Upland Proving Generous Toward Selected Businesses

While cash-strapped Upland is becoming increasingly stingy with the dwindling money it has available to sustain and promote itself as well as bolster local economic development, a subset of the city’s businesses are still tugging at City Hall’s apron strings, seeking shelter from the financial brutality of the real business world.
Currently, the city is landlord to 22 businesses in town. Whether those entities are standing on their own or are being propped up by taxpayer subsidizations in the way of discounted rent payments is a matter of debate, conjecture, perspective and relative consideration.
What is undeniable is that at least some of those businesses are struggling. City officials are divided as to whether the city should raise their rents, continue leasing the properties out to those entrepreneurs on the same terms as before, or actually lower some of the businesses’ lease payments in an effort to keep them from closing their doors.
Last week the Upland Finance and Economic Development Committee previewed a proposal to grant struggling businesses leasing space from the city a break on their rents if they can demonstrate they are enduring financial hardship. This week the city council took a look at its options.
Many if not most Upland residents are unaware that the city has any sort of a business relationship with Upland shops, stores and operations. But over the years, the city has acquired several properties, many within commercially zoned districts, and that space has been leased out, theoretically giving the city a return on its investments while promoting and boosting local economic development and employment.
Though some maintain the city’s lease rates on the properties are below that reflected in the current real estate market, some of the business owners leasing from the city have said they are paying too much in rent. They have asked the city to reduce their lease rates.
In response, the finance and economic development committee, consisting of councilman Brendan Brandt and councilwoman Debbie Stone, has considered a new rent modification policy for the city’s tenants, the particulars of which may at some point be submitted to the full council for approval.
The city is entertaining the notion of modifying rents in conjunction with the requests, according to Jeff Zwack, the city’s economic development director, because “based on real world information provided to us by four local commercial management companies, it is better to keep tenants than find new ones.”
Zwack said two of the city’s tenants – Boomers and RG Performance – are having difficulties and have actually requested assistance in the form of lease reductions. A third city tenant – Hubcap Annie – is likely to make such a request soon, he said.
As a consequence, Zwack said, he is proposing to formalize the rent reduction process, establishing criteria that if met would provide a tenant such a reduction. The prime criterion, Zwack said, would be “if the tenant is paying rent that exceeds eight percent of monthly gross sales.”
To qualify for the reduction, a tenant would have to subject his business operation, Zwack said, “to a third party review and show two years of gross sales, sales tax receipts and profit and loss statements to get a favorable report for reducing rent. That report we would then bring to the [city] council to approve lowering the lease.”
There would be the expense of employing the third party to do the review and that expense would ultimately have to be borne by the tenant, Zwack said, although perhaps not up front. “That fee we would add to end of the lease,” Zwack said.
Zwack said the rent reductions would be relatively limited in duration. “The leases would be reduced six months to a maximum twelve months,” he said. “And they would have to go for a two year period to request assistance again. To obtain a rent modification they would have to go to the small business center for free financial consulting, where analysts would look at cash flow and the products they are selling to make them more productive.”
City treasurer Dan Morgan said he was not necessarily opposed to the concept of granting lease payment reductions to struggling businesses, but that the businesses rather than the city would need to cover the cost of processing the reduction applications. “I would hate for us to be subsidizing this analysis,” he said. The cost of such an evaluaion could run as high as $1,500 to $2,000, Zwack said, which might offset much of the rent reduction.
Zwack said that by the city covering the cost of the analysis and placing it on the business’s tab to be paid at the end of the lease, the city would risk losing that money if the business failed.
The city of Upland is smarting from having suffered a significant loss on another ultimately unsuccessful attempt to kick start the local economy with the subsidization of Christophe’s Restaurant and Lounge at 296 N. 2nd Avenue in the city’s downtown core. Christophe’s closed January 7.
Christophe’s Restaurant was intended as an upscale eatery that would draw top paying customers to the downtown area as a complement to the Upland Playhouse, i.e., the former Grove Theater. That never panned out, however. In the case of Christophe’s, the city was not the landlord.
Barbara Polk actually owned the property at 296 North Second. Christophe’s Restaurant opened in October 2009, having participated as the maiden recipient in the city’s loan program, by which entrepreneurs were provided with loans from the city’s redevelopment agency if certain expectations with regard to the businesses in question were satisfied. In the case of Christophe’s, owner Christophe Jardillier was provided with a $350,000 loan, which has yet to be paid back. At present, he owes the city more than $405,000 in principal and interest on that loan. The city has little prospect of collecting on that debt. Jardillier likewise owes Polk upwards of $70,000 in back rent.
The city’s redevelopment agency was closed out by the state last year.

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