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Gouged, Palm Coast Calls City Market Place Lease Demands “Unacceptable” and Looks Elsewhere

| May 27, 2014

It's not as if tenants are beating down the doors for space at City Market Place, a troubled, poorly designed strip mall given a lifeline by Palm, Coast government offices since 2008. (© FlaglerLive)

It’s not as if tenants are beating down the doors for space at City Market Place, a troubled, poorly designed strip mall given a lifeline by Palm, Coast government offices since 2008. (© FlaglerLive)

Can you say ungrateful gouging? That appears to be the strategy of the owners of City Market Place toward the City of Palm Coast as the city seeks to renew its lease there for less than a year.

Palm Coast government has been renting space at City Market Place since November 2008. The current lease for 22,000 square feet, which includes the second floor of the sheriff’s substation there (the first floor of the substation is a separate lease between the sheriff and the landlord), expires in October. The city is paying about $20,000 a month for that space, or about $10.80 per square foot. Over time, that’s been actually less than what the city paid the first two years it was at City Market Place.

Palm Coast is about to build a new city hall in Town Center. But, assuming the city council approves it, construction won’t start until fall, and it won’t be completed until the following August (2015) at the earliest, if not later that fall. That leaves Palm Coast in need of one more year of renting somewhere. That somewhere was to have been its current location at City Market Place. “We need a short-term gap, if you will, and that has raised some interesting challenges for us,”  City Manager Jim Landon said.

The city proposed a six month lease at the current rate with a month-to-month option after that, giving it the flexibility to make the move to Town Center only when appropriate. The city did not expect the landlord’s demands.

The landlord wants $17 per square foot. That works out to $31,480 a month, a staggering 57 percent increase and $138,000 over what the city has budgeted for its offices.

That kind of hit on city budgets cannot be absorbed without having to increase the property tax, Landon said. “It’s a hit that I don’t think we want to absorb,” Mayor Jon Netts said. He later called the proposal “unacceptable.”

“While the City would like to minimize disruption of City operations, the proposed increase and associated costs compel the City to research alternatives,” Diane Torino, the city’s contracts manager, wrote John Bills, president of the property company, on May 19. The city, offering Bills another chance at a compromise, proposed a 10 percent increase in lease terms, which would result in a $22,000-a-month bill for rent. Bills returned with a $13.50-per-square foot proposal, or $24,750 per month. But Palm Coast would also be responsible for all interior and HCAV costs in the units.

From an administrative perspective, Falgout said, that option is not feasible because it is too open-ended. The building is in too shoddy a state that the city could be faced with endless repair costs. “That kind of risk in our opinion is a deal-killer,” Landon said. That leaves the working option at $17 per square foot. “Everything is still being negotiated,” Falgout said. (The landlord is also proposing a lease-to-buy option, but Palm Coast isn’t interested, its own city hall being 60 percent into the design phase.)

The landlord’s proposal is inexplicable from the city’s perspective. City Market Place is a four-building strip mall that went into foreclosure four years ago before being taken back by a bank, then sold to John C. Bills Corp. of Palm Beach gardens, the same firm that owns Roma Court. City Market Place has never thrived. Poorly built and designed, it’s never been able to fill its storefronts, and the city’s presence, along with several cultural organizations, provided an anchor and a boon that that prevented the area from being more ghostly. Continuing the current lease would have guaranteed the new owners of City Market Place a guaranteed income for a significant chuck of square footage in the complex, almost through the end of 2015. The alternative is more empty space.

The city wants to minimize disruptions to its staff and to residents, as well as limit the financial costs of the additional year it needs before moving to Town Center. With that in mind, the administration on Tuesday proposed alternatives to City Market Place’s rigid demands.

One would be for the city to vacate its third-floor spaces at City Market Place, currently occupied by top administrative staff that does not interact with the public on a day-to-day basis, as the first-floor staff does. Those first-floor offices (utility billing, code enforcement, the Business Assistance Center, and so on) would remain in their current spaces at City Market Place as would, presumably, the city council’s chambers, where twice-monthly workshops are held. That cuts in half the city’s space at City Market Place, down to 11,334. It would cost the city $16,000 a month.

