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HomeMy WebLinkAboutagenda.council.worksession.20150804 CITY COUNCIL WORK SESSION August 04, 2015 4:00 PM, City Council Chambers MEETING AGENDA I. Walkable Cities Presentation - no packet material II. Right of first refusal Isis building Page 1 of 2 MEMORANDUM TO: Mayor and City Council FROM: Don Taylor, Director of Finance THRU: Steve Barwick, City Manager DATE OF MEMO: July 28, 2015 MEETING DATE: July 28, 2015 RE: Right of First Refusal for ISIS Commercial Lease Spaces REQUEST OF COUNCIL: Staff seeks direction from City Council as to whether to exercise a Right of First Refusal for the two commercial retail spaces and the two affordable housing units located in the ISIS building (The Theater space is not covered by the right of first refusal). The price at which it is being offered is $10,400,000. PREVIOUS COUNCIL ACTION: In 2007, the city entered into a Public Private Partnership to acquire the ISIS building and secure the theater space for the benefit of Aspen Film. The City issued Certificates of Participation (COPs) to finance the acquisition and entered into leases with ISIS Retail Group (IRG) and Aspen Film in amounts sufficient to cover the debt service. BACKGROUND: The leases were written so that the tenants, IRG and Aspen Film, would own the property at the end of the lease, after the COP’s were paid off. Both of the tenants have the ability to defease their obligation for their share of the COP’s before they are finally amortized by providing enough funds into escrow to meet their obligations under the lease. If either chooses to do this, the City and the other tenant has a right of first approval on the property. We were given notice of a pending sale and we must notify IRG whether we are interested in exercising the right to buy. DISCUSSION: The City’s main purpose in this transaction was to secure a movie theater space in Town and provide a modest amount of cash flow to Aspen Film. This remains in place without exercising the right of first refusal. There seems to be no obvious utility for the City to own this space. It is not well suited for office space. There was at one time a requirement that the spaces be for affordable oriented businesses. It has been difficult for the landlord to fill the spaces with that type of business. While the City does have some commercial leases that it manages, it is off mission for us and perhaps not in our wheelhouse to buy and lease the space. Staff does not believe this is an option that the City should exercise. P1 II. Page 2 of 2 FINANCIAL/BUDGET IMPACTS: If the City were to purchase the property, it may be able to assume the remaining obligation of the existing COP’s ($4,810,000) to finance a portion of the cost. We would then have to come up with an additional $5,590,000. There would be other adjustments for accrued interest and such. RECOMMENDED ACTION: Give staff direction to not exercise right of first refusal. ALTERNATIVES: Enter into negotiations to exercise the right of first refusal. PROPOSED MOTION: If no action is taken by City Council then the right of first refusal will lapse without any formal action being required. CITY MANAGER COMMENTS: ATTACHMENTS: Letter from Herb Klein P2 II. P3 II. P4 II.