April 2013
A Message from Our Leader
With a new strategic plan comes opportunity to change the way we educate our board and our partners about what staff is working on. The staff at NCDC has initiated a new Monthly Activity Report which we share with our board, Norwich City Council and Norwich Public Utilities Board of Commissioners. I will be using my monthly note to summarize this report to include you in our activities.
We have had several developers interested in the Norwich area. Developer 1 has been to Norwich several times and NCDC has compiled a 15-20 property assessment for them. Developer 2 has purchased a mortgage on the partially complete Hampton Inn and we have been providing guidance on filling a large financial gap in the project. Developer 3 is working on the development financing for a large mill project. We have been working to reconfigure the project and locate gap financing in order to position the project for development. We are working with the National Development Council to work our way through some of these hugely complicated financial projects.
The office has also been working with several manufacturers looking for space. Manufacturer 1 is working to finalize an extremely complicated financial process. Manufacturer 2 is in the initial stages of project development in the city but is working on a solution for an exit strategy for their existing property. Manufacturer 3 and 4 are both startups and are working on finding capital investment and Manufacturer 5 is also a startup but has identified a space and will be communicating business needs shortly.
On other fronts, an $80,000 Recreational Trail Program Grant application was submitted to the Connecticut Department of Energy and Environmental Protection on March 26th. This grant would provide funding for signs along the Heritage Walk (connecting downtown and Uncas Leap), site design for the Uncas Leap property and some initial construction work at the site.  We have also been working on getting our Farmer’s Market up and running for the 2013 season. We are pleased to announce we have several new vendors this year and are excited for a successful season. The staff has been working with Miranda Creative on an update of our website. We anticipate being able to bring the new NCDC mobile compatible web page to our Board in late June or early July.
This is only a small sampling of a 10 page document we produce monthly.  If you are interested in knowing more about any of these projects or would enjoy reading a full copy of the report please feel free to contact the office. Have a wonderful month!
Robert Mills
NCDC President
Featured Property
The weather is finally turning warm and you’ve lined up the family vacation the kids have been talking about all winter - camping in the White Mountain National Forest! A quick look at the camping gear shows that you’ve got some serious upgrading to do - that stuff you’ve had since college just isn’t going to make the cut. Its time to hop on into the SUV and head for the big box sporting goods store - but wait a minute, didn’t you hear about a new outfitter that moved in to the newly renovated mall in Norwichtown? That’s just down the street… List in hand you head into the store and what you find is amazing - tents large enough for the family, back packs and sleeping bags. Folding chairs, camping tables, lanterns and camp stoves fill a whole section of the store. Lining the wall are coolers of all sizes - this place has all the gear you’d ever need for the camp site.Â
You’ve reserved a site within striking distance of the Ammonoosuc River and there are loads of hiking trails to explore - head to the clothing section and get hiking boots for the kids, then over to fishing for some new tackle, and… that’s when you spy the kayaks and canoes - racks and racks of canoes and brightly colored kayaks stacked nearly ceiling high. A canoe - the family will love it! Grab a couple of life vests and head for the checkout.  You’re ready to go and there are only four short weeks to wait…
April 30, 2013
Leasing Fundamentals
Leasing commercial space can be confusing. This month Money matters explores some of the basic elements of commercial leases. We will explore the common types of leases that are in the marketplace, identify critical terms to consider as part of reviewing a lease, some of the terminology used and how commercial space costs are defined.
What type of lease is it?
Common Lease Types |
Overview |
Pros |
Cons |
Percentage Lease |
Base rent + Percent of monthly sales |
|
|
Net Lease |
Base rent + A portion of taxes, insurance and / or maintenance |
|
|
Double Net Lease (NN) |
Base rent + Taxes and insurance |
||
Triple Net Lease (NNN) |
Base rent + Taxes, insurance and maintenance |
|
|
Gross Lease |
Base rent |
|
Critical lease terms
Once you have determined the lease type you need to review the various terms of the lease. Typical terms that are addressed in commercial leases include:
- length of lease (lease term), starting date, occupancy date and renewal options
- rent including allowable increases (escalations) and how they are calculated
- provisions for the payment of insurance, property taxes, and maintenance costs
- security deposit and conditions for its return
- description of the leased space (including common areas, e.g., hallways, rest rooms, elevators) and how the space is measured
- improvements, modifications (build outs when new space is being finished to your specifications), or fixtures added to the space; who will pay for them, and who will own them after the lease ends (generally, the landlord does)
- specifications for signs, including where you may put them
- maintenance and repair of the premises, including the heating and air conditioning systems
- whether the lease may be assigned or subleased to another tenant
- whether there's an option to renew the lease or expand
- how the lease may be terminated, including notice requirements, and whether there are penalties for early termination, and
- whether disputes must be mediated or arbitrated as an alternative to court.
How much will it cost?
How much the lease will cost you is a very important term consideration. To understand the cost, you have to determine the basis (monthly or annually) that the rate is based on. By example, a $12.00 per square foot annual rate is equal to $1.00 per square foot when expressed as a monthly rate. While this is simple math, it can come as a bit of a shock when you hear a rate quoted for one space as $3.00 per square foot and another as $12.00.
In the Norwich market, commercial rates range from $1 - $25 per square foot depending on the type of activity, location, term of the lease and terms of the lease. Old industrial buildings limited to industrial uses tend to have lower rates while Class A office space, retail and restaurants located in prime locations will garner the highest rates.
Resources
Leasing Commercial Space Guide
U.S. Small Business Administration sba.gov/content/leasing-commercial-space
Key terminology
Common Area Maintenance (CAM) – The amount of additional rent charged to maintain areas shared by all tenants (e.g., landscaping, snow removal, exterior lighting, insurance, property tax).
Escalation Clause – Allows the landlord to increase the rent in the future to reflect changes in expenses paid by the landlord (e.g., real estate taxes, operating costs). It can be either fixed periodic increases, adjustments based on the Consumer Price Index (cost-of-living increases), and / or an increase tied to the increased costs of operating the property.
Full Service Rent – An “all-inclusive” rent (operating expenses and real estate taxes for the first year). The tenant is responsible for any increase in operating expenses over the base year amount.
Gross Lease – A flat sum for rent, covering all landlord-paid expenses (e.g., taxes, insurance, maintenance, utilities).
Letter Of Intent -– An informal and preliminary agreement between the tenant and the landlord indicating intent to move forward with negotiations. Always consult your legal counsel before signing any Letter of Intent.
Non-Compete Clause – Prevents the landlord from leasing any other premises on the development to a direct competitor or another tenant operating the same type of business.
Rentable Square Footage - Usable square feet, plus a portion of the common area (typically 10 - 15 percent more)
Tenant Improvements – Any improvements to the leased space either by, or for, a tenant. If the tenant plans to make improvements to the space. The Tenant Improvement (TI) Allowance or Work Letter defines the fixed amount that the landlord will contribute towards these improvements, and costs over this amount are then covered by the tenant (Tenant Finish Allowance).
Usable Square Footage – Area rented and exclusively used (e.g., private rest rooms, storage, other areas used only by the tenant).
In next month’s NCDC E-news we will discuss ways to negotiate a lease that will result in a win-win for the tenant and landlord.
