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Mar

28

2016

From The Blog

Update on the TOKI/KICA Lease Agreement

KICA’s administrative offices are located at 23 Beachwalker Drive in space leased from the Town of Kiawah Island. From the issuing of decals, to processing commercial passes (thus preventing backups at the gate), to performing nearly all of the administrative functions of the association, the community relies on this space. Replacing it elsewhere would amount to a significant financial strain on KICA, and perhaps even necessitate a special assessment. As you know, when KICA spends money, it has to reach into your pockets to do so. When the town spends money, it does not, but rather uses revenue derived from business licenses, hospitality taxes on tourists, etc.

Lease Agreement: In 1995, the town held a special Council meeting to discuss and approve a lease with KICA for a portion of the Town Hall building. Then Mayor Ralph Magnotti said that the town did not, at any point, enter the agreement on the basis of sheer financial gain for the town. As a result, KICA’s lease includes an initial 20-year term with base rent calculated by taking its percentage occupancy of the building and multiplying it by the original construction cost of the building. When the initial term expires in 2017, KICA will have paid its share of the building’s cost, plus interest of more than $1 million. The lease then calls for KICA to have two 15-year options with zero base rent, only being responsible for its share of common area maintenance. While not required to exercise the option until 180 days prior to the end of the initial term, KICA sent a renewal notice to TOKI in November 2014. The town had just purchased 22 acres for a new Municipal Campus, and KICA felt it appropriate to inform the mayor and Council very early in their planning process of KICA’s intent to remain in its leased space. The mayor commented publicly on this lease renewal and did not express any concern. In late 2015, the town’s attorney informed KICA that the town considers KICA’s lease renewal options to be invalid and would start legal action if necessary. KICA’s legal counsel has reviewed the matter in detail and strongly believes the lease is valid.

What’s Next: The town has expressed its desire to sell the building to KICA, and to use such sales proceeds to help finance construction of the new Municipal Campus, and KICA has indicated an interest in buying the building. Both the town and KICA have obtained separate appraisals, and it is clear that KICA’s lease, with its renewal options, significantly impacts the building’s value.

After a number of discussions between the parties, the town has set a minimum price that is significantly higher than KICA’s appraisal, and KICA has informed the town that it can’t justify paying so much above appraised value.

The town has expressed a willingness to sit down for another round of discussions to see if common ground can be achieved. KICA hopes the effort will be successful.