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July 23, 2018

7/10/2018 11:52:00 AM
 City and Smylie Brothers Reach Agreement on Termination of Lease
By Mary Helt Gavin


Smylie Brothers and the City of Evanston walked away from the recycling center venture on July 9, each with some gain, some loss, and, on the City’s side, relief and disappointment. The parties signed, and aldermen approved, a termination of the lease of the former recycling center, 2222 Oakton St.

The vote was 6-2, with Alderman Tom Suffredin, 6th Ward, and Alderman Cicely Fleming, 9th Ward, voting against the agreement because they said the City did not recoup enough money. Alderman Peter Braithwaite, 2nd Ward, did not attend the meeting.

The Lease

In December of 2016, Smylie and the City entered into a 10-year lease with two five-year options so Smylie could convert the former recycling center into a brew pub. The lease provided that Smylie would pay no rent for 18 months, while the company and the City completed the build-out. Beginning in the third year of the lease, Smylie would pay an annual rent of $163,750 with an annual adjustment equal to the consumer price index.

Construction should have begun after the “inspection period” set forth in the lease, which, it seems, expired in May or June of 2017.

The lease also required the City to split the parcel and place the building on the tax rolls, leaving the parking lot City-owned and thus tax-exempt. According to County records, the parcel was split as required by the lease. But both parcels are listed as tax-exempt with no taxpayer of record, and therefore no taxes are owed.

At the June 25 Administration and Public Works Committee meeting, Eighth Ward Alderman Ann Rainey questioned why City staff had not placed the building on the tax rolls.

“Would you say you blew it?” she asked Community Development Director Johanna Leonard.

Ms. Leonard replied the window of time to do so “was compressed” – only about four months, fro July until October of 2017.

Although over the past several months the parties corresponded by email and talked by telephone and in person, discussing progress, financing, difficulties and challenges, City staff said it was a surprise for them to learn via Facebook in early spring that Smylie was planning instead to open a brewpub elsewhere.

The Termination Agreement

There was no opt-out provision in the lease, and at the June 25 City Council meeting, aldermen directed City Manager Wally Bobkiewicz to negotiate with Smylie for a termination of the lease.

Under the terms of the lease termination agreement Smylie will pay $40,937.49, the equivalent of three months of rent, and $7,354.63, representing a portion of the amounts paid for water and electricity. Since the City continued to store property in the building, it did not request reimbursement for the amount paid to Nicor – a sum of roughly $7,000 – for heat for the building.

Smylie has also agreed to give to the new tenant or owner the due diligence documents prepared during the inspection period, which Smylie says is worth approximately $20,000. Finally, Smylie will pay the City $10,000 to help mitigate the City’s loss of future property and liquor taxes from Smylie’s abandoning the project. 

According to a June 29 memo from Mr. Bobkiewicz and Ms. Leonard, “When the lease was approved by the City Council for execution, staff had estimated that the property could generate annually between $47,980 and $50,600 in property taxes (City portion) and liquor taxes. On a prorated basis, three months of these taxes are estimated to have been between $11,995.00 and $12,650.00.”

Next Steps

The City is working quickly to find another tenant for the property. On June 25, aldermen agreed the City should issue a combined request for proposals and request for qualifications to streamline the process of finding a new occupant of the property

Even then, four businesses expressed interest in using the property: Peckish Pig, Evanston Rebuilding Warehouse, a rock-climbing company and a fitness studio.

After approving the termination of the lease, aldermen approved a combined request for qualifications (RFQ)/request for proposals (RFP) for re-use of the property. Again, the vote was 6-2. Ald. Suffredin and Alderman Eleanor Revelle, 7th Ward, voted against the RFP/RFQ package because it did not allow nonprofits to submit applications.

With the combined RFQ/RFP, the City expects a shortened timeline:

July 20, Tours of the property;

Aug. 13, Responses to RFQ/RFP

Aug. 29, Staff Review of Submissions

Sept. 26, Economic Development Committee Review of Submissions

Nov. 5, City Council review of RFQ/RFPs

December 2018/January 2019, Selection [by Council] of development team.

 

 







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