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<br />A new provision in the second amendment would allow the tenant to opt out of the lease with
<br />thirty days notice to the City at any time after the end of the first five year term of the contract,
<br />which would be after April 30, 2011. If the tenant opts out of the lease after that date, the tenant
<br />would be required to pay the City twelve months ofrent. If the City exercises any of its options
<br />to terminate the lease within the first five year term, the tenant would
<br />not be required to pay the twelve months of rent penalty. The
<br />remaining termination provisions in part eight of the original contract
<br />would still apply.
<br />
<br /> Chart 1 :
<br />Proposed Rent
<br />Year Monthlv Rent
<br />2007 $1,012.66
<br />2012 $1,093.67
<br />2017 $1,181.17
<br />2022 $1,275.66
<br />2027 $1,377.71
<br />2032 $1,487.93
<br />2037 $1,606.96
<br />Not prepared bv Black Dot
<br />
<br />The third primary change is the method used to calculate the rate of rent
<br />increase over the life ofthe contract. Starting May 1,2007, the monthly
<br />rent would be reduced to $1,012.66 from the current $1,355.79. Instead
<br />of tying the rental increase rate to the CPI, the rent would increase by
<br />eight percent at the end of each five year term (Chart I).
<br />
<br />For comparison, if rental rate increases were still tied to the consumer price index, the potential
<br />monthly rents by increase year depending on the inflation rate are shown in Chart 2. According
<br />to the Bureau of Labor Statistics, the increase in retail prices in the Twin Cities was 1.6 percent
<br />in 2006, 2.8 percent in 2005, and 2.8 percent in 2004 (http://www.bls.gov/cpiD.
<br />
<br /> Chart 2: Potential Monthly Rental Rate By Potential Inflation Rate bv Year
<br />Inflation Year
<br />Rate per
<br />Year 2007 2012 2017 2022 2027 2032 2037
<br />1% $1,012.66 $1,064.32 $1,118.61 $1.175.67 $1,235.64 $1,298.67 $1,364.91
<br />2% $1,012.66 $1,118.06 $1,234.43 $1,362.91 $1,504.76 $1,661.38 $1,834.29
<br />3% $1,012.66 $1,173.95 $1,360.93 $1,577.69 $1,828.98 $2,120.29 $2,457.99
<br />4% $1,012.66 $1,232.06 $1,498.98 $1,823.74 $2,218.86 $2,699.59 $3,284.46
<br />The 2007 rental rate would continue through 2011, the 2012 rate would continue to 2016, and so on.
<br />This chart was not prepared bv Black Dot.
<br />
<br />Depending on the change in the CPI through 2037, the rent mayor may not be keeping up with
<br />inflation at each five year increase. Since the monthly rent would not change each year, the rent
<br />is probably not keeping up with inflation in the years without a rental increase (2008-2011, 2013-
<br />2016, etc).
<br />
<br />Finally, Schedule 1 of the Second Amendment incorporates the following additional language
<br />into the lease:
<br />L Expansion of Permitted Use. Landlord hereby agrees, at the direction of the Tenant, to allow
<br />the Tenant to modity, supplement, replace, upgrade, expand, or refurbish the equipment related to
<br />the Antenna Facilities, increase the number of antennas thereon or relocate the Antenna Facilities
<br />within the Leased Premises at any time during the term of this Lease, and Landlord shall
<br />cooperate with Tenant in all respects in connection with the foregoing. If Landlord does not
<br />comply with the terms of this section, Tenant may terminate this Lease and shall have no further
<br />liability to the Landlord.
<br />
<br />Staffs concern with the above language is that the reference to expansion and an increase in the
<br />number of antennas. A replacement project in 1994 and an expansion in 2002 required a
<br />Conditional Use Permit (referred to as a Special Use Permit at the time). It appears that Black
<br />Dot is requesting a waiver of the Conditional Use Permit requirement in Schedule 1. While Staff
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