SR-900-003 (2)
RMD:EDD:MR:F:\RESOURCE\SHARE\STAFFREPORTS\CITYLEASINGPOLICIES.DOC
Council Meeting: November 28, 2000 Santa Monica, California
To: Mayor and City Council
From: City Staff
Subject: Proposed Guidelines for Leasing City-Owned Non-Aviation Properties at
Santa Monica Airport and other Properties in the Bayside District and at
Bergamot Station
Introduction
This report recommends City Council approval of guidelines for Leasing City-Owned
Non-Aviation Properties at Santa Monica Airport and other Properties in the Bayside
District and at Bergamot Station.
Background
The City of Santa Monica owns various parcels and sites of commercial real estate not
currently needed or in use for municipal purposes. Several of these sites, represented
by The Victorian Restaurant and Pacific Shore Hotel, are subject to long-term ground
leases with rental income and other financial returns benefiting the City General Fund.
Uses for other City-owned properties, such as aviation land at Santa Monica Airport, are
constrained in their long-term use by commitments to the Federal Aviation
Administration.
Other City-owned land and buildings not constrained in use or committed by long-term
lease are or may become periodically available for leasehold occupancy and are
currently in use for a variety of commercial and community-serving purposes. These
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Bayside District
properties are clustered in four locations: , where City-owned right-of-
way is licensed for outdoor dining, and kiosks on Third Street Promenade and purpose-
built space within two parking structures are leased for retail sales and neighborhood
Santa Monica Pier
services; , on which buildings and buildable deck sites have been
leased by the Pier Restoration Corporation for visitor-serving restaurant, retail,
Bergamot Station
educational, entertainment and amusement operations; , which the
City has rented to a master tenant on a month-to-month basis for development and
operation of art galleries, artist studios and exhibition areas and related facilities; and
Santa Monica Airport
the non-aviation properties at , where land and buildings have
been rented on a month-to-month basis for an eclectic range of uses.
Leasing of City property on Santa Monica Pier by the Pier Restoration Corporation
(PRC) has been guided by the General Use and Development Plan since its adoption
by City Council in 1988. This Plan sets forth a multi-step development program for the
commercial revitalization of the Pier through attraction of a diversity of products and
services offering a broad range of public appeal. Proposed Leasing Guidelines for
Santa Monica Pier will be separately referred to City Council for consideration as an
update of the 1988 General Use and Development Plan in conjunction with a proposed
new Services Agreement with the PRC and the Annual Plan of Work for Fiscal Year
2000-01.
SMMC Section 2.32.030 assigns to the City Manager the duty of executing all contracts
on behalf of the City, as authorized by City Council. The Charter and Municipal Code
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are generally silent regarding procedures for leasing of City-owned property. It has
been the established practice for staff to obtain Council approval of all leases except
short-term leases and license agreements, and leases on the Pier.
Adoption of guidelines governing advertising, marketing, tenant selection and leasing for
the City?s real estate assets promotes fair and equitable treatment of all potential
lessees and avoids any perceived gifts of public funds. Clearly stated guidelines also
assure that leases of public property optimally benefit the City and its residents, that
property is periodically offered on the marketplace as a means of providing competitive
access to its use, and that property is managed with an objective of meeting the needs
of the Santa Monica community.
Non-aviation Airport Property
The Economic Development Division provides leasing and property management
services to the Airport Division, both divisions of Resource Management, for
administration of non-aviation airport land and buildings at reasonable rates that are
consistent with and reflective of the interim month-to-month terms.
Draft leasing guidelines for non-aviation property were presented to the Airport
Commission at its July and August 2000 meetings. An overview of Airport Division
operational and capital expenditure projects was presented at the September meeting
of the Airport Commission to provide a comprehensive understanding of Airport revenue
needs and a context for the consideration of proposed lease rates. Also during this
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period staff sought additional input from current non-aviation airport tenants regarding
the proposed leasing guidelines and pricing strategies, resulting in individual meetings
with a majority of the tenants. Various leasehold issues raised during tenant meetings
and Airport Commission meetings are reflected in the attached proposed Non-aviation
Airport Property Leasing Guidelines.
At the August meeting of the Airport Commission, an ad hoc committee was appointed
to meet with members of the Arts Commission?s Artist Live/Work/Studio Task Force to
examine ways in which non-aviation airport properties could reasonably be used to
support the Santa Monica arts community?s need for affordable day studio space, while
balancing the fiscal requirements of the Airport. The ad hoc subcommittee met on two
occasions with Task Force representatives. The Task Force subcommittee presented
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its report to the September 18 meeting of the Artist Live/Work/Studio Task Force, and
the Arts Commission approved recommendations regarding artist day studio uses at the
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Airport at its meeting also held September 18.
