Two downtown Grand Forks retailers are seeking to modify leases they hold with the city, with one business looking to extend and the other wanting out early, in anticipation of closing.
The city’s Growth Fund Committee approved a request from womens’ clothing boutique Kittsona, to extend its lease through the end of the year. The shop’s current one-year lease ends on Wednesday, July 1. The short, six-month lease reflects a potential sale of the city-owned Corporate Center II, located at 402 DeMers Ave.
Kittsona’s new six-month lease, should the city council accept it, adheres to the same terms as its previous lease, which was modified on July 1, 2019. The company will pay $2,000 of its slightly more than $4,900 rent, with the remainder of that amount deferred at 0% interest. Kittsona is expected to repay that debt, which totals about $92,000. Meredith Richards, community development director for the city, said the business is current on its portion of the lease.
Richards, after noting the city is “kicking the can down the road” about recovering that debt, was requested by the committee to begin discussions with Kittsona owner Tessa Hiney as well as newly installed city attorney Dan Gaustad, over what repayment should look like.
Ann Love, also a women’s clothing boutique and also located in the Corporate Center II, has asked to terminate its lease, with the intention of closing.
The Growth Fund, at its June 30 meeting, delayed taking any action on the lease at the time, citing the need for more time to research the situation. The committee directed city staff and the city attorney to begin negotiations with the retailer, who owes the city $42,000 in unpaid rent. Ann Love’s lease runs through the end of 2022, with an opt-out clause at the end of this year. Should the store continue until that time, it would add another $20,000 of debt to be paid back.
Much like Kittsona, Ann Love last year restructured its lease with the city in anticipation of a slow down brought on by the DeMers Avenue summer construction project. The shop’s payment was set at 50% of its $3,400 monthly rent. However, it has only made one payment since then.
Roman Schmidt, a co-owner of the business with his wife, Callie, said the construction project followed by the pandemic has made it impossible for his business to get back on its feet.
“It's not going to happen for us at this time,” Schmidt said.
Callie Schmidt, in a letter to city staff, proposed the nearly $40,000 in improvements they made to the retail space be allowed to cancel-out the back rent owed. Gaustad, however, said he wanted to review the lease, and that such a decision, might encourage other city tenants to want to cancel their leases, and have any back rent forgiven.
“It begs the question, who’s next,” Gaustad said.
Committee member Jonathan Holth said the Growth Fund Committee has a responsibility to city taxpayers, but he also has sympathy for business owners who have been impacted by the unprecedented downturn brought on by the pandemic. Holth volunteered to meet with the Schmidts to discuss options.
“I personally don’t have any desire to squeeze every last penny out of the Schmidts,” Holth said. “That’s not where I’m at.”