Merry Christmas.  Last week Aspen City council approved a memorandum of understating to purchase the Isis theatres. Here’s the deal;

-The City buys the theatre for $7.5M and puts in another $1.4M re-developing one of the upper theatres into 7500 square feet of new commercial space while retaining the four other theatres.

-The city then gives a thirty year lease for the retail space to a private entity (the Isis group) and a thirty year lease to Film Fest for the theatres. Lease payments from these two groups are pegged at the actual cost of the city’s purchase loan, which is significantly below market rates since the city has more economical borrowing power.

-At the end of the lease term the two entities get to own their respective spaces free and clear.

-The entities leasing the space have no restriciton on the amount they can charge to whomever they sub-lease it too.  For example, the Isis group will pay about $56 per sq. ft. for the life of their thirty year lease and can turn around and sub-lease it to Banana Republic for $96 a sq. ft. and keep the profit ($40 per SF excess X 7500=$300,000 a year potential net profit on the life of the lease).

-The city is placing a deed restriction on the retail space to “mid level) retail, identified as a Banana Republic or Gap.

-The city is guaranteeing appoval of this commercial growth by waiving it’s own development moratorium, vastly reducing the usual employee and parking mitigation, and promising to expedite the permit process.

-The city is waiving the Real Estate Transfer tax.

Commentary; Now I’m all for keeping the Isis as movie theatres, in fact would be heartbroken if one had to drive to El Jebel to see a flick. However, I’m not so sure it’s proper for the city to make $10 million real estate development deals behind closed doors with no public discussion or input. If the city is going over to the dark side and expanding it’s development activities to purchasing of private property for commercial development growth, by God they ought to open the deal to public scrutiny and be accountable to the same rules as every other developer in this town.  Can you imagine the Ski Corp formulating a commercial expansion behind closed doors, waiving city rules, bypassing the city development moratorium and approving their own project with no public discussion?

In my opinion, and the opinion of several local bankers, this is an unnecessary $23million giveway to private sector developers resulting in ANOTHER national chain entering Aspen to compete with local retailors. The $23million is composed of $9million in excess lease revenue ($300k a year X thirty years) and the minimum estimated value of the 7500 sf retail space to be given away at the end of the lease, $14 million. Has any owner in the history of Aspen given away the property at the end of a lease, especially an under-market lease?  Even for the city of Aspen $23 million is a lot of taxpayer money to toss away. 

On Monday night, December 11th, the city will vote on another potential real estate purchase.  They are considering buying a $3.5 million 60′s house on Hyman to add 2 ADU’s too and deed restrict to affordable housing.  $4 million for 4 units.

Merry Christmas from the taxpayers of Aspen.

Aspen city government; So much money, too little sense.