The Arts Commission adopted the following recommendations:
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Non-aviation airport property at 3000 and 3026 Airport Avenue be dedicated to use
for artist day studio spaces
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A sub-committee of the Artist Live/Work/Studio Task Force be formed to make
recommendations on an artist definition and selection process for use at the Airport
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Current artist leases at the Airport be extended for five years with two three-year
options for renewal at current rental rates plus annual CPI adjustment
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The Arts Commission also adopted motions urging the Airport Commission to:
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Set a reasonable aggregate rent target for all non-aviation airport properties
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Seek super-premium tenants for a portion of the non-aviation properties
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Set aside on a permanent basis 42% of gross building square footage at below-
market end user rents for artist studio spaces with a year 2001 rate of approximately
$0.65 per s.f. per month
The Airport Commission at its meeting held October 23, 2000 considered the public
input received at the three previous Commission meetings, heard additional comments
from current tenants, and reviewed additional related information. The Airport
Commission adopted a motion recommending the Leasing Guidelines subject to the
following:
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3400 Airport Avenue office buildings be subject to a Request for Proposals process
for leasehold use at premium rental rates
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3026 Airport Avenue hangar building be subject to a Request for Proposals process
for artist day studio use at lowest feasible rental rates
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Current tenants be offered five-year term leases plus one three-year renewal option
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Current tenant rental rate increases not exceed 20% per year over the next four-year
period plus annual CPI adjustment
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Fiscal requirements of Santa Monica Airport resulting from rates protecting the arts
community be supported by City General Fund or other funding sources external to
the Airport Fund
Some but not all adopted recommendations of the Arts Commission and the Airport
Commission are reflected in the attached proposed Non-aviation Airport Property
Leasing Guidelines.
City-Owned Property in Bayside District
Economic Development Division staff has been delegated to act on behalf of the City to
solicit interest in prospective commercial leasing opportunities for City-owned property
in the Bayside District. Staff has generally utilized leasing guidelines suggested in 1986
to solicit and manage tenancies in the parking structures that provide services to
residents and visitors that may otherwise be absent from Bayside District due to high
commercial rental rates. Examples of these leases are Best Hardware, Pete the
Barber, and Willie & Gloria?s.
Draft leasing guidelines for City-owned property located in the Bayside District were
presented to and reviewed with the Executive Director of Bayside District Corporation in
July. The guidelines were referred to the Land and Asset Committee of the Bayside
District Corporation. At its meeting held November 7, 2000, the Committee
recommended the proposed Leasing Guidelines for referral to City Council.
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Bergamot Station
The City acquired land and buildings at Bergamot Station in 1989 from Southern Pacific
Transportation Company with loan funds provided by the Los Angeles County
Transportation Commission and from the City?s T.D.A. Rail Reserve Fund. The site of
Bergamot Station had been in use for decades for manufacturing purposes, and the
70,000 square feet aggregate industrial shell structures on 5.4-acre land parcel were in
extremely poor condition. Economic Development Division renegotiated and
administers the tenancy agreement. Current operation and maintenance of the property
commenced in 1994 on a month-to-month agreement basis for rehabilitation and interim
use of Bergamot Station as a center for art galleries, artist studios, art foundations,
exhibition areas and supporting purposes.
Leasing guidelines are proposed for the continued interim use of Bergamot Station
pending redevelopment of all or a portion of the property for the intended long-term
public transportation purposes. The intent of the guidelines is to preserve and optimize
the interim use of the site as an art center. The proposed guidelines have been
discussed in general terms with the current master tenant, who is in concurrence with
the approach to continuity of operations.
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Discussion
Proposed Non-aviation Property Leasing Guidelines
Proposed leasing guidelines for the non-aviation airport properties are attached. The
Airport currently accommodates 36 artist studios, more than 100,000 square feet of
space for small businesses and other users, and Spitfire Grill restaurant. It is estimated
that approximately 100 artist studios exist in the balance of the City. Dedication of the
22,560 square foot vacant structure at 3026 Airport Avenue and dedication of the
18,035 square foot occupied structures at 2900 and 3000 Airport Avenue for Artist Day
Studios will more than double the amount of Airport space, from 15% to more than 38%
of total building area, utilized to support the arts community, and prospectively increase
the number of artists at the Airport to more than 100 studios. This would be by far the
highest concentration of artist studios in the City.
The Airport Commission expressed serious concern for the preservation of the diverse
multi-use community that has been established on non-aviation airport properties. As a
result, it is proposed that current tenants with three specific exceptions be offered five-
year term leases plus one three-year renewal option for stable continued use.
Consistent with an objective to periodically make public property available to members
of the public for the preferred uses, succeeding leases would generally be for five-year
terms without renewal options. Two current tenants that have made or may be required
to make substantial new capital investment in the buildings to achieve the preferred
uses are recommended for ten-year terms.
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Pricing of the leases has been extensively reviewed by the Airport Commission in terms
of the fiscal requirements of Santa Monica Airport to remain self-sufficient and not
reliant on the Federal Aviation Administration, City General Fund or other outside
funding sources. The Airport Fund is restricted to purposes only in support of the
Airport and its operations. Staff developed and recommends an economic model for
pricing the non-aviation airport properties in a manner that helps achieve Airport Fund
fiscal self-sufficiency, and provides the requisite maintenance and repair of the Airport
and its noise management programs. Rents for new office tenants are proposed to be
set at prevailing market rental rates. Under the proposed guidelines, these rates in turn
will help provide supportive rates for Artist Day Studio rents. Projected total revenue
required from the Airport?s non-aviation properties in FY2002-03 will be approximately
$3,700,000, in contrast to the $2,100,000 currently budgeted in FY2000-01.
