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.
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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