7.2. EDSR 02-16-2021 City of
Elk = Request for Action
Diver
To Item Number
Economic Development Authori 7.2
Agenda Section Meeting Date Prepared by
General Business February 16, 2021 Colleen Eddy, Economic Development Director
Item Description Reviewed by
Sportech LLC Tax Abatement Application Cal Portner, City Administrator
Reviewed by
Action Requested
Recommend,by motion,the City Council provide Tax Abatement Assistance for Sportech LLC.
Background/Discussion
The Joint Finance Committee reviewed and recommended the EDA approve Sportech LLC application for
Property Tax Abatement financing.
Sportech LLC applied for financial assistance to fund a portion of the construction costs for a 91,050sf building
expansion located at 10752 168"' Circle. Sherburne County will consider a similar request on February 16, 2021.
The project is expected to retain the existing 323 employees and require a minimum of 85 new FTEs within
three years of completion. The average wage of new jobs is projected to be $18.20/hr ($23.04 with benefits)
which meets the city business subsidy policy provisions.
The original building has 14 years of abatement remaining. The proposal is to amend the original abatement
agreement to include the expansion. The county assessor estimates the expansion's taxable value at$2,825,000
accounting for a city tax share for the remaining 14 years of approximately$362,880. The city's tax abatement
and business subsidy policy objectives are met with the proposed level of assistance.
Financial Impact
The owner,Meritex,proposes an$2,825,000 million project funded through private funds, owner cash equity
and city/county tax abatement of$769,875 for up to 14 years with no more than $362,880 from the city.
Mission/Policy/Goal
The purpose of the tax abatement assistance is to provide financial and technical assistance for the creation and
retention of new employment to an existing business located in the community.
Attachments
■ Financial Analysis
■ Executed Tax Abatement Application
■ Meritex Lease Agreement
■ Second Amendment to Sportech Lease
■ 2021 B2 Expansion
■ Sportech Expansion Proposal
The Elk River Vision
A Y�elcoming community nvith revolutionary and spirited resourcefulness, exceptional P U W E H E o s r
service, and community engagement that encourages and inspires prosperity ,g /` UR
Memo – Draft for Review
To:
Members of the Economic Development Authority
Cal Portner, City Administrator
Colleen Eddy, Economic Development Specialist
From: Mikaela Huot, Director
Date: February 11, 2021
Subject: Financial Analysis and Review related to Application for Tax Abatement
Assistance for Sportech business expansion
Background
The City of Elk River received an application from Sportech LLC, the applicant, for financial assistance through
tax abatement to assist with financing a portion of the construction costs related to the 91,050 square foot
expansion to the existing building located at 10752 168th Circle in the City of Elk River for continued business
growth and expansion of existing company operations. In 2015, they purchased 14 acres from the City and
built a 105,000 square foot facility and moved into it in early 2016 (removing previous Building 2), bringing their
total square footage of buildings in the City to 201,000 sq. ft. The City approved tax abatement assistance
related to the original project acquisition and construction and 14 years remain on the original abatement. The
building was purchased by Meritex, a private real estate investment and management company in May 2016
and Sportech (the business leasing the building) was purchased by Off Road Acquisition Co., LLC (becoming a
wholly owned subsidiary) in December of 2019.
The expansion project is expected to retain the existing 323 company employees and create a minimum of 85
new FTE employees within 3 years of project completion. The new expansion alone would retain 171
employees (132 FTE), plus the additional 85 full-time employees. The average base wage of the Building 2
employees is $17.92/hr (excluding benefits) and $22.76 (including benefits). Average wage of jobs to be
created at the expanded site is $18.20/hr, (excluding benefits) and $23.04 (including benefits) and would meet
the City’s business subsidy policy provisions.
Baker Tilly has been retained by the City to review the application for financial assistance. The purpose of this
memorandum is to provide a summary of Baker Tilly’s review of the development project costs and sources of
funds, and supporting financial information as provided by the applicant to assist the City with making a
determination if the project as proposed meets the merits of the City’s tax abatement policy and verification of
the need for the requested tax abatement assistance. When reviewing requests for financial assistance it is
important to understand how the level of financial assistance would impact the ability of the project to proceed
as proposed and maximize new value created on the current project site. The level of requested tax abatement
assistance would trigger the City’s business subsidy policy and thereby require certain job and wage goals
related to the project and public assistance. Without public assistance, the applicant would not be subject to
the same requirements.
Applicant Request for Assistance
The applicant’s application for financial assistance includes an approximate $8.38 million project that would be
funded by Meritex (the owner) through private funds and owner cash equity. The applicant has requested
$769,875 in tax abatement assistance from both the City and County to provide annual cash flow assistance
following the expansion construction for up to 15 years. The City’s share of tax abatement as requested over
15 years is approximately $388,800 and would constitute as a business subsidy due to the proposed amount.
The process for considering a business subsidy includes holding of a public hearing, similar to the tax
abatement process. The maximum amount available based on 14 years of the remaining eligible term of the
abatement is estimated to be $362,880, as further described within the memo.
The sources and uses of funds for the business expansion as outlined in the application for tax abatement
assistance is illustrated in the table below.
Sources Amount Uses Amount
First Mortgage $0 Acquisition $0
Other Private Funds (Meritex - owner) $5,963,775 Site Development $353,000
Owner Cash Equity $2,425,000 Construction $5,503,775
Machinery & Equipment $2,425,000
Legal/Professional Fees $107,000
Contingencies $100,000
Total $8,388,775 Total $8,388,775
Qualifications
Pursuant to the Section V of the City’s tax abatement policy, all tax abatement projects considered by the
City must meet each of the following qualifications:
a. The project shall meet one of the objectives set forth in Section III
b. The use of tax abatement will be limited to
• Industrial development, expansion, redevelopment, or rehabilitation or
• Commercial redevelopment or rehabilitation, or
• Research and development facilities that satisfy Business Park zoning requirements, or
• Office facilities with a minimum new construction of 25,000 square feet, or
c. The developer shall demonstrate that the project is not financially feasible but-for the use of tax
abatement.
d. The city will consider the use of Tax Abatement assistance for projects that may not meet the but-for
and job creation criteria, but rather would be considered as a “location incentive”. These projects
may result in other public benefits such as a significant tax base increase, the creation of higher
paying jobs (at least twice the minimum hourly rate stated in the city’s Business Subsidy Policy), and
is likely to assist in the marketing and attraction of additional desired developments.