The underlying assumptions of the recommended lease-pricing model are:
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Eight structures available for lease, totaling 123,928 square feet net rentable area
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Three of eight structures (2900, 3000 and 3026 Airport Avenue) dedicated to Artist
Day Studios as the Preferred Use (approximately 38% of all space), achieved over
time through attrition as non-artist leases expire
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Airport Fund is a restricted enterprise fund for airport operations and improvements
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Grand-parented tenant rent increases to be phased in over a three-year period
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3400 Airport Avenue will be subject to a Request for Proposals for ten-year term
tenancy at highest feasible rent
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3026 Airport Avenue will be subject to a Request for Proposals for ten-year term
operation of an art studio center
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Grandparented tenancies at Spitfire Grill and Benchmark will be offered ten-year
term occupancies at fair market rent
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Rent increases for non-artist tenancies in buildings other than those dedicated to
Artist Day Studios and existing commercial tenants within art-dedicated structures
will be to 90% of estimated July 1999 fair market rates
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Artist Day Studio tenants in art-dedicated structures and existing day studios in non-
dedicated structures will pay lowest feasible rents (currently estimated at $0.95 per
s.f. per month), balanced against Airport fiscal requirements
A rental rate support program for Artist Day Studios is feasible if the overall fiscal
requirements of the Airport Fund to operate and maintain Santa Monica Airport are met.
This can be achieved through appropriate pricing of non-aviation airport property for
uses other than the arts. Use of the building at 3400 Airport Avenue and other
structures at market rates to support studio pricing achieves the overall goal. To the
extent that General Fund and other revenue sources external to the Airport Fund are
available, studio support pricing may be further adjusted.
The Arts Commission has proposed creation of a sub-committee of the
Live/Work/Studio Task Force to make recommendations on a selection process and
artist definition to be adopted for leasing of studio space at the Airport. The Cultural
Affairs Division of the Community and Cultural Services Department will oversee the
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necessary process that will provide the Economic Development Division with a waiting
list of candidate artist tenants for lease access to studio space. Tenant recruitment for
uses other than artist studios would be in accordance with public marketing and
solicitation for prospective qualified tenants suitable for the available space.
The Airport Commission suggested that the rent increases for current tenants be
phased over a four-year period with a cap of 20% increase in any one year. This
Commission recommendation was a dual concern for potential tenant impact from
construction of Airport Park and the possible business impact of tenants absorbing large
stepped rent increases. Staff acknowledges the Commission?s concerns. However,
Airport Park construction will have minimal adverse effect on these noncommercial
tenants, and access will not be impeded. Additionally, the proposed rent structure is
being applied to base rents that are substantially below market, and scheduled
increases are proposed to be phased over a three year period to provide an adjustment
period.
Staff also proposes that City Council delegate to the City Manager the authority to
negotiate and execute leases of non-aviation airport property providing terms of use up
to five years on the basis of written agreements prepared and approved as to form by
the City Attorney and in accordance with these Leasing Guidelines. Leases for terms of
use greater than five years would continue to be referred to City Council for its approval.
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Proposed City-Owned Property in Bayside District Leasing Guidelines
Leasing guidelines for City-owned properties located within the Bayside District are
attached and further described therein. The City owns two kiosk structures located on
Third Street Promenade totaling 1,275 square feet used for visitor-serving commercial
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purposes, and seven leased premises in 2 Street and 4 Street parking structures
totaling 10,627 square feet used for neighborhood-oriented educational and commercial
services. Additionally, 27 outdoor dining licenses have been issued to restaurants
fronting on Third Street Promenade and the cross streets of Arizona Avenue, Santa
Monica Boulevard and Broadway totaling 7,761 square feet.
The current uses of these City-owned properties are considered to be consistent with
guideline objectives, and support continued services to the residential community and
Bayside District visitors that may otherwise not be offered due to escalating commercial
rental rates. In order to maintain this neighborhood service orientation, it is proposed
that leases and licenses of City-owned properties in Bayside District be subject to a
preference for local independent, non-formula businesses and operations. Accordingly,
if a competent and economically viable local prospective tenant can provide the
preferred community or visitor-oriented commercial services sought for the available
leasehold premises, then a leasing preference would be applied over an applicant
representing a business offering a standardized service, décor or format.
Consistent with an objective to periodically make public property available to members
of the public for the preferred uses, it is proposed that leases be issued on the basis of
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non-renewable five-year terms. Exceptions may arise if a prospective tenant may be
required to make substantial new capital investment in the City-owned property to
achieve the preferred uses, resulting in recommendation of a five-year term lease with
one five-year renewal option.
Rental rates will be established based upon independently appraised fair market rates
or in accordance with responses received to a public Request for Proposal process.
Lease rates are considered secondary to establishing or retaining a preferred use, and
pricing may be adjusted as necessary to maintain the preferred local-serving purposes
of the leaseholds. Tenant recruitment would be in accordance with public marketing
and solicitation for prospective qualified tenants suitable for the available space.
Staff also proposes that City Council delegate to the City Manager the authority to
negotiate and execute leases of City-owned property in Bayside District providing terms
of use up to five years on the basis of written agreements prepared and approved as to
form by the City Attorney and in accordance with the Leasing Guidelines. Leases for
terms of use greater than five years will continue to be referred to City Council for its
approval.
