Kum & Go looks for someone to take its $5M lease at Sugar House Park. Could the city buy?

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Kum & Go is no longer attempting to build a gas station on the northwest corner of Sugar House Park and is instead looking to hand its 20-year triple-net lease off to someone who will pay the high price for the complicated parcel.

The lease, worth $250,000 per year, is sure to fetch a small list of interested parties at best.

And with that, the 0.83 acres of expensive land could remain in limbo, leaving one big question lingering a prominent corner in Sugar House: What happens now?

“Back to square one,” said Kip Paul, vice chairman of investment sales at Cushman & Wakefield, who represented the land owner in the lease to Kum & Go and now represents Kum & Go in its attempt to pass off its lease to someone else.

Kum & Go has apparently decided not to sue and overturn Salt Lake City’s rejection of a gas station and convenience store at 2111 S. 1300 E.

A Kum & Go representative has repeatedly declined to comment about its plans for the less than 1-acre site, and didn’t respond to a request for comment this week.

Meanwhile, locally owned gas station chain Maverik is working to acquire Kum & Go from the Krause Group. The details about that acquisition haven’t been made publicly available, and it’s not clear whether Kum & Go would retain the right to execute a lease or develop the site after the merger is complete.

Maverik’s communications director has ignored inquiries about the merger and plans for the Sugar House parcel, and did not immediately respond to a request for comment this week.

Given the silence, it’s not clear whether Maverik officials had any sway over Kum & Go in its decision not to sue the city.

Kum & Go is stuck with a fairly long lease that will cost $250,000 a year for at least two decades, according to a representative in the deal. Given the failure to get a permit for a gas station and the neighborhood’s previous ability to stymie a housing development, the Midwestern gas station chain is looking for another company willing to take on that monthly bill, with few options for who might emerge.

The property would also likely need a 100-year ground lease for a housing development, something that can’t happen without renegotiating the lease.

Kum & Go took a $5 million risk that the city would agree to give it a conditional use permit to build and operate a gas station, just outside the Sugar House urban core. Its due diligence period ended before it knew whether the city would grant permission, leaving it on the line for the lease.

“I think everyone felt confident they would get approvals from the city,” Paul said.

News of the sublease was first reported by The Salt Lake Tribune after developers began chatting about it on social media.

What’s next?

Renegotiating a lease is an option only if the property owner agrees, and it’s not clear how aggressive the city would be during an election year and shortly after it already bought other valuable land nearby for a different park in the wealthy neighborhood.

“I think the steps would be one, try to find a tenant that would take it as-is based on the current terms,” Paul said. “If we are not successful, I think phase two might be to reengage with the apartment developers, condo developers to try to do a project there.”

The city could also attempt to enter the scene and lead an attempt to buy the land to incorporate into the park.

When the property was first up for sale — at first for $7.2 million, then for $5.5 million — Paul said he approached the city about buying the property.

“We gave them the option to buy it,” Paul said. “We called the city, the parks department, we called everybody and anybody, we proposed doing a land swap.”

An RDA spokeswoman confirmed the city had been approached before Kum & Go attempted to build a gas station on the site, and whether there was a possibility to buy it.

“These were moot once a ground lease agreement was executed between the owner of Kum and Go and they started down the path of developing a gas station,” said Amanda Greenland, RDA spokeswoman.

The mayor’s office didn’t say whether she thought the city should buy the property if given the chance. The office also said it couldn’t confirm whether it was previously given the chance to buy the parcel.

“Unfortunately, I cannot confirm any sort of discussions about a purchase or land swap at that property,” Andrew Wittenberg, the mayor’s spokesman, said. “That sort of info would come from the RDA.”

A representative from the RDA confirmed that the RDA spoke with the teams about the city purchasing the property before the gas station proposal moved forward.

For now, all eyes are on whether Kum & Go can sublet the property.

“Our understanding is that the property owner is not interested in selling, and that the ground lease with Kum and Go is still in place,” Greenland said.

“At this point it’s a wait-and-see situation if the parties opt to switch uses, sublease, and/or negotiate a longer-term lease,” she said. “The only way the City or RDA would have any say in its future is if the current property owner changes their mind on selling to us.”

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Posted by Taylor Anderson

Taylor Anderson grew up near Chicago and made his way West to study journalism at the University of Montana. He's been a staff writer for the Chicago Tribune, Bend Bulletin and Salt Lake Tribune. A move from Portland, Oregon, to Salt Lake City opened his eyes to the importance of good urban design for building strong neighborhoods. He lives on the border of the Liberty Wells and Ballpark neighborhoods.