SR-802-001-03
RMD:EDD:DM:F:\RESOURCE\STAFFREPORTS\Pier Restoration Corporation.doc
City Council Meeting: February 13, 2001 Santa Monica, California
To: Mayor and City Council
From: City Staff
Subject: Recommendation to Approve the Proposed Guidelines for
Leasehold Management of City Property on Santa Monica Pier for
Fiscal Year 2000-01.
Introduction
This report recommends that Council approve the proposed guidelines for
leasehold management of City property on the Santa Monica Pier for Fiscal Year
2000-01.
Background
In November 1983 City Council created the Santa Monica Pier Restoration
Corporation (PRC) as a non-profit, public benefit corporation to oversee the
reconstruction and revitalization of the Pier. The responsibilities and authority of
the PRC were broadened and formalized in December 1985, with City Council
approval of a Services Agreement with the PRC and by-laws for the corporation.
The relationship between the City and PRC was reaffirmed and modified upon
Council approval of a new Services Agreement on December 19, 2000,
transferring to City Economic Development Division staff, supported by the Office
of the City Attorney, responsibility for lease negotiations and lease
administration.
City Council oversight and review of PRC activities continues through its
appointment of members to the PRC Board of Directors and through annual
review and approval of a plan of work and budget proposed by the PRC. The
Plan of Work sets forth the goals and objectives of the PRC for the ensuing fiscal
year, and through its allocation of budget resources, the City funds the PRC?s
activities and program implementation.
The PRC formulated a set of public policy statements, goals and objectives for
future development and use of property on the Pier. These guidelines were set
forth in the General Use and Development Plan adopted by the PRC in
September 1987 and approved by City Council in February 1988. The 1988 Plan
set 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. The appropriate tenant mix distribution identified at that
time included retail, restaurant and entertainment/amusement uses. A primary
objective of the PRC?s development program was to revitalize the Pier in a
manner that preserved its character while serving the future recreational needs of
the community and the economic requirements of the City. The Pier?s economic
position was to be improved by increasing the commercial area available for
lease and improving the quality of products and services offered while preserving
it as an affordable destination.
2
Highlights of the 1988 Development Plan and the progress to date toward
implementation of the Plan are summarized as follows:
?
Total commercial development program on the Pier will consist of
approximately 150,000 square feet of leased building and deck area.
As of November 1, 2000, total leased commercial area on the Pier consists of
122,870 square feet of building and deck area.
?
Diversity of products and services offered on the Pier will appeal to a broad
range of incomes, ages and lifestyles. The 1988 proposed tenant distribution
was 40% amusements, 40% dining and music entertainment venues and
20% retail.
As of November 1, 2000, the Pier tenant mix is 61% amusements, 35% dining
and music entertainment venues, 1% retail and 4% educational. This change
in tenant distribution reflects the growth in retail popularity and density of the
nearby Third Street Promenade.
?
Opportunity is provided for all existing Pier tenants to participate in the
Development Program provided that the operations meet reasonable
standards of quality and service. Existing tenants will be given priority in the
3
selection process for new leases if their leasehold concepts and standards
are equal to or better than those of competing applicants.
The PRC and City staff have provided the opportunity for existing Pier tenants
to present their development concepts consistent with the Development
Program.
?
Design Guidelines will be prepared and implemented as the method by which
the eclectic appearance and important design elements of the Pier are
retained, preserved and enhanced.
Design Guidelines have been adopted and continue to serve as a standard by
which any proposed structural modifications and tenant improvements on the
Pier are reviewed.
?
The Pier?s economic position will be improved by increasing the amount of
leased commercial area and providing quality tenancies and services,
consistent with the character, scale and role of the Pier to the community.
Leasehold uses and operations on the Pier remain eclectic, casual and
reasonably unique to Santa Monica, while providing enhanced rental income
and recapture of common area maintenance costs.
4
?
The Pier will attract and serve visitors from a broad range of sources, income
groups and lifestyles, and provide a vital entertainment and recreational outlet
for Santa Monica residents and visitors.