Bergamot Station Leasing Guidelines
Leasing guidelines for continued interim use and operation of Bergamot Station in
support of the Santa Monica arts community are attached and further described therein.
Bergamot Station currently provides approximately 70,000 square feet of building space
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accommodating art galleries, artist studios, art foundations, art exhibition areas and
related purposes on a 5.4-acre land parcel. These activities were implemented in 1994
subject to a month-to-month agreement. The tenant, Bergamot Station, Ltd., accepted
the premises in an ?as-is? condition and made significant structural improvements
suitable for the intended purposes at its expense partially offset by rental credits valued
at $392,000. The tenant has also been responsible for all maintenance and repair of
structures and other improvements to the property at its expense.
In 1984, the City entered into an agreement with the Los Angeles County Transportation
Commission (LACTC) (now the Metropolitan Transportation Authority, or MTA) to
establish a City Rail Reserve Account. The account was established using State
Transportation Development Act (TDA) funds. Under the terms of this agreement, there
can be no permanent change in use of property without LACTC approval, and any
eventual permanent use must be rail-related. Under the terms of a subsequent 1989
agreement between the City and the LACTC, the City was permitted to use these funds
to partially fund acquisition of the Bergamot Station site. The Bergamot parcel today
remains an asset in the City?s TDA Rail Reserve Fund. The proposed leasing
guidelines recommend an ongoing interim Preferred Use of the property, with a
proposed lease agreement which could be terminated upon 90 days notice by the City
that the long-term Preferred Use is being implemented; this proposal complies with the
existing LACTC restrictions.
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In recognition of the service provided by Bergamot Station to the Santa Monica arts
community and the significant capital investment and facility management burden
carried by the operator, it is proposed that the current tenant be offered a five-year term
lease plus five one-year renewal options for stable continued use. The tenant would be
required to provide on-going management, maintenance and repair of the premises at
its expense, and sublease portions of the space for permitted uses consistent with
terms and conditions of the master lease.
Lease pricing for continued master tenant operation and management of the Bergamot
Station arts center would be negotiated on a basis consistent with the interim preferred
arts-support use for the five-year term. The agreement would remain cancelable upon
ninety days? notice if all or significant portions of the premises were required for
development of public transportation systems. If the current master tenant were
unwilling or unable to accept a new lease in accordance with the proposed guidelines,
preservation of the arts center as an interim use would be pursued through the Tenant
Recruitment procedures. Interim operation of the art center would also be subject to a
preference for local independent master operators capable of performing the lease
obligations necessary to preserve the preferred uses.
Budget/Financial Impact
No budget or financial impact in Fiscal Year 2000-01 will result from approval of the
Leasing Guidelines. By Fiscal Year 2002-03, after the three year phase-in of tenant
rent increases, the annual revenue received by the Airport Fund will have increased by
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approximately $1,600,000 over estimated revenue for Fiscal Year 2000-01 to satisfy
requisite operating and capital needs of the Airport.
Recommendation
Staff recommends that City Council approve the proposed Leasing Guidelines for non-
aviation airport property, City-owned property in Bayside District and Bergamot Station,
and that the City Manager be authorized to implement the Leasing Guidelines as
approved.
Attachments
A). Non-aviation Airport Property Leasing Guidelines
B) City-Owned Property in Bayside District Leasing Guidelines
C) Bergamot Station Leasing Guidelines
Prepared by: Jeff Mathieu, Director of Resource Management
Mark Richter, City Real Estate Manager/Economic Development Manager
Robert Trimborn, Airport Manager
Rod Merl, Senior Administrative Analyst
Gretchen Kubacky, Senior Administrative Analyst
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ATTACHMENT A
Non-aviation Airport Property Leasing Guidelines
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NON-AVIATION AIRPORT PROPERTY
LEASING GUIDELINES
GUIDELINE OBJECTIVES
Maintain the compatibility of non-aviation airport property use with Santa Monica Airport
operations and the adjacent residential community; assist Santa Monica Airport in
meeting its fiscal obligations in a self-sufficient manner; establish implementation
procedures for the use of non-aviation property; provide a safe harbor for the local arts
community; and assure access to and use of public properties by the general public for
the Preferred Uses through a leasing program that promotes orderly and periodic
changes in tenancy.
PREFERRED USES
Current uses of the non-aviation airport property are diverse, and range from Technical
Office, Arts Education and Artist Day Studio to Contractor facilities, Architectural Offices
and General Office. Diversity of use is valued in establishment of a community of
property users. Diversity will be maintained but limited to those purposes which have
an historic connection to the property, an ability to pay prevailing market rental rates as
a means to support Airport fiscal self-sufficiency and Arts Community access, and to
those purposes which serve broader community interests and needs, including Artist
Day Studios.
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GRANDPARENTING
All existing non-aviation airport tenants who are current in rent payments and not
otherwise in default of their current agreements will be offered the opportunity to retain
use and occupancy of their current lease premises for a non-renewable five-year term
plus one three-year option. Exceptions are current tenancies at Spitfire Grill and
Benchmark that, in recognition of their significant investment in facilities, will be offered
ten-year term leases, and the current tenant at 3400 Airport Avenue. Existing tenants
may request shorter duration leases, at their option.
