SR-900-002 (11)
RMD:EDD:GK:F:\RESOURCE\SHARE\GRETCHSHARE\STAFFREPORTS\Bergamot LTL Auth.DOC
Council Meeting: July 13, 2004 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Lease Agreement With Bergamot Station, Ltd. for the Lease of Light
Deleted:
Negotiate and Execute a
Industrial Space Located at 2525 Michigan Avenue, providing for a one-year
termination notice.
INTRODUCTION
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a
This report recommends that the City Council authorize the City Manager to negotiate and
execute a modified lease agreement with Bergamot Station, Ltd. for the lease of light
industrial space at 2525 Michigan Avenue. The lease would provide a ?right to terminate?
notice of one year.
DISCUSSION
In 1984, the City entered into an agreement with the Los Angeles County Transportation
Commission (LACTC; now the Metropolitan Transportation Authority, or MTA). A
subsequent 1989 MTA agreement allowed for purchase of the property from Southern
Pacific Transportation Company with City Rail Reserve funds, which require that any
interim use be such that rail-related purposes can be introduced readily. The property is
5.4 acres and contains approximately 70,000 square feet of building area. In September
1994, the City entered into a month-to-month lease agreement with Bergamot Station Ltd.,
(?Lessee?).
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The Lessee upgraded the property and now leases it to approximately 30 art galleries,
design firms, and related users. Currently, the rent is $42,350 per month and is adjusted
annually in accordance with increases in the CPI.
In December 2000, Council approved Leasing Guidelines for Bergamot Station, and
authorized the City Manager to negotiate and execute a lease for Bergamot Station in
accordance with the Leasing Guidelines. The Bergamot Station Leasing Guidelines
provided for a five-year term plus five one-year options, conditioned by the ability of either
the City or master tenant to terminate the agreement upon ninety days? prior written notice
to preserve the right to implement the long-term preferred use. The long-term preferred
use for all or a portion of the property is for public transportation purposes.
Although Council approved the Leasing Guidelines, the Lessee did not execute the
proposed Lease while evaluating the feasibility of various improvement plans for the
property. In April 2004, the Lessee asked the City to consider a lease subject to
modification in the length of time for termination. The Lessee requests that the termination
period be extended from 90 days to one year, to provide time to schedule improvements
and plan for relocation, if possible.
Due to the protracted nature of planning, design and construction of public transportation
projects, it is likely that the City would receive multiple years? notice before commencement
of such a project. Providing a one-year notice of termination to the Lessee would allow for
an orderly transition process from an arts use to transportation use. This should
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encourage greater tenant and subtenant stability, as well as a more reliable revenue
stream for both the Big Blue Bus and the master tenant. Staff has researched the records
and found that the only requirement from MTA is that non-transit uses be short term. MTA
staff concurs that, given the typical length of project pre-planning, a one-year termination
period qualifies as ?short-term.?
With the proposed lease and a one-year termination clause, the Lessee will be able to
provide a greater level of improvements to the property as well as continued service to the
community at this popular public arts center destination. The proposed lease is a triple net
lease, effective August 1, 2004, at the existing rate. No other modifications to the terms
originally approved by Council in December 2000 are sought.
BUDGET/FINANCIAL IMPACT
Revenue from this lease is recorded in Big Blue Bus revenue account number
41642.404090. The total revenue for FY 04/05 is estimated at approximately $508,200,
with annual CPI increases thereafter.
RECOMMENDATION
It is recommended that the City Council authorize the City Manager to negotiate and
execute a lease agreement with Bergamot Station, Ltd. for the lease of light industrial
space at 2525 Michigan Avenue, with a notice to terminate period of one year.
Prepared By: Jeff Mathieu, Director, Resource Management
Miriam Mack, Economic Development Manager
Gretchen Kubacky, Senior Administrative Analyst - Real Estate
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