City has been asleep at the switch on leases
"Sitting on our hands."
That’s the way Key West Commissioner Tom Oosterhoudt described the
city’s track record as landlord for some prime property in the
Southernmost City.
"If we’re going to be a landlord, we need to act like one," he said.
Well, I’m not sure what most people would say about landlords, but
finding one who overlooks a half-million-dollars in past-due rent
payments has got to set a record of some kind – even in Key West.
The Keynoter, last Saturday, detailed nearly $565,000 in payments
made months late by one of the city’s biggest tenants: Historic Tours of
America.
City records show rent due in March was paid two months later in May
for some of the properties, and three months later – in June – for
others.
At Wednesday night’s commission meeting, Merili McCoy urged that the
city have one person direct lease management and negotiations. "I think
the time has come," the District II commissioner said.
We agree.
District VI Commissioner Carmen Turner voted against changing the
city’s ordinance to give tenants up to three years to negotiate terms
before existing leases expire.
"We need to get serious about our leases," Turner said. "Anyone who
looks at them can tell we haven’t been."
Later in Wednesday’s meeting, she spoke about the importance of
viewing lease revenue to the city as an alternative to higher taxes.
And a resident who spoke out during the public hearing said: "The
city’s primary responsibility is to the taxpayers, not to its tenants."
Even if HTA had computer glitches and new software problems and all
the rest, the city can’t afford to "float" half-million-dollar loans to
well-heeled tenants like HTA, especially when many of those lease deals
are considered pretty cushy compared to today’s standards for commercial
rents.
Ed Swift’s Old Town Trolley and Conch Tour Train pay the city 5
percent of gross sales as rent, a deal that runs to 2028. And, the
Trolley and Tour Train businesses pay no base rent.
By contrast, commercial leases for other types of businesses paying
current market rates have terms as high as 10 and 15 percent of gross
sales, or higher base rents to compensate.
Some enterprises in Key West, like the Turtle Kraals and the Half
Shell Raw Bar, lease from the city and pay base rents not a percentage
of sales. For those two restaurants, the city lease earns more than
$33,000 per month.
When Swift approached the commission last month with a proposal to
lease the city-owned Plantains restaurant property on Caroline Street,
the rent he pledged to pay the city was $1,000 a month.
This for a site where Swift planned to build a $1.25 million
restaurant and eight affordable housing units.
Before the commission could take up that item, it was pulled from the
agenda.
That didn’t stop Commissioner Harry Bethel from grousing about the
low rental for such prime real estate.
And it was a theme that Bethel repeated Wednesday night during a
vigorous discussion about how the city manages its leases.
"If you bring a lease before me, I’m going to be looking at your
history very close, inclusive of late payments, and that’s been a sore
subject in the last two to three weeks," he said.
He added: "There is some fault to be shared both by the city and by
the leaseholder."
And he asked that the city staff be directed to contact all tenants
holding leases that don’t have a penalty clause and ask that language be
added.
For any
leaseholder who’s reluctant to add such a penalty clause, Bethel offered
this warning: "At some point, they will come back. And I do have a
memory, and I will take that into consideration."
For the city’s leaseholders, they can consider that a threat. Or a
promise.
Only time will prove which.
Publisher Wayne Markham can be reached via e-mail at
wmarkham@keynoter.com
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