TO: Chair and Members of the Board
FROM: Kim Vazquez, Interim Executive Director
DATE: June 14, 2017
Title
SHOES2GO (d.b.a. BEAUTY LAND) - FIVE YEAR LEASE OPTION
BACKGROUND: Shoes2Go (d.b.a Beauty Land) entered into a five (5) year lease agreement and has been a tenant in the Chevy Chase Plaza since November 2012. As part of the lease, Beauty Land was provided six (6) months free rent (four months up front and two months later) to assist with build-out cost and the purchase and installation of four (4) new ten (10) ton air conditioning units. In 2013, the lease was amended to compensate an additional month of rent for various issues that resulted in their opening being delayed. Their current lease expires December 31, 2017.
Recently, Mr. Emad Bataineh, store owner approached the Property Manager regarding replacement of a non-working air conditioning unit. Although tenants are responsible as per the lease for replacement or repair work, the Property Manager and staff secured a vendor at CRA expense to do an inspection of the unit to see if it could be repaired. The inspection revealed the one (1) unit is in disrepair and a second unit will need to be replaced in the near future. It was also stated by the vendor that the manufacturer of this type of air conditioning units, purchased and installed by Beauty Land is known for not holding up and at some point all the units will need replacing.
Although Beauty Land is a good tenant, past practice has been if a tenant could not afford to pay for large repairs, the CRA would pay the cost up front, amend the lease and the cost of the repairs would be added to the monthly rent payment and generally paid off within a 24 month period. In this case, Beauty Land’s lease expires the end of December making this option not viable. Also, Beauty Land has expressed concerns over whether they were going to enter into a new lease at the end of the year due to sales not meeting their expectations at this location.
In trying to work with Beauty Land to retain them as a tenant and to offer some form of assistance in replacement of the a/c unit(s), they were offered the three (3) year standard lease with a twelve (12) month out clause and two (2) months free rent beginning January 1, 2018. Beauty Land would be responsible for replacement, repair and maintenance of all the a/c units.
Mr. Bataineh countered and is requesting consideration of one of two (2) options; Option 1) a new five (5) year lease, five (5) year renewal option with sixty (60) day out clause, no rent increase and the CRA will replace the disabled a/c unit and maintain all a/c units through the term of lease OR Option 2) five (5) year lease with five (5) year renewal option, sixty (60) day out clause, no rent increase and five (5) months free rent beginning at the start of the lease and they will replace the one (1) unit and Beauty Land will maintain all the a/c units during the term of the lease.
As per CRA policy for new leases, “leases for longer than a three (3) year term or longer termination clause must be approved by the Board”, if the Board wants to consider one of the two options proposed by Mr. Bataineh.
RECOMMENDATION: Discuss and provide direction.
FISCAL IMPACT: N/A
CONTACT PERSON: Kim Vazquez, Interim Executive Director