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5. HRSR 12-03-2007ITEM # 5. aty E t~ver MEMORANDUM TO: Housing & Redevelopment Authority FROM: Catherine Mehelich, Director of Economic DATE: December 3, 2007 Development SUBJECT: Consider Lease Agreement with Elk River Area Arts Alliance for 716 Main Street Attachment • Email correspondence from Patrick Grace dated October 11, 2007 • Draft Lease Agreement between HRA and Elk River Area Arts Alliance Action Requested The HRA is asked to review and consider approval of the attached Lease Agreement with the Elk River Area Arts Alliance for 716 Main Street. Background At its November 5, 2007 meeting the HRA reviewed the attached email lease request from the ERAAA for the use of the 716 Main Street building. The HRA authorized the preparation of a draft 2-year lease agreement with the ERAAA for use of the 716 Main Street building. Staff has been working with the HRA's attorney to prepare the attached draft lease agreement consistent with the framework that was presented by the ERAAA. The ERAAA Executive Director Patrick Grace has reviewed and generally accepted the lease agreement as drafted, subject to review and approval by the ERAAA Board of Directors. In summary the lease provides for: • 2-year term from January 1, 2008 to December 31, 2010. • Rent in the amount of $1.00 for the entire term. • Use of the first floor space (approximately 3,370-square feet) for administrative offices, art gallery and sales, meetings, programming and receptions. • The Sherburne County Assessor has determined the property to be exempt from real estate taxes. • Utilities will be the responsibility and cost of ERAAA. • ERAAA will be required to carry general liability, property, and workers compensation insurance. Page 1 of 3 Clark, Scott From: Patrick Grace [patrick..grace@eraaa,orgj Sent: Thursday, October 11, 2007 4:36 PM To: Clark, Scott Cc: Mehelich, Catherine; Wendy Simenson Subject: [!! SPAM] Re: Houlton Building Scott: Thanks for the update. Here is a first go at your questions. Please let me know if any of this is not clear or you need more information. I would be able to attend the Council meeting next week if having someone from the Arts Alliance present would help answer any questions. I do have an internal document that was developed as a business plan for the storefront; with some modifications we could make this available, if deemed required. I will be out of the office November 5-9. A description of what you will use the building for. The storefront will be used by the Arts Alliance as 1) administrative offices; 2) changing art gallery with sales by Arts Alliance members; 3) small meetings and arts programming including lectures, recitals, workshops; This will eventually include daytime programming for seniors, after school programming for young adults, and weekend programming for families; 4) receptions for visiting artists and performers as well as Arts Alliance events. What would be the hours of operation? Office hours are generally 9-4 Tuesday through Friday. Gallery hours will be Tuesday through Friday 11-4 and also include Thursday evenings through 8pm, some Friday evenings, and Saturdays, 11-5. Sundays are a possibility, but are not planned yet. Special events and receptions will be Thursday and Friday evenings, Saturdays. Do you anticipate doing any leasehold improvements at your cost. We anticipate providing partitions for art displays, additional temporary lighting as needed for art displays. Some external signage would also be developed. Will you be providing insurance for yourself? The Arts Alliance will provide liability insurance as required. How long do you want the lease to run for at a minimum? We are seeking a minimum of two years with options to extend a possibility. From our previous discussion, will your organization pay for all utility costs? We will be responsible for utilities in the areas we occupy in the building. 10/31/2007 Page 2 of 3 Are you proposing a rent to the City (HI2A) or are asking for free rent? We are seeking a dollar a year lease with the City/HRA. Other preliminary thoughts or ideas. The Arts Alliance is eager to be a part of the revitalization of the downtown ax•ea. We believe that having the arts in the downtown area will help furthering the work already done by the City of Elk River. The storefront will offer the Arts Alliance the opportunity to strengthen our programming and expand our ability to service the community and help make the community a better place to live and have a business by having a strong arts presence. The Arts Alliance relies upon community volunteers and anticipates more participation as we have a presence in the downtown area. Patrick Grace Executive Director Elk River Area Arts Alliance 763.441.4725 patrick race(~elkriverart org December 1st, Joe Chavala & the Flying Foot Forum @ the Zabee Theater Tickets now available. Visit www.elkriverart.org for full details. bringing the arts home,. On Oct 11, 2007, at 11:40 AM, Clark, Scott wrote: As you may be aware the City Council accepted the parking study as is (except for adding quarterly parking surveys to be completed by staff ). Based on this it seems that we should be able to go back to the HRA in November for a preliminary discussion on the use of the building by your agency. To start with, can you provide me with the following information: (I recognize some of these will be estimates ) A description of what you will use the building for What would be the hours of operation Do you anticipate doing any leasehold improvements at your cost Will you be providing insurance for yourself How long do you want the lease to run for at a minimum 10/31/2007 Page 3 of 3 From our previous discussion, will your organization pay for all utility costs Are you proposing a rent to the City (HRA) or are asking for free rent Other preliminary thoughts or ideas I will get the past historical water and electric costs to you as promised, Scott P S. I will be taking a small leave starting on the 19th of this month and returning on the 29th. Thanks 10/31 /2007 LEASE AGREEMENT THIS LEASE AGREEMENT (the "Lease") is made and is effective as of this day of , 200_. 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 %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, except for the approximately 225 feet of storage space on the main level and 3,000 square feet of storage space on the lower level depicted on Exhibit A that Landlord leases to First National Financial Services, Inc. pursuant to a lease dated October 20, 2006, and the exterior portions of the Property (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, 2008 and expires on December 31, 2010 (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 real 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 2109788v3 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 Leased Premises, whether for sale or otherwise, Tenant shall require the third party 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 10, 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. 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 ofnon-responsibility for alterations, additions or repairs. 2109788v3 2 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. 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 2109788v3 3 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-half times 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 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 2109788v3 4 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 U.S.C. Section 6901, et seq. (42 U.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. 2109788v3 5 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: LANDLORD: The Housing and Redevelopment Authority in and for the City of Elk River. 13065 Orono Parkway Elk River, Minnesota, 55330 Attention Executive Director 2109788v3 6 TENANT: Elk River Area Arts Alliance. 716 Main Street Elk River, Minnesota 55330 Attention Executive Director [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] 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: 2109788x3 7