In addition to accommodating a relatively low density, eclectic mix of
commercial operations, the PRC has promoted the Pier to the Santa Monica
community and visitors through annual operation of the Twilight Dance
Series, various special public promotional events, private events and filming.
As part of its budget considerations in June 1999, City Council concluded that,
with the exception of on-going negotiations between the PRC and Pacific Park
for a comprehensive lease amendment, new lease negotiations and lease
management responsibilities were to be transferred to the City Economic
Development Division (EDD) staff supported by the Office of the City Attorney.
The revised relationship between the City and PRC was formalized upon the
December 19, 2000 approval by City Council of the new Services Agreement, the
Fiscal Year 2000 PRC Plan of Work, and revised PRC by-laws.
5
Discussion
Leasing Guidelines and Operations
Guidelines for design and future development and use of property on the Pier
were set forth as public policy statements, goals and objectives in the 1988
General Use and Development Plan. As called for in section 5.1 of the Services
Agreement, draft leasing guidelines for the Santa Monica Pier were presented to
and reviewed with the Leasing Committee of the PRC on October 26, 2000, and
were recommended for approval by the PRC Board. At its meeting held
December 6, 2000, the PRC Board adopted a motion recommending approval of
the Leasing Guidelines, and approval was reaffirmed by the PRC Board at its
meeting held January 10, 2001. The Leasing Guidelines are conveyed as
Attachment A. The PRC Board has reviewed and approved concepts for
development of opportunity sites on the Pier which may become available due to
lease expiration, lease termination or as part of implementation of the 1988 Plan,
in accordance with the approved Fiscal year 2001 Plan of Work. The Board
considered alternative uses for leaseable sites, established design and
operations standards for Pier lessees, and set general policies for solicitation of
tenants and review of leasehold proposals. Any lease or lease modification
recommended to the PRC Board by City staff for approval will be consistent with
the Plan of Work and Leasing Guidelines, and will be subject to review and
approval by the Board prior to execution by the City Manager. The Leasing
Guidelines will also be subject to annual review by the PRC Board in conjunction
6
with each fiscal year?s proposed Plan of Work. The annual Plan and any related
modifications to the Leasing Guidelines would then be submitted to City Council
for its consideration.
For its part, the City is obligated to use commercially reasonable efforts to solicit
proposals and identify qualified prospective tenants for leasehold occupancy of
available space on the Pier for purposes consistent with the 1988 Plan and
Leasing Guidelines. Leases negotiated for use of Pier space will be reasonably
consistent with the Plan of Work and Leasing Guidelines, and must be submitted
to the PRC Board in the form of a recommended action for approval prior to
implementation. The City EDD staff will also monitor tenant and City compliance
with the terms and conditions of approved leases, and enforce lease provisions,
respond to tenant and visitor complaints and requests related to Pier leases, bill
and collect rents and other tenant assessments which may become due, and
pursue legal actions as necessary for the defense and prosecution of leasehold
disputes.
The PRC Board expressed serious concern for the identification and preservation
of preferred uses for each leasehold site on the Pier, and the establishment of
pricing for leasehold occupancy consistent with supporting the unique character
of Pier uses and optimizing the preferred uses while assisting in the fiscal self-
sufficiency of the Pier Fund. Uniqueness and diversity of Pier Leases will be
7
maintained, focused on those purposes that support the historic character of the
Pier and offer choices of services and pricing within the general use categories.
The controlled scope of commercial development and casual recreational
ambiance are also important factors in defining the unique character of Santa
Monica Pier. Leasing and licensing of buildings and Pier deck area will be
subject to a preference for local independent businesses that are financially and
operationally capable of providing the preferred uses for each leasehold site.
Staff recommends that automatic lease renewals or options to extend occupancy
not be offered to existing or future tenants, with two current exceptions. As
vacancies arise either by lease expiration or earlier termination, recruitment for
occupancy will be conducted in accordance with the Leasing Guidelines, thereby
assuring periodic public access to Pier leasing opportunities. The two exceptions
are recommended short term interim leases with present month-to-month tenants
of Surf View Café, where changes to portions of the Pier deck may arise within
the ensuing three years, and Santa Monica Pier Bait & Tackle, which will be
affected by the anticipated restoration of a portion of the breakwater and
installation of commercial vessel moorings and vessel landing.
