6. HRSR 06-06-2011~ /~,
Elk REQUEST FOR ACTION
River
TO ITEM NUMBER
Housin & Redevelo ment Authori 6
AGENDA SECTION MEETING DATE PREPARED BY
6 June 2011 Annie Deckert, Director of Economic
Develo ment
ITEM DESCRIPTION REVIEWED By
Consider Lease Extension with Arts Alliance for 716 Main Tim Simon, Finance Director
Street REVIEWED BY
ACTION REQUESTED
Authorize 1-year lease extension with the Elk River Area Arts Alliance (ERAA) for 716 Main Street under
the current lease terms.
BACKGROUND/DISCUSSION
In January 2008 the ERAA began occupancy of the 716 Main Street building under ashort-term lease
authorized by the HRA. Purchased in 2008 by the HRA, the primary purpose of this purchase was to be
able to expand surface and possible deck parking downtown. Since then, the HRA has maintained the
buildings with minimal maintenance, however within the past two years, the ongoing maintenance costs
have increased (i.e.: roof repairs, HVAC systems, etc.). Since 2009, approximately $4800 in roof
maintenance costs has been incurred. An estimate of approximately $45,000 to replace the roof was
obtained in 2010. The building maintenance budget for 2011 is $5000.
At the Apri14~', 2011 HRA meeting, the HRA discussed different options regarding their long term
intentions of 716 and 720 Main Street to determine how maintenance issues will be handled. Options
included:
• Create approximately 21 surface parking stalls
• Facilitate ramp or deck parking
• Sell buildings for private business development/redevelopment
• Maintain buildings for longer term lease (10-years) to new business
The HRA favored the first two options and directed staff to research the cost of removing the buildings
in addition to determining what (if any) portions of the wall between the Elk River Meat Market and 716
Main Street are shared. Commissioners indicated there was no immediate need for parking, however,
stated these properties would most likely be needed for parking in the future.
Estimates for demolition (which include determining common wall) range from $48,000-$55,000,
depending on if the wall is shared, or if there is a double wall. A wall agreement appearing in the title
work during the purchase of the property indicates that in the event of a party (shared) wall, HRA would
be responsible for repairing any damage which may occur from demolition.
N:\Departments\Communiry Development\Economic Development\Houlton Buildings\Arts Alliance\June 2011 Action Requested lease
extension.doc
The existing lease expires December 31, 2011 unless: 1) previously terminated as provided in the lease
agreement; or 2) the HRA delivers written notice of non-renewal to Arts Alliance on or before July 1,
2011. The ERAA has submitted a letter indicating their desire to occupy the building through December
31, 2013. Because of the unclear need for parking and maintenance costs, the HRA indicated they would
prefer a one year lease. Tonight, the HRA will be considering renewing the lease at a one year term (to
expire December 31, 2012).
FINANCIAL IMPACT
The lease agreement is not subject to the collection of rent revenue due to its tax-exempt status.
However, under the lease ERAAA is responsible for routine maintenance, utilities and insurance
associated to their occupancy of the building.
ATTACHMENTS
• Draft Lease Agreement between HRA and ERAAA
Action Motion by Second by Vote
Follow Up
N:\Departments\Communiry Development\Economic Development\Houlton Buildings\Arts Alliance\June 2011 Action Requested lease
extension.doc
~=. ~~~ t:
~ ~ - -- . _ .~ a*
P.O. Box 737 716 Main Street Elk River, MN 55330 763-441-4725 info@elkriverart.org www.elkriverart.org
June 2, 2011
To: Housing and Redevelopment Authority
From: Elk River Arts Alliance
Re: Lease extension of 716 Main Street
The Arts Alliance would like to advise the HRA that we are interested in an extension of
the lease, which expires at the end of 2011, for the storefront space at 716 Main Street.
We are aware of the plans the City has to eventually remove the building and are
currently exploring options for relocating. At this time, however, no move is imminent.
We request a 2 year extension to run through 2013 under the same terms currently in
effect:'
Thank you,
~,A s~~-
t~John Stander, Executive Director
The Arts Alliance
Art Classes Arts in Harmony ArtSoup Gallery & Gift Shop Performance Series Strings for Youth
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and is effective as of this day of
December, 2011. The parties to this Lease are The Housing and Redevelopment Authority in and
for the City of Elk River, a body corporate and politic under the laws of the state of Minnesota
(hereinafter referred to as "Landlord"), and Elk River Area Arts Alliance, a Minnesota non-profit
corporation (hereinafter referred to as "Tenant").
