SR-417-007 (13)
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MAY - q 1989
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Santa Monica, California
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Council Meeting: May 9, 1989
TO:
The Mayor and city Council
City Staff
FROM:
SUBJECT: Recommendation to Authorize city Manager to Negotiate
and Execute Five Leases for Retail Space in parking
structures No. 5 and No. 6 located in the Bayside
District Area
INTRODUCTION
This report recommends that city council authorize the City
Manager to negotiate and execute:
(A) a ten-year lease with A
Change of Robbit, Ltd. for 5,820 square feet of retail space in
Parking structure No. 6 located at 1433 Second street; and (B)
five and seven-year leases with four potential tenants for a
total of 5/206 square feet of new retail space in Parking
structure No. 5 on Fourth Street.
BACKGROUND
On February 28, 1989, City staff transmitted an Information Item
regarding leasing activities for Parking Structures No. 5 and No.
6. The Information Item provided a summary of the past leasing
experiences with tenants in parking structure No.5, the status
of the existing tenant spaces, and a description of Bayside
District Corporation's role in identifying potential tenants for
vacant and newly-designated space in the parking structures.
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MAY - 9 1989
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Market rates in the downtown commercial district for comparable
retail space range from $1.15 to $1,60 per square foot, depending
on the perceived advantages and amenities of specific locations.
Rates have increased considerably over the past five years and
concern has been expressed that some valued and lonq-time
neighborhood businesses are being displaced by a more competitive
downtown real estate market. The goal of preserving basic
neighborhood services and products was advanced by the Bayside
District corporation board in determining the type of tenant
desired, and a monthly base rental rate of approximately $1. 25
per square foot was determined a fair and affordable rate for the
specific location and conditions of parking structure space.
The length of the term for the individual tenants varied in
relation to the size of space required and associated m.oving
costs, and in relation to the perceived long-term benefits of the
location for their purposes. A Change of Hobbit and Best
Hardware anticipate enhanced future business from the new
location and desired a longer-term commitment. However, A Change
of Hobbit was also assuming a greater riSk by assuming a
significantly higher rent at the new location and, therefore, in
order to ensure a successful transition, a lower rental rate of
$.90 per square foot was negotiated for the first and second
years, increasing incrementally to the competitive market rate of
$1.25 per square foot by the fourth year. Because both A Change
of Hobbit and Best Hardware have substantially longer leases and
future projections of cost-of-living increases are tenuous, a
mutually acceptable floor and cap were negotiated with each. As
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Pete the Barber and Garbo Shoe Repair are sole proprietorships
and their business success depends entirely on their individual
productivity, five year leases were negotiated for them. A
five-year lease was also deemed appropriate for the Chamber of
Commerce since this space was to accommodate a new outreach
function. Below is a summary of the tenant service, space size,
square foot rate, and the unique terms and conditions of the
lease agreements.
1) A CHANGE OF HOBBIT
c/o Sherry Gottlieb
Science fiction bookstore
city provides space "as is";
tenant will do all build out
and future maintenance and
repair
2) BEST HARDWARE
c/o Jim Cummings
Full service hardware store
city will provide basic
structure, light/plumbing
fixtures, flooring; tenant
responsible for all mainten-
ance and repair thereafter
3) GARBO SHOE REPAIR
c/o Garabed Jingozian
Shoe and handbag repair
service
City will provide basic
structure, light/plumbing,
fixtures, flooring; tenant
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Parking structure No. 6
1433 Second Street
5,820 square feet
10-yr lease, with one 5-yr
option
5484 square feet @ $.90/sf
1st & 2nd yr increasing to
$1.25/sf in years 4-10
CPI increase every year in
years 6-10, with 5% cap and
3% floor
Parking structure No. 5
1440 Fourth street
3,404 square feet @ $1.25/sf
$4,255.00 monthly rent
lO-yr lease, with one 5-yr
option
Annual CPI increases, with
5.5% cap and 3.5% floor
Parking Structure No. 5
1450 Fourth street
675 square feet @ $l.OO/sf
$675.00 monthly rent
5-yr lease, with one 5-yr
option
.
responsible for all mainten-
ance and repair thereafter
4) PETER'S BARBER SHOP
c/o Peter Katsikides
Barber shop
city will provide basic
structure, light/plumbing,
fixtures, flooring; tenant
responsible for all mainten-
ance and repairs thereafter
5) SANTA MONICA AREA CHAMBER
OF COMMERCE
c/o Dave Paradis
Information pavilion
City will provide basic
structure, light/plumbing,
fixtures, flooring; tenant
responsible for all mainten-
ance and repairs thereafter
.
Annual cPt increases, no cap
or floor
Parking Structure No. 5
1448 Fourth Street
276 square feet @ $1.25/sf
$345.00 monthly rent
5-yr lease, with one 5-yr
option
Annual CPI increases, no cap
or floor
Parking Structure No. 5
1454 Fourth street
851 Square feet @ $1.25/sf
$1,063.75 monthly rent
5-yr lease, with one 5-yr
option
Annual CPI increases, no cap
or floor
Each of the tenants has reviewed and approved the Lease Agreement
and the terms and conditions set forth therein.
Tenant space is presently being built out in Parking Structure
No.5.
While construction on the interior portions of the
parking structure is expected to be completed by middle May, the
exterior facade is schedUled for plastering and finishes the last
week in May, precluding customer traffic. Therefore, June 1,
1989 is projected as the Lease commencement date for tenants of
parking structure No.5. The tenant for Parking No. 6 hopes to
begin interior construction May 15, 1989,
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BUDGETARY/FISCAL IMPACT
Security deposits from each of the five tenants totaling
$16,377.45 are being held and recorded on the General Fund
balance sheet, Rental income in FY 1988-89 is projected to be
$6,338.75 for one month's rent from the four tenants in Parking
structure No.5. Rental income in FY 1989-90 is projected to be
$128,770.80 from all five new tenants.
All rental income is
deposited into revenue account #01-904-087-000-000.
RECOMMENDATION
Staff respectfully recommends that the City Council authorize the
city Manager to negotiate and execute a lease with A CHANGE OF
HOBEIT, LTD. bookstore for space in parking structure No. 6 on
Second Street, and leases with Best Hardware, Garbo Shoe Repair,
Peter I s Barber Shop, and Santa Monica Area Chamber of Commerce
for spaces in Parking Structure No. 5 on Fourth street.
Prepared by: Peggy Curran, Director
Community and Economic Development Department
Jeff Mathieu, Manager
Economic Development Division
Ruta Skirius, Senior Administrative Analyst
Economic Development Division
copslse
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