Section III of the policy outlines the following objectives for the use of tax abatement:
• To retain local jobs and/or increase the number and diversity of jobs that offer stable employment
and /or attractive wages and benefits as defined in the City’s Business Subsidy policy
• To enhance and diversify the City of Elk River’s economic base
• To encourage additional unsubsidized private development in the area, either directly or indirectly
through “spin off” development
• To facilitate the development process and to achieve development on sites which would not be
developed without Tax abatement assistance
• To remove blight and/or encourage redevelopment of commercial and industrial areas in the City
that result in high quality redevelopment and private reinvestment
• To offset increased costs of redevelopment (i.e. contaminated site clean-up) over and above the
costs normally incurred in development
• To create opportunities for affordable housing
• To contribute to the implementation of other public policies, as adopted by the city from time to time,
such as promotion of quality urban or architectural design, energy conservation, and decreasing
capital and/or operating costs of local government
• To significantly increase the City of Elk River’s tax base
Any political subdivision, including statutory cities, home rule charter cities, towns, counties, and school
districts, is authorized to abate property taxes on selected parcels or defer the payments of the taxes and
abate the interest and penalty that otherwise would apply, if:
• The benefits gained equal or exceed the cost to the political subdivision or the abatement phases in
a property tax increase, and
• The abatement is in the public interest because it will:
− increases or preserves the tax base;
− provides employment opportunities;
− provides or helps acquire or construct public facilities;
− helps redevelop or renew blighted areas;
− helps provide access to services;
− finances or provides for public infrastructure;
− phase in a property tax increase on the parcel resulting from an increase of 50% or more in one
year on the estimated market value of the parcel, other than an increase due to improvement of the
parcel; or
− stabilize the tax base through equalization of property tax revenues for a specified time period with
respect to a taxpayer whose real and personal property is subject to valuation under Minnesota
Rules, chapter 8100.
Cities, counties, and school districts as combined jurisdictions may grant an abatement for no longer than 15
years (8 year maximum if no initial duration is specified), or for no longer than 20 years if two or fewer
jurisdictions participate. No back-to-back abatements. Eight years must pass before a new abatement can
be applied.
In any given year, the total amount of property taxes abated by a political subdivision for all parcels may not
exceed the greater of (1) 10% of the net tax capacity of the political subdivision for the taxes payable year to
which the abatement applies, or (2) $200,000. Property in a tax increment financing district is not eligible for
abatement.
Project Financing
There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-
as-you-go basis. With upfront financing, the City would finance a portion of the applicant’s initial project costs
through the issuance of bonds or as an internal loan. Future revenues would be collected by the City and used
to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the applicant
would finance all project costs upfront and would be reimbursed over time for a portion of those costs as
revenues are available.
Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the
risk for repayment to the applicant. If revenues are less than originally projected, the applicant receives less
and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases
pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt
service payments and would have to use other sources to fill any shortfall of revenues. With internal financing,
the City reimburses the loan with future revenue collections and may risk not repaying itself in full if revenues
are not sufficient. The project financing would be pay-as-you-go for reimbursement of certain costs.
Tax Abatement Revenue Assumptions
The County Assessor provided a taxable value estimate for the project. To estimate the amount of available
revenues generated by the proposed project, certain assumptions were made based on the value of the project,
construction schedule, and anticipated financing terms.
• Total existing value
o Parcel ID: 75-828-0205
o Base value as of Jan. 1, 2020
Existing building value of $5,384,800
Original net tax capacity (ONTC) of $106,946
o Assuming classification as commercial-industrial (C-I)
C-I classification rate is 1.5% first $150,000 value and 2% value above $150,000
• Estimated total market value upon completion
o 91,050 square foot facility
$31 per square foot (approximate)
$2,825,000
• Incremental value based on difference between existing and new land/building value
• Construction commences and is completed in 2021
o Project values 100% complete for assess 2022 and taxes payable 2023
• First abatement collection in 2023
• Final year collection in 2036
• Original term of abatement
o Approved term from 2015 was 15 years (2017-2031)
• Maximum term of abatement
o 15 years if all three taxing entities participate or
o 20 years if one taxing entity declines participation or 90 days pass from initial participation
request
o Total revised abatement term would be 2017-2036
To include both original and updated abatements and
With written denial of participation from the School District
• 0% annual market value inflator
Tax Abatement Revenue Estimates
Tax Abatement Revenue Projections
Annual Market Value Inflator 0%
City Share Total Estimated Annual Revenue Full Buildout $25,920
County Share Total Estimated Annual Revenue Full Buildout $26,584
School Share Total Estimated Annual Revenue Full Buildout $0
Total Gross Revenues $52,504
Estimated City Share (14 Years) $362,880
Estimated County Share (12 Years) $312,300
Estimated School District Share
Total over Remaining Number of Years $675,180
The City and County approved a tax abatement for the original building construction for Sportech in 2015. The
City approved a 15-year term and the County approved a 12-year term. Due to location of the building
expansion on the same property and within the existing tax abatement, the maximum level of assistance that
could be provided must fit within the remaining term of tax abatement (up to 20 years total). The first year of
abatement was 2017 and the final year with a full 2-year term would be 2036. Based on current assumptions
for construction of the expansion, the maximum number of years for the City share of tax abatement assistance
would be 14 years (2023-2036).
Applicant Pro forma Analysis including But-For
In approving an abatement project, the Elk River EDA and City Council have requested that a finding be made
that the proposed project would not reasonably be expected to occur solely through private investment within
the reasonably foreseeable future. The City’s tax abatement policy outlines the considerations for which tax
abatement may be considered as a financing tool. The policy also includes a provision for which the but-for test
need not be met if the assistance for a project is considered more as a “location incentive”. Public benefits may
include significant tax base increase, the creation of higher paying jobs (at least twice the minimum hourly rate
stated in the city’s Business Subsidy Policy), and is likely to assist in the marketing and attraction of additional
desired developments.
The applicant has provided minimum expected job creation (85 new FTE) and wage goals (average $23.04 with
benefits) based on completion of the business expansion. Without financial assistance, it will not be committed
or required to meet those job and wage goals. Financial assistance from the City allows for additional revenues
to provide sufficient project cash flow and market returns to investors that will achieve project feasibility and
facilitate the targeted job creation and wage goals. The applicant has stated the assistance will offset a portion
of the costs associated with construction of the building expansion, acquiring the machinery and equipment,
related costs and hiring the new employees. In addition, the current estimated project costs are in excess of the
estimated future value of the building upon development as provided by the County. Based on this analysis, the
EDA and City could be justified in determining that the project meets the “but for” test and would not proceed
without assistance. As stated tax abatement does not statutorily require a “but for” analysis to determine if the
project would proceed without assistance and the City’s tax abatement policy provides considerations for when
the but-for test may not be entirely met.