WITNESSETH:
1. LEASED PREMISES. Landlord owns the property legally described as the East
39 and 1/2 feet of the South 119 feet of Lot 3, Block 2, Village of Elk River, Sherburne County,
Minnesota (the "Property") and the building located thereon which has a street address of 716
Main Street, Elk River, Minnesota (the Building"). The property subject to this lease is all of the
interior space in the Building (collectively, the "Leased Premises").
2. DEMISE AND PREMISES. Landlord hereby leases the Leased Premises to
Tenant and Tenant hereby leases the Leased Premises from Landlord for the term and upon the
conditions herein provided. Tenant accepts the Leased Premises in their "AS IS" condition and
without any warranties with respect thereto, express or implied, from Landlord.
3. TERM AND TERMINATION. The term of this Lease Agreement commences
on January 1, 2012 and expires on December 31, 2012 (the "Expiration Date"); provided that this
Lease Agreement is subject to termination prior to the Expiration Date as provided herein.
4. RENT. Tenant shall pay to Landlord rent of $1.00 for the entire term, the receipt
of which Landlord hereby acknowledges.
5. REAL ESTATE TAXES. Based on conversations with the Sherburne County
Assessor, it is Landlord's understanding that the Property is exempt from ad valorum real estate
taxes and that Tenant is not subject to taxes in lieu of real estate taxes under Minn. Stat. Section
272.01 Subd. 2(a). Landlord makes no representations or warranties regarding real estate or
other taxes and if the Property becomes subject to estate taxes that are due and payable during
the term or if Tenant becomes subject to taxes in lieu of real estate taxes under Minn. Stat.
Section 272.01 Subd. 2(a), Tenant shall be obligated to pay or reimburse Landlord for all such
taxes, provided that if Tenant reasonably determines that the Property or Tenant are or will be
subject to any such taxes, Tenant may terminate this lease by written notice to Landlord.
6. USE. Tenant may use the Leased Premises for its administrative offices, an art
gallery with sales of art by Tenant's members, small meetings and arts programming including
lectures, recitals and workshops (this may include daytime programming for seniors, after school
programming for young adults and weekend programming for families), and receptions for
visiting artists and performers as well as Tenant's own events and for no other purpose without
the written consent of Landlord which consent Landlord may grant or withhold in Landlord's
sole and absolute discretion. If Tenant allows third parties to keep or store artwork on the Lease
Premises, whether for sale or otherwise, Tenant shall require the third part to agree, in writing,
that the third party assumes the risk of loss of or damage to the artwork and releases Landlord
and Tenant from any claims for loss of or damage to the artwork.
7. ALTERATIONS. Tenant shall not have the right to make alterations in or
additions or changes to the Leased Premises without the prior written consent of Landlord. If
Landlord consents to alterations, additions or changes, Tenant is responsible for obtaining, at
Tenant's sole cost and expense, any governmental approvals, including but not limited to
building permits, required in connection with such approved alterations, additions or changes.
Unless Landlord otherwise agrees in writing, Tenant must, prior to the expiration or termination
of this Lease Agreement, remove any alterations, additions or changes Tenant makes to or places
in or on the Leased Premises and must restore the Leased Premises to the same condition as they
were in prior to said alterations, additions or changes, reasonable wear and tear, damage from the
elements, acts of God, or damage resulting from the negligence or willful misconduct of
Landlord, its agents or employees, excepted.
8. REPAIRS AND REPLACEMENTS. Except as set forth in Section 9, neither
Landlord nor Tenant is obligated to repair or replace the structural parts of the building and other
improvements that are part of the Leased Premises which structural parts and improvements
include, but are not necessarily limited to the Building's foundation, exterior walls, interior
bearing and non-bearing walls, roof, floors, windows and doors and their frames, exterior paved
surfaces, HVAC system, plumbing system, or electrical system, but either party may, after notice
to the other party, elect to do so at its sole cost and expense. If, for any reason, the condition of
the Building or the systems serving the Building deteriorates to a condition that Tenant
reasonably concludes is not conducive to Tenant's continued use and occupancy of the Leased
Premises, Tenant may terminate this Lease Agreement by written notice to Landlord.
