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Committee pauses Market House lease negotiations, asks for performance and rent clarifications
Summary
The Economic Matters Committee postponed action on O-33-25, a proposed long-term lease for Market House, after lengthy discussion about term length, rent structure, performance rent, and tying renewals to infrastructure improvements. The committee asked staff to return in October with negotiated amendments.
The Economic Matters Committee on Sept. 17 voted to postpone consideration of O-33-25, a proposed long-term lease for Market House, until the committee’s October meeting so staff and the tenant can negotiate amendments on renewals, rent escalators and performance metrics.
Assistant City Attorney Ashley Leonard presented the draft lease and said it is based on the current agreement but includes several substantive changes. The new draft would set a five-year initial term with three unilateral five-year renewal options exercisable by the tenant unless in default; the draft removed the previous unlimited extension language.
Under the draft, base rent was increased from $8,000 to $10,000 and would rise 5% at each renewal (every five years). The lease would also include performance rent equal to 1% of cumulative annual gross revenues over $1,500,000 — a reduction from the existing 2% rate. Leonard said the finance director reviewed the change and calculated that, for FY 2025 receipts, the new arrangement would have produced about $20,000 more in base rent despite the lower performance percentage.
Committee members pressed for stronger performance metrics and for mechanisms to ensure tenant-funded infrastructure improvements. Alderman Huntley asked that renewals be mutual rather than unilateral, and requested either a higher base rent or a higher performance-rent percentage and an inflation-based escalator. Chair and other members suggested tying some renewal rights or rent escalators to specific investments — for example, restroom upgrades or geothermal and HVAC work the tenant has described as priorities.
Leonard said the draft permits the tenant to sublease portions of Market House with the city’s prior written approval, requires the tenant to ensure subtenant compliance with the lease and laws, and allows the tenant, if it coordinates and pays for certain city maintenance tasks, to take the costs as a rent setoff. She also described more flexible financial documentation for calculating performance rent: instead of a highly specific custom audit, the tenant could provide standard audited financial statements and supporting tax returns or other documentation the city reasonably requires.
Alderman Savage said he supports keeping the current operator but wants stronger assurances that significant building upgrades will be prioritized if the city grants long-term rights. "If we are gonna commit to giving this essentially, allowing them to continue to operate Market House for 25 years, I feel like … we should tie some of the renewals to performance standards," he said.
After discussion, Chair asked for a motion to postpone action until October; the committee moved, seconded and approved the postponement by voice vote. Staff will return with negotiated language addressing mutual renewals, CPI-based escalators and possible performance-linked renewal criteria.
Ending: Committee members asked staff to present proposed amendment language in October; the committee also requested that finance return with detailed rent- and performance-impact analyses before the item returns for a vote.