RENEWAL OPTIONS
Lease renewals will not be automatically offered to existing or new tenants. As
vacancies arise either by lease expiration or earlier termination, recruitment for
occupancy will be conducted in accordance with the Leasing Guidelines.
RENTABLE AREA
Grandparented tenant lease premises will not include assessment of rent for lofts
constructed by the tenants. Single occupancy and/or master tenanted buildings will be
leased on the basis of gross building area. New leases for multi-user buildings will be
on the basis of net interior rentable area excluding building common areas.
TERM OF YEARS
As vacancies arise either by lease expiration or earlier termination, available space will
be leased for Preferred Uses for a non-renewable five-year term. Prospective tenants
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for leasing of vacant space will be selected from applications received by City staff
pursuant to Tenant Recruitment procedures for each Preferred Use. Prospective
tenants will be screened for confirmation of use and credit-worthiness.
When a tenant has made or is required to make substantial new capital investment in
the non-aviation airport property to establish their Preferred Use consistent with
intended purposes and uses of the premises (e.g. remodeling/renovation of 3026 and
3400 Airport Avenue), a ten-year term lease will be offered.
EXPANSION OF LEASEHOLDS
In order to provide access to and use of the non-aviation airport properties to as many
prospective tenants as possible, physical expansion of existing and new leasehold
occupancies will not be accommodated.
PERIODIC REVIEW OF RENTAL RATES
Fair market rents for individual buildings on non-aviation airport properties were
appraised in as-condition in July of 1999. Rental rates for use of non-aviation airport
properties will be set as follows effective January 1, 2001:
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3026 Airport Avenue will be subject to a Request for Proposals for ten-year term
operation of an art studio center at lowest feasible rent, currently estimated at $0.85
per s.f. per month.
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3400 Airport Avenue will be subject to a Request for Proposals for ten-year term
single users or master lease operation at highest feasible marketplace rent, and
compatible with airport operations and adjacent residential neighborhood.
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Grandparented tenancies at Spitfire Grill and Benchmark will be offered ten-year
term occupancies at fair market rent.
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2900 Airport Avenue and 3000 Airport Avenue will be dedicated to artist day studios
as the Preferred Use at lowest feasible rent, currently estimated at $0.95 per s.f. per
month for art studio use.
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Grandparented artists in buildings other than those dedicated to artist day studios
will be offered preferred rental rates consistent with 2900 and 3000 Airport Avenue
for art studio use.
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Grandparented tenancies in buildings other than those dedicated to artist day
studios will be offered stepped-up rental to 90% of estimated July 1999 fair market
rates over a three-year period.
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Grandparented and new leases will be subject to annual CPI adjustment on each
January 1.
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Non-aviation airport properties will be appraised for fair market rental rates at five
year intervals (next appraisal ? 7/2004).
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If then-current rents for uses other than artist day studios are determined to be less
than 90% of estimated market rent, step-ups to prevailing market rates followed by
annual CPI adjustment will be made for the term of any new property lease.
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If then current rents for Technical Offices, General Offices and Restaurant are
determined to be within 10% of estimated market rates, annual CPI adjustment will
be made for the term of the property lease.
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Artist Day Studio tenancies in 2900, 3000 and 3026 Airport Avenue will be granted a
continuing preferential rent structure to an extent consistent with offsetting rents
obtained from non-studio leaseholds and consistent with maintaining the fiscal self-
sufficiency of Santa Monica Airport.
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New (non-grandparented) Artist Day Studio tenancies in buildings other than 2900,
3000 and 3026 Airport Avenue will pay prevailing market rates for the space used.
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New (non-grandparented) rents for uses other than artist day studios will be at
prevailing market rates
FACILITY CONDITION REVIEW
3026 Airport Avenue and 3400 Airport Avenue will be leased in an as-is condition. The
tenant of each would be responsible for any and all improvements, including roofs and
exteriors of the facilities, necessary to support the Preferred Uses. If tenants make
improvements to the buildings for compliance with basic decent, safe and sanitary
standards as a mutually agreed condition of a lease, the City must first review and
approve the proposed work. Appropriate rental credits for the approved work performed
would be negotiated as part of the lease.
All other non-aviation airport buildings will be inspected prior to new leasehold
occupancy and brought by the City or tenant to a decent, safe and sanitary condition
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appropriate for the Preferred Use. If tenants must make improvements to the buildings
to implement the Preferred Uses as a mutually agreed condition of a lease, the City
must first review and approve the proposed scope of work and improvement design. All
necessary building permits must be obtained, and the work inspected for compliance
with applicable code. Appropriate rental credits for the approved work performed would
be negotiated as part of the lease.
TENANCY RELATIONSHIPS
3026 Airport Avenue and 3400 Airport Avenue are appropriate and suitable for leasing
by the City to a single user/operator or a master tenancy basis in accordance with
agreements prepared by the City. The master tenant would be responsible for any
structural improvements or modifications necessary to support the Preferred Uses, and
would be responsible for all interior and exterior facility maintenance, repairs and utilities
associated with operation of the property. Master tenant activities at 3026 and 3400
Airport Avenue must be compatible with airport operations and the adjacent residential
neighborhood. Subletting of interior space by the master tenants for the Preferred Uses
would be explicitly permitted.