Rents will be established based upon independently estimated fair market rates
or in accordance with responses received to any public Request for Proposal
8
process. Lease rates are considered secondary to implementing or retaining a
preferred site use, and pricing may be adjusted as necessary for that purpose.
Tenant recruitment will be in accordance with the procedures set forth in the
proposed Leasing Guidelines. Leasehold tenants will also pay, as a condition of
occupancy on the Pier, a proportionate share of the City?s cost to manage,
maintain and provide security to Santa Monica Pier. As of January 1, 2000, the
applied Common Area Maintenance cost is $5.00 per leased square foot per
year, increasing with CPI adjusted as of July 1 biennially.
A well-publicized process to market and solicit interest by prospective tenants
and licensees with appropriate financial and experience qualifications to
successfully implement the preferred uses will be conducted for any available
leasehold opportunity on the Pier. Requests for Proposals will be prepared by
City staff and approved by the Leasing Committee of the PRC prior to
dissemination. Responses to the public solicitation will be analyzed and rated by
a review team comprised of City staff and the Executive Director of the PRC.
Representatives of City Engineering and/or Planning and Community
Development may be included as appropriate. The lease proposal review team
will provide its analysis and recommendation as to a preferred respondent to the
Leasing Committee of the PRC. The staff recommendation may be to reject all
responses, solicit additional information from one or more respondents, or to
enter exclusive lease or license negotiations with a preferred respondent.
9
The Leasing Committee will consider the review team analysis and make its
recommendation to the PRC Board. The Board may authorize City staff to enter
exclusive negotiations with a preferred respondent on terms consistent with the
Leasing Guidelines, or it may reject all responses or direct that additional
information be solicited. City staff will conduct any negotiations as authorized by
the PRC Board, and any proposed agreement will be prepared and subsequently
approved as to form by the City Attorney. If a proposed lease or license is
consistent with the authorization to enter exclusive negotiations, the Leasing
Committee and PRC Board will approve and transmit the lease to the City
Manager for execution on behalf of the City.
Budget and Financial Impact
The City currently budgets for and funds anticipated costs of the Pier Restoration
Corporation including salaries, supplies and other basic operating expenses
through Economic Development Division, Resource Management Department
Account Number 30625.577300. Approval of the proposed Leasing Guidelines
would not affect the fiscal year 2000-01 budgeted amount.
Recommendation
Staff recommends that City Council approve the proposed Leasing Guidelines for
Fiscal Year 2001 for use of Santa Monica Pier commercial areas, and that the
City Manager be authorized to implement the Leasing Guidelines as approved.
10
Attachments: A. Santa Monica Pier Leasing Guidelines
Prepared by: Jeff Mathieu, Director of Resource Management
Mark H. Richter, Economic Development Manager
JoAnne Brosi, Senior Administrative Analyst
11
ATTACHMENT A
Santa Monica Pier Leasing Guidelines
12
SANTA MONICA PIER
LEASING GUIDELINES
GUIDELINE OBJECTIVES
Promote and maintain the compatibility of use of City-owned property located on the
Santa Monica Pier in a manner supporting an attractive, safe and accessible environment
for visitors and the residential community; preserve and enhance the Preferred Uses
through operation of the facility in a manner supporting diverse and affordable public
recreational and community asset; establish the pricing of leasehold occupancy consistent
with optimizing the Preferred Uses and assisting in the support of fiscal self-sufficiency
of the Pier Fund; and assure access to and use of City-owned properties by the general
public for the Preferred Uses through a leasing program that promotes the orderly
management of tenancies.
PREFERRED USES
Current uses of City-owned structures and deck area on Santa Monica Pier are diverse,
and have been intended to preserve the Pier as a unique community recreational resource.
The Pier is an internationally recognized attraction serving residents and visitors
representing a broad range of incomes, ages and lifestyles. The current lease and license
agreements represent the implementation of the Santa Monica Pier Development Program
adopted in 1988.
