SR 12-19-2023 5G
City Council
Report
City Council Meeting: December 19, 2023
Agenda Item: 5.G
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To: Mayor and City Council
From: Rick Valte, Public Works Director, Public Works, Airport
Subject: Approval of Lease Renewal with Snap Inc. for Property Use and Approval of
Agreement Modifications with CRG and with Aeroplex for Commercial Real
Estate Broker Services
Recommended Action
Staff recommends that Council:
1. Adopt a finding of Categorical Exemption pursuant to Section 15301 (Existing
Facilities), of the California Environmental Quality Act (CEQA) Guidelines.
2. Authorize the City Manager to negotiate and execute a Lease extension with
Snap, Inc. dba (“Snap”) for general office and administrative uses and storage of
personal property. Located at 2772-2800 Donald Douglas Loop North (“DDLN”)
and 3000 31st Street.
3. Authorize the City Manager to negotiate and execute a first modification to
professional services agreement 11419 (CCS) in the amount of $2,259,094 with
Corporate Realty Group (“CRG”) for commercial real estate broker services
associated with these negotiations. This would result in a 5-year amended
agreement with a new total amount not to exceed $3,423,897 with future year
funding contingent on Council budget approval.
4. Authorize the City Manager to negotiate and execute a first modification to
professional services agreement 11381 (CCS) in the amount of $211,144 with
Aeroplex Group Partners for commercial real estate broker services associated
with these negotiations. This would result in a 5-year amended agreement with a
new total amount not to exceed $2,617,236 with future year funding contingent
on Council budget approval.
Summary
Snap Inc. (“Snap”) is the City’s tenant at the Santa Monica Airport. Snap has two
leases at the Airport consisting of 119,800 rentable square feet (“RSF”) of commercial
office, hangars, and parking spaces located at 2772-2800 Donald Douglas Loop North
(“DDLN”) and at 3000 31st Street. Snap proposes to extend its current leases which
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expire on February 28, 2026. The proposed extension would combine the two leases
into one lease covering both premises and would include an initial term of 10 years and
one month with two early termination intervals (after the 5th and 7th years) where Snap
could terminate the agreement without cause. Under the proposal Snap would have two
consecutive 5-year renewal options that Snap can exercise at its discretion to extend
the initial 10-year term. Upon Snap’s exercise of an option, the agreement rental rate for
that 5-year period shall be adjusted and priced at market rate. In essence, the proposed
extension would extend Snap’s tenancy with the City to at least March 31, 2031, with
the possibility—should Snap not terminate the agreement early and also exercise both
5-year options—of tenancy lasting until March 31, 2046.
Because the term of this proposed new lease would extend beyond December 31,
2028, it falls outside the parameters set forth in the current Airport Leasing and
Licensing Policy (Attachment A) and thus requires City Council approval. Securing the
proposed lease extension aligns with the City’s priorities of economic recovery and
ensuring a healthy enterprise fund for future years. The proposed lease extension with
Snap, Inc. would generate an estimated $49.4 million over the initial 10 year and one
month term.
Corporate Realty Group (CRG) is the City’s current real estate broker for non-aviation
properties at the Airport. Aeroplex Group Partners (AGP) is the City’s property manager
and commercial real estate broker for aviation properties. Both CRG and AGP would
provide brokerage services for the proposed lease extension. A first modification to
agreement 11419 with CRG and a first modification to agreement 11381 with AGP is
recommended by staff in order to provide for the required additional commissions
associated with the proposed new lease including Snap’s broker’s commission.
Discussion
Lease Terms and Conditions
Snap seeks to extend their leases that expire on February 28 th, 2026, consisting of
119,800 rentable square feet (“RSF”) of commercial office, hangars, and parking spaces
located at 2772-2800 Donald Douglas Loop North (“DDLN”) and 3000 31st Street. The
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City and Snap would finalize negotiations and execute a new combined lease
agreement for both properties and based on the following proposed terms and
conditions.
• The proposed term for the new lease is for 10 years and one month, with two
five-year options to extend the agreement, to be exercised consecutively if at all.
• During the initial term of the agreement Snap would have two early termination
options (after the 5th and 7th years) for the entire premises or a portion thereof,
with both options subject to Snap providing the City with written notice 12 months
prior to early termination. Snap would be responsible to pay the City for the
unamortized rental abatement and brokerage commissions for the premises
being terminated.
• Base Rent shall be abated for the first month of each year of the initial lease term
for a total of (10) months.
• The proposed annual rent for the first year of the lease including parking fees
and the one-month rental abatement would be $3,533,713. This rental rate is
reflective of the current state of the commercial real estate market and soft
demand for office space of this size.
• Base monthly rent shall increase three percent per year.
• Snap would have a preferential right to lease and a right of first refusal for
properties that are directly adjacent to their current leasehold including the ability
to sublease properties at or below the rate charged by the City.
• Snap proposes to make improvements and upgrades to City Buildings in
exchange for rental credits. The proposed upgrades include but are not limited to
1) upgrades to their interior elevator bay for 2772 Donald Douglas Loop North
building; 2) replacement of hangar door motors for 3000 31st Street building; 3)
replacement of selected HVAC units; 4) repair and/or replacement of boilers; and
5) upgraded landscaping design aesthetics. All work to be undertaken by Snap
shall be completed prior to February 28, 2026.
