HomeMy WebLinkAboutAgenda - 8-e - Lease Modification for Hillsborough Commons 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: April 16, 2019
Action Agenda
Item No. 8-e
SUBJECT: Lease Modification for Hillsborough Commons
DEPARTMENT: Asset Management Services
ATTACHMENT(S): INFORMATION CONTACT:
1.) Lease Modification John Roberts, 919-245-2318
2.) Exhibit F - Form of Tenant Estoppel Alan Dorman, 919-245-2627
PURPOSE: To approve a modification of the lease for Hillsborough Commons (113 Mayo
Street, Hillsborough) and authorize the Chair to sign the appropriate documents upon final
review of the County Attorney.
BACKGROUND: In September 2018, the Board approved a five (5) year lease renewal option
for the Department of Social Services spaces within the Hillsborough Commons shopping center
for a term beginning January 22, 2019 through January 21, 2024. Separately, the owner of
Hillsborough Commons had the shopping center re-surveyed, separating out the County leased
space from the other shops within the shopping center.
In the existing lease, the cost of common area maintenance ("CAM") was shared proportionally
among all tenants based on square footage. CAM charges include such items as snow
removal, grounds care, insurance, real estate taxes, landscaping, etc. This proposed lease
modification allows CAM charges to be re-proportioned such that the County would now only
pay for CAM charges associated with the space occupied by the Department of Social Services
("DSS") and its parking lot.
This change is not expected to affect the cost of the lease to the County. The following will
illustrate how this new framework will work in principal:
The 2018 CAM charges paid by Orange County DSS, using the formulation under the
existing lease, were calculated as 66% of $136,686 in CAM charges for the entire
shopping center, or $65,689. The 66% figure represents the proportion of square footage
occupied by DSS out of the total square footage of the Hillsborough Commons Shopping
Center. Under the new framework with the shopping center and its parking lot having
been sub-divided, there is no further need to subdivide CAM charges for the whole
shopping center. The County will only be responsible for the CAM charges associated
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with its occupied space and parking spaces. Those charges would be expected to
remain proportionally the same - $65,689.
How this will work in practice can be illustrated by looking at the CAM charges for snow
removal. The cost to remove the snow from the entire Hillsborough Commons parking lot
in 2018 was $5,898. Since the County has been occupying 66% of the square footage of
the shopping center, the County was responsible for paying for 66% of the snow removal
costs, or $3,633. Under the lease modification, the County would only be invoiced for the
snow removal from the parking spaces provided to the County under the lease. There is
no reason to believe that this cost would differ in a significant manner from the current
cost, so the County would expect to pay approximately the same amount - $3,633.
It should also be noted that, written into the modified lease, the shopping center owners have
agreed to replace the roof for all DSS space occupied space within a reasonable time.
In all other respects, the existing lease remains unchanged.
FINANCIAL IMPACT: There are no direct financial impacts associated with this lease
modification beyond some reduction in maintenance costs once the roof is replaced.
SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goals are applicable
to this item:
• GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY
The creation and preservation of infrastructure, policies, programs and funding necessary
for residents to provide shelter, food, clothing and medical care for themselves and their
dependents.
• GOAL: CREATE A SAFE COMMUNITY
The reduction of risks from vehicle/traffic accidents, childhood and senior injuries, gang
activity, substance abuse and domestic violence.
The modification of the Hillsborough Commons lease allows the Department of Social Services
to continue serve the residents of Orange County.
RECOMMENDATION(S): The Manager recommends the Board approve the proposed
modification of the lease for Hillsborough Commons and authorize the Chair to sign the
appropriate documents upon final review of the County Attorney.
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Attachment 1
LEASE MODIFICATION
THIS MODIFICATION OF LEASE made and entered into this day of
, 20 by and between HILLSBOROUGH COMMONS, LLLP as (hereinafter
"Landlord" and/or "Seller"), and ORANGE COUNTY, NORTH CAROLINA, (hereinafter
"Buyer" and/or"County" and/or"Tenant");
WITNESSETH:
Recitals:
Whereas Landlord and Tenant entered into that certain Lease Agreement dated July 25,
2008, modified January 12, 2015, modified November 12, 2015 and modified September 20,
2018 in connection with certain premises situated and being in Orange County and the State of
North Carolina being more particularly described in said Lease Agreement; and
Whereas, Tenant has leased Unit 01 and Unit 03 containing 66,444 square feet which
agreement has an expiration date of January 21, 2024, subject to three (3) renewal option of five
(5) years each, with rent escalations at the beginning of each such renewal option; and
Whereas, Tenant's portion of the Shopping Center has been platted separately from the
balance of the Shopping Center; and
Whereas, to properly allocate each separate parcel Landlord desires to amend the Lease
Agreement to modify the Base Year Stop and Tenant's Proportionate Share to reflect Tenant's
building exclusively; and
Whereas, Tenant and Landlord have agreed upon the terms of the Base Year Stop and
Tenant's Proportionate Share and desire to so modify the Lease.
Now, therefore, for and in consideration of the sum of$1.00 and other good and valuable
consideration each to the other paid the receipt and sufficiency of which consideration is hereby
acknowledged, the parties hereto hereby agree as follows:
Terms:
1. The recitals to this Modification are hereby incorporated into and made a part of this
Agreement.
