SR-800-005 (5)
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Santa Monica, California
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Council Meeting 8/8/89
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AUG 0 8 1989
TO:
Mayor and City Council
FROM:
city staff
SUBJECT:
Recommendation to Authorize City Manager to Negotiate
and Execute a Lease with Brian and Michael Vidor to
Develop and Operate a Restaurant in the Clover Field
Terminal and Administration Building at Santa Monica
Airport
Introduction
This report recommends that the City Council authorize the City
Manager to negotiate and execute a lease with Brian and Michael
Vidor to develop and operate an airport restaurant in the Clover
Field Terminal and Administration Building.
The restaurant
operators intend to serve breakfast, lunch and dinner six days a
week and include a full service bar and snack counter concession
on the sky deck. They also will provide box lunch service and
hot meals to the Santa Monica city College Center for the
Humanities.
Background
The Clover Field Terminal and Administration Building, completed
in July, 1988, contains a range of public amenities including
space for a small restaurant overlooking the runway and a 1418
square foot sky deck located directly above the restaurant. The
restaurant interior space is approximately 2400 square feet. An
adjacent outdoor patio area, if fully enclosed, would increase by
about one quarter the space available for dining.
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Design of the sky deck initially called for installation of a
dumb waiter to service a snack counter concession. The dumb
waiter and other basic provisions for the restaurant such as the
floor, mechanical (HVAC) and electrical systems, plumbing and
drainage, were deleted from the project after the first round of
bids came in significantly higher than the city Engineer's
estimate had suggested.
Staff intended to provide a tenant improvement allowance to
assist in completing the improvements necessary to attract a
restaurant. The minimum cost of these improvements was estimated
to be $250,000. Nevertheless, following the second round of
bids, the successful bid was still higher than anticipated and no
money was available to cover the restaurant's basic improvement
costs.
Accordingly, the strategy devised by staff was to allow the
restaurant developer to deduct from the rental payments a sum
equal to the cost of the basic improvements. The objective was
to ensure that essential food service be provided to the Airport
at a reasonable price.
Description of the Developer Selection Process
Initially, the Airport solicited bids on the restaurant in early
1987. The request for proposals was advertised widely in
newspapers and ethnic publications from Ventura to San Diego
County, as well as in Restaurant News, a national trade journal
with a circulation of 352,000. Airport food concessionaires
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(Host, Red Baron, the Ninety-Fourth Aero Squadron) and local
restaurant operators also were contacted.
Minimum acceptable business terms included a fixed annual rent of
$38,452, with triennial CPI increases after the first five years
of operation, and a fixed percentage of the lessee's annual gross
receipts for food and liquor sales of four and six percent
respectively. The base rent requested was slightly above the
appraised value. Percentage rents for the six comparable
restaurants in the appraisal ranged from four to eight percent on
food and beverage sales.
The only proposal received as a result of the advertised bid
process was withdrawn by the developer before agreement was
reached. Over the next year, it became apparent that the limited
size of the restaurant and the high cost of the build out tended
to mitigate against the type of modestly priced restaurant that
the Airport desired.
However, discussions with six individual developers continued
through March of 1989, when a request for proposals was issued.
Three proposals were received by the deadline date but, following
requests for clarification or verification of proposal
information, only one proposer was responsive.
Experience of Successful proposer
The Brian and Michael Vidor proposal met the minimum acceptable
business terms offered by the city. Furthermore, the principals
have demonstrated that they are fully able to live up to their
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guarantees and lease obligations during the period of time it
will take for the restaurant to build up a clientele.
The vidor family has been operating restaurants for more than 20
years. The restaurants have been an eclectic mix ranging from a
French-style bistro, L'Auberge, in Portland, Oregon, to a 12
restaurant chain in three states called Macheesmo Mouse serving
low priced and healthful Mexican food.
As part of the Vidorst philosophy of doing business, the proposal
includes both stock option and profit sharing plans for
employees. The Vidor's commitment to affirmative action also
includes the hiring of WBE/MBE professional consultants on the
project, such as the restaurant accounting consultant, Mikio
Koga, and Ruben santiago as graphics designer.
The Vidor's propose a preliminary budget of $600,000 for tenant
improvements and furnishings which include enclosing the lower
outdoor patio, raising the floor so that every seat in the
restaurant has a runway view I canopies for the upper outdoor
patio and mechanical systems. A preliminary bid provided by
Hamilton Contractors of El Toro, California, establishes an
estimated cost of construction at $525,000.
