Mimi Fritz, president and executive director of the Downtown Market, will have more flexibility in closing leases for new tenants.
Expect more announcements soon of tenants leasing space in the new Downtown Market because the market’s board and Grand Rapids Downtown Development Authority made two amendments to their ground lease last week.
One — a non-disturbance clause — will directly affect tenant leases. In layman’s terms, a non-disturbance agreement gives a tenant a sense of security because it ensures that a lessee will keep possession of its property for the duration of a lease even if foreclosure action is taken against its landlord. In short, the clause guarantees that nothing outside of a tenant’s action can interfere with a lease.
At the market, a retail tenant leases a “white-box” space and often needs financing to convert the space into a store, and lenders are more likely to approve a loan for that purpose if a non-disturbance clause is in place.
DDA Chairman Brian Harris said the amendment also gives Mimi Fritz, the market’s president and executive director, an enhanced ability to close on leases.
Up until last week’s modification of the ground lease, five vendors had leased spaces in the market’s indoor hall. Simpatico Coffee and Love’s Ice Cream were the first to do so, while Crescent Floral & Gifts, Dorothy & Tony’s Gourmet Kettle Corn and Old World Olive Press followed a few weeks later. A brew pub was expected to sign a lease in mid-March but didn’t, and those talks are reportedly continuing.
The market, on Ionia Avenue near Wealthy Street SE, has room for 24 vendors in the year-round interior spaces in the hall. The indoor portion of the market is projected to open July 1. The outdoor farmers market is set to begin selling fresh produce May 4.
The second amendment made to the ground lease involves the tax-increment revenue that will come from improvements the market makes to the property, which has gained brownfield status. Last June, the Grand Rapids Brownfield Redevelopment Authority issued tax-increment bonds worth $2.32 million to pay for street improvements around the market’s site. The bonds have a term of 20 years, but the tax-increment payout will run for 30 years and the authority plans to use its share of that revenue to pay bondholders.
The DDA then agreed to give the authority $75,000 annually toward its debt service and the authority would fund the remainder of that yearly tab. But if, in any of those years, the DDA doesn’t get at least $42,000 in tax-increment revenue from the market property, then the Downtown Market board will be asked to reimburse the DDA the difference between what it receives and its $42,000 revenue expectation that it counts on for its $75,000 payment toward the debt service.
The market board will have 30 days to let the DDA know if it will make the reimbursement. If it can’t, or decides not to, then an interest rate of 3.514 percent will be added to the “difference” amount that is owed to the DDA.
“We expect that this will never happen, that there will be sufficient tax-increment revenues,” said DDA counsel Dick Wendt, a partner at Dickinson Wright. Wendt also serves in the same capacity for the city’s brownfield authority. The market’s board previously approved the contract.
The brownfield authority will pay the debt service that exceeds $75,000 each year.
In addition, the amendment calls for a third-party independent audit if the market fails to lease at least 60 percent of its space, doesn’t have a fund balance of $250,000, and its income is less than 90 percent of its expected expenses at the end of any given fiscal year.
The lease between the DDA and the market runs for 99 years and has the market paying the DDA $1 a year in rent for the 3.5-acre site. The market is also responsible for any taxes, assessments, rates, fees and other charges associated with the property.
Grand Rapids Urban Market Holdings LLC has title to the property. The DDA and the Grand Action Committee are developing the market, which could cost up to $30 million to create, and those two groups created the LLC.
The DDA bought the property several years ago for $2 million and initially planned to sell the site to the market but later settled on a leasing arrangement.
Chris Muller of M Retail Solutions is the contact for anyone who wishes to lease space inside the market’s hall; the market’s Claire Duthler is the person to speak with about an outdoor stall. The market’s leasing committee reviews all applications from tenants.