Mayor looking for alternatives that would net higher rent

By Leah Shaffer

The franchise owner of a Dunn Bros. that operates out of Eden Prairie’s historic Smith-Douglas-More house was looking for a yearlong extension to her lease with the city.

Tuesday the City Council rejected that plan, instead looking for alternatives that could pay higher rent.

“There is no way that I’m going to support the renewal of this lease on the terms which this council agreed to last year,” said Mayor Phil Young.

Under those terms, the city had cut the rent for the tenant from $67,000 to about $31,000.

According to Community Development Director Janet Jeremiah, the city will net $11,000 this year in rent because it was an above average year in terms of expenses for the property.

In the future, the net rent is expected to be closer to $17,000.

Either way, Mayor Young was not satisfied with the massive cut to rent. “We accepted this lowball offer from this subtenant without as far as I can tell, going to the marketplace and getting a single competing offer.”

Young noted that he’s not suggesting they sell this property, but if that’s the best offer the tenant can make, “find out what the marketplace will pay,” he said.

City Council Member Kathy Nelson did not agree with the rejection of the Dunn Bros. lease, while Council Members Brad Aho and Jon Duckstad concurred with Mayor Young.

Council Member Sherry Butcher was absent from the meeting.

“I think we can look, but I would hate to lose this tenant while we’re looking too long. Because we might not find anything,” said Nelson.

It serves a definite function to the community, she noted.

She added, if the city looks for other offers, the search should be for a short period of time.

The lease with the Dunn Bros. franchise owner expires at the end of the year. The issue of what to do with the businesses within the Smith-Douglas-More house has come up ever since the city first invested in renovations to the house.

It was first purchased by the city in 1981 for $140,000. The house, built in 1877, is eligible for the National Register of Historic Places.

In 2002, the city invested in renovations to the house that would allow it to be used as a Dunn Bros. coffee shop. Corporate Dunn Bros. operated the business until 2006, when it switched over to franchise owner Ann Schuster. Last year, the issue of possibly selling the property came up and the city appraised the property for a value of $565,000 but neither the franchisee nor corporate Dunn Bros. was interested in buying it.

According to the staff report, the franchisee offered the new reduced lease agreement based on what they could afford to pay.

Additionally, Schuster took on a sublease with College Nannies and Tutors to pay a portion of the rent, while that business operates out of the upstairs of the house. Schuster and the owner of College Nannies and Tutors had been seeking an extension to last year’s terms.

“It’s been a great partnership between Dunn Bros. and the College Nannies and Tutors,” said Schuster in an interview before Tuesday’s council meeting. Schuster said she’s just getting to the point where she’s starting to be profitable.

“But we would like one more year at the same terms to really build our businesses,” she added.

Schuster said she was researching the possibility of selling beer or wine in the evenings, or for special events. She noted that almost once a day, customers will ask about that option.

 “It’s an idea that I am open to.”

During Tuesday’s council meeting, Council Member Nelson said rejecting the tenant’s lease offer goes too far.

But Mayor Young responded by saying the tenant can make a counter offer, but it’s inappropriate to leave that same tenant hanging.

 “If nothing else comes by November or December, we can revisit this issue.”

Smith-Douglas-More house

Built in 1877, the house is eligible for the National Register of Historic Places. The city of Eden Prairie purchased the house in 1981 for $140,000 then invested funds in renovations in 2002 to ready the house for use as a Dunn Bros. Coffee. The business has been operated by current franchise owner Ann Schuster since 2006, when ownership of the franchise switched to her from corporate Dunn Bros.