Conclusion
The applicant has requested financial assistance through tax abatement from the City of Elk River for financing
a portion of the costs associated with constructing an approximate 91,050 square foot building expansion to the
existing building. The taxable value for the expansion is estimated to be $2.825 million and total project
investment is close to $8.38 million. Tax abatement revenues would provide additional cash flow for the project
to allow fulfilment of increased employment goals and requirements and meet growth expectations and future
potential business growth and development.
According to the City’s tax abatement policy, the City may consider the use of tax abatement assistance for
projects that may not meet the traditional “but-for” and/or job creation criteria, but rather would be considered
as a “location incentive”. These projects may result in other public benefits such as a significant tax base
increase, the creation of higher paying jobs (at least twice the minimum hourly rate stated in the city’s
Business Subsidy Policy), and is likely to assist in the marketing and attraction of additional desired
developments. For this proposed project, the applicant is proposing to retain over 323 employees between
both company locations, and create an additional minimum 85 employees with average wages of $23.04.
Without tax abatement assistance from the City, the company will not be required to create the jobs or meet
any provisions of the City’s business subsidy policy. The applicant is also requesting tax abatement
assistance from the County for the same period (15 years). The County’s policy for assistance supports 12
years of financial assistance through tax abatement.
Tax abatement is a tool that can assist with covering a portion of the additional eligible costs associated with
the project. Since terms of the assistance include pay-as-you-go as reimbursement for certain costs, the
applicant will be responsible for obtaining all upfront funding sources and using cash flow from the project and
any tax abatement assistance to repay obligations. Total estimated tax abatement revenues that could be
available from the City’s share of taxes for this project for the remaining 14 years within the abatement area are
approximately $362,880 for the years 2023-2036. Aligning the level of assistance to the availability of projected
revenues provides a method of financing a portion of the project costs and allow the public participation for the
project to remain at a reasonable level, while meeting the City’s tax abatement and business subsidy policy
objectives. Without tax abatement assistance, the project may not adhere to the job and wage goal
requirements.
Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533
or Mikaela.Huot@bakertily.com with any questions or comments.
Projected Tax Abatement Report
City of Elk River, Minnesota
Proposed Tax Abatement Assistance
Sportech Business Expansion
Draft Abatement Revenues: 91,050 new building construction
Less:45.88%46.08%
Non-Retained Times:Estimated Maximum Maximum Maximum P.V.
Annual Total Total Abated Captured Tax Annual Tax Tax Tax Estimated Annual
Period Market Net Tax Net Tax Net Tax Capacity Property Abatement Abatement Abatement Project Abate To
Ending Value (1)Capacity (2)Capacity (3)Capacity Rate (4)Taxes City *County *School *Abatement 02/01/21
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)2.25%
12/31/21
12/31/22 0 0 0 0 128.860%0 0 0 0 0 0
12/31/23 8,209,800 163,446 106,946 56,500 128.860%72,806 25,920 26,035 0 51,955 48,962
12/31/24 8,294,550 165,141 106,946 58,195 128.860%74,990 26,698 26,816 0 53,514 49,321
12/31/25 8,381,843 166,887 106,946 59,941 128.860%77,240 27,499 27,621 0 55,119 49,683
12/31/26 8,471,754 168,685 106,946 61,739 128.860%79,557 28,323 28,449 0 56,773 50,047
12/31/27 8,564,362 170,537 106,946 63,591 128.860%81,944 29,173 29,303 0 58,476 50,414
12/31/28 8,659,749 172,445 106,946 65,499 128.860%84,402 30,048 30,182 0 60,230 50,784
12/31/29 8,757,998 174,410 106,946 67,464 128.860%86,934 30,950 31,087 0 62,037 51,157
12/31/30 8,859,194 176,434 106,946 69,488 128.860%89,542 31,878 32,020 0 63,898 51,532
12/31/31 8,963,425 178,519 106,946 71,573 128.860%92,228 32,835 32,980 0 65,815 51,910
12/31/32 9,070,784 180,666 106,946 73,720 128.860%94,995 33,820 33,970 0 67,789 52,291
12/31/33 9,181,364 182,877 106,946 75,931 128.860%97,845 34,834 34,989 0 69,823 52,674
12/31/34 9,295,261 185,155 106,946 78,209 128.860%100,780 35,879 36,039 0 71,918 53,061
12/31/35 9,412,575 187,501 106,946 80,555 128.860%103,804 36,956 0 0 36,956 26,666
12/31/36 9,533,408 189,918 106,946 82,972 128.860%106,918 38,064 0 0 38,064 26,861
12/31/37 9,657,866 192,407 192,407 0 128.860%0 0 0 0 0 0
$1,243,985 $442,878 $369,489 $0 $812,367 $665,363
(1) Total estimated market value based on preliminary value estimate following review by County Assessor
very preliminary and subject to further review. Includes 3% annual market value inflator
(2) Total net tax capacity based on commercial-industrial class rate of 1.5% first $150,000 value and 2% value above $150,000
(3) Original net tax capacity based on existing land value
(4) Total local tax capacity rate for taxes payable 2020
* subject to individual Board approvals. Maximum 20 year term requires denial of participation from other taxing entity (or 90 days passing from original request)
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease (this “Amendment”) is made and entered into as of
_____________________, 2021, by and between Meritex Elk River, LLC, a Delaware limited liability
company (“Landlord”), and Sportech, LLC, a Minnesota limited liability company (“Tenant”).
Background
A. Landlord and Tenant are the current lessor and lessee, respectively, under that certain
Lease dated April 8, 2016, as amended by that certain First Amendment to Lease dated May 26, 2020 (as
amended, the “Lease”), pursuant to which Tenant presently leases from Landlord a parcel of land
improved with an approximately 105,000 square foot building (the “Original Building”) located at
10752 168th Circle NW, Elk River, Minnesota, as more fully described in the Lease (the “Premises”).
B. Tenant desires to expand the Original Building on the Premises by approximately 91,050
square feet as generally depicted on Exhibit A (the “Building Addition”), and accordingly Landlord and
Tenant desire to amend the Lease as provided in this Agreement.
For valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and
Tenant agree the Lease is amended as follows, effective immediately:
1. Defined Terms. All words and phrases with their initial letters capitalized will have the
meaning ascribed to such words and phrases as provided in the Lease.