9. MAINTENANCE. Tenant, at its cost, shall perform any routine maintenance
associated with Tenant's occupancy and use of the Leased Premises including, but not limited to
the removal of snow from paved portions of the Property and from sidewalks adjacent to the
Property and normal and routine maintenance of the HVAC, electrical and plumbing systems
serving the Leased Premises. Tenant shall keep the Leased Premises in a clean and wholesome
condition and shall regularly remove all trash and refuse of any kind from the Leased Premises at
its own expense. Tenant shall be liable to Landlord for the cost of repairing any damage to the
Leased Premises that results from the negligent or willful acts or omissions of Tenant, its
employees or agents, except to the extent Landlord is entitled to recover such costs under any
insurance policy Landlord elects to maintain with respect to the Property. Costs for structural or
mechanical repairs/replacements necessary to occupy the building which are in excess of $1,000
(for each such repair or replacement) shall be split equally by the Landlord and Tenant.
Landlord may, in its discretion, allow tenant to pay its share of such costs in installments.
10. LANDLORD'S ACCESS. The Landlord, his employees, and his agents shall have
the right to enter the Leased Premises at all reasonable times for the purpose of inspecting,
cleaning, repairing, altering, or improving the premises or to exhibit the premises to prospective
tenants, purchases, or others. Nothing in this section shall be interpreted as requiring the
Landlord to perform any such acts independent of the requirements of the other provisions of this
Lease Agreement. The Landlord shall also be permitted to enter the Leased Premises for the
purpose of posting notices of non-responsibility for alterations, additions or repairs.
11. SUBLEASE AND ASSIGNMENT. Tenant may not voluntarily assign or
encumber its interest in this Lease Agreement or in the Leased Premises, or allow any other
person or entity (except Tenant's authorized representatives) to occupy or use all or any part of
the Leased Premises, without first obtaining Landlord's written consent which consent Landlord
may grant or withhold in Landlord's sole and absolute discretion.
12. UTILITIES. Tenant shall make arrangements for and pay for all utilities and
services furnished to the Leased Premises, including, without limitation, gas, electricity, water,
telephone service and trash collection, and for all connection charges.
13. INSURANCE. Tenant must, at all times during the term hereof, at its own
expense, maintain and keep in effect a policy of Commercial General Liability Insurance
insuring against all liabilities, claims and expenses for damages to persons or property in or
about the leased premises. The amount of said liability shall not be less than $1,000,000 per
occurrence. Tenant shall have the policy of insurance endorsed to reflect the following
provisions: (i) name Landlord as an Additional Insured; (ii) provide a thirty (30) day written
notice of cancellation; (iii) include an endorsement wherein insurance carrier agrees to waive
rights of subrogation against the Landlord; and (iv) agrees that insurance carried by Tenant shall
be primary, without rights of contribution from any insurance which is carried by the Landlord.
Tenant must also obtain and maintain, at all times during the term hereof, property insurance
insuring:
a. any fixtures or person property belonging to Tenant and located on the
Leased Premises against loss or damage by fire or other casualty for the full
replacement cost thereof.
b. any personal property belonging to third parties but in the care, custody or
control of Tenant, including, but not limited to, any art work kept or stored at the
Leased Premises for purpose of sale or otherwise, against loss or damage by fire
or other casualty in such amounts as Tenant deems reasonable and appropriate
based on Tenant's reasonable estimate of the value of such personal property.
Tenant must also obtain and maintain, at all times during the term hereof, workers compensation
insurance as required by state law. Tenant must provide Landlord with Certificates of Insurance
(or other documentation reasonably acceptable to Landlord) evidencing that Tenant has obtained
and is maintaining the insurance coverage this Section 13 requires before Tenant takes
possession of the Leased Premises and thereafter as Landlord may reasonably request.
In addition, Tenant shall reimburse Landlord for Landlord's cost to insure the premises. Such
reimbursements shall be made by Tenant monthly, in the amount of $109.08 for the months of
January through June 2010. Thereafter, Landlord shall advise Tenant each six months of the
monthly insurance costs for the following six months.