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Modification to CRG Agreement
On September 26, 2023, the City executed professional services agreement 11419 with
CRG for a total contractual amount not to exceed $1,164,803.00 over five years. Under
this agreement, CRG provided the City with commercial real estate brokerage for the
proposed Snap lease agreement extension. Should the proposed lease extension be
approved and executed, the real estate commission fee due to CRG is estimated to be
$526,376 based on commission rates consistent with CRG’s agreement for term lease
extensions of 2% for years 1-5 and 1% for years 6-10. This amount is $181,415 higher
than anticipated at the time of the original contract. In addition, a $2,077,680
commission to Snap’s broker (Cushman & Wakefield) would be paid by CRG on behalf
of the City, as per CRG’s obligations under its agreement with the City. Therefore, a first
modification of the City’s agreement with CRG would include both the delta for CRG’s
commission for representing the City ($181,415) and the commission for Snap’s broker
($2,077,680), for a total modified amount of $2,259,094. These new commission
amounts would exceed the current contract threshold. Therefore, staff recommends a
first modification to the agreement with CRG to increase its compensation by
$2,259,094 for a new total amount not to exceed $3,423,897 over five years.
Modification to Aeroplex Agreement
On April 25th, 2023, the City Council awarded agreement 11381 to Aeroplex to provide
aviation property management, broker, and consulting services for City-owned
properties at the Santa Monica Airport. The agreement is for a total amount not to
exceed $2,406,092 over five years. Along with CRG, Aeroplex has provided commercial
real estate brokerage services to the Airport for the proposed lease agreement
extension with Snap. Should the proposed lease extension be approved and executed,
the real estate commission fee due to Aeroplex is estimated to be $211,144 , consistent
with the terms of its agreement with the City, which calls for a 1.5% commission for term
lease expansions. This commission amount would exceed the current contract
threshold; therefore, staff recommends a first modification to agreement 11381 with
Aeroplex to increase compensation by $211,144 for a new total amount not to exceed
$2,617,236 over five years.
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Environmental Review
The proposed lease is categorically exempt from the California Environmental Quality
Act (CEQA) under Section 15301 of the CEQA Guidelines. Section 15301 provides
Class 1 (existing facilities) exemption for projects that consists of the operation, repair,
maintenance, leasing, licensing, permitting, or minor alteration of existing public or
private structures, facilities, mechanical equipment, or topographical features, involving
negligible or no expansion of the existing or former use. The lease would not result in
any significant modifications to the existing space at 2772-2800 Donald Douglas Loop
North (“DDLN”) and 3000 31st Street. Therefore, the lease is categorically exempt as set
forth in Section 15301 of the CEQA Guidelines.
Past Council Actions
Meeting Date Description
8/14/2018
(Attachment A)
Santa Monica Airport Leasing and Licensing Policy
9/26/2023
(Attachment B)
Authorize PSA Agreement to Corporate Realty Group, Inc. for
Commercial Real Estate Broker Services at the Santa Monica Airport
following RFP process
4/25/2023
(Attachment C)
Authorize Agreement to Aeroplex Group Partners, LLC for
Commercial Real Estate Broker Services at the Santa Monica Airport
following RFP process
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Financial Impacts and Budget Actions
Staff seeks authority to approve available funding from the Airport Fund to increase the
amount of agreement 11419 with the CRG and agreement 11381 with Aeroplex for
commercial real estate leasing services.
Agreement Modification Request
Agreement
#
Current
Authorized
Amount
FY 2023-24
Request
Amount
Dept Account #
Total Revised
Contract
Amount
11419 $1,164,803 $2,259,094 57500001.552010 $3,423,897
11381 $2,406,092 $211,144 57500001.552010 $2,617,236
Future year funding is contingent on Council budget approval.
Prepared By: Ria Valas, Real Estate Project Manager
Approved
Forwarded to Council
Attachments:
A. August 14, 2018 Staff Report (Web Link)
B. September 26, 2023 Closed Session Item 3.D (Web Link)
C. April 25, 2023 Staff Report (Web Link)
D. Oaks Initiative Form - Aeroplex
E. Oaks Initiative Form - CRG
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5.G.d
Packet Pg. 302 Attachment: Oaks Initiative Form - Aeroplex [Revision 1] (6099 : Snap Inc. Lease Renewal, Modification of Agreement with CRG, Modification of
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Packet Pg. 303 Attachment: Oaks Initiative Form - Aeroplex [Revision 1] (6099 : Snap Inc. Lease Renewal, Modification of Agreement with CRG, Modification of
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Packet Pg. 304 Attachment: Oaks Initiative Form - CRG [Revision 1] (6099 : Snap Inc. Lease Renewal, Modification of Agreement with CRG, Modification of
5.G.e
Packet Pg. 305 Attachment: Oaks Initiative Form - CRG [Revision 1] (6099 : Snap Inc. Lease Renewal, Modification of Agreement with CRG, Modification of