Lack of long-term leases raises Greenbank Farm tenant anxieties

With management plans in the air, Greenbank Farm tenants are expressing concerns about the future.

Pat Powell

With management plans in the air, Greenbank Farm tenants are expressing concerns about the future.

Adding to the worry is the fact that all but one of the seven tenants at the publicly owned farm are on month-to-month leases.

During last week’s Port of Coupeville meeting, several of those tenants spoke about their desire to have the security of long-term leases.

Jan Gunn, owner of Whidbey Pies Cafe, touted her economic contribution to the Whidbey Island community, noting she sells about 50,000 pies each year.

The current month-to-month leases are with the Greenbank Farm Management Group. When the port assumes management of the farm on Jan. 1, 2016, new leases will need to be signed with the port.

“We’ve staked our futures in Greenbank Farm,” Gunn said.

“We ask the port to fully support and partner with the local businesses that support Greenbank Farm.”

DAVID DAY, executive director for the Port of Coupeville, said the port hasn’t entered into lease negotiations with any of the farm’s tenants.

Day said the state requires the port to lease “close to fair market value or explain why.”

The port is trying to determine what the fair market value is for commercial space at the farm, he said.

Port officials are looking to the Island County Economic Development Council and local real estate agencies for help.

DURING PREVIOUS negotiations, port commissioners said that the farm tenants would be expected to pay leasehold taxes.

Tenants that hold leases with the port in Coupeville were paying a 12.84 percent leasehold tax up until this month. Per the state Department of Revenue, a leasehold tax is a tax on the use of public property by a private party.

It is in lieu of the property tax.

While researching costs associated with another partnership with the port, staff discovered the port was actually exempt from paying the leasehold tax on its properties in Coupeville.

Day said the port received its exemption from the Department of Revenue last Friday.

WITH LIMITED revenue and an ever-growing list of repairs for its two historic properties — the Coupeville Wharf and the farm — port commissioners are looking at ways to turn things around financially.

John Carr, a retired real estate agent, was hand-picked by Commissioner Marshall Bronson to review the tenant leases.

Across the board, tenant leases are below market value — even with the leases currently held at Coupeville Wharf, according to both Day and Feldman.

This is something the port is addressing as leases come up, Day said. The most current lease signed was in June when ownership of Local Grown changed hands.

The new owners are paying 98 cents per square foot for the 530-square-foot commercial space on the wharf.

Tenants in Coupeville all hold long-term leases, with two being up in 2016.

PORT LEASE rates in Coupeville are across the board, with the highest being the Front Street property currently occupied by Collections. The business pays $1.03 per square foot.

Jason Joiner, a Realtor with Windermere Real Estate, said commercial spaces in Coupeville generally run $1-1.25 per square foot. For medical office space, rates can rise to $1.50 and, for retail space, it depends on the retail traffic.

If it’s a true retail lease, tenants often will pay a base rent and then pay a percent of gross sales, Joiner said.

PORT OF Coupeville’s lowest rate payer is a kayak business, which is seasonal and outdoors, paying just 16 cents per square foot. The wharf’s largest commercial space, Kim’s Cafe, pay just 56 cents per square foot and has a lease until 2017.

Day said he knows that rate is low and said he doesn’t expect commissioners to let that rate continue once the lease is up.

Just above that, Harbor Gifts pays 61 cents and has a lease until 2017.

All leases with the port also have an annual cost-of-living increase built into them.

AT THE FARM, tenant rates average about 74 cents per square foot.

“I think all of the tenants have acknowledged they pay a lower rate,” said Judy Feldman, executive director of the Greenbank Farm Management Group. “But they will also tell you how hard it is to have a business here.”

Among the challenges facing businesses on the farm are sign restrictions. The special review district for the county limits the farm to five signs.

“At 55 mph, that gets a little tricky,” she said.

Tenants also deal with the seasonal ebb and flow of business.

“You either got everyone or no one,” Feldman said.

“In the winter, we know summer will come.”

THE ONLY tenant at the farm that currently has a lease beyond month-to-month is the Whidbey Camano Land Trust, which occupies about 2,100 square feet of office space on the top floor of Barn C.

The Land Trust pays the highest rate at 84 cents, and that lease is up in April.

It’s because the group had a long-term lease that it was able to invest $30,000 to take unfinished rental space and convert it into a functional office, said Pat Powell, executive director for the Land Trust,.

While tenant rates average about 74 cents at the farm, those rates do vary tenant to tenant.

WHIDBEY PIES Cafe rents two commercial spaces, the cafe space in Barn A and commercial kitchen space in Barn B.

At 48 cents per square foot, Gunn pays the lowest rate at the farm. For her cafe, she pays 80 cents.

The farm’s other food businesses, Greenbank Cheese Shop, pays 68 cents per square foot, while another office space in Barn C pays 83 cents.

Raven Rocks Gallery pays 80 cents, Artworks pays 70 cents and Rob Schouten Gallery pays 78 cents.

Tenants at the farm do not pay leasehold tax. The management group currently picks up that tab at $14,800 annually for the entire farm’s commercially leased space.

Farm tenants also don’t have to pay for water or sewer because the farm is served by its own water system and septic. But they do pay for their own electricity and trash.

BOTH DAY and Feldman acknowledge that it’s not reasonable to expect lease rates comparable to those of, for example, businesses on Front Street.

But they should not be well below market value, Day said.

“We have a fiduciary responsibility to the taxpayers,” he said. “It’s not fair for the government to rent space at well below market value.”

As a port, the commissioners must look at granting lower lease rates for incubation businesses to start up.

“But not for a million-dollar pie shop,” he said.

WHEN LOOKING at rental rates in Greenbank, there isn’t anything to compare, according Joiner, who manages commercial properties on Central Whidbey.

Considering the location, he said, the 74 cent rate isn’t that low.

“It seems like there’s room to make it more,” he said. “Greenbank Farm is the furthest from everything and you have to price accordingly.

“I don’t think Greenbank to Coupeville to Freeland is a completely accurate comparison.”

 

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