The third-floor operations would be dispersed among current city offices elsewhere (the city’s utility offices, its water treatment plant #3, the main fire station), and the city would have to find additional square footage of office space somewhere for the city manager, the city council, the city clerk, purchasing and the finance department.  Or it could vacate City Market Place entirely.

One possibility: the old News-Journal satellite offices, closed in 2007, on State Road 100, a 9,800 square foot space with 50 parking spaces, available at $9 a square foot. Another possibility: The Winn Dixie Plaza on State Road 100, with up to 4,800 square feet in three units, at $16.87 per square foot. But moving to the News-Journal space means that the city could vacate City Market Place entirely, and actually lower its costs to $233,000 a year, from $240,000 currently. That includes moving costs.

“The goal was to be under the current budgeted amount and to try to minimize disruption to the services,” Falgout said. “If we’re not able to reach an agreement of some sort that gets us under this budget with our current landlord, then this is the News-Journal combination alternative.” Meaning vacating City Market Place entirely, dispersing city offices among its existing offices elsewhere, and occupying both the News-Journal space and the Winn Dixie space.

Keeping first-floor offices at City Market Place to minimize disruptions would incur the $17 a square foot cost the landlord is currently demanding. That’s not sitting well with Netts. “I’m not comfortable with that number at all. That’s for first class, premier space,” he said, which City Market Place clearly is not.

Council member Jason DeLorenzo is worried about the “disruptions” to city functions, which he said could have an effect on economic development. He favors keeping at least some of the city functions at City Market Place. But Landon said disruptions are going to be inevitable regardless, from now until the city moves into its permanent home in Town Center.

Tuesdays council discussion on how to move forward was inconclusive. Landon was looking for some direction, but was not expecting  final decision so much as to put the City Market Place landlord on notice that the city was not going to be held hostage to the landlord’s s demands. Tuesday’s discussion may have been nothing more, and nothing less, than part of the negotiations. It’ll be June 10 when the administration returns to the council with a more solid proposal.

“You still got some work to do,” Netts told Landon.

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29 Responses for “Gouged, Palm Coast Calls City Market Place Lease Demands “Unacceptable” and Looks Elsewhere”

  1. Gia says:

    Move somewhere else you’ve got enough places. The landlord is way too greedy. Tell him to go the hell.

  2. fruitcake says:

    Tell the landlord no thank you and move…save a bunch of money and don’t make the move more of a problem/hassle that it needs to be.

  3. Oh its no fun when your being raped is it , now you know how us citizens feel with your red light cams and water bill increases , why don`t you think about that….. and readjust your moral compass!

  4. A.S.F. says:

    There is plenty of more reasonably priced office space to be had in Palm Coast. Try looking.

  5. Genie says:

    Anybody want to bet they end up at Town Center in the empty office building space of a certain local attorney?

  6. Seminole Pride says:

    Maybe the city can work out a deal to move into the old Flagler Hospital with the county. Sure would us taxpayers a ton of money, and not built that city hall. Anybody in favor of common sense ?

  7. Nancy N. says:

    Perhaps the city had an inkling the landlord felt he owned them and was going to try to jack their rent, which explains the push to get into their own building – so they won’t be hostage to the whims of a landlord anymore?

    • w.ryan says:

      What does their small business division do to spur on new business? They could have avoided renting altogether.

  8. Rocket Scientist says:

    How about immediately seizing the property (Tennis Courts) in-between the toll bridge and European village for unpaid liens? Or work a deal with the owners to forgive some of its debt/penalties if it can be temporally used for city business. Invite all skilled and unskilled volunteers to sign waivers and help fix it up the property for temporary use.

    • Genie says:

      @ Rocket Scientist, Nah, we specialize in run down, vacant properties in Palm Coast. And people wonder why business doesn’t move here, why we have no jobs. Look to your esteemed elected officials and City Manager.

  9. Biker says:

    What exactly are these people thinking?? The complex is already over 80 percent empty, now you are forcing out the two remaining large tenants?? It sounds like property mis-managment to me.