2. Building Addition. Landlord shall complete the Building Addition Work (as defined in
Exhibit B) in accordance with Exhibit B attached hereto. Effective as of the Completion Date (as defined
in Exhibit B), the Lease is amended to provide that the Building shall mean the Original Building together
with the Building Addition.
3. Term. The Term of the Lease is hereby extended to expire on the last day of the calendar
month occurring one hundred and forty-four (144) months following the later of (a) October 1, 2021 or
(b) the Completion Date (the “Building Addition Commencement Date”). The Expiration Date under
the Lease is amended to be the last day of the calendar month occurring one hundred and forty-four (144)
months following the Building Addition Commencement Date. Promptly following the Building Addition
Commencement Date, upon request of Landlord, Tenant shall execute a reasonable memorandum
memorializing the Building Addition Commencement Date, the Expiration Date, the total rentable square
footage of the Building, and the dates for payment of Monthly Rent set forth in the rent table in Section 5
below.
4. Termination of Options to Extend. Article 25 of the Lease is hereby deleted and
rendered void and of no further force or effect. Accordingly, Tenant has no rights to renew or extend the
Term.
5. Rent. Tenant shall continue to pay all Monthly Rent and Additional Rent as provided in
the Lease through the day prior to the Building Addition Commencement Date. On and following the
Building Addition Commencement Date, the Monthly Rent for the Premises shall be as follows:
2
Months of Term Rentable
Square
Footage of
Building
Annual
Rent Per
Square
Foot
Annual
Rent
Monthly
Rent From (measured
from Building
Addition
Commencement
Date)
Through (months
following
Building
Addition
Commencement
Date)
Building
Addition
Commencement
Date 12 196,050 $5.75 $1,127,287.50 $93,940.63
13 24 196,050 $5.87 $1,150,813.50 $95,901.13
25 36 196,050 $5.98 $1,172,379.00 $97,698.25
37 48 196,050 $6.10 $1,195,905.00 $99,658.75
49 60 196,050 $6.22 $1,219,431.00 $101,619.25
61 72 196,050 $6.35 $1,244,917.50 $103,743.13
73 84 196,050 $6.48 $1,270,404.00 $105,867.00
85 96 196,050 $6.60 $1,293,930.00 $107,827.50
97 108 196,050 $6.74 $1,321,377.00 $110,114.75
109 120 196,050 $6.87 $1,346,863.50 $112,238.63
121 132 196,050 $7.01 $1,374,310.50 $114,525.88
133 144 196,050 $7.15 $1,401,757.50 $116,813.13
6. Taxes; Insurance. For avoidance of doubt, during the Term, Tenant shall be responsible
for the payment of any additional assessments and increases in Taxes resulting from the Building
Addition. Further, from and after the Building Addition Commencement Date, Tenant shall ensure that all
insurance required under Article 6 of the Lease and that is maintained by Tenant (rather than Landlord)
shall reflect the Building as so expanded, including the increased full replacement cost thereof. As of the
date of this Amendment, Landlord and Tenant acknowledge that Landlord is maintaining the insurance
under Section 6.1(a) of the Lease, and that pursuant to Section 6.6 of the Lease, Tenant is required to
reimburse Landlord for the cost thereof, including any increase as a result of the Building Addition.
7. Security Deposit. [To be determined]
8. Repairs to Building and Premises. Section 8.1 of the Original Lease is hereby amended
and restated as follows:
“Subject to the limitations of Articles 12 and 13 hereof, Tenant shall, at its sole cost and
expense throughout the Term, (a) take good care of the Premises (including any
improvements now existing, the Building Addition and those constructed in the future on
the Land), (b) keep the same in order and condition consistent with the standards for
buildings of comparable type, quality, age and size in the City, and (c) make and perform
all maintenance thereof and all necessary or appropriate repairs thereto, interior and
exterior, structural and nonstructural (including, without limitation, to the foundations,
HVAC and other systems, the roof and other structural components of the Building),
ordinary and extraordinary, foreseen and unforeseen, of every nature, kind and
description. All of the items referred to in the preceding sentence are herein referred to as
3
“Repairs” and when used in this Article, “Repairs” shall include all necessary and
appropriate replacements, resurfacing, renewals, alterations, additions and betterments,
whether capital improvements or otherwise, using new materials therefor, but Tenant
shall not be required to make any Repair which would be in excess of those which a
reasonable and prudent owner would make under the circumstances, in light of
investments made in and construction of the Building Addition and the care and
maintenance of buildings of comparable type, quality, age and size in the City. All
Repairs made by Tenant shall be, to the extent reasonably possible, at least equal in
quality to the original work performed in constructing the Building and/or the Building
Addition, as the case may be. In the event of any Repairs, Tenant shall first provide
Landlord with notice and with drawings sufficient for Landlord to review and approve
the proposed Repairs, which approval shall not be unreasonably withheld or delayed;
provided, however, no approval by Landlord is required for routine and ordinary Repairs
and maintenance the cost of which is $100,000 or less, for which plans are not
customarily prepared, which is not structural in nature and which is not visible from the
exterior of the Premises. Further, no prior approval of Landlord is required for any
emergency Repairs (but telephonic or email notice to Landlord’s Regional Manager shall
be made as soon as is practical). For all Repairs and all changes and alterations under
Article 18, following substantial completion and upon request of Landlord, (i) Tenant, at
Tenant’s cost, shall ensure that all available warranties are partially assigned to Landlord,
(ii) Tenant must provide Landlord with full and final lien waivers from all contractors
and material suppliers, and (iii) Landlord may inspect the Repair, alteration or change to
ensure it was made consistent with this Lease (and may also do so during construction
and execution of the Repair, change or alteration). All Repairs made by Tenant shall be
made in accordance with all Applicable Laws.”
9. Condemnation/Casualty
a. Notwithstanding anything in the Lease to the contrary, in the event of a Substantial
Casualty or Substantial Taking affecting the Original Building prior to the Building
Addition Commencement Date, Tenant shall be required to cause the Restoration of
the Premises in accordance with Sections 12.2(b)(ii) and 13.2(b)(ii), respectively, to
the condition required under the Lease, as modified by the Final Plans described in
Exhibit B to accommodate the Building Addition Work.
b. In the event of casualty or condemnation affecting the Building Addition prior to the
Building Addition Commencement Date, Landlord shall cause the Building Addition
to be restored and substantially completed pursuant to the Final Plans and in
accordance with Exhibit B. The amount of any insurance deductible in connection
with such Restoration shall be paid from the Tenant Allowance or from the Over-
Allowance Amount, and to the extent the cost of such Restoration exceeds available
insurance proceeds, Tenant shall pay such amount to Landlord within ten (10) days
of written demand therefor.
c. Section (a)(ii) of Exhibit E to the Lease is hereby amended and restated as follows:
“(ii) all amounts paid by, incurred by or owing to Landlord in connection with the
construction of the Building Addition pursuant to the Second Amendment to Lease,
including, without limitation, the Tenant Allowance;”
10. Changes and Alterations. Section 18.1(d) of the Lease is hereby amended and restated
as follows:
4
“For any change or alteration costing less than $100,000, for which plans are not customarily
prepared, which is not structural in nature and which is not visible from the exterior of the
Premises, Landlord and Mortgagee approval is not required, but Tenant will provide Landlord
notice of such change or alteration.”
