AGENDA #4e
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Response to Request to Purchase Parking Lot #6
DATE: September 8, 2003
The following resolution would decline the offer of Investors Title Insurance Company to purchase the land on West Rosemary Street known as Parking Lot #6.
BACKGROUND
On May 15, we received the attached letter from Mr. David M. Rooks, representing Investors Title Insurance Company, inquiring about the Town’s interest in selling Parking Lot #6, located on the north side of West Rosemary Street, diagonally across from Pritchard Avenue. Please see the attached location map.
On May 28, the Council received the letter and authorized the Manager to investigate options for a follow-up report.
Lot #6 contains 12 monthly rental parking spaces that are leased to Brown & Bunch, PLLC, Attorneys and Counselors at Law. Brown & Bunch has leased the lot from the Town since 1993. The current lease term is for one year, which began on July 1, 2002, with an option to renew the agreement, with revised parking rates, for two additional years (Attachment 3). Brown & Bunch notified the Town this spring that the firm wishes to renew the lease for another two years. Current parking rates are $80 per space per month, or $960 per space per year, a total of $11,520 per year for all 12 spaces.
Under the lease terms, Brown & Bunch must be given 60 days’ notice prior to implementation of new rates. The lease agreement also stipulates that either party may terminate the agreement for any reason with 180 days’ written notice given to either party.
DISCUSSION
We commissioned a market appraisal of this 6,300 square foot lot. The opinion of value is $170,000.
We believe that the Council has at least two options to consider: Sell the land or continue to lease the lot.
Sell the land
We have not discussed a price with Investors Title, nor have they made an offer. However, our appraisal indicates a market value of $170,000, which is 14.75 times the annual revenue presently derived from the lease with Brown & Bunch. One could assume that our parking rental would increase over the years, probably at approximately the rate of increase of the market value of the parcel. Expense of maintaining the lot is minimal, primarily trimming the overhanging trees and replenishing the gravel. Therefore, one could assume that it would take approximately 15 years of net revenue from the present parking lot to equal the potential purchase price.
Ordinarily this ratio of current income to market value might suggest consideration of a sale. However, the Town is at this time considering development of both Lot #2 at Columbia and Rosemary Streets and Lot #5 at Church St., and several groups are also studying ways to improve the downtown. It is possible that this small parcel could be helpful in achieving the objectives of plans soon to be made. A sale at this time might be premature.
Advantages of a sale:
Disadvantages of a sale
Lease the land
Although the lease with Brown & Bunch expired June 30, 2003, there is an option to renew for two years at revised rates. Brown & Bunch has indicated the firm’s interest n a new lease for a year with the option to renew for two one-year periods. The monthly rate for the Town’s downtown parking is $80 per month, but Brown & Bunch has agreed to pay $90 per month after the first four months for a total of $12,480 the first year.
Advantages of leasing the land
Disadvantages of leasing the land
RECOMMENDATION
That the Council authorize the Town Manager to respond to the attorney of Investors Title that it is not interested in selling Lot #6 at this time, and to execute an extension of the lease with Brown & Bunch. Because the timing of any redevelopment of Lots #2 and #5 is not yet known, Brown & Bunch have agreed to a lease for one year with the option to renew for two one-year periods. They have also agreed to an increase in the rent from $80 to $90 per space per month, starting after the mandatory 60-day notice period.
ATTACHMENTS
A RESOLUTION NOTING THE COUNCIL’S LACK OF INTEREST IN SELLING PARKING LOT #6 AND AUTHORIZING THE MANAGER TO PROCEED TO EXTEND THE CURRENT LEASE OR ADVERTISE FOR A NEW TENANT FOR A ONE YEAR TERM (2003-09-08/R-7)
WHEREAS, the Council of the Town of Chapel Hill has received a letter inquiring whether the Council is interested in selling Parking Lot #6; and
WHEREAS, the Council is considering economic development plans for the downtown; and
WHEREAS, other groups in the community are also considering plans for improving the downtown; and
WHEREAS, the Town, in compliance with G.S. 160A-272, advertised its intent to consider leasing Lot #6 at its September 8 meeting;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that it does not wish at this time to sell Parking Lot #6.
BE IT FURTHER RESOLVED that the Manager is authorized to execute the present lease of the lot for one year with the option to renew for two one-year periods with revised rental rates.
This the 8th day of September, 2003.