All other non-aviation airport buildings appropriate and suitable for leasing by the City to
individual occupants for the Preferred Uses will also be in accordance with agreements
prepared by the City. Each tenant would be responsible for interior maintenance and
repair and utility consumption pro ration, and the City would retain responsibility for
maintenance and repair of roofs, building exteriors, landscaping and common user
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parking. Subletting of interior space by the individual tenants would be explicitly
prohibited. However, artists may cooperatively share individual Artist Day Studio
spaces provided that rents charged do not exceed lease rates.
TENANT RECRUITMENT
The Cultural Affairs Division of Community and Cultural Services Department will define
eligible visual artists, and will provide to Economic Development Division a waiting list of
qualified artist-candidates for leasing of individual Artist Day Studios. Candidate tenants
for available Artist Day Studio space in 2900 and 3000 Airport Avenue will file Lease
Applications for screening purposes, and qualifying artists will be selected only from the
screened waiting list.
3026 Airport Avenue and 3400 Airport Avenue will be the subjects of public Requests
for Proposals intended to optimize leasehold occupancy of the properties for the
Preferred Uses. Requests for Proposals will be publicized utilizing some or all of the
following, as appropriate:
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Media advertising, including general circulation newspapers and local/limited
circulation publications.
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Advertising in specialized trade publications
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Posting notice on the California Real Estate Journal Internet web site.
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Direct mail to waiting list and/or other targeted individuals having expressed previous
interest in master lease operation of the properties for the Preferred Use.
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?
Direct contact or outreach to prospective master tenants and/or referrals from other
City departments.
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Posting notice on the City?s and Resource Management?s Internet web site.
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Dissemination by fax, e-mail or telephone to local commercial real estate brokers.
All occupancies of non-aviation airport buildings other than Artist Day Studios, 3026 and
3400 Airport Avenue will be subject to a public marketing and solicitation process to
identify appropriate and qualified tenants for the Preferred Use of the available space.
Vacancies will be publicized utilizing some or all of the following, as appropriate:
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Media advertising, including general circulation newspapers or local/limited
circulation publications, as appropriate.
?
Direct mail to waiting list and/or other targeted individuals having expressed previous
interest in leasehold occupancy for the Preferred Use.
?
Direct contact or outreach to prospective tenants
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Posting notice on the City?s and Resource Management?s internet web site
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Dissemination by fax, e-mail or telephone to local commercial real estate brokers
All prospective tenants will file a Resource Management Department Lease Application.
Upon confirmation that the proposed tenancy is a Preferred Use consistent with
Guideline Objectives, verification of references and credit history, and mutual
preliminary concurrence in proposed lease terms and conditions, a lease agreement will
be prepared by the City Attorney for review and execution by the prospective tenant and
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referral to City Manager for approval. Leases for terms greater than five years will
require Council approval.
The City will neither pay nor receive commissions for leasing of City-owned property.
Staff will cooperate with commercial real estate brokers who are authorized to negotiate
leases on behalf of prospective tenants.
DELEGATION OF AUTHORITY
The City Manager will negotiate and execute leases of City-owned property providing
terms of occupancy up to five years for the Preferred Uses in accordance with these
Leasing Guidelines on the basis of written agreements prepared and approved as to
form by the City Attorney. Leases for terms of occupancy greater than five years will be
referred to City Council for its approval.
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NON-AVIATION AIRPORT PROPERTY
SUMMARY OF USES
CURRENT USES S.F. - % OF SPACE
NET RENTABLE AREA ? ALL 123,928 s.f. ? 100%
Technical Offices 36,895 s.f. - 30%
Vacant 22,560 s.f. ? 18%
Media/Entertainment Offices 22,444 s.f. ? 18%
Artist Day Studios 18,816 s.f. ? 15%
Contractors 9,588 s.f. - 8%
Architectural Offices 4,440 s.f. - 4%
Restaurant 3,750 s.f. - 3%
General Offices 3,490 s.f. - 2%
Storage 1,190 s.f. - 1%
Commercial 755 s.f. - 1%
PROPOSED USES S.F. - % OF SPACE
Artist Day Studio 47,805 s.f. ? 38%
General Offices 36,563 s.f. - 30%
Technical Offices 35,810 s.f. ? 29%
Restaurant 3,750 s.f. - 3%
11
ATTACHMENT B
City-Owned Property in Bayside District Leasing Guidelines
1
CITY-OWNED PROPERTY IN BAYSIDE DISTRICT
LEASING GUIDELINES
GUIDELINE OBJECTIVES
Maintain the compatibility of use of City-owned property located within the Bayside
District for purposes which contribute to pedestrian orientation and neighborhood
residential services; establish and implement procedures for managing and preserving
the Preferred Uses of City-owned property; and assure access to and use of these
public properties by the general public for the Preferred Uses through a leasing program
that promotes orderly and periodic changes in tenancy.
PREFERRED USES
Current uses of City-owned property in the Bayside District are diverse, and have been
intended to enhance open air casual dining experience on Third Street Promenade and
support those purposes which serve broader neighborhood community interests and
needs. Diversity will be maintained but focused on those purposes which support
continued services to the residential community and Bayside District visitors, and which
have an ability to pay fair market rental rates. Preferred Uses include, but are not
limited to, outdoor dining license agreements associated with adjacent restaurants and
cafes, commercial activities providing services which may otherwise not be offered to
the neighborhood residents in the Bayside District, and educational and recreational
access for otherwise under-served segments of the community.
