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council Meeting: October 29, 1991 Santa Monica, California
TO: The Mayor and city council
FROM: city Staff
SUBJECT: Recommendation to Authorize City Manager to Negotiate
and Execute Two Third street Promenade Pavilion Leases
and a 602 Colorado Lease
INTRODUCTION
This report recommends that city council authorize the City
Manager to negotiate and execute leases with MUDRA, Inc. and
KEELY'S KITES for the south pavilion on the Third Street
Promenade and with ALITTA, Inc. for 602-A Colorado Avenue. For
many months now, the Bayside District corporation, real estate
agents, and City staff have been searching for suitable tenants
for these spaces. A synopsis of the search procedures and
profiles of the new tenants and the terms of their Lease
Agreements are provided in this report.
BACKGROUND
The two locations of City-owned property which are leased to
market-rate tenants have been available for different lengths of
time. The City building commonly known as 612 Colorado has been
leased from the Transportation Department since 1988 for
temporary use by a mixture of social service organizations and
private, market rate firms through December 1992. The short term
availability of space in this building is now becoming an
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obstacle in recruiting an ideal tenant: The strongest candidates
are looking for a more permanent location. The space at 602
Colorado became available at the downturn of the economy in
January 1991. The art gallery which occupied the corner space
was required to consolidate its operations into one central
gallery location. Because this corner is highly visible and
because it is surrounded by two thriving art galleries,
advertising efforts were directed to the gallery and design
markets. After six months without success, a real estate agent
was retained; the search took another three months before a
suitable tenant was found. The selected tenant proposes to do
design work for a sportswear line at this site, which is then
manufactured by contractors at other locations.
The Third street Promenade pavilion at Santa Monica Boulevard had
been occupied by one tenant, a florist, for approximately two
years. Beginning in March of this year, it was becoming apparent
that the tenant was no longer maintaining the space or paying
rent in timely fashion. By September of this year, the space was
officially vacated. Between March and September, numerous
parties inquired about the availability of the space and
requested the opportunity to submit proposals. Approximately ten
proposals were received without conducting any formal marketing
activities.
In September, a joint meeting with the Bayside District
Corporation staff and Economic Development Division staff was
held to determine a Inarketing program, proposal criteria,
evaluation methodology, responsibility assignments, and
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schedules. Because the south pavilion is located in an area
highly concentrated with food concessions and because this
pavilion represents the city's only opportunity to demonstrate to
the Promenade business community the type of retail store desired
on the Promenade, it was decided that food service proposals
would not be considered. "For Leasell signs were posted in the
pavilion and an ad was placed in the Outlook for ten days that
proposals for retail stores were now being accepted. Hundreds of
inquiries were made, fifty-one (51) people either picked up from
the Bayside District corporation or were sent a proposal outline.
Fifteen (15) proposals were submitted.
The evaluation consisted of a review of the written proposals and
meetings with each of the proposers. The evaluation criteria
focused on candidate's financial strength, previous success in
the retail business, merchandising capability, and quality and
desirability of merchandise proposed for the pavilion. The range
of proposals included: a used record/tape/CD store, photo and
gift shop, body lotions outlet, women's romantic dresses,
aquarium showroom, dishes and novelty shop, nut/candy shop,
cosmetics store, jewelry store, beachwear shop. The two tenants
selected by the combined City and the Bayside District
corporation staff review committee on september 19 were Mudra, a
hand-painted clothing and hand-crafted novelty store, and Keely's
Kites, a unique kite retail store.
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DISCUSSION
A description of the tenants and a summary of the terms and
conditions of their leases are provided below:
1) ALITTA - 602-A Colorado Avenue
Alitta Inc. , founded in 1984 by Anita Jacobson, is a
bicycle and fitness apparel manufacturer~ the
manufacturing aspect of her business is contracted out
to firms at other locations.
