Adopt Resolution #23-099 Approving Lease Agreement of 6745 Hwy 10 NW (front) with Mille Lacs Motor Sports II

PURPOSE:
To consider a lease for the front portion of 6745 Hwy 10 NW. 

BACKGROUND:
Mille Lacs Motor Sports II's primary location in Ramsey is at 6781 Hwy 10.  They also currently lease a portion of 6701 Hwy NW and the rear portion of 6745 Hwy 10 NW.   This company is growing and needs additional space to operate efficiently.  The City filled in the "old Pit Area" in 2021 and worked with the tenant to conduct needed maintenance and the building is in condition to rent as verified by the building official and Fire.  The leases premises would be used to conduct repairs on boats and ATV vehicles and the fenced in area would be used for outside storage of product for its business (ATV's, boats, etc.). Originally the City did not include an option to extend the lease past May 31, 2023 and recommended that the building be demolished after the lease was over.  However, this arrangement has gone well and City Staff supports leasing it out until the Highway 10 Construction is nearing completion in 2025 and business operations can continue "as-is" for Power Lodge and to give them more time to find a future location.  The Tenant has invested over $10,000 to improve the aesthetic and functionality of the building which supports the additional two-year lease in the opinion of staff.   Staff believes that this building should be demolished once the Hwy 10 project is complete or is nearing completion and this would be communicated to the Tenant.
 

N/A

The duration of the lease works well with Hwy 10 construction as it terminates no later than May 31, 2025.  This timing would allow time for the property to be demolished and to be put for sale on the open market after the improvements to Hwy 10 are completed.  The City Attorney has reviewed the lease and approves it to form.  The proposed lease rates include rent of $10 per square foot in Lease Period 1 and $12 per square foot for Lease Period 2 as defined below in the key lease terms:

Key Lease Terms
Location: 6745 Hwy 10 (Front 4,864 SF)
Lease Duration: June 1, 2023 - May 31, 2025
Lease Rate :
                        Year 1 (6/1/23 through 5/31/24): $4,053.33 / month 
                        Year 2 (6/1/24 through 5/31/25): $4,864.00 / month 
                                        
Utilities: Tenant paid
Snow Plowing / Sidewalks: Tenant paid 
Maintenance responsibilities are clearly outlined.
No political signage allowed.
Early termination clause included. Per the City's agreement with Premier Commercial Properties, a 5% commission payment will be made to Premier for this lease agreement.

Other Special items of consideration include:

• The front portion of the building (Old Siding) has been repaired and repainted by the Tenant at the cost of the Tenant.
• The Pylon Sign has been removed by Tenant at the cost of the Tenant.
• All required items have been completed that were identified in the Building Memo and the Building Official has granted occupancy for the Leased Premises. 
• The Lease will be from June 1, 2023 - May 31, 2025. The lease will not be extended and no new leases will be entered into on this property after May 31, 2025.

Alternatives:

1) Adopt Resolution #23-099 Approving Lease Agreement of 6745 Hwy 10 NW (front) with Mille Lacs Motor Sports II (as presented); subject to City Attorney review. 

2) Adopt Resolution #23-099 Approving Lease Agreement of 6745 Hwy 10 NW (front) with Mille Lacs Motor Sports II (with changes); subject to City Attorney review.

3) Something Else.

Lease Revenue, RALF.

Staff recommendation is to approve Resolution #23-099 Approving Lease Agreement of 6745 Hwy 10 NW (front) with Mille Lacs Motor Sports II (as presented); subject to review by the City Attorney.

Staff also recommends including a provision in the Resolution stating that the lease will not be extended past May 31, 2025 which is included in Resolution #23-099

Motion to:
Adopt Resolution #23-099 Approving Lease Agreement of 6745 Hwy 10 NW (front) with Mille Lacs Motor Sports II (as presented); subject to review by the City Attorney.