2
Existing City-owned properties within Bayside District available for lease or license, and
associated Preferred Uses, consist of the following:
?
Twenty-seven outdoor dining licenses located on Third Street Promenade and the
cross streets of Arizona Avenue, Santa Monica Boulevard and Broadway totaling
7,761 square feet.
?
Four kiosk lease premises located on Third Street Promenade totaling 1,275 square
feet (excluding the SMPD substation) occupied for visitor-serving commercial
purposes.
?
Seven parking structure lease premises totaling 10,627 square feet occupied for
neighborhood and community-oriented educational, recreational and commercial
services.
?
One retail cart license for operation of a vending cart program on Third Street
Promenade consisting of a minimum 15 and a maximum 24 individual cart operators
subject to sublicense agreements and for retail purposes approved by the City.
Other City-owned properties within and adjacent to Bayside District are also subject to
agreements separately administered by Planning and Community Development and
Environmental and Public Works Management Departments, consisting of licenses for
outdoor dining on Ocean Avenue and Wilshire Boulevard and parking occupancies.
3
LOCAL PREFERENCE
The low-density scale of public improvements and a casual aesthetic ambience are
important factors in defining the character and pedestrian orientation of the Bayside
District. Leasing and licensing of City-owned property within Bayside District will be
subject to a preference for local independent, non-formula businesses and community
services that are capable of providing the Preferred Uses. A formula business is that
which requires by contractual or other arrangement the maintenance of standardized
services, décor, uniforms, facility design and format substantially identical to another
operation.
RENEWAL OPTIONS
Lease renewals or options to extend the term of occupancy will not be offered to
existing or new tenants. As vacancies arise either by lease expiration or earlier
termination, recruitment for occupancy will be conducted in accordance with the Leasing
Guidelines.
TERM OF YEARS
As vacancies arise either by lease expiration or earlier termination, available space will
be offered for lease for Preferred Uses for typically a non-renewable five-year term if
significant tenant improvements are not required. Prospective tenants for leasing of
vacant space will be selected from applications received by City staff pursuant to
Tenant Recruitment procedures for each Preferred Use. Prospective tenants will be
screened for confirmation of use, operating experience and credit-worthiness.
4
Term of years for new leases and licenses will vary with the following:
?
If a tenant is required to make substantial new capital investment in the City-owned
property to establish their Preferred Use consistent with intended purposes of the
premises, a five-year term with one five-year renewal option will be offered.
?
Outdoor dining licenses will be issued for month-to-month and subject to periodic
use review in support of the adjacent restaurant operation. If the licensee is current
in rent payments and not otherwise in default, the license will be continued.
?
A Vending Cart license agreement will be issued for a term of three years and
subject to periodic performance review.
EXPANSION OF LEASEHOLDS
In order to provide access to and diverse use of the City-owned properties to as many
prospective tenants as possible, physical expansion of existing and new leasehold
occupancies will not be accommodated.
PERIODIC REVIEW OF RENTAL RATES
Rentals will be established at independently appraised fair market rates or in
accordance with responses received to a public Request for Proposal process. City-
owned property will be independently appraised for fair market rental rates at five-year
intervals. Lease rates are considered secondary to establishing or retaining a preferred
use, and pricing may be adjusted as necessary to maintain the preferred local-serving
5
purposes of the leaseholds. Annual CPI adjustments will be made for the term of any
new property lease or license.
FACILITY CONDITION REVIEW
All City-owned structures will be inspected prior to new leasehold occupancy and
brought by the City or new tenant to a decent, safe and sanitary condition appropriate
for the Preferred Use. If tenants must make improvements to the structure to implement
the Preferred Uses as a mutually agreed condition of a lease, the City must first review
and approve the proposed scope of work and improvement design. All necessary
building permits must be obtained, and the work inspected for compliance with
applicable codes. Appropriate rental credits for the approved work performed would be
negotiated as part of the lease.
TENANCY RELATIONSHIPS
All City-owned property within the Bayside District appropriate and suitable for leasing
or licensing by the City to individual occupants for the Preferred Uses will be in
accordance with agreements prepared by the City. Each tenant or licensee would be
responsible at its expense for interior maintenance and repair and utility consumption,
and the City would retain responsibility for maintenance and repair of roofs and building
exteriors. Subletting of space would be explicitly prohibited, with the exception of
vending cart agreements to individual cart operators issued by the licensee.
6
TENANT RECRUITMENT
All City-owned property within the Bayside District appropriate and suitable for leasing
or licensing will be subject to a public marketing and solicitation process to identify
prospective tenants with financial and experience qualifications for the Preferred Use of
the available space. Vacancies will be the subject of public Requests for Proposals
publicized utilizing some or all of the following, as appropriate:
?
Media advertising, including general circulation newspapers or local/limited
circulation publications, as appropriate.
?
Direct mail to waiting list and/or other targeted individuals having expressed previous
interest in leasehold occupancy for the Preferred Use.
?
Direct contact or outreach to prospective tenants and through Bayside District Corp.
?
Posting notice on the City?s and Resource Management?s internet web site.
?
Dissemination by fax, e-mail or telephone to local commercial real estate brokers.