11. Option to Expand. The Building Addition is in lieu of constructing the Expansion
pursuant to Article 26 of the Lease. Accordingly, Article 26 of the Lease is hereby deleted and rendered
void and of no further force or effect.
12. Miscellaneous. This Amendment may be executed in multiple counterparts, each of
which shall be effective upon delivery. This Amendment may be transmitted by electronic mail in
portable document format ("pdf") and signatures appearing on electronic mail instruments shall be treated
as original signatures. In the event of any conflict between the Lease and this Amendment, the terms of
this Amendment shall control. Except as expressly amended, supplemented or modified by this
Amendment, the Lease shall continue in full force and effect.
LANDLORD: TENANT:
MERITEX ELK RIVER, LLC
SPORTECH, LLC
By: ______________________________ By: _______________________________
Name: Arvid A. Povilaitis
Its: Chief Operating Officer
Name: _____________________________
Its: _______________________________
EXHIBIT A
Building Addition
B-1
EXHIBIT B
Work Letter
1. Definitions. The following defined terms used in this Work Letter have the meanings set
forth below:
(a) “Building Addition Work” means the work to construct the Building Addition,
including the structure, foundation, Building Systems, roof and interior structure and finishes of
the Building Addition, as well as associated exterior work including an expansion of the parking
field, sidewalks and landscaping, in accordance with the Final Plans.
(b) “Building Systems” means the Building Addition’s HVAC, mechanical,
electrical, plumbing, and fire and life safety systems and equipment (including, but not limited to,
the fire alarm and fire sprinklers).
(c) “Completion Date” means the date on which Substantial Completion occurs.
(d) “Contractor” means RJ Ryan Construction.
(e) “Cost Proposal” is defined in Section 4(a) hereof.
(f) “Days” means, unless otherwise indicated, calendar days. In all instances where
Tenant is required to approve or deliver an item, if no written notice of approval is given or the
item is not delivered within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant and the next
succeeding time period shall commence.
(g) “Delivery Conditions” means the Building Addition Work is substantially
complete and all Building Systems serving the Building Addition are in good working order and
condition and comply with all Applicable Laws.
(h) “Final Plans” is defined in Section 2(b).
(i) “Force Majeure” means, for purposes of this Work Letter, failure or delay
caused by or resulting from acts beyond Landlord’s reasonable control, including, without
limitation, acts of God; flood, fire, earthquake, pandemics or explosion; war, invasion,
hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest;
government order, law, or actions; embargoes or blockades; national or regional emergency;
strikes, labor stoppages or slowdowns, or other industrial disturbances; and other similar
events beyond the reasonable control of Landlord.
(j) “Landlord's Representative” means Landlord’s Chief Operating Officer Arvid
Povilaitis and Regional Manager Ben Lieser as the only persons authorized to act for Landlord
pursuant to this Work Letter, independently or together. Tenant shall not be obligated to respond
to or act upon any request, approval, inquiry or other communication from or on behalf of
Landlord in connection with this Work Letter unless such communication is in writing from a
Landlord's Representative. Landlord may change the Landlord's Representative at any time.
(k) “Over-Allowance Amount” is defined in Section 4(d) hereof.
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(l) “Permits” is defined in Section 5(a).
(m) “Preliminary Addition Plans” is defined in Section 2(a).
(n) “Punch List Work” means those minor corrections of construction or decoration
details, and minor mechanical adjustments, that are required to cause any applicable portion of
the Building Addition Work as constructed to conform to the Final Plans in all material respects
and that do not materially interfere with Tenant's use or occupancy of the Building and the
Premises.
(o) “Substantial Completion” of the Building Addition Work shall be deemed to
have occurred on the date that: (i) Landlord has satisfied the Delivery Conditions; (ii) all Building
Addition Work has been performed in accordance with the terms of this Work Letter, other than
any Punch List Work; and (iii) Landlord has obtained and delivered to Tenant a permanent or
temporary certificate of occupancy with respect to the Building Addition, except to the extent the
same cannot be obtained by reason of the incompletion of installations or other work that is the
responsibility of Tenant (such as, but not limited to, the installation and making operational of
Tenant's systems and telecommunications equipment), in which case Landlord shall obtain the
same within a reasonable time after the same can be obtained.
(p) “Tenant Allowance” shall be up to $5,963,775.00.
(q) “Tenant Delay” means a delay caused by any of the following:
(i) Tenant's failure to timely approve the Preliminary Addition Plans or any
other matter requiring Tenant 's approval;
(ii) a breach by Tenant of the terms of this Work Letter or the Lease;
(iii) Tenant's request for changes in any of the Preliminary Addition Plans,
but only if such a request actually causes a delay to Substantial Completion of the
Premises;
(iv) Tenant's requirement for: (A) materials, components, finishes, or
improvements which are different from, or not included in, Landlord's standard tenant
improvement items for the Building; or (B) materials that are not available in a
commercially reasonable time given the estimated date of Substantial Completion of the
Premises; or
(v) any other acts or omissions of Tenant, or of any of the Tenant
Contractors, their agents, or employees that continue more than three (3) days after
written notice thereof by Landlord.
(r) “Tenant's Representative” means ___________ as the only person authorized
to act for Tenant pursuant to this Work Letter. Landlord shall not be obligated to respond to or act
upon any request, approval, inquiry, or other communication from or on behalf of Tenant in
connection with this Work Letter unless such communication is in writing from Tenant's
Representative. Tenant may change the Tenant's Representative[s] at any time upon advance
written notice to Landlord.
2. Plan Approval.
B-3
(a) Within 30 days following this Amendment, Landlord shall cause to be prepared,
at Landlord’s sole cost and expense, architectural, engineering and construction drawings and
specifications, including an estimated construction cost breakdown (including hard and soft costs)
and a proposed construction schedule (collectively, the “Preliminary Addition Plans”).