14. RELEASE AND INDEMNITY. Tenant releases Landlord from any and all
claims for loss of or damage to Tenant's fixtures and personal property located on the Leased
Premises. Tenant must defend and-indemnify Landlord against and hold Landlord harmless from
any and all third party claims and demands arising from or related in any way to Tenant's use and
occupancy of the Leased Premises including, but not limited to, claims relating to the loss of or
damage to the personal property of third parties that is in the care, custody and control of Tenant
15. MECHANICS' LIENS. If Landlord consents to any alterations in or additions or
changes to the Leased Premises or if, notwithstanding the requirements of Section 8, Tenant
undertakes any alterations in or additions or changes to the Leased Premises without Landlord's
consent, Tenant must pay all labor and materials provided to the Leased Premises and keep the
Property and the Building free and clear of all mechanics' liens. Tenant shall have the right to
contest the correctness or the validity of any such lien if, immediately on demand by Landlord,
Tenant procures an irrevocable letter of credit in favor of Landlord in an amount equal to one
and one-halftimes the amount of the claim of the lien.
16. DESTRUCTION OF THE PREMISES. In case of the total or such partial
destruction of the Leased Premises by fire, the elements or other casualty, either party may
terminate this Lease Agreement by written notice to the other party.
17. CONDEMNATION. In case of the total or such partial loss of the Leased
Premises through condemnation, either party may terminate this Lease Agreement by written
notice to the other party.
18. DEFAULT OF TENANT. The occurrence of any of the following shall
constitute a default and breach of this Lease Agreement by Tenant:
a. Any failure by Tenant to pay rent, Landlord's insurance costs, or any other
monetary sums required to be paid hereunder (where such failure continues for
five (5) days after written notice thereof from Landlord to Tenant).
b. The abandonment or vacation of the Leased Premises by Tenant.
c. A failure by Tenant to observe and perform any other provision of this
Lease Agreement to be observed or performed by Tenant, where such failure
continues for twenty (20) days after written notice thereof by Landlord to Tenant;
provided, however, that if the nature of such default is such that it cannot
reasonably be cured within such twenty (20) day period, Tenant shall not be
deemed to be in default if Tenant shall within such period commence such cure
and thereafter diligently prosecute the same to completion.
d. The making by Tenant of any general assignment or general arrangement
for the benefit of creditors; the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within ninety (90) days); the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets located
at the Leased Premises or of interest in this Lease Agreement, where possession is
not restored to Tenant within sixty (60) days; or the attachment, execution or
other judicial seizure of substantially all of Tenant's assets located at the leased
premises or of Tenant's interest in this Lease Agreement, where such seizure is
not discharged within forty-five (45) days. In the event of any such material
default or breach of Tenant, Landlord may at any time thereafter without limiting
Landlord in the exercise of any right or remedy at law or in equity which
Landlord may have by reason of such default or breach.
In the event of any breach of this Lease Agreement by Tenant, Landlord shall have the
immediate right of re-entry and possession of the Leased Premises; which such right remains
continuous until such time as Tenant shall have cured such default. Additionally, Landlord shall
have the right to terminate this Lease Agreement by written notice of such intention to Tenant.
19. COMPLIANCE WITH LAWS. Tenant shall comply with all laws and
regulations concerning the Leased Premises or Tenant's use of the Leased Premises, including,
without limitation, the obligation to comply with any code, law or regulation that requires
alterations, additions or restoration to the Leased Premises. If the laws of any government body
prohibit Tenant from using the Leased Premises in its present condition as provided in Paragraph
No.6, Tenant can elect to terminate this Lease Agreement on notice being given to Landlord
within thirty (30) days after Tenant has learned that its use of the Leased Premises will be
prohibited. In the event Tenant elects to terminate this Lease Agreement as allowed in this Lease
Agreement, on the date of the termination, the parties shall be released from further liabilities
and obligations.
