City of Grand Forks' rental space: 1.1 million square feet
By Matt Eidson
Fourteen private businesses rent from the city of Grand Forks, occupying more than 1.1 million square feet in six buildings.
Gross revenue from the rental properties comes to nearly $2.3 million, with the net income being placed into the city's growth fund.
With the city's recent purchase of the Grand Forks Herald building, the number of businesses renting from the city likely will increase in 2019 and beyond, though there are potential purchase options for some of the buildings owned.
The city will charge rent to the four businesses currently housed there, including the Herald, which plans to stay in the building for the foreseeable future. Meredith Richards, the deputy community development director for Grand Forks, said the city has been "in the property management business for many years" at this point, "so a system is in place."
"Obviously, with the acquisition of the Herald, you're acquiring new tenants and a new property, so there are some pick-ups and a learning curve associated with any of that," Richards said. "But it's become business as usual for Grand Forks to do what we're doing."
Along with the Herald building, the city also owns Corporate Center 1 and Corporate Center 2 in downtown Grand Forks, the Cirrus building, the LM Wind Power building and a building on South Fourth Street that houses Centre Inc. and Social Detox.
Despite the businesses renting from buildings owned by the city, tenants pay property tax on the spaces they occupy — not for the entire structure. Richards says this is common practice.
"As a government entity, we're tax exempt," she said. "But since they're private for-profit businesses they are not tax exempt."
When asked if it is usual for a city to rent to private businesses, Richards said the downtown corporate center was the only unique circumstance as it was a post-disaster recovery effort.
Businesses currently renting space from the city include Alerus Financial, Brady Martz (two locations), Camrud Law Firm, Ann Love, Kittsona, GSA/SSA, Cirrus (two locations), LM Wind Power (also rents space for blade storage), Centre Inc. and Social Detox.
Combined, the city collects rent on more than 1 million square feet of property, with base rental rates ranging from a fraction of a cent to $12.50 per square foot.
LM Wind Power, whose rental agreement is effective from April 2018 until the end of March 2021, pays $73,212.57 per month in rent. Richards said the costs don't represent net income for the city.
"That's certainly not our net income because, obviously, there are a lot of expenses associated with operating that building," Richards said.
Some of the buildings owned by the city have buy-out options. Corporate Center 1 and Corporate Center 2 have purchase options in November 2020 and lasting until late 2022. The building occupied by Cirrus also has a buy-out option approaching.
Along with the options, Richards said the city is "actively negotiating" on the sale of 201 S. Fourth. Richards seems confident the sale for the property would take place.
"We're anticipating that there will be some sort of sale," she said. "We're not quite sure what form it will take."
Richards also said she expects the city's "property portfolio" to decrease over the next five years.
But being a landlord does come with unique circumstances, and one case recently came before the city. Last month, the owners of the Ann Love store sent a letter to the city, requesting a deferment of rent while construction continues on DeMers Avenue in downtown Grand Forks.
Callie and Roman Schmidt, whose clothing store is in the city-owned Corporate Center, expressed concern that construction will hamper foot traffic downtown. That disruption will negatively impact their business, they claim.
So far, Ann Love is the only business to formally request a rent deferral. Kittsona, another retail business that rents from the city in the same building as Ann Love, has had conversations with leadership about rent deferral but has not submitted a formal request at this time.
Related Topics: CITY OF GRAND FORKS