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Annapolis committee recommends changes to Market House lease, adds $100,000 tenant investment requirement
Summary
The committee voted to recommend amended lease terms with the Market House tenant that raise base rent and create reporting requirements; the committee added language tying a $100,000 required tenant investment to capital expenditures that directly benefit the city.
The Annapolis Finance Committee on Oct. 15 recommended a negotiated revision to the Market House lease that raises base rent, adds reporting requirements and formalizes a $100,000 initial-term investment obligation by the tenant, with limits on when the city will allow that $100,000 to be deducted from performance rent.
Ashley Leonard, Assistant City Attorney, summarized the key lease changes: security deposit raised to $15,000; basic rent increasing to $11,000 per month; and a performance-rent structure that charges 1 percent of gross receipts over $2,000,000. Leonard said basic rent will increase by 10 percent for each five-year renewal period and performance rent will increase 5 percent at the same intervals. She noted an annual reporting requirement would make revenue and performance information public: the report would be presented to the mayor, city manager and shared with city council.
Keith Bouchard, representing the Market House tenant, said his team is satisfied with the negotiated terms and hopes to remain a locally owned business under the new arrangement. Bouchard described the changes as manageable and said the tenant expects to continue contributing to the city’s market program.
A major point of debate was a required $100,000 investment the tenant must make as part of the initial-term improvements. Some council members wanted to be certain that the $100,000 would represent tenant investment rather than an offset against revenues the city would otherwise receive. Bouchard said portions of the performance rent could be used under written amendment to make agreed capital improvements, citing an example such as renovating public restrooms. Leonard proposed and the committee agreed to an amendment clarifying that the $100,000 cannot be deducted from performance rent unless the expenditure is a city-agreed capital improvement that benefits the city and the building. The amendment was presented as a written amendment process that would require director-level and legal signoffs.
Following discussion the committee moved and approved a favorable recommendation on O3325 as amended; staff and the tenant will finalize language and confirm partner agreement before final execution.