Diversity will be maintained but focused on those purposes that support the historic
character of the Pier and offer choices of services and pricing within the general use
categories while retaining the intended emphasis on low density, unique recreational and
entertainment-oriented activities. Preferred Uses include, but are not limited to, a range
of entertainment and commercial products and services that will appeal to and serve both
the residential community and area visitors.
Buildings and deck area on Santa Monica Pier that are and will be available for lease or
license, and associated Preferred Uses for each, consist of the following:
?
1600 Oceanfront Walk ? 4,533 s.f. enclosed structure area
Current Operation: UCLA Ocean Discovery Center
Lease Term: 8 years, commencing 7-1-95
Preferred Use: marine research and educational facility accessible to the public
?
200 Santa Monica Pier ? 8,236 s.f. enclosed structure area
Current Operation: Carousel and related retail activities
Lease Term: Month-to-month. Trafton Operating Agreement expired 6-30-00
Preferred Use: public access to Carousel at supported pricing, and evening/off-hours
use of the Carousel building for parties, receptions and special events
?
250 Santa Monica Pier ? 5,015 s.f. enclosed structure and 1,064 s.f. patio area
Current Operation: The Arcadia
Lease Term: 20 years, commencing 10-27-98
Preferred Use: music and entertainment venue with food and beverage service
?
256 Santa Monica Pier ? 3,035 s.f. enclosed structure and 1,073 s.f. patio area
Current Operation: Rusty?s Surf Ranch
Lease Term: 20 years, commencing 11-1-94
Preferred Use: full service restaurant with music and entertainment
?
258 Santa Monica Pier ? 2,557 s.f. enclosed structure and 1,392 s.f. patio area
Current Operation: Santa Monica Pier Seafood
Lease Term: 23 years, commencing 5-1-91
Preferred Use: limited or full service family-oriented restaurant
?
301 Santa Monica Pier ? 4,534 s.f. enclosed structure and 2,198 s.f. patio area
Current Operation: Boathouse Restaurant
Lease Term: Month-to-month. Lease expired 6-30-98
Preferred Use: limited or full service family-oriented restaurant
?
310 Santa Monica Pier ? 1,292 s.f. enclosed structure
Current Operation: Blazing Saddles Bicycle Rentals and Sales
Lease Term: 43 months, commencing 4-1-00
Preferred Use: recreation-oriented rentals and sales
?
330 Santa Monica Pier ? 1,525 s.f. enclosed structure and 584 s.f. patio area
Current Operation: Surf View Café
Lease Term: Month-to-month
Preferred Use: limited service convenience restaurant
?
350 Santa Monica Pier ? 8,603 s.f. enclosed structure and 641 s.f. patio area
Current Operation: Playland Arcade
Lease Term: Twenty years, expiring June 30, 2010
Preferred Use: amusement and self-operated games arcade with ancillary retail sales
?
370 Santa Monica Pier ? 12,085 s.f. gross deck area
Current Operation: Club Route 66 (not yet constructed)
Lease Term: 40 years, not yet commenced
Preferred Use: full service restaurant with music and entertainment
?
380 Santa Monica Pier ? 75,000 s.f. gross (56,891 s.f. net) deck area
Current Operation: Pacific Park
Lease Term: 50 years, commencing 5-26-96
Preferred Use: amusement rides and games with ancillary retail sales and fast food
?
401 Santa Monica Pier ? 6,204 s.f. enclosed structure and 2,217 s.f. patio area
Current Operation: Mariasol Restaurant
Lease Term: 35 years, commencing 1-1-91
Preferred Use: limited or full service family-oriented restaurant
?
404 Santa Monica Pier ? 292 s.f. enclosed structure
Current Operation: Santa Monica Pier Bait & Tackle
Lease Term: Month-to-month. Lease expired 6-30-98
Preferred Use: fishing bait and tackle sales with ancillary retail sales and fast food
?
Municipal Pier Deck Area
Current Operation: Promenade Services Vending Cart Program
License Term: Month-to-month
Preferred Use: Pier and/or beach-oriented retail sales and services
?