Landlord and Tenant will, in good faith, cooperate with each other in the preparation of the
Preliminary Addition Plans and shall provide the other party with such additional information as
may be requested in order to prepare the Preliminary Addition Plans in a manner which will be
consistent with the intended use by Tenant of the Building Addition.
(b) Tenant shall approve or disapprove the Preliminary Addition Plans within five
(5) business days after receipt. If Tenant disapproves the Preliminary Addition Plans, (i) Tenant
shall advise Landlord for the reason for such disapproval and shall detail the aspects of the
Preliminary Addition Plans which are not acceptable to Tenant, and (ii) Landlord shall modify the
Preliminary Addition Plans, taking into account the reasons given by Tenant for such disapproval,
and shall submit revised Preliminary Addition Plans to Tenant within ten (10) days of receipt of
Tenant’s disapproval for Tenant’s review. Tenant and Landlord shall continue pursuant to this
Section 2(b) until Tenant has approved the as-revised Preliminary Addition Plans, which once
approved, shall be the “Final Plans”. To the extent required by Applicable Law, Landlord shall
use commercially reasonable efforts to obtain (or cause Contractor to obtain) approval of the
Final Plans by the City of Elk River and to obtain any necessary permits for the Building
Addition Work.
3. Construction Contracts. Landlord shall enter into a construction contract for the
performance of the Building Addition Work with Contractor. Landlord shall use commercially reasonable
efforts to obtain at least three (3) bids from each trade.
4. Cost Estimate.
(a) Landlord shall provide Tenant with a cost proposal (the “Cost Proposal”) in
accordance with the Final Plans, showing all anticipated hard and soft costs of the Building
Addition Work, all architectural, structure, civil design, geotech, environmental, development and
permitting fees and costs and a management fee payable to Landlord in the amount of 4% of the
cost of the Building Addition Work (the “Construction Management Fee”).
(b) Within ten (10) days of the receipt of the same, Tenant shall either: (i) approve
the Cost Proposal; or (ii) have a one-time right to propose modifications to the Preliminary
Addition Plans in order to reduce the cost. Any proposed changes to the Preliminary Addition
Plans shall be subject to Landlord's approval, which approval shall not be unreasonably withheld,
conditioned, or delayed. If Landlord approves the proposed revisions: (A) Landlord shall have the
Preliminary Addition Plans revised in accordance with the approved revisions; and (B) Landlord
shall submit a revised Cost Proposal to Tenant. Tenant shall notify Landlord in writing within
five (5) days whether it desires to proceed with such revisions. If Tenant fails to approve such
revisions and revised Cost Proposal within such five (5) day period, such failure shall be deemed
to be a Tenant Delay. Any delays arising from further changes to the Preliminary Addition Plans
requested by Tenant shall be deemed to be Tenant Delays.
(c) Tenant's final approval of the Cost Proposal and the Final Plans shall be
authorization by Tenant for Landlord to purchase all materials set forth in the Cost Proposal and
to promptly commence the construction of the Building Addition Work in accordance with the
Final Plans.
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(d) To the extent the Cost Proposal exceeds the Tenant Allowance, then within ten
(10) days of final approval of the Cost Proposal, Tenant shall deliver to Landlord by wire transfer
of immediately available funds the amount of such excess and a Construction Management Fee
(the “Over-Allowance Amount”). Landlord shall hold the Over-Allowance Amount and apply
the same to costs and expenses in connection with the Building Addition Work, including draw
requests from Contractor and the Construction Management Fee, at such time as the Tenant
Allowance has been exhausted. In the event Force Majeure, Tenant Delay, the items listed in
subsection (e) below or other unanticipated matters arise that result in costs of the Building
Addition Work exceeding the Tenant Allowance and amounts previously deposited by Tenant for
initial calculations of the Over-Allowance Amount, Tenant shall pay such additional amounts to
Landlord within ten (10) days following receipt of an invoice therefor. Change Orders are dealt
with in Section 6 below.
(e) Tenant acknowledges that the Tenant Allowance does not account for the
following items which, if necessary, required or requested by Tenant, will require additional
amounts be included in the Over-Allowance Amount: (i) winter conditions; (ii) equipment wiring
work for installation of furniture, fixtures or equipment, (iii) soil correction work and/or
remediation of hazardous materials, (iv) warehousing exhaust systems, and (v) exterior signage.
5. Performance of the Building Addition Work.
(a) Subject to Force Majeure, Tenant Delay and provided there is no Event of
Default under the Lease by Tenant:
(i) Landlord shall cause the Contractor to obtain all applicable building
permits for construction of the Building Addition Work (collectively, the “Permits”),
and to perform the Building Addition Work;
(ii) Landlord shall ensure the Building Addition Work is performed in in a
good and workmanlike manner and in compliance with the Permits and all Applicable
Laws in effect at the time of construction;
(iii) Landlord shall use commercially reasonable efforts to cause the Building
Addition Work to be Substantially Completed on or before the later of (i) October 1,
2021, or (ii) 180 days after receipt of all permits and approvals required from the City of
Elk River to commence construction.
(b) If any local governmental agency requires revisions to the Final Plans, Tenant
shall be deemed to have approved any adjustments to the Final Plans and the Cost Proposal
resulting therefrom.
(c) Except as provided in Section 8 below, Tenant shall not have access to the area
of the Premises on which Building Addition Work is being completed. Tenant acknowledges that
the Building Addition Work may from time to time disrupt certain operations in the remainder of
the Premises, may cause noise, vibrations, smells and other interference, may require temporary
relocation of equipment, fixtures and personal property, and may require a reduction in or
temporary closure of parking areas and access drives. Tenant acknowledges that the Building
Addition Work requires relocating the precast end wall located on the Eastern side of the Original
Building, building a temporary wall separating the Original Building from the Building Addition,
and then demolishing and removing said temporary wall. Landlord shall use reasonable efforts to
minimize any such disruption, interference, limitation or closure or to communicate the schedule
B-5
for such matters in advance. In no event shall any such disruption, interference, limitation or
closure constitute a constructive eviction or permit Tenant to offset or abate rent. Tenant shall at
all times reasonably cooperate with Landlord’s construction of the Building Addition Work.
