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SR-800-005 (12) RMD:AIR:F:\RESOURCE\SHARE\STAFFREPORTS \12-17-02 MoF-VW Lease Amnd.doc Council Meeting: December 17, 2002 Santa Monica, California To: City Council From: City Staff Subject: Authorization for the City Manager to Negotiate and Execute a Lease Modification with Supermarine of Santa Monica to Retain the Museum of Flying and Sub- Lease Rental Space to an Automotive Design Studio Sub-Tenant Introduction This report recommends that the City Council authorize the City Manager to negotiate and execute a modification to the lease agreement between the City of Santa Monica and Supermarine of Santa Monica to retain the Museum of Flying as a subtenant and to permit an automotive design studio use at the leasehold premises. Background Originally founded as the Donald Douglas Museum and Library in 1974, the Museum of Flying had been operating at its current location since April of 1989. Citing escalating insurance and operational costs and the unsuitability of the Airport as base for flying World War II warbirds, the Museum of Flying suspended operations on July 28, 2002. In addition Museum officials indicated that funding sources were no longer adequate to sustain museum operations and hours. Staff met with Supermarine management on numerous occasions in an attempt to retain the Museum on the field to display artifacts and exhibits relevant to the history of the Airport. 1 Discussion A reorganization of space has been devised for the Supermarine parcel that would retain the presence of the Museum of Flying. The proposed museum space would be relocated to Supermarine Hangar #33 directly across the ramp from its present location and comprise approximately 12,000 square feet of hangar, ramp and office space. The aircraft display area will be enclosed with a fence-type enclosure and partially covered to shield visitors from weather elements, yet still provide an unobstructed view of the aircraft operating areas. Though reduced in size, it is expected that the new location will provide greater interaction with the aviation activities on the field and the flexibility to provide the public with access to aviation memorabilia through a regular program of rotating exhibits. The present site of the Museum of Flying is proposed for use as an automotive design studio for Volkswagen of America, Inc. (?Volkswagen?). Volkswagen desires to sublease approximately 44,000 square feet of design/studio space from Supermarine. Volkswagen proposes to relocate their North American Design Studios to the site from their present location in Simi Valley. The company plans to have approximately 50 employees based at the site. The present parking on the north side of the building will be adequate to accommodate the occupants of the design studio. There will be minimal public parking needed in the north side parking area. 2 The design/studio use is not an identified ?permitted use? as provided in the lease agreement between the City of Santa Monica and Supermarine of Santa Monica. Even though the proposed use will be less intensive than any other permitted use, a lease modification must be approved to accommodate the proposed use. Airport Commission Review and Recommendation At its meeting on November 25, 2002 the Airport Commission reviewed, considered and unanimously supported the relocation of the Museum of Flying and the Application for Commercial Operations Permit (COP) for Volkswagen, subject to the approval of a lease modification. Budget/Financial Impact There are no budget or financial impacts. Recommendation Staff recommends that the City Council authorize the City Manager to negotiate and execute a modification to the lease agreement between the City of Santa Monica and Supermarine of Santa Monica to retain the Museum of Flying as a subtenant and to permit an automotive design studio use at the leasehold premises. Prepared by: Jeff Mathieu, Director of Resource Management/Airport Director Robert Trimborn, Airport Manager 3