All prospective tenants will file a Resource Management Department Lease Application.
Upon confirmation that the proposed tenancy is a Preferred Use for the available space,
verification of references and credit history, and mutual preliminary concurrence in
proposed lease terms and conditions, a lease agreement will be prepared by the City
Attorney for review and execution by the prospective tenant and referral for approval.
7
The City will neither pay nor receive commissions for leasing of City-owned property.
Staff will cooperate with commercial real estate brokers who are authorized to negotiate
leases and licenses on behalf of prospective tenants.
DELEGATION OF AUTHORITY
The City Manager will negotiate and execute leases and licenses of City-owned
property providing terms of occupancy up to five years for the Preferred Uses in
accordance with these Leasing Guidelines on the basis of written agreements prepared
and approved as to form by the City Attorney. Leases and licenses for terms of
occupancy greater than five years will be referred to City Council for its approval. All
proposed leases and licenses shall be reviewed and discussed with the Bayside District
Corporation Board of Directors, and staff will consider the suggestions and/or
recommendations of the board in its preparation of agreements.
8
ATTACHMENT C
Bergamot Station Leasing Guidelines
1
BERGAMOT STATION
LEASING GUIDELINES
GUIDELINE OBJECTIVES
Maintain and enhance the interim use of City-owned property at Bergamot Station in
service and support of the Santa Monica arts community; maintain the future use of all
or a portion of the property for development of public transportation systems; and
optimize the access to and use of this public property for the benefit of the community.
PREFERRED USES
Current uses of City-owned property at Bergamot Station are limited to art galleries,
artist studios, art foundations, museums and exhibition areas, and related purposes.
These uses support an active and vital arts community in Santa Monica, and are
designated as interim Preferred Uses for purposes of these Guidelines. The Bergamot
Station property was acquired to preserve and protect the long-term future use of the
property for development of public transportation systems and as the prospective site of
an intermodal transportation transfer point. This remains the long-term Preferred Use of
the property.
LOCAL PREFERENCE
The low-density, diverse leasehold improvements and local character of Bergamot
Station are important factors in defining the popularity and acceptance of this arts center
by the visual arts community. Interim operation of gallery, exhibition space and related
2
purposes will be subject to a preference for local independent businesses that are
capable of providing the Preferred Uses.
TERM OF YEARS
In recognition of the significant capital investment made in rehabilitation and conversion
of structures and facilities at Bergamot Station by the current master lessee, a five-year
term lease plus five one-year options will be offered in lieu of the existing month-to-
month agreement. Both the initial lease term and options will be conditioned by the
ability of either the City or master lessee to terminate the agreement upon ninety days?
prior written notice to preserve the right to implement the long-term Preferred Use.
PERIODIC REVIEW OF RENTAL RATES
Interim master lease tenancy of the property will be granted a continuing preferential
rent structure consistent with the right to terminate the leasehold upon short notice,
acceptance by the tenant of all responsibility for maintenance, repair and improvement
to the premises, and consistent with the support provided to the Santa Monica arts
community. Initial term rent will be negotiated with the master tenant on a basis
consistent with the interim preferred use, and subject thereafter to annual CPI
adjustment commencing January 1, 2002.
FACILITY CONDITION REVIEW
All structures and other improvements on the premises will be inspected prior to
issuance of a new lease agreement and brought by the master tenant at its sole
3
expense without offset in rent to a decent, safe and sanitary condition appropriate for
the interim Preferred Use. If the master tenant must make improvements to the
premises to implement the interim Preferred Uses as a mutually agreed condition of a
new lease, the City must first review and approve the proposed scope of work and
improvement design. The master tenant must obtain all necessary building permits,
and the work must be inspected for compliance with applicable code.
TENANCY RELATIONSHIPS
Bergamot Station is appropriate and suitable for leasing by the City to a single
user/operator on a master tenancy basis in accordance with an agreement prepared by
the City. The master tenant would be responsible for any structural improvements or
modifications necessary to support the interim Preferred Uses, and would be
responsible at its expense for all interior and exterior facility maintenance, repairs and
utilities including paving and landscaping associated with operation of the property.
Subletting of interior space by the master tenant for the interim Preferred Uses would be
explicitly permitted.
TENANT RECRUITMENT
The current master tenant of Bergamot Station will be offered the right of first refusal to
lease the premises to optimize leasehold occupancy of the premises for the interim
Preferred Uses. If the current master tenant declines to accept a new master lease in
accordance with these Guidelines or defaults or otherwise terminates its occupancy, a
4
Request for Proposals will be publicized utilizing some or all of the following, as
appropriate:
?
Media advertising, including general circulation newspapers and local/limited
circulation publications.
?
Advertising in specialized trade publications.
?
Direct mail to targeted individuals or prospective master tenants having expressed
previous interest in operation of the properties for the interim Preferred Uses.
?
Direct contact or outreach to prospective master tenants and/or referral from other
sources.
?
Posting notice on the City?s and Resource Management?s Internet web site.
?
Dissemination by fax, e-mail or telephone to the Santa Monica arts community and
to local commercial real estate brokers.
The City will neither pay nor receive commissions for leasing of City-owned property.
Staff will cooperate with commercial real estate brokers or other individuals who are
authorized to negotiate leases on behalf of prospective master tenants.
5