6. Change Requests. No changes to the Final Plans or the agreed Cost Proposal may be
made without the prior written consent of Landlord, which consent may be withheld in Landlord's sole
discretion. If Tenant requests a change that would directly or indirectly delay the Substantial Completion
of the Building Addition Work, Landlord shall not be obligated to make such change unless Tenant
agrees in writing that such delay (in the amount reasonably determined by Landlord) is a Tenant Delay. If
Tenant requests a change to the Final Plans that increases the agreed Cost Proposal, Landlord shall not be
obligated to make such change unless Tenant agrees in writing that such increase in costs is included in
the Over-Allowance Amount and Tenant pays such increase to Landlord within ten (10) days.
7. Substantial Completion. When Landlord's architect certifies that the Building Addition
Work is Substantially Complete, Landlord shall notify Tenant thereof in writing. Tenant's Representative
and Landlord's Representative shall at a mutually convenient date and time conduct a joint walk-through
of the Building Addition in order to review the Building Addition Work. Based upon said walk-through,
Landlord's Representative and Tenant's Representative shall prepare a list of Punch List Work and,
subject to Force Majeure, Tenant Delays and other causes beyond Landlord's reasonable control,
Landlord shall use commercially reasonable efforts to complete the Punch List Work items within 30
days after such joint walk-through. In the event of any dispute as to whether or not Landlord has
Substantially Completed the Building Addition Work, the decision of Landlord's architect shall be final
and binding on the parties. Tenant agrees that, at the request of Landlord from time to time after the initial
inspection, Tenant shall initial such punch list or execute revised lists of Punch List Work to reflect
completion or partial completion of prior Punch List Work.
8. Early Entry by Tenant. Subject to the terms hereof and provided that Tenant and its
agents do not interfere with the Contractor's work, Landlord shall allow access to the Building Addition
within a reasonable time as determined by Landlord prior to the Substantial Completion of the Building
Addition Work for the purpose of installing equipment and/or fixtures (including Tenant's data and
telephone equipment) and Tenant's furniture in the Building Addition. Prior to Tenant's entry, Tenant
shall submit a schedule to Landlord and the Contractor, for their approval, which schedule shall detail any
of Tenant’s contractors, employees or agents accessing the Building Addition and the timing and purpose
of such entry. In connection with any such entry, Tenant acknowledges and agrees that all Tenant’s
contractors, employees or agents shall fully cooperate, work in harmony with and not, in any manner,
materially interfere with Landlord or Landlord's contractors (including the Contractor), agents, or
representatives in performing work in the Building, Building Addition and the Premises, or in performing
any inspections, or interfere with the general operation of the Building, Building Addition and the
Premises.
9. Cost Allocation.
(a) Landlord shall pay the costs of the Building Addition Work in an amount up to,
but not exceeding, the Tenant Allowance. Landlord shall deduct the Construction Management
Fee from the Tenant Allowance.
(b) In no event shall Landlord be obligated to pay for, nor shall the Tenant
Allowance be used to pay for, the costs of any of Tenant's furniture, fixtures, computer systems,
telephone systems, equipment, or other personal property (whether or not such items may be
depicted on the Final Plans), and the cost of such items shall be paid for by Tenant from Tenant's
own funds.
B-6
(c) Tenant shall not be entitled to receive (in cash or as a credit against any rental or
otherwise) any portion of the Tenant Allowance; any unspent amounts will revert to Landlord.
Landlord shall refund to Tenant any unspent Over-Allowance Amounts within a reasonable time
following completion of Punch List Work.
10. Miscellaneous.
(a) All Building Addition Work to be performed by Landlord shall use Building-
standard specifications, materials, finishes, and supplies, unless otherwise specified in the Final
Plans. Landlord, in its sole discretion, may substitute items, materials, or finishes with other
items, materials, or finishes of comparable kind and quality. Landlord, at its sole option, may also
change mechanical plans and specifications where necessary for the installation or modification
of the Building Systems, provided that any such changes may not materially and adversely affect
Tenant's use and occupancy of the Building for the uses permitted in Article 3 of the Lease.
(b) Tenant acknowledges that the timely completion of the Building Addition Work
is of the utmost importance to Landlord and Tenant. Accordingly, Tenant hereby agrees to fully
and diligently cooperate with all reasonable requests by Landlord in connection with or related to
the design and construction of the Building Addition Work and the completion of the permitting
process and, in connection therewith, Tenant shall respond to Landlord's requests for information
and/or approvals, except as specifically set forth herein to the contrary, within two (2) days
following request by Landlord. Landlord and Tenant, and such other parties as may be useful or
appropriate, shall meet on a scheduled basis to be determined by Landlord's Representative and
Tenant's Representative, to discuss progress in connection with the same.
(c) If at any time on or before the Substantial Completion of the Landlord Work,
Tenant is in default under this Work Letter or under the Lease, which default remains uncured
after the expiration of applicable notice and cure periods or ten (10) days, whichever is sooner, or
Landlord reasonably determines that Tenant is unwilling or unable to perform its obligations
under the Lease or this Work Letter and Tenant is unable to provide Landlord with reasonable
assurances to the contrary within five (5) days of request, then: (i) in addition to all other rights
and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to instruct
the Contractor to cease the construction of the Building Addition Work (in which case, Tenant
shall be responsible for the Tenant Delay caused by such work stoppage); and (ii) all other
obligations of Landlord under the terms of this Work Letter shall be suspended until such time as
such default is fully and finally cured. In the event of the foregoing, or an Event of Default under
the Lease prior to the Building Addition Commencement Date, then in addition to other damages
that Landlord may be entitled to under the Lease, at law or in equity, Tenant shall immediately
pay to Landlord upon demand all amounts, costs, fees, penalties, liabilities and expenses in any
way incurred by Landlord in connection with ceasing or completing the Building Addition Work,
in Landlord’s discretion, including costs to cease and demolish any and all improvements, costs
and penalties under the Construction Contract and other contracts, the Tenant Allowance, the
Over Allowance Amount, attorneys’ fees, consultants fees, court costs, permitting costs, and any
other costs, fees, penalties, liabilities and expenses to either terminate and demolish the Building
Addition or to Substantially Complete the same.
(d) Effective as of the Completion Date, Landlord hereby assigns to Tenant all
warranties by Contractor relating to the Building Addition Work, which assignment shall be on a
non-exclusive basis such that the warranties may be enforced by Landlord and/or Tenant.
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(e) Notwithstanding Section 6.4 of the Lease, Landlord shall require Contractor
maintain adequate builder’s risk insurance for at least the value of the Building Addition and all
sums expended therefor, and any increased costs associated therewith will be included in the Cost
Proposal. Landlord reserves the right, in its sole discretion, to instead carry adequate Builder’s
Risk insurance with respect to the Building Addition and all sums expended therefor and net the
cost, expense and premiums from the Tenant Allowance.
