SR-802-001-03 (3)
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City Council Report
City Council Meeting: August 8, 2006
Agenda Item: .J:I::L
To:
Mayor and City Council
From:
Martin Kennerly, Acting Director, Resource Management Director
Subject:
Santa Monica Pier Leasing and Licensing Guidelines
Recommended Action
Staff recommends that Council approve the updated policy guidelines for the leasehold
and license management of City properties located on the Santa Monica Pier.
Executive Summary
Santa Monica Pier Leasing and Licensing Guidelines provide the objectives and
procedures for the management of City-owned commercial properties on the Santa
Monica Pier.
The proposed modifications to the Guidelines approved by Council on March 11, 2003,
have been reviewed by the Santa Monica Pier Restoration Corporation ("SMPRC") and
include updates to Preferred Uses of certain leasehold opportunities, and the
identification of new leasing and licensing opportunities. The most notable new
opportunities are the proposed installation of a commercial gangway at the west end of
the Pier to usher in a return of boating activities (sport fishing, sightseeing excursions,
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educational/research excursions, etc.), the change in the preferred use for 250 Santa
Monica Pier to a creative, cultural and/or performing arts venue with non-formula (i.e.
non-chain) food service, and the development of 370 Santa Monica Pier, an 10,985 sq.
ft area located between Playland Arcade and Pacific Park, for a mixed use project
including specialty retail and non-formula food service.
Background
In November 1983 City Council created the SMPRC as a non-profit, public benefit
corporation to oversee the reconstruction and commercial revitalization of the Pier. The
responsibilities and authority of the SMPRC were formalized and broadened in
December 1985, with Council approval of a Services Agreement with the SMPRC and
by-laws for the corporation. The relationship between the City and SMPRC has been
modified in subsequent Service Agreements and under the terms of the current
Services Agreement, the SMPRC is charged with the promotion and marketing of the
Pier; management of special events, filming and street performers; advocacy for Pier-
related capital improvement projects and for the preservation of the Pier as a historic
resource; and the establishment of guidelines, subject to Council approval, for the
commercial leasehold development and operation of the Pier. In addition, all leases and
licenses are subject to review and approval by the SMPRC in terms of consistency with
the City Council approved Leasing Guidelines prior to the execution of such leases and
licenses by the City Manager. The City Economic Development Division staff, supported
by the Office of the City Attorney, is responsible for lease and license negotiations and
administration of approved uses.
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Guidelines for the development and management of commercial opportunities on the
Pier were set forth as public policy statements in the 1988 General Use and
Development Plan and have been advanced through a series of Leasing Guidelines
reviewed and updated most recently in 2003. The proposed Leasing and Licensing
Guidelines (Attachment A) will supersede the previous Leasing Guidelines and become
effective upon the date of approval by Council, and be subject to periodic review and
modification by the SMPRC Board and City Council.
Discussion
The proposed Leasing and Licensing Guidelines were approved by the SMPRC Board
of Directors at its meeting held June 7, 2006.
The adoption of the proposed Leasing and Licensing Guidelines will provide an
important step forward in maintaining the commercial, recreational and historic uses of
City-owned property available for lease and license by the public, and ensuring a fair
and orderly selection process when such opportunities become available.
The significant modifications in the proposed Leasing and Licensing Guidelines from the
previous Leasing Guidelines are summarized as follows:
Section I. Guideline Obiectives.
~ To underscore the importance of preserving the unique character of the Pier, the
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following two additional objectives have been added to the overall guideline
objectives:
(vi) the preservation and promotion of the unique, eclectic and community
recreational character of the Pier; and
(vii) the preservation and promotion of the history of the Pier.
~ A small change was made to objective (iv) "... support fiscal self-sufficiency of
the Pier." The SMPRC Board recommended deletion of reference to the "Pier
Fund" in order to emphasize the overall "self-sufficiency of the Pier" rather than
specifically referencing a financial account of the City.
Subsection II. Preferred Uses.
~ Item C-1. 200 Santa Monica Pier (Santa Monica Pier Carousel).
In an effort to activate the area around the Carousel, the proposed Guidelines
make available a new leasing opportunity for food service within the building that
respects the historic uses of the Carousel and can be integrated with other uses
in the building. The SMPRC is hoping to find a traditional ice cream/soda
fountain operation.
