U.S. Dept. of Energy tied to lease OK’d by Bloomington for parking garage office space
A lease agreement is finally in place for the ground floor commercial space that was constructed as a part of Bloomington’s Trades District parking garage project, which was completed in 2021.
At its regular Monday meeting, Bloomington’s redevelopment commission approved the terms of a lease that will allow Energy Sciences Network (ESnet) to set up an office in the space, which covers 4,059 square feet.
ESnet describes itself as providing high-bandwidth, reliable connections that link scientists at national laboratories, universities, and other research institutions, to make it possible for them to collaborate on scientific challenges like climate science among others.
The actual tenant for the lease is the regents of the University of California. That’s because the steward of ESnet is Lawrence Berkeley National Laboratory in Berkeley—it’s funded by the U.S. Department of Energy’s Office of Science.
Attending Monday’s RDC meeting for ESnet was Jon-Paul Herron, a Bloomington resident and member of the Trades District Advisory Board. Making the presentation on the city’s side was John Fernandez, who is vice president of The Mill, the non-profit that was tapped over a year ago by the RDC to promote development of the Trades District.
The commercial space was constructed as a part of the parking garage project in order to conform with the zoning requirement that 50-percent of the ground floor area provides non-residential and non-parking uses. The project provided only about 25 percent of the ground floor area for office use, and got a waiver from the plan commission for the deviation.
The finalization of the lease deal on Monday marked a long effort to get the space rented. In April of 2022, it looked like the RDC had a software company lined up as a tenant, but that did not ever materialize. In December of that year, it looked like the deal with ESnet would get locked in, but that proved to be a long slog that ended on Monday.
At Monday’s RDC meeting, city attorney Larry Allen said that the regents of the University of California have a standard lease form that has to be used, if UC is the tenant, and that had contributed to the delay in getting the lease finalized.
Getting to a point where the lease was finalized was noteworthy enough that the city of Bloomington issued a news release on Friday before Monday’s meeting, previewing the expected action by the RDC.
Some discussion unfolded at the RDC’s meeting about the terms of the lease.
The base rent for the first year is $19 per square foot. The annual increase is set for 2.5 percent. ESnet gets a $55 per-square-foot improvement allowance, which translates into a total of $223,245. The initial term of the lease is five years, and includes three possible five-year renewals.
The spaces needs some improvements before it can be occupied as office space, because it was built as an empty box with cinder block walls.
RDC member Sue Sgambelluri drew out the fact that the amount of the improvement allowance would be drawn from the city’s TIF (tax increment finance) fund. There’s also additional money that the RDC has committed to spending on improvements to the space—$550,000 more, which would have to be reimbursed to the RDC by ESnet, according to city attorney Larry Allen. That reimbursement would come through additional rent to be paid on top of the base rent.
RDC member John West, owner of F.C. Tucker/Bloomington, questioned whether the terms of the actual lease had the same effect as what Allen had described, with respect to the $550,000 worth of improvements to be paid by the tenant. “This is not my first lease,” West said, adding, “I just didn’t read it that way.”
Allen said he was comfortable with the interpretation of the lease that was in the resolution up for approval by the RDC. Fernandez indicated that West’s interpretation arose out of a “scrivener’s error” in that lease that omitted one word.
West said that his concern was that the RDC does not get “upside down” on the lease.
West said the $19 per square foot was a good rate from the RDC’s perspective, but given the improvement allowance, the value of the lease lies in the renewals—which could push the whole lease period to 20 years. West put it like this: “Where this lease really works out for us, in the long haul, will be in the renewals.”