(f) If it is determined by Landlord and Tenant that the Building Addition Work will
not receive required City permits and approvals, then Tenant must immediately reimburse
Landlord for all of Landlord’s out of pocket costs incurred as of such time for the Building
Addition Work, including the cost of the Preliminary Addition Plans, Final Plans, Cost Estimate,
contract termination fees and costs to apply for any permits and approvals.
Description of Business, ownership, history, product and services
Description of Project
Sportech, Inc. is an innovation-driven plastics thermoformer specializing in the design,
development and production of quality products and accessories for the recreational and utility
product industry that began in 1994. The first product was the Indy Lightshield, which
eliminates snow from covering the headlights of snowmobiles. This product is recognized today
as one of the most innovative and best-selling accessories ever introduced to the snowmobile
market. Since then, Sportech has continued to evolve and grow, through their development of
numerous ground-breaking aftermarket snowmobile products and significant company growth.
As a Tier-1 supplier to OEMs, they design and manufacture windshields, body panels and
screen printed parts for motorcycles, snowmobiles, scooters, ATVs, UTVs and more.
Originally a home based business in the Carlson garage, the company moved to a 10,000
square foot facility in 1998, and built a brand new 96,000 sq. ft. facility (Building 1) in Elk River
in 2008. In 2012, an additional 55,000 square foot facility (Building 2) was added in Elk River
for warehouse and assembly productions. In 2015, they purchased 14 acres from the City of
Elk River, and built a 105,000 sq. ft. facility and moved into it in early 2016 (removing previous
Building 2), bringing their total square footage to 201,000 sq. ft. The building was purchased by
Meritex, a private real estate investment and management company in May 2016, and the
business (Sportech) was purchased by Off Road Acquisition Co., LLC (becoming a wholly
owned subsidiary) in December of 2019.
Continuing to see exponential growth under new ownership, the company has now grown by
over 100 employees in the past five years. Sportech currently employs a total of 322 FT
employees company wide, 171 total FT employees in Building 2.
Sportech's continued growth has resulted in the company rapidly outgrowing its current physical
plant size, as well as production capacity. This project will strengthen the local economy
through increased tax base, the retention of 323 well-paying jobs, and the creation of a
minimum of 85 new FTE within three years of proposed JCF project completion at the JCF
project site.
The new expansion would retain 171 employees (132 FTE), plus will create an additional 85 full-
time employees created by the proposed project. Average base wage of B2 employees is
$17.92/hr (excluding benefits), $22.76 (including benefits). Average wage of jobs to be created
at the expanded site is $18.20/hr, (excluding benefits), $23.04 (including benefits).
Currently, Sportech contributes approximately $360,000 annually in property taxes between the
two buildings (B2 project site contributes $196,000/yr). Preliminary tax estimates anticipate the
new facility will generate an additional $99,405/yr.
This project will keep a MN based company in Minnesota; with over 25 years in Elk River, MN,
the company would like to continue to grow, create jobs, and contribute to the local economy.
Sportech prides themselves in diligently working to diversify their workforce. With employees
speaking a total of four different languages (several of employees are native to Mexico and
Liberia), 24.1% of employees are minorities. Sportech employees also regularly frequent local
eating establishments and partner with local organizations to strengthen the local economy.
Ownership description below.
● Meritex (the real estate entity, landlord)
● Sportech, Inc. (the business entity), wholly owned subsidiary of Off-Road Acquisition.
B. Financial Statements for the past two years (P&L, Balance Sheet)
C. Current Financial statements (P&L to date, Balance Sheet to date)
D. Two-Year Financial Projections
E. Personal Financial Statements & Current Tax Return of all Major Shareholders Sportech is owned 100% by Off-Road Acquisition Co., LLC
F. Letter of Commitment from Application Pledging to Complete
G. Letter of Commitment from Other Sources of Financing See attached, draft lease agreement.
H. Application deposit of $10,000
I. Construction Plans and Itemized Construction Statement
December 22, 2020
Mr. Mike Merrill
Sportech
10800 175th Ave NW
Elk River, MN 55330
mmerrill@sportechinc.com
RE: Sportech Expansion Proposal
10752 168th Circle NW, Elk River, MN
Dear Mike:
Thank you for the opportunity to present this proposal expanding Sportech within
the Meritex portfolio. Sportech has been an excellent client and we look forward
to continuing the relationship.
Expansion Premises: Approximately 91,050 square feet
Commencement: October 1, 2021
Lease Term: Twelve (12) years from October 1, 2021, which
includes the existing 105,000 square foot premises.
Net Rental Rate: $5.75 per square foot with 2% annual increases.
Operating & CAM Tenant’s proportionate share shall include the
Expense and Taxes: expansion square footage
Shell Improvements: Landlord shall provide up to $65.50/SF to expand the
building.
Shell Improvements to be further defined in the
lease document and final construction plans.
General clarifications below:
• Shell Building which includes painted walls,
painted columns up to 12’ A.F.F., caulked joints in
expansion warehouse floor and (6) LED high bay
light fixtures per bay in the warehouse
• Extend Truck dock the full length and extend car
parking as shown on the preliminary plan dated
12/11/20
• Building was set up for future expansion so
precast end wall will be picked up and relocated,
temp wall built prior
• Utilize existing 3,000amp electrical service. We’ll
have to validate their existing actual peak usage
with the power company to confirm existing
service size is sufficient
• Utilize existing fire pump & extend fire sprinkler
service
• Gas fired unit heaters in the warehouse to
temper space
• Add (15) new dock doors/mechanical
levelers/seals on South wall and 1 drive-in door
• Replicate façade on all sides of the building
• Includes architectural, structural, civil design,
development fees and 3rd party construction
management fees
• Approximately 10,000 square feet of office space
assuming an allowance of $70/SF
• Items not included:
o Winter Conditions
o FF&E, including equipment wiring
o Soil Corrections
o Warehouse exhaust
o Signage
Financials: This proposal is contingent on Landlord’s review and
acceptance of Tenants most recent financials.
Additional security enhancements may be required.
Furthermore, this proposal assumes Sportech will
have equal to, or better than financials at the time
construction commences in 2021.
Brokerage: Proposal is based on Landlord not paying a broker fee.
Non-Binding: This Proposal is intended to be a general outline of
deal terms to expand the building and shall not be
binding upon either party until a lease agreement is
fully executed. This proposal expires December 29,
2020.
Best Regards,
Ben Lieser
Regional Manager
651-855-9672
blieser@meritex.com