COUNTY OF ALBEMARLE
Public Hearing: Silvercrest Lease for 614 East High Street
Authorize the County Executive to sign the Silvercrest Lease agreement.
Tucker, Foley, Davis
FOR LEGAL REVIEW: Yes
September 7, 2005
ACTION: X INFORMATION:
The City of Charlottesville and Albemarle County purchased the Jessup House and adjacent parking at 614 East High Street, on April 27, 2005 to address Court facility needs. The property was one of three purchased from Hedgerow Corporation as part of a package that included the Levy Opera House and the parking lot at 7th and Market Streets. Silvercrest Asset Management Group, formerly Heritage Financial Management, has leased the building for a number of years under a lease executed prior to the City/County purchase. Its current lease will expire in August, 2006. Silvercrest would now like to enter into a new five-year lease in order to make substantial improvements to the interior of the building.
Attached for your information is a memorandum from Silvercrest dated August 24, 2005 (Attachment A), outlining their intentions to assume interior and exterior building and grounds maintenance during the lease renewal period from August 1, 2005 through June 30, 2010. It also details the anticipated costs for the work they wish to undertake in the building. Also attached is the proposed Lease (Attachment B), which places an affirmative obligation on Silvercrest to spend approximately $90,000 on improvements to the premises during the first year of the new lease.
Virginia Code § 15.2-1800 requires that the Board hold a public hearing to receive public comment prior to authorizing a lease for County-owned property.
Provide Effective and Efficient County services to the public in a courteous and equitable manner.
The Hedgerow properties were purchased with the intent of ultimately using them to meet the 20-year needs of a combined City/County General District Court as proposed in the original, comprehensive Courts Study. Given that construction and renovation of the old J&DR Court building has not yet begun, we anticipate that the J&DR Court functions will remain in the temporary facilities at Levy Opera House at least until the Spring of 2007. The County and City have set aside funding in the current fiscal year to better define the long term needs of the General District Court facilities, and ultimately determine the need for the Jessup property as a component of addressing those needs.
The Jessup building has had
only basic maintenance since Silvercrest began leasing it from Hedgerow
Corporation in 1993. Silvercrest proposes to immediately spend ~$90,000 on
painting, flooring, wallpapering, new fixtures and related interior improvements
in exchange for a rent credit of up to $55,000 during the first year. In
addition, the lease is based on an original rate of $16/square foot ($100,000)
reduced to $75,000 to reflect Silvercrest’s assumption of interior and exterior
property maintenance costs (including janitorial, snow removal and gardening),
estimated at $25,000/year.
Final terms of the lease include:
¨ A base annual rent of $75,000, with an inflator or 3% or the CPI increase (whichever is greater) in each subsequent year;
¨ Silvercrest’s assumption of interior and exterior maintenance of the property at an estimated cost of $25,000;
¨ An allowance to Silvercrest for the cost of interior repairs and improvements made in the building not to exceed a total of $55,000 in the first year; and
payment to the City of the tax on the leasehold interest (15% of the total real
estate tax on the property or $1,188.65 in the current year).
As justification for the first year credit of $55,000, Silvercrest has provided a breakdown of its estimated $90,000 of improvements in the attached letter. City staff, responsible for the management of the property, has reviewed the $44,000 estimate obtained by Silvercrest for interior work and believes the estimate is fair and reasonable and could most likely not be done for less by the City. Beyond this work, Silvercrest also intends to replace carpet, improve other interior features and address needed landscaping around the building, among other improvements. Given that very little has been done to the facility since 1993 and many of the improvements are either permanent improvements that will extend beyond the term of the lease or are upgrades that would reasonably be expected if this property were to be put out on the market, County staff believe that the $55,000 credit is reasonable. It should be noted that the rent on the property has also been increased and will begin a year sooner than the current lease requires.
The City and County as Lessors will be responsible for repair to the exterior front and side walkways, front and side retaining wall, and repainting of the exterior window frames, shutters and roof. City staff estimates this cost to be approximately $100,000, to be shared equally between the City and County and paid from the revenues that have been and will be accruing in the segregated revenue account kept by the City as specified in the Interjurisdictional Agreement approved on July 20, 2004 by City Council and the Board of Supervisors.
Alternatives: 1) Assume the costs of both interior and exterior repairs to the building, as well as annual maintenance costs and renegotiate the lease for an annual rent of $100,000/year plus tax on the leasehold interest; or 2) let the current lease lapse and lose the tenant and revenues that would be realized.
Additional revenue will be realized by both the City and the County and kept in a segregated City account as specified in the Interjurisdictional Agreement. Projecting a minimum of a 3% annual inflator, lease payments can be conservatively expected to total ~$343,000 over the five year period. If the improvements that are the responsibility of the City/County are paid from this account, then net revenues will be ~$243,000 over the lease term.
Approval of the terms of this lease agreement will result in improvements to the long-term value of a public asset and retention of a valuable downtown business in a historic setting.
After holding the public hearing, staff recommends that the Board authorize the County Executive to execute the lease agreement in a form approved by the County Attorney.
A – Silvercrest Memorandum
B – Commercial Lease Agreement
Return to regular agenda