Alitta will occupy 1,637 square feet of space at the
east end of 612 Colorado. The lease term is one ( 1)
year and one (1) month, ending December 31, 1992 along
with all other leases at 612 Colorado. The rate is
$1. 30 per square foot, plus a 10% common area fee,
bringing the total monthly rent to $2,340.90. On
December I, 1993, the base monthly rental shall be
adjusted upward according to the Consumer Price Index
for the month-to-month tenancy thereafter. The tenant
will pay operating expenses, billed on a quarterly
basis.
2) MUDRA, Inc. - 1400-A Third street Promenade
Robert and Kay Miller began designing their
private-label clothing in 1973. Their first store was
located on Washington street in Venice, near their
warehouse, also in Venice. In 1984, they opened a store
on Main street, Santa Monica, followed in 1986 with a
store in La Jolla. The La Jolla store was sold and the
Main street store was recently closed. Also in the
seventies, they operated a wholesale business for large
chain department stores. The hallmark of the clothing,
and related accessories, is their hand-crafted and
hand-painted artistic designs. Now expanded to include
hand-made jewelry, puppets, dolls and their accessories,
the Millers provide opportunity for creative expression
for 134 people, who are directly employed to support
Mudra's product line.
Mudra will occupy 500 square feet on the north side of
the Santa Monica pavilion. The lease term is three (3)
years with a three (3)-year option. The rate is $3.75
per square foot, including utilities, totaling $1,875.00
per month in rent. On November I, 1992, and every year
thereafter, the monthly rent is subject to a Consumer
Price Index adjustment. A subcommittee of the Bayside
District corporation's Board of Directors also included
language in the Lease Agreement which defined the
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quality of operations expected from a tenant at this
high visibility location.
3) KEELY'S KITES - 1400-B Third Street Promenade
This would be the third store for Keely Diamantopoulos
who specializes in the sales of unique kites, windsocks,
wind chimes, and kite-related T-shirts and jewelry. The
other two stores are in Massachusetts and on Main
street, Santa Monica where they have been for two years.
Keely's Kites is the exclusive distributor of Stinger
Stunt Kite Company. In conjunction with Mudra, it is
believed that Keely's Kites will attract family-oriented
customers to the Promenade.
Keely's Kites will occupy 250 square feet on the south
end of the Santa Monica pavilion. The lease term is
three (3) years with a three (3)-year option. The rate
is $4.00 per square foot, including utilities, totaling
$1,000.00 per month in rent. On November 1, 1992, and
every year thereafter, the monthly rent is subject to a
Consumer Price Index adjustment.
BUDGET IXPACT
Total monthly rent from the three leased spaces will be
$5,215.90. Mudra and Keely's Kites have been allowed six (6)
weeks for tenant improvements and, along with Alitta, given one
(1) month free rent.
Rental income from 602-A for FY 1991-92 is projected to be
$14,045.40 for six months tenancy and will be deposited in
revenue account number 01-200-263-00000-0410-10000. As
$31,823.00 income was projected in the budget as full year rental
from this suite, the budget impact is a net loss of $17,777.10.
Rental income from both pavilion spaces for FY 1991-92 is
estimated to be $15,812.50 for five and one half (5 1/2) months
tenancy and will be deposited in revenue account number
01-130-224-00000-0077-10218. This year's budget projected
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$30,750.00 income; as a consequence of the unexpected length of
the vacancy, budget impact is a net loss of $14,937.50.
Security deposits from the three tenants total $8,090.90 and will
be held on the General Fund balance sheet.
RECOMMENDATION
Staff respectfully recommends that city Council authorize the
City Manager to negotiate and execute leases with Alitta for
space at 602-A Colorado Avenue, with Mudra for space at 1400-A
Third street Promenade, and with Keely's Kites for space at
140Q-B Third street Promenade, and reduce the revenue budget as
specified above.
Prepared By: Darrell George, Manager
Economic Development Division
Ruta Skirius, Senior Administrative Analyst
Economic Development Division
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