As Governor Lynch looks to the liquor commission for more revenue, NH's top liquor official says up to a dozen stores face eviction from area malls due to state's outmoded lease policy.
On the same day Governor Lynch recently told reporters this:
"I’ve been talking to the liquor commission about trying to do what they can to maximize revenue."
NH Liquor Commission Chairman Mark Bodi was telling lawmakers that unless he can find more money to spend on rent, the state may have to close or relocate up to a dozen liquor stores.
"We face eviction notices unless we adjust our rents. It’s quite an irony given the availability of space, but we are now forced to pay more for out space given the changing dynamics of banking."
The dynamics Bodi was talking about -- and these include a tight credit climate for landlords, and a decline in locally-owned malls willing to cut the state some slack -- threaten a key part of its current business model, which is, that NH never pays market rates to rent space. At present, the commission caps rental costs at 8 dollars per square foot gross; an arrangement those in commercial real estate say defies market conventions.
"Typically for shopping center rent is expressed in triple net terms."
Ned Gordon is with the Meg companies, which runs two Manchester shopping centers where the state now rents space. He notes that under a triple net lease, tenants are on the hook for real estate taxes, property management costs and insurance…Under a gross lease, the landlord picks up those costs. The going rate at the malls Gordon runs from 12 to 18 dollars a square foot triple net.
"So, if you are looking at the differential you are looking at a 4 or 5 dollar net rent. Which is half to a third of what the market might be. So it’s quite significant."
The significance for the state remain to be seen. Paying low rents carries some obvious advantages, but it may also hinder the state’s ability to maximize profits. Liquor Commission chairman Bodi pegs the short term costs of bringing state leases in line with the market at about a million dollars. Beyond that, he says it’s hard to know. But what he says is clear is that the state can’t depend on paying bottom dollar rents if it’s to follow through with plans to open new, so-called superstores in Salem and Plaistow within the year. Commissioner Bodi says under the right circumstances each location could generate up to 25 million dollars in new gross yearly sales – largely to out of state customers. Bodi isn’t tipping his hand on what sort of lease rates the state might have to pony up to locate in such value areas, but it’s surely not 8 dollars a square foot …And on the larger question of how much new money the commission might be able to toss into a budget hole that’s now expected to exceed 200 million dollars, well, at this point, Bodi’s talking pretty conservatively.
"I’m reluctant to provide forecasts prior to speaking with legislative leaders, but there are circumstances where we could add five million or more in the next biennium."
With those kinds of numbers, the state lottery – which Governor Lynch recently identified as another place to find money to close the budget gap -- had better hit it big.
I found out that the state is attempting to total eliminate the independent operators by removing the discount that we get when buying wine/spirits wholesale from, who else, the State of NH. NH SB321 has passed in the House and is scheduled for a public hearing on Tuesday, May 6th at 10am.
The bill states that anyone buying wine from he state will pay the same amount. You, me, Shaw's, restaurants, convenience stores, independents. Everybody, but the STATE. They get their discount. Restraint of Fair Trade???