -j 15, t C) 24-Apr-95 BALSCO LEASE ANALYSIS - 248 THIRD AVENUE EAST Planning, Economic & Community Development Department Office Space: Primary term - commencing May 1, 1991 TERM/YR RENT/MO RENT/YR. GROSS/S RENT NET/SF RENT % CHAN AREA* GROSS/S AREA* NET/SF (NET/SF) 1991 /1992 $1,570.83 $18,850 2,859 $6.59 2,687 $7.02 1992/1993 $1,570.83 $18,850 2,859 $6.59 2,687 $7.02 0.00% 1993/1994 $1,665.00 $19,980 2,859 $6.99 2,687 $7.44 5.99% 1994/1995 $1,715.09 $20,581 2,859 $7.20 2,687 $7.66 3.01 % TOTAL $78,261 PROPOSED LEASE: 1995/1996 $2,272.16 $27,266 2,859 $9.54 2,687 $10.15 32.48% 1996/1997 $2,390.75 $28,689 2,859 $10.04 2,687 $10.68 5.22% 1997/1998** $2,534.20 $30,410 2,859 $10.64 2,687 $11.32 6.00% COMPUTATION INCL. BASEMENT NET USABLE AREA - 687.24/SF 1995/1996 $2,272.16 $27,266 3,546 $7.69 3,374 $8.08 5.50% 1996/1997 $2,390.75 $28,689 3,546 $8.09 3,374 $8.50 5.22% 1997/1998** $2,534.20 r' f':. 3,546 $8.58 3,374 $9.01 6.00% * The Area computations are for the main floor only ** Proposed lease option to renew COST OF OCCUPANCY: GAS, ELECTRIC, WATER GAS/ELEC WATER 1991 /1992 $2,451.00 $346 2,859 1992/1993 $2,867.94 $738 2,859 1993/1994 $2,719.00 $702 2,859 1994/1995*** $2,166.00 $1,086 2,859 *** CHARGES ONLY THRU 3/31 /95 $0.98 2,687 $1.04 $1.26 2,687 $1.34 28.92% $1.20 2,687 $1.27 -5.13% $1.14 2,687 $1.21 -4.94% NOTE: $30,410/YR. WILL AMORTIZE $315,998 OVER 20 YEARS @ 7.25%/YR. VM