Friday, April 22, 2011

URA sets terms for Starbucks

Board divided on plan for site


By TREVON MILLIARD
Express Staff Writer

The Cairde Group—which wants to put a Starbucks franchise in the Ketchum Visitor Center building downtown—would be paying about $3,000 a month in rent if it accepts the lease terms of Ketchum's Urban Renewal Agency, agreed on at Thursday's URA meeting.

Despite the URA's approval of a letter of intent outlining its lease requirements for Cairde, two of the URA board's seven members—Nina Jonas and Trish Wilson—weren't in support of the conditions.

At issue is a plan to lease part of the URA-owned building at the corner of Sun Valley Road and East Avenue. Many of the 50 members of Ketchum's business community in the audience also didn't think the URA was asking enough of the Starbucks group.

"You guys are giving them everything they want," real estate agent Ellie Ellis told the URA members. "Shame on you."

Her statement received a hearty applause from the audience behind her.

Many of these same business owners filling the audience argued the space shouldn't be leased to a Starbucks franchise—period—regardless of terms, arguing that the URA was ignoring the will of the people in doing so.

"I have to tell you that you're a very vocal minority," said URA Board Member Baird Gourlay. "It's not a question of us not listening to you but [of you] not getting your way."

URA Vice Chair Mark Eshman added to Gourlay's point.

"There are 600 businesses licensed in the city of Ketchum," he said. "The vocal minority is all in food services. We do serve a broader purpose."

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Along that reasoning, the URA approved a letter of intent asking Cairde to pay $1.50 per square foot. Cairde has asked for 1,900 square feet, which is half of the visitor center's groundfloor. Cairde would pay half that rate for 250 square feet of outdoor space and an undetermined payment in lieu of taxes since the building is property-tax exempt. Details would be established in the lease itself, said URA attorney Stephanie Bonney, explaining that the letter of intent is just a starting point, not the legally binding lease. The URA's requested lease term is five years, giving Cairde an option in 2016—after paying $182,000 in rent over the first five years—for a five-year extension and another five-year extension after that. At the start of each extension, rent would be adjusted to reflect market rate at that time.

The URA put a $100,000 cap on the building improvements it would make before Cairde's June move-in date. URA Executive Director Gary Marks said that money could come from a short-term loan (which received a disapproving gasp from many audience members), from the tenant, who'd be reimbursed, or from the URA's contingency fund.

One lease term surprised many members of the audience: "In the event that Cairde Group should terminate their lease agreement, Starbucks Coffee Company shall be granted an exclusive first right to assume the Cairde lease."

Audience members said that is disconcerting considering that proponents tried to garner support for Starbucks because the franchise would be owned and operated by locals. Cairde has until 5 p.m. today, April 22, to sign the letter of intent in agreement with the terms.

Despite passing the letter of intent, the URA wasn't decided on one term after hearing from landlords that businesses usually hand over a percentage of their gross revenue on top of a flat rate per square foot.

URA Board Member Trish Wilson said she voted against the letter of intent for that reason.

"Without the percentage, I think it's a hell of a deal for them [Cairde Group]. This is beachfront property," she said, referring to the property's prime location on Sun Valley Road in downtown.

Gourlay agreed but voted for the letter of intent, requesting that the percentage-of-gross-revenue charge be added during negotiations with Cairde for drawing up the lease, which is the legally binding document.

Trevon Milliard: tmilliard@mtexpress.com




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