Santa Monica Harbor Moorings
Current Operation: 12 vessel moorings, with at least eight available for commercial
boating activities, one for public safety, three for transient/harbor of refuge (project
subject to EIR; not yet constructed)
License Term: commercial vessels, one year; transient, 72-hours
Preferred Use: sportfishing, scuba, and harbor tour vessel operations
DESIGN GUIDELINES
The historic character and eclectic appearance of the Pier are important aesthetic
elements to be retained, preserved and enhanced. The City has previously adopted
Design Guidelines to serve as a standard for the Pier. All structural modifications and
other improvements both public and private proposed for implementation on the Pier will
be subject to review for consistency with the Design Guidelines, without exception. If
tenants must make improvements to structures on the Pier deck or build new structures 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 in
accordance with the Design Guidelines. All necessary architectural reviews and building
permits must be obtained, and the work inspected for compliance with applicable codes.
LOCAL PREFERENCE
The controlled scope of commercial development and casual recreational ambiance are
important factors in defining the unique character of Santa Monica Pier. Leasing and
licensing of City-owned buildings and Pier deck area will be subject to a preference for
local independent, non-formula businesses and activities that are financially and
operationally 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 terms of occupancy will not be offered to
existing tenants or to new tenants, with two current exceptions. As vacancies arise either
by lease expiration or earlier termination, recruitment for occupancy will be conducted in
accordance with the Leasing Guidelines. Changes to portions of the Pier deck area,
including the site of Surf View Café, may occur within the ensuing three years.
Restoration of a portion of Santa Monica Breakwater and installation of 12 commercial
vessel moorings and landing may also occur within the ensuing three years, prospectively
affecting operation of Santa Monica Pier Bait & Tackle. It is recommended that the two
current tenants be offered leases terminating June 30, 2003, conditioned upon cosmetic
structural and signage improvements to the premises.
TERM OF YEARS
As vacancies arise either by lease/license expiration or earlier termination, available
space will be offered for lease for Preferred Uses for non-renewable five-year terms if
substantial new capital investment in structures, structural improvements or equipment is
not warranted.
If a tenant is required to make substantial new capital investment in structures, structural
improvements or equipment to implement the Preferred Use consistent with intended
purposes of the premises, lease terms of ten years to twenty-five years varying with
financial requirements of the investment.
Prospective tenants for licenses or leasing of vacant space will be selected from responses
to public Requests for Qualifications and/or Requests for Proposals. City staff pursuant
to Tenant Recruitment procedures will receive applications for each Preferred Use.
Prospective tenants will be screened for responsiveness to the public solicitation,
confirmation of credit-worthiness, confirmation of operational capability, anticipated
effect on parking space ratios, anticipated effect on the Pier substructure and related
issues.
EXPANSION OF LEASEHOLDS
In order to provide access to and use of the leasehold opportunities of Santa Monica Pier
buildings and deck to as many prospective tenants as possible, physical expansion of
existing and leasehold occupancies will not be accommodated if the number or diversity
of commercial activities are adversely affected.
PERIODIC REVIEW OF RENTAL RATES
Minimum rents and participation by City in percentage rents based on gross receipts from
commercial lease and license activities will be established at estimated fair market rates
and set forth in any public Request for Qualifications and/or Request for Proposals issued
for any available leasehold or license opportunities. Responses received for lease and
license opportunities may exceed the minimum and percentage rents set forth in the
Requests.
Leaseholds with Preferred Uses for research and public educational purposes (e.g. UCLA
Ocean Discovery Center) and Operating Agreements subject to supported pricing
standards (e.g. Carousel) will be maintained without application of fair market rental
rates. The City will seek to reasonably minimize its costs associated with these activities
by recovering Common Area Maintenance costs from leaseholds and participating in
ancillary gross receipts from commercial activities at educational facilities and the
Carousel.
COMMON AREA MAINTENANCE COSTS
Leasehold tenants will pay as a condition of occupancy of Pier building or deck areas a
proportionate share of the City?s cost to manage, maintain and provide security to Santa
Monica Pier. As of January 1, 2000, the applied Common Area Maintenance cost is
$5.00 per leased square foot per year, increasing with CPI adjusted as of July 1
biennially. Monthly payment of Common Area Maintenance costs as additional rent will
be a condition of each lease granted for the Pier. The Common Area Maintenance cost
will be reanalyzed and adjusted on five-year intervals, commencing with July 1, 2000.