2. As a result of the re-platting of the Shopping Center, each parcel shall stand on its
own. Landlord will re-contract with the vendors so that expenses are charged for
each parcel separately to maintain clarity of maintenance for each parcel.
3. Section 1. BASIC LEASE PROVISIONS, (21) County's Proportionate Share:
61.64% shall be deleted in its entirety and shall be replaced with: Section 1. BASIC
LEASE PROVISIONS, (21) County's Proportionate Share: 100%.
LEASE MODIFICATION-HILLSBOROUGH COMMONS
ORANGE COUNTY
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Attachment 1
4. Section 1. BASIC LEASE PROVISIONS, (22) Base Year Stop: $221,751 shall be
deleted in its entirety and shall be replaced with: Section 1. BASIC LEASE
PROVISIONS, (22) Base Year Stop: $136,687.32.
5. In all other respects said Lease Agreement shall remain in full force and effect
unchanged and shall not be altered in any way by this modification.
6. This Modification may be signed and delivered by facsimile or email and may be signed
in counterparts, which together shall constitute one Modification.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, the parties hereto have executed this Modification of Lease
the day and year first above written.
Signed, sealed and delivered HILLSBOROUGH COMMONS LLLP
in the presence of: BY: HILLSBOROUGH SHOPPING CENTER,
INC., GENERAL PARTNER
By:
Witness 1 Marc L. Hagle, CEO
Witness 2
ORANGE COUNTY, NORTH CAROLINA
Witness 1
Witness 2 Print Name
LEASE MODIFICATION-HILLSBOROUGH COMMONS
ORANGE COUNTY
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Attachment 2
Exhibit F
FORM OF TENANT ESTOPPEL
Purchaser: [Boyd Watterson Acquisitions, LLC] or its nominee
Tenant: Orange County North Carolina
Demised Premises: Building comprising approximately 66,444 square feet at 113 Mayo
Street, Hillsborough, NC (the "Demised Premises"); a portion of Hillsborough Commons
Shopping Center.
TENANT CERTIFIES TO PURCHASER, SOLELY AS OF THE DATE HEREOF, THAT:
1. Tenant and Hillsborough Commons LLLP ("Landlord") entered into a Lease for the lease
of the Premises dated July 25, 2008 (the "Original Lease"), as amended by the Lease
Modification dated November 12, 2015 and as amended by the Lease Modification dated
(the "Lease Modifications" and collectively the Original Lease,
the"Lease").
2. Tenant is the sole tenant of the Demised Premises under the Lease.
3. The current base rent is $71,705 per month. Tenant's proportionate share of the shopping
center is 100%. The base year stop for the landlord's share of annual Real Estate Taxes,
Insurance and Operating Expenses (as defined in the Lease) is $136,687.32 per annum.
4. The current Lease term expires on January 21, 2024; following which Tenant has three
(3) optional five (5)-year extensions.
5. The Lease is in full force and effect and has not be assigned, modified, supplemented,
altered or, amended in any respect except as set forth above and is the only lease or
agreement between Tenant and Landlord affecting the Premises. Tenant is not entitled to
receive any concession, reimbursement or benefit (rental or otherwise) or similar
compensation in connection with renting the Premises other than _None_. If none,
state "None."
6. The Lease is valid and in full force and effect and Tenant is not presently in default under
the Lease and no event has occurred and no condition exists which, with the giving of
notice or the passage of time or both, would constitute a default by Tenant under the
Lease, except_None_. If none, state "None."
7. Tenant currently has no defense, set-off against the payment of rent or other amounts due
from Tenant to Landlord under the Lease, or counterclaim against Landlord arising out of
the Lease or in any way relating to the Lease.
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8. Landlord is not in default under the Lease and Landlord has not failed to perform or
observe any term, covenant, or condition which (but for any applicable notice or grace
period) would constitute a default under the Lease except it appears the roof is at the
end of its useful life and as such shall be replaced within a reasonable time by the
Landlord or its successor in interest. If none, state "None."
9. Tenant has received any and all amounts due and owing by Landlord pursuant to the
$600,000 Completion Allowance Rider (Exhibit E to the Lease). No other
reimbursement agreement exists between the parties for work undertaken by the County
on the Premises and no Tenant Improvement costs are due and owing from Landlord,
except_None_. If none, state "None."
10. Tenant was given the opportunity to purchase the parcel of land that includes the
Demised Premises pursuant to paragraph 23 of the Lease Modification and declined to
purchase the property.
11. No Rent has been paid more than one (1) month in advance except _None _. If none,
state "None."
12. No security deposit or credit in lieu of deposit has been granted the County or is held by
Landlord.
13. Tenant has not sublet the Premises or any portion thereof.
14. Tenant is in exclusive possession of the Premises and has accepted the Premises and any
improvements thereon or therein, the Premises are in full compliance with the terms of
the Lease and there are no outstanding repairs to be completed by Landlord, except it
appears the roof is at the end of its useful life and as such shall be replaced within a
reasonable time by the Landlord or its successor in interest..
This Tenant Estoppel Certificate is certified by Tenant's authorized representative with the
knowledge that it will be relied upon by Landlord and Landlord's prospective purchaser and their
respective successors and assigns.
DATED this day of 12019.
TENANT: Orange County North Carolina
By:
Name, Title