~ Item D. 250 Santa Monica Pier (vacant tenant space located in the Billiards
Building - 6,069 sq. ft. enclosed structure and 1,033 sq. ft. patio area).
The Guidelines adopted March 11, 2003, described the preferred use for this
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space to be "casual breakfast, lunch and dinner restaurant or cafe with or without
alcohol service, and preferably with evening music, entertainment and/or other
live performances." The City requested proposals for a use consistent with the
Guidelines, but was not able to negotiate a lease. In keeping with the SMPRC's
commitment to bring more cultural and performance opportunities to the Pier
SMPRC recommends that the preferred use for this space be changed to a
"creative, cultural and/or performing arts venue with non-formula food service."
Cultural vitality is important to the Pier and rich cultural programming enriches
the lives of residents and draws tourists. However there are revenue
implications. The use consistent with the Preferred Use set forth in the existing
Leasing Guidelines which call for a casual dinning restaurant, would be expected
to generate base rents of $120,000 per year in addition to percentage rent over
breakpoints and Common Area Maintenance costs. Unlike a restaurant,
performing arts venues typically are unable to pay market-rate rents. This
disparity in rents could result in a reduction in potential revenue to the Pier Fund.
~ Item I. 312 Santa Monica Pier (future site of the Central Plaza Multi-Use
Facility).
Construction of the new Central Plaza Multi-Use Facility will incorporate new
public restrooms, storage space, food commissary, and a new 250 square foot
commercial space for retail and/or non-formula food service. Construction is
estimated to be completed in FY 2007/08.
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~ Item L. 370 Santa Monica Pier (10,985 sq. ft. area between Playland Arcade
and Pacific Park).
To allow more flexibility of uses for this undeveloped leasehold area, the
Preferred Use is recommended to be changed from a "full service restaurant with
alcohol service and with evening music and entertainment" to a "Mixed use
specialty retail, non-formula food service (with or without alcohol) and possibly
with a portion of the site open and accessible to the public."
~ Item P. Municipal Deck Area.
The most significant recommended change to the Leasing Guidelines is to the
section that deals with vending carts and historic vending carts. Licensing
opportunities that occur on the Pier deck have been reclassified into three new
subcategories: Rotating Vending Carts (P-1), Other License Opportunities (P-2),
and a future Gangway Operation (P-3).
o P-1. Rotating Vendors: refers to up to eleven vending pushcart operators.
These vendors are granted 35-month license agreements.
o P-2. Other License Opportunities: refers to vendors who operate from
stationary locations and are granted 50-month vending licenses. The
previously approved Guidelines had identified three of the five stationary
vendors as 'historic' operators in recognition of their longevity and
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contribution to the character of the Pier. The designation as 'historic' was
problematic as it had legal implications that generally relate to historic
buildings. Consequently, the designation was eliminated in the proposed
Guidelines in favor of establishing a separate category from rotating
vendors. The Preferred Use for certain stationary license opportunities
differs from the Preferred Use for rotating license opportunities in that
there is an emphasis for non-rotating license opportunities to also have
"historical character and eclectic elements of the Pier; preserve the good-
will associated with the presence of owners who share their knowledge of
the history of the Pier with the public and otherwise promote the Guideline
Objectives, including newly added subsections 1 (vi) and (vii)."
The proposed Guidelines also provide longstanding tenants who operate
in an exemplary manner additional evaluation points during the selection
process.
o P-3 Gangway.
Small boat moorings and commercial vessel operations in the form of
sport fishing and bay excursions were an integral part of the recreational
activities on Santa Monica Pier, from construction of a breakwater in 1934
through its destruction in winter 1982-83. The return of commercial and
recreational boating to the Pier through the development of a gangway
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operation is an expressed priority of the SMPRC 2006 Annual Work Plan.
The installation of a gangway would also provide an additional means to
evacuate the seaward end of the pier in the event of an emergency.
The proposed Guidelines call for the development and operation of a
gangway to service commercial boating activities, with or without the
installation of a breakwater, following the completion of feasibility studies
analyzing economic, environmental and other issues to inform Policy
makers about conditions under which a gangway could be financed,
constructed, operated and maintained.
~ Item a. Temporary Licenses.
