Council approves plan to lease downtown building for $1/year

Megan Raposa -

Simplified: The Sioux Falls City Council voted unanimously to authorize the mayor to lease a downtown building to Startup Sioux Falls for $1 per year.

Why it matters

  • Startup Sioux Falls – formerly known as the Zeal Center for Entrepreneurship – announced last spring a new name, a new focus on creating a startup "ecosystem" and a plan to move downtown.
  • The lease agreement gives the organization a downtown home in the former parks and recreation building at the corner of Sixth Street and Phillips Avenue.
  • In exchange for $1/year rent, Startup Sioux Falls has agreed to renovate the building, a project estimated to cost up to $1 million.
"We are putting equity into a city-owned building," said Brienne Maner, executive director for Startup Sioux Falls. "And with that equity, that building is only going to increase in value."

What's in the lease agreement?

You can see the entire 17-page agreement here.

Here are a few of the main points, though:

  • Startup Sioux Falls will pay $1 per year in rent for up to ten years.
  • The building will be used to create a co-working space, an event space and an office space.
  • Startup Sioux Falls is responsible for maintaining the building, utilities, and the renovations.
  • The city can terminate the lease after five years but will be responsible for paying back up to 50 percent of the costs Startup Sioux Falls spent on renovating the building.
  • The city can use the event space at no cost up to six times per year.
  • The city will sign off on renovations before they happen.

What did councilors have to say?

"I do believe that their success will be our success in the long run, so I happily support this, and I wish them well," Councilor Marshall Selberg said.

Councilor Pat Starr said he struggled to see why the city would hold onto this building and lease it rather than selling it, but he agreed with other councilors that the mission of Startup Sioux Falls is one worth supporting.

Councilor Greg Neitzert said it makes sense. The building is vacant, and Startup Sioux Falls helps the city achieve strategic objectives in terms of job creation.

"It’s pretty simple," Neitzert said. "It's not that complicated."
"It's not a normal situation for us to lease buildings and to lease them for less than market value," Brekke said, adding that while this is a "good deal," she'd like to see the city use a more competitive process to determine tenants if this situation arises again in the future.

What happens next?

Renovation plans are in the works, and the hope is Startup Sioux Falls will relocate downtown by late this year or early 2023, Maner said.

Also still in the "to be determined" column? The future of the existing Zeal building in the northwest side of town.