FACILITY CONDITION REVIEW
All City-owned structures and deck area available for lease 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 a
building or deck area to implement the Preferred Uses as a mutually agreed condition of a
lease, City staff will first review and approve the proposed scope of work and
improvement design. The proposed scope of work and improvement design will be
provided by the prospective tenant in accordance with Tenant Recruitment procedures.
All improvements on the Pier shall be in accordance with the Design Guidelines. 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 buildings and deck areas on Santa Monica Pier appropriate and suitable
for leasing or licensing by the City to individual tenancies or licensees for the Preferred
Uses will be in accordance with agreements prepared by the City. Each tenant or licensee
would be responsible for interior maintenance and repair and utility consumption at its
expense, and the City would retain responsibility for maintenance and repair of roofs and
exterior of its buildings. Structures constructed by tenants for the Preferred Uses would
be subject to interior and exterior maintenance and repair by the tenant at its expense.
Subletting of leased premises is explicitly prohibited.
TENANT RECRUITMENT
All City-owned buildings and deck areas on Santa Monica Pier appropriate and suitable
for leasing or licensing will be subject to a public marketing and solicitation process to
identify prospective tenants and licensees with financial and experience qualifications for
the Preferred Use of the available space. Vacancies will be the subject of public Requests
for Qualifications and/or Requests for Proposals publicized utilizing:
?
Media advertising, including general circulation newspapers or local/limited
circulation publications
?
Direct mail to waiting list and/or other targeted individuals having expressed previous
interest in leasehold occupancy or license operation for the available Preferred Use
?
Posting notice on the Pier Restoration Corporation?s, City?s and Resource
Management Department?s internet web site
As appropriate, vacancies may also be publicized utilizing:
?
Direct contact or outreach to prospective tenants
?
Dissemination by fax, e-mail or telephone to local commercial real estate brokers
?
Press releases and other direct marketing performed by the PRC
Requests for Qualifications and/or Requests for Proposals will be drafted by City staff
and approved prior to release by the Leasing Committee of the PRC.
The Request for Qualifications and/or Request for Proposals will set forth the Preferred
Uses of the available space, proposed terms and conditions for the leasehold or license
opportunity, and criteria for reviewing and rating responses. All respondents and
prospective tenants will file a Lease Application. Information contained in the Lease
Application will be utilized for confirmation that the proposed tenancy is a Preferred Use
for the available space, and verification of experience, references and financial capability
to perform leasehold obligations. Responses will also state preliminary terms and
conditions for the proposed lease or license.
Responses to Request for Qualifications and/or Request for Proposals will be analyzed
and rated by a review team comprised of City staff and the Executive Director of the
PRC. Representatives of City Engineering Division and/or Planning and Community
Development may be included as appropriate. The review team will provide its analysis
and recommendation as to a preferred respondent to the Leasing Committee of the PRC.
The recommendation may be to reject all responses, solicit additional information from
one or more respondent, or to enter exclusive lease or license negotiations with a
preferred respondent.
The Leasing Committee will receive the review team analysis, and make its
recommendation the PRC Board. The Board may authorize City staff to enter exclusive
negotiations with a preferred respondent subject to specific terms and conditions, or it
may reject all responses or direct that additional information be solicited from one or
more respondent prior to making a determination.
City staff will conduct exclusive negotiations with a preferred respondent as authorized
by the PRC Board. All term sheets and lease or license agreements will be prepared by
the City Attorney for review and execution by the prospective tenant or licensee. The
executed agreement will be submitted to the Leasing Committee for its review in terms of
consistency with the PRC Board authorization. If determined to be in accordance with
the authorization to enter exclusive negotiations, the lease or license will be
recommended to the PRC Board for approval. Upon approval of a lease or license by the
PRC Board, the agreement will be approved as to form by the City Attorney and
transmitted to the City Manager for execution.
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.