7.0. EDSR 07-09-2001 - Laserfiche WebLink

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Item # 7 • cty of Elk -..� River TO: Economic Development Authority FROM: Marc Nevinski, Assistant Director of Economic Development DATE: July 9, 2001 SUBJECT: Consider Renegotiation of Incubator Lease Issue MEMORANDUM One of the recent concerns with the Business Incubator has been the high vacancy rate of the facility. Economic factors as well as the building's physical characteristics (i.e. limited power and no urban services) have contributed to the high vacancy rate. To address this problem, staff has explored the option of reducing lease space with the building owner, Larry Hickman, and is requesting EDA direction. Background Currently, the EDA is leasing 13,186 sf of space from Mr. Hickman which is then subleased to emerging companies who enter the incubator program. Included in this space are six suites ranging in size from 1400 to 2300 sf, plus commons area. At no time in the history of the program have all of the six suites been fully subleased. Currently only two suites are subleased, one to Vertical Publishing and the other to SolarAttic at market rate. In light of these vacancies, staff meet with Mr. Hickman to discuss the concept of leasing only 4000 -8000 sf (two-four suites and commons area) and retaining an option to lease the remaining space on an "as-needed" basis, saving the EDA between $30,000 and $16,000 over the remaining term of the current lease (Please see Attachment A). In turn, Mr. Hickman would have the option to lease the vacant space to other firms at market rate if the EDA had no prospective companies for its incubator program. The advantage of such an arrangement would allow the EDA to preserve the CDBG funds that support the incubator program. Currently, enough dollars exist to fund the incubator through approximately 2006. Amending the lease could significantly extend the fund dollars and the incubator program . The disadvantage to such an arrangement however, is that the EDA risks the possibility of not having space available for a • prospective company.