  10. JoJo says:

    Raise Taxes? Vote these people out as they come up for election. The tax payer always get screwed. Hold on to your wallet, Landon is at it again.

  11. Well... says:

    Well….I hear one of the Palm Coast Data buildings is going to be empty and available, soon. Talk about irony at its finest.

  12. m&m says:

    It sounds like they’re breaking ground a new Taj Mahal which the voters VOTED DOWN…

  13. fruitcake says:

    Who cares where you move to…when was the last time you actually had to GO to the town offices….as long as the phones work thats all that matters…

  14. Rob says:

    Although I live in and pay tax to Palm Coast I don’t feel one bit of empathy or sympathy for this arrogant mayor, town council or over paid senior city staff. The sooner the next the election the better I will feel when and if at least two of them are gone. And if the citizens of Palm Coast re-elect any of those in office now the idiots who did the voting deserve every; stick in the eye, splinter under the fingernail, rock in the shoe and boil on their asses that comes their way.

    Didn’t Bill Lewis say something to the effect that he doesn’t care if voters are inconvenienced by having to vote in less than an acceptable venue? How does that other shoe fit now?

  15. Shark says:

    Take it out of Landon’s $200,000 pay check!!!!!!

  16. Freddy says:

    A landlord tried that on me when recession started and was increasing my rent 30 percent so I moved and he lost rent for almost three years before finding another tenant that only paid him my old rent price. It cost him for being so greedy.

  17. taxpayer says:

    Leave! A temporary inconvenience is better than a permanent tax hike. Besides, they need you more than you need them! Without the city workers who’s going to support the eateries. That ‘s about all that’s left there.

  18. And there you go... says:

    The interior of those offices is depressing at best. Not a very nice facility. There has to be someplace else.

    • w.ryan says:

      Who’s their decorator? Does the office have to be plush? Maybe they should support the arts or buy some art to put up on their walls. The problem is that they are squeezed into a tight space which means that if the City had bought the premise for what the present owner paid the city could have spread out and save money while supporting artists and entrepreneurs in an incubator!

  19. WiseWoman says:

    This investor never intended to rent to anybody. Their strategy is to declare exhorbiant rent that nobody would ever pay for the property/properties and then, when their demands are not met, “write off” the exhorbiant value as a “loss” for tax purposes. Another benefit to an out-of-area business and a loss for Palm Coast. Only development in this area has been with McDonalds and Dollar Generals. Anybody else notice our “growing town center” will have TWO dollar stores, a city building no taxpayer wants to pay for, and all flanked by re-zoned income-restricted housing?

    • Genie says:

      @ WiseWoman – You get it. Palm Coast unfortunately is in the clutches of investors like this. They bought for profit and write offs. Unfortunately, our Council caters to the whims of many of them.

      Income -restricted housing….Section 8. And because of this, Town Center will NEVER develop. If you want to something more, you are going to have to vote these people out and slim chance of that happening.

      Suggest everyone google: Cabrini Green in Chicago.

  20. Obama 2014 says:

    They are just raising rents so they can knock the building down and sell it. Same thing happened at Palm Harbor. In 5 years that building will be gone and a Dollar General will be built. The City should have purchased the building and rented the spaces low below going rate and made some $$ all while promoting small businesses in Flagler County. They could have moved all City offices and pretty much paid nothing because all the renters would have paid the bills. Once a new city hall was built they could have still kept it and offered it to companies to start looking at moving to Palm Coast and set up offices to search for employees. Then again that is just a crazy Liberal idea.

    We need a City Hall but we need to get a few companies here to help with the job issues and get rid of the red light cameras.

    • w.ryan says:

      Building a booming economy while nurturing a cultural movement sounds to complicated. City Market Place with a very low price tag would have resulted in the best return of any investment by Palm Coast to date! What was the monthly rent? What I don’t get is did the city inspectors inspect City Market Place? All I hear is that it’s shabby construction??? It’s been around for some 7-8 years.

  21. Anonymous says:

    Is this the pot calling the kettle?

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