On Monday evening (Oct. 21), the City of Auburn authorized Mayor Nancy Backus to negotiate another purchase-and-sale agreement, this one for $6.3 million concerning a key piece of commercial property it has been leasing for five years at 2802-2826 Auburn Way North.
The property is key because the Auburn Resource Center, the Auburn Food Bank, the Ray of Hope Day Shelter, the Sundown Night Shelter and the We Care Daily Clinic all operate there, thanks to the 5-year lease the city entered into with the owner, Feenix Parkside LLC, on Jan. 31, 2020.
“Purchasing the property rather than continuing to lease it,” said Acting Deputy Mayor Yolanda Trout-Manuel, “will protect and ensure that each critical operation continues [for] those most vulnerable in our community.”
The yes vote was unanimous.
The initial lease was for the five-year initial term with three consecutive 5-year options. This past March, the city issued its Exercise Option Interest Notice to Feenix Parkside, expressing its interest in exercising the first of the three available 5-year-option terms.
On April 10, 2024, Feenix Parkside LLC, through its property management contractor, issued the city its Option Rent Notice, proposing a base rent of $18 per square foot for the upcoming option term, a 26.4% increase over the city’s current $13.25 per square foot base rent.
The sharp rent increase did not sit well with the city.
In June, the city commissioned SH&H Valuation and Consulting to perform an update to its July 25, 2023, appraisal of the property. The July 3, 2024, update returned a $6.13 million valuation. The city took a look and concluded that it made more financial sense to buy rather than to continue to lease
According to the city, starting at the $18 per square foot and factoring in historical 2.5% annual increases to the base rent, it determined it would be on the hook for a nearly $12 million in the future option base, given rent increases of 20% and using historical increases of 1% to the triple net expenses over the remaining 15 years of the lease. Although the triple net expenses are in addition to the $18/ft. base rent, they are considered part of the total rent owed.
Under the threat of condemnation, Feenix Parkside LLC agreed to sell the property to the city for the $6.13 million appraised value if the city agreed to pay all closing costs, including those costs the seller typically pays. Because acquiring property under the threat of condemnation allows for the waiver of certain excise tax fees, the city estimated the total closing costs would be less than $100,000.
