Adopt Resolution #21-117 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.  Independent Auto recently vacated the front portion of the building and the parking lot at 6745 Hwy 10 NW.  Mille Lacs Motor Sports II has expressed an interest in leasing the building and the fenced in area and has provided a Letter of Intent dated April 21, 2021.  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.).

The front portion of the building is in poor condition and has a number of items that need to be addressed in order to allow for occupancy.  Building and Fire conducted an inspection of the building on April 6, 2021.  A summary of improvements needed to be done to occupy the building was put together by Building Official Szykulski.(See attached) The proposed tenant has indicated that he is willing to complete the improvements needed on the list by the Building Official at his own cost before occupying the building.  He has also offered to paint and replace bad wood panels on the front portion of building, remove the Hwy 10 sign and to generally clean up the outside of the building and grounds.  The tenant is looking to have this lease term mirror his existing lease at 6781 Hwy 10. The proposed lease would be from May 1, 2021 - May 31, 2023.

The Pit area of the building (Between the office area and the 3 Back Bays) has been an area of concern for a good number of years.  Staff believes that the empty oil tanks should be removed in this are should be filled in with sand.  Once this area is deemed safe and is covered, Staff is open to this area being leased to the tenant at a later date.

N/A

The terms of the proposed lease are attached on in the Letter of Intent provided to the City on April 21, 2021.  If the City Council is amenable to terms and conditions within and is willing to lease out additional space at 6745 Hwy 10 NW to Mille Lacs Motor Sports II, Staff will work with the City Attorney and Premier Commercial Properties to draft a lease consistent with standard city lease terms and unique ones specific to this property (In Bold) outlined below:  

• Terms, conditions and language has been updated to be consistent with recent lease agreements.
• Includes rent payments that are market rate.
• Maintenance responsibilities are clearly outlined.
• No political signage allowed.
• Early termination clause included.Per the City's agreement with Premier Commercial Properties, a commission payment will be made to Premier for this lease agreement.
  All outside storage within the fenced area will be screened.
• The front portion of the building (Old Siding) will be repaired and repainted by the Tenant at the cost of the Tenant.
• The Pylon Sign will be removed from the site by Tenant at the cost of the Tenant.
• The Tenant and contractors may enter the building to conduct repairs and work required by the Building Official to bring the building into a condition to permit occupancy.
• The Tenant cannot occupy or operate out of any portion (except for the pit area) of the leased premises until all required improvements by the Building Official are complete and the Building Official has granted occupancy for the Leased Premises. (See attached Building Official Memo)
• The Lease will be from May 1, 2021 - May 31, 2023. The lease will not be extended and no new leases will be entered into on this property after May 31, 2023.
• The Square footage of the lease will be adjusted based on the usable space to the Tenant (i.e.exclusion of the Pit area)

The Tenant is agreeing to invest about $12,000 into the building and grounds to ensure it is a safe and aesthetically pleasing property on Highway 10. 

Alternatives:

1) Adopt Resolution #21-117 Approving Lease Agreement of 6745 Hwy 10 NW (front) with Mille Lacs Motor Sports II and to authorize Staff to obtain bids to fill and pave/cover the pit area.

2) Based on the poor condition of the building, existing safety issues, and its high visibility, the City Council could choose not to lease the front portion of the building out and to begin work to demolish the structure.

3) Something Else.

Lease Revenue, RALF.

Staff recommendation is to approve Resolution #21-117

and (included in draft Resolution)

1) Commit to a lease end date of May 31, 2023 and to not extend or renegotiate future leases at 6745 Hwy 10 NW

2) Authorize Staff to obtain bids to fill and pave/cover the Pit Area.

Motion to:
Adopt Resolution #21-117 Approving Lease Agreement of 6745 Hwy 10 NW (front) with Mille Lacs Motor Sports II; subject to review by the City Attorney.