The proposed 180 seat restaurant (112 lower, 70 upper) will
feature a combination of Chinese and American cuisine and
incorporate an aviation weather theme in its graphics and decor.
The restaurant. to be called "The Typhoon," will operate six days
a week, serving breakfast, lunch and dinner. The breakfast and
lunch menu will offer a diversified range of selections at prices
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competitive with the Kitty Hawk and similar restaurants in the
Santa Monica Business Park. Selections on the dinner menu will
be more expensive but still within the moderate range.
A stage may be included for night time entertainment and a full
service bar will be provided from the outset. The restaurant
will offer a Sunday brunch. A telescope will be installed on the
sky deck to encourage public use. In addition, speakers
broadcasting the SMO Tower frequency also will be provided. The
sky deck will be open to the public at large during non-peak
hours of restaurant operation. Clever graphics already have been
developed which invite the public during non-peak hours to visit
the sky deck whether or not they place a food or drink order.
A sample menu shows the restaurant will offer a wide variety of
traditional American foods for breakfast and lunch with some
Asian specialties. This is very similar to the Kitty Hawk which
offers Italian specialties. The dinner menu will include more
traditional Chinese dishes. The proposal also includes a box
lunch program and catering for business and charter aircraft as
well as inexpensive hot meal service for breakfast and lunch to
the Center for the Humanities.
Basic Lease Terms
The basic terms Of the restaurant lease are outlined below:
- Lease term: 15 years with an option to renew for ten years
at a fair market rate to be established by the City.
- Minimum investment required: $500,000.
- Completion of tenant improvements: Improvements to the
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site must be completed and a Certificate of Occupancy granted
within six months of delivery of the shell or execution of the
lease agreement.
- Minimum base rent: Annual rent shall include a minimum
base rent of $38,452.00 per year for the first five years of the
lease, pI us a fixed percentage of the lessee's annual gross
receipts for food and beverage sales. The base rent shall be
subj ect to triennial adj ustment based on the increase in the
Consumer Price Index, Unadjusted, All Urban Consumers, All Items,
Los Angeles-Long Beach-Anaheim Area, for the prior years. The
minimum base rent shall be waived for the initial three year
period '36 months), in recogni tioD of the tenant improvement
costs involved.
- Percentage Rent: Royalty payment shall be paid to the city
of four '4%) percent on all gross receipts for food and other
sales and six (6%) percent on all gross receipts for beverage
sales. Minimum rental payments shall be deducted from the
percentage rent. For the first three years of the lease term the
restaurant operator will be allowed to deduct up to 15% of
improvement costs per year from the percentage rental due, up to
a maximum of 45% of total tenant improvement costs. Percentage
rent shall be paid quarterly.
- The lessee shall be required to operate a restaurant at
least nine hours a day, from 7 a.m. to 4 p.m., and shall have the
right to operate the restaurant additional hours, up until 2 a.m.
The tenant shall be required to operate at least six days per
week. The lessee shall be required to obtain a full liquor
license and to operate a full service bar during the hours that
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the restaurant is open 7 provided, however, that lessee's
obligations to operate a bar shall be conditioned upon obtaining
a full liquor license.
The parties shall enter into a lease containing many
standard lease terms such as those found in the form prepared by
the American Industrial Realty Association, which also will
incorporate standard City of Santa Monica liability clauses and
insurance requirements. The lease shall also comply with any and
all FAA requirements, including affirmative action hiring and
minority and women-owned business obligations.
- The lease shall provide that the City will not enter into
any new restaurant leases south of the runway without tenant I s
consent during the term of the lease or any extension thereof.
Additional restaurant operations will be authorized on the
Airport's residual land.
Budgetary/Fiscal Impact
No fiscal or budgetary changes are required in the FY1989-90
revenue budget for the Municipal Airport.
Recommendation
staff respectfully recommends that the city Council authorize the
city Manager to negotiate and execute a lease with Brian and
Michael Vldor for the restaurant concession and leasehold in the
Clover Field Terminal and Administration Building at Santa Monica
Airport.
Prepared by: Hank Dittmar, Airport Director
Linda Sullivan, Sr. Administrative Analyst
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