20. ENVIRONMENTAL MATTERS. As used herein, the term "hazardous
substances" means any hazardous or toxic substance, material or waste which is or becomes
regulated by any local, state or federal governmental authority. The term "hazardous substances"
includes but is not limited to any material substance which is (i) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
Section 1317); (ii) defined as a "hazardous substance" pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act, 42 V.S.C. Section 6901, et seq. (42 V.S.C. Section
6903); or (iii) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response Compensation and Liability Act (42 U.S.C. Section 9601, et seq.). As
used herein, the term, "environmental requirements" means all laws, ordinances, rules,
regulations, orders and other requirements of any government or public authority now in force or
which may hereafter be in force relating to protection of human health or the environment,
including all requirements pertaining to reporting, licensing permitting, investigation and
remediation of emissions, discharges, storage, disposal or releases of hazardous substances and
all requirements pertaining to the protection of the health and safety of employees or the public.
Tenant shall not permit or conduct the generation, treatment, storage or disposal on, in or about
the Leased Premises of any hazardous substances without prior written notice to Landlord. Any
such notice to Landlord shall be in writing and shall demonstrate to the reasonable satisfaction of
Landlord that such hazardous substances are necessary to the business of Tenant and will be
generated, treated, stored or disposed of in a manner that complies with all environmental
requirements. Any such generation, treatment, storage or disposal of any hazardous substances
by Tenant hereunder shall be in compliance with all environmental requirements. Tenant shall
indemnify and defend Landlord against and hold Landlord harmless from all claims, demands,
liabilities, damages, fines, encumbrances, liens, losses, costs and expenses, including reasonable
attorney's fees and disbursements, and costs and expenses of investigations, arising from or
related to the existence of hazardous substances in or on the leased premises as a result of the
acts or omissions of Tenant.
21. SIGNS/ADVERTISING. Tenant shall not have the right to place, construct, or
maintain any other sign, advertisement, awning, banner, or other exterior decoration without
Landlord's prior written consent which consent Landlord may grant or withhold in Landlord's
sole and absolute discretion. In addition, Tenant must obtain all governmental approvals required
in connection with the installation and maintenance of any approved signage.
22. ATTORNEY'S FEES. If either party becomes a party to any litigation concerning
this Lease Agreement, the leased premises, or the building or other improvements in which the
leased premises are located, by reason of any act or omission of the other party or its authorized
representatives, and not by any act or omission of the party that becomes a party to that litigation
or any act or omission of its authorized representatives, the party that causes the other party to
become involved in the litigation shall be liable to that party for reasonable attorneys' fees and
court costs incurred by it in the litigation.
If either party commences an action against the other party arising out of or in connection with
this Lease Agreement, each party shall pay its own attorneys' fees and costs of suit.
23. MISCELLANEOUS.
a. The unenforceability, invalidity, or illegality of any provision shall not
render the other provisions unenforceable, invalid, or illegal.
b. This lease agreement is made and entered into in the State of Minnesota
and shall in all respects be interpreted, enforced and governed by the laws of the
State of Minnesota. The language of all parts of this lease agreement shall in all
cases be construed as a whole, according to its fair meaning, and not strictly for or
against Landlord or Tenant.
c. This Lease Agreement, and all its provisions, shall be binding upon the
heirs, administrators, executors, successors and assigns of the parties hereof.
d. This Lease Agreement sets forth the entire agreement between Landlord
and Tenant, and fully supersedes any and all prior agreements or understandings
between them pertaining to the subject matter hereof. This Lease Agreement may
only be modified by a written agreement signed by Landlord and Tenant.
24. NOTICES. All notices as required by any of the terms and conditions of this
Lease Agreement shall be deemed given when the notice is prepared, adequately addressed and
deposited in the United States mail, postage prepaid. Notices to Landlord and Tenant are
adequately addressed as follows:
IN WITNESS WHEREOF, the respective parties have executed this instrument as of the day and
year first herein above written.
LANDLORD: The Housing and Redevelopment Authority in and for the
City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
Attention: Executive Director
TENANT: Elk River Area Arts Alliance.
716 Main Street
Elk River, Minnesota 55330
Attention: Executive Director
IN WITNESS WHEREOF, the respective parties have executed this instrument as of the day and
year first herein above written.
LANDLORD: THE HOUSING AND
REDEVELOPMENT AUTHORITY IN AND
FOR THE CITY OF ELK RIVER
By:
Its:
By:
Its:
TENANT: ELK RIVER AREA ARTS ALLIANCE
By:
Its:
Gr:z~oi9~s ~i