This post answers public questions regarding the Coventry School Building raised at and after the June 21, 2022 Meeting of the Library Board of Trustees. As used in these answers:
- “CPC” means Coventry P.E.A.C.E., Inc., the nonprofit corporation with an existing (but expired) lease, signed in 2020, as the master tenant for the Coventry School Building. CPC currently subleases parts of the building to the occupant organizations.
- “LOI” means Letter of Intent. This is the document that establishes the major terms that will be negotiated and incorporated into leases with each of the individual prospective tenant organizations (including those occupying the building as subtenants under leases with CPC).
1.Why did the Library conduct the Allegro Real Estate Study? The Library hired commercial real estate firm Allegro Real Estate Brokers and Advisors to complete a study of the Coventry School property to help determine rent rates and the structure of any agreement with a property management company and future tenants. The Library commissioned this study at its own expense following the expiration of CPC’s lease term, as part of the Library’s efforts to develop a sustainable and financially responsible plan for the building. This expense has not and will not be passed through to the tenants of the building, CPC or otherwise. CPC had previously called into question the financial recommendations provided by IFF, the nonprofit real estate company hired in 2020 to perform an assessment of what CPC would need to do to successfully operate the building. Additionally, IFF’s study originated prior to the pandemic, and the Library Board sought an updated analysis using current financial projections of operating costs.
2. Is CRESCO property management an “expensive and unnecessary cost” as stated by the CPC?
As with any commercial real estate, property management is a service that costs money, and is one of the necessary components of a responsible plan to successfully operate and maintain such a building. CRESCO’s management agreement and service fees for the Coventry School Building were reviewed by the Library Board before it unanimously voted to approve the same at the Monday, May 16 board meeting. CRESCO’s fee for property management at the building for the one-year term is not to exceed $36,000; CPC itself has suggested that property management services for the building should be valued at a similar amount.
3. Does the CPC owe the library money?
Under the current (2020) lease, CPC is solely responsible for all utility and service charges to the building, including but not limited to electricity, gas, water and sewer, telecommunications and security services, trash and recycling removal, routine pest control, internet services, elevator maintenance, HVAC maintenance, fire extinguisher inspection, and any other utilities used or consumed in or chargeable to the Premises during the Lease Term. The Library pays these utility and service costs directly, and CPC is required, under the 2020 Lease, to pay the Library a monthly estimate to cover the above costs. The parties agreed to reconcile actual payments made by the Library and estimated payments made by CPC at the end of the term.
In addition to the above expenses, CPC is solely responsible for any and all non-structural interior alterations, improvements or repairs to the interior of the building. Further, CPC is responsible, at CPC’s expense, to keep and maintain the entire building in good condition and repair while CPC remains the master tenant. In the lease with CPC, the Library agreed to advance funds in excess of $10,000.00 toward the cost of any major, necessary capital repair, to allow CPC to complete such repair even if it lacked the immediately available funds to pay at that time. The lease requires CPC to contribute the first $10,000.00 for such repairs, and provides the mechanism for repayment of the full amount advanced by the Library upon the conclusion of the term.
At present, the Library has advanced more than $80,000 toward HVAC repairs alone, with additional, necessary repairs in excess of $40,000 slated for the next few months. All of these costs are ultimately CPC’s responsibility as the master tenant under the 2020 Lease. CPC has so far failed or refused to pay the first $10,000.00 (or any other amount) toward these repairs. In short, during the term of the lease, the Library has loaned money to CPC to complete necessary repairs, and CPC is responsible for paying it back.
4.Why has the library increased the rent so much?
The rent rates for the current organizations at the building were set by CPC as a master tenant of the building under its lease with the Library. Only CPC’s “rent” was set out in that (now expired) lease. However, especially given CPC’s maintenance and repair obligations, the rent amount alone does not represent the full scale of CPC’s obligations under the old lease, nor does it reflect the real cost of occupancy at the building.
The new rent structure for a multiple tenant scenario (as set out in the LOIs) is based on the Allegro report and an updated understanding of the building’s needs for independent economic sustainability. The leases are designed to be simpler to provide the tenant organizations with the ability to estimate and budget for the true and actual cost of rent, utilities, and maintenance needed to sustain the building.
5. What is the status of new leases?
As of this date, CRESCO has begun contacting tenant organizations to begin initial discussions regarding new lease terms and provisions. The Library Board has reviewed the LOIs, and will be holding a special meeting on July 5 to vote on the same. From there, leases will be negotiated and special circumstances will be addressed with each prospective tenant.