TO: Members of the City Council
FROM: Mayor Angela Birney
DEPARTMENT DIRECTOR CONTACT(S):
|
Finance |
Kelley Cochran |
425-556-2748 |
DEPARTMENT STAFF:
|
Finance |
Terry Marpert |
Real Property Manager |
TITLE:
title
Approval of the NW Restaurants, Inc. 2023 Lease Amendment
OVERVIEW STATEMENT:
recommendation
NW Restaurants, Inc. operates the Kentucky Fried Chicken (KFC) restaurant located at 15802 Bear Creek Parkway on City of Redmond property under a lease that will expire on June 30, 2023. NW Restaurants wishes to continue leasing the property and has negotiated with staff for a proposed lease amendment extending the lease up to five years to June 30, 2028. Attachment A summarizes the proposed lease amendment terms, and Attachment B has the proposed lease amendment. Staff support the proposed amendment and recommend that it be submitted for City Council approval.
body
☒ Additional Background Information/Description of Proposal Attached
REQUESTED ACTION:
☐ Receive Information ☐ Provide Direction ☒ Approve
REQUEST RATIONALE:
• Relevant Plans/Policies:
N/A.
• Required:
N/A
• Council Request:
N/A
• Other Key Facts:
N/A.
OUTCOMES:
NW Restaurants, Inc. has operated the KFC restaurant under a lease with the previous property owners since 1971. In 2016 the City bought the property and assumed the lease, with the intent to facilitate the preservation of land needed to build a new street link connecting Redmond Way and 158th Ave. NE, and a new four-way intersection at Redmond Way and Bear Creek Parkway. These planned improvements are identified in the Redmond Transportation Master Plan (TMP), an element of the Redmond Comprehensive Plan.
In 2018, the City and NW Restaurants Inc. signed a five-year lease amendment that will expire on June 30, 2023. The amendment set the “fixed rent” at $6,588.77 per month for the five-year lease period, plus an annual “percentage rent” based on sales. During the lease period from 2018 to 2023, the Consumer Price Index for Urban workers (CPI-U) in the Seattle-Tacoma-Bellevue area increased by 25.2%.
In recognition of the need to keep pace with inflation, the proposed lease amendment raises the first-year fixed rent beginning on July 1, 2023, by 25.2% from $6,588.77 to $8,251.00 (rounded to the nearest dollar). Rent for the second year beginning July 1, 2024, will be based on the April 2023 to April 2024 change in the CPI-U. If exercised, the three optional one-year lease extensions will use same annual April to April changes in the CPI-U to set the monthly fixed rent. The City will also continue to receive annual percentage rent, and NW Restaurants, Inc. will continue to pay stormwater utility charges and the Washington State leasehold tax of 12.84%.
The City is authorized by RCW 35A.11.010 - Rights, powers, and privileges, to conduct real estate property transactions such as the leasing of City-owned property to NW Restaurants, Inc.
COMMUNITY/STAKEHOLDER OUTREACH AND INVOLVEMENT:
• Timeline (previous or planned):
N/A
• Outreach Methods and Results:
N/A
• Feedback Summary:
N/A
BUDGET IMPACT:
Total Cost:
N/A
Approved in current biennial budget: ☐ Yes ☒ No ☐ N/A
Budget Offer Number:
N/A
Budget Priority:
Strategic and Responsive
Other budget impacts or additional costs: ☐ Yes ☐ No ☒ N/A
If yes, explain:
N/A
Funding source(s):
N/A
Budget/Funding Constraints:
N/A
☐ Additional budget details attached
COUNCIL REVIEW:
Previous Contact(s)
|
Date |
Meeting |
Requested Action |
|
6/13/2023 |
Committee of the Whole - Finance, Administration, and Communications |
Provide Direction |
Proposed Upcoming Contact(s)
|
Date |
Meeting |
Requested Action |
|
N/A |
None proposed at this time |
N/A |
Time Constraints:
A new lease amendment with NW Restaurants, Inc. should be approved before the current amendment expires on June 30, 2023.
ANTICIPATED RESULT IF NOT APPROVED:
The terms of the existing contract would remain in place until the City and NW Restaurants, Inc. reach agreement on a new lease agreement.
ATTACHMENTS:
Attachment A - Lease Amendment Summary
Attachment B - Proposed 2023 Lease Amendment