This new provision formalizes the existing practice of issuing short-term
temporary licenses for use of the Pier in a manner consistent with the Guidelines'
Objectives.
Section V. Renewal Options.
~ The recommended Leasing Guidelines include restated language that existing
tenants or licensees who operate in an 'Exemplary Manner' as defined in the
Guidelines in Section XIV are granted additional points during the selection
process.
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Section XI. Common Area Maintenance Costs.
Modification to this section provides clarification regarding the basis of the fixed
rate Common Area Maintenance charge which commenced January 1, 2000.
Section XIV. Tenant Recruitment.
~ Under Tenant Recruitment, new selection criteria have been developed to aide
evaluating and rating of responses to Request for Proposals (RFP). The
selection criteria may include any of the following:
(i) character, integrity, reputation, judgment, training, and experience of the
prospective tenant or licensee; (ii) ability, capacity, and skill of the prospective
tenant or licensee; (iii) capacity to perform; (iv) quality of the services or goods to
be provided; (v) price of the goods or services; (vi) financial resources and (vii)
length of tenure in an Exemplary manner on the Pier.
~ The term "Exemplary Manner" has been defined in this section as those Pier
tenants or licensees who meet all of the following criteria: (i) provide on a
consistent basis a high quality product with excellent customer service; (ii)
maintains their premises or cart in a first class and attractive manner; and (iii)
complies with all lease or license provisions, as well as all applicable local, state
and federal laws and regulations.
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~ The City's prohibition on the payment of commissions to commercial brokers for
the leasing of City-owned properties has been affirmed, however to aid in the
recruitment of desirable tenants the proposed Guidelines allow the City to hire a
~ consultant "to assist in the recruitment process" and directs "staff to cooperate
with commercial real estate brokers who are authorized to negotiate leases and
licenses on behalf of prospective tenants."
~ Also, a closing paragraph has been added to affirm: "Nothing in this Section XIV
is intended to modify or alter the rights and responsibilities of the parties pursuant
to the terms of the Service Agreement between the City of Santa Monica and the
Santa Monica Pier Restoration Corporation."
Previous Council Actions
Council approved Santa Monica Pier Leasing Guidelines on March 11, 2003.
Commission Action
SMPRC Board approved proposed Santa Monica Pier Leasing and Licensing
Guidelines on June 7, 2006.
Alternatives
Section 1, Guideline Objectives of the Proposed Leasing Guidelines call for
establishing the price of leasehold and license occupancy consistent with optimizing the
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Preferred Use and assisting in the support of fiscal self sufficiency of the Pier. The
change of the Preferred Use of 250 Santa Monica Pier from a casual dinning restaurant
use to that of a performance arts venue will likely have
negative revenue impacts on the Pier Fund, as a restaurant would likely pay
significantly more rent than a theater or similar cultural use. However there is precedent
for the City to consider leaseholds uses without regard to fair market rates as is
currently the case with the Santa Monica Pier Aquarium whose rent is $1 per year in
addition to operational subsidies provided by the City.
Therefore, an alternative to the Preferred Use recommended in Item D above for 250
Santa Monica Pier ("creative, cultural and/or performing arts venue with non-formula
food service") could be the Preferred Use set forth in the 2003 Leasing Guidelines
("casual breakfast, lunch and dinner restaurant or cafe with or without alcohol service,
and preferably with evening music, entertainment and/or other live performances.")
Council may adopt Guidelines as proposed, or adopt the Guidelines with any
amendments it deems necessary, or reject the proposed Guidelines.
Budget/Financial Impact
Future revenue to the Pier Fund will be affected by policy decisions relating to new
leasing opportunities. Anticipated revenue based upon the proposed Leasing Guidelines
are included in the City's adopted Budget in Fund 30. The Pier rental revenue account
number is 30625.402010.
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Prepared by:
Elana Buegoff, Sr. Administrative Analyst
Approved:
Forwarded to Council:
/""
Martin Kenn rly, Acting Director
Resource Management Depart ent
ATTACHMENTS:
Proposed Santa Monica Leasing and Licensing Guidelines
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SANTA MONICA PIER LEASING & LICENSING GUIDELINES
Recommended by the Santa Monica Pier Restoration Corporation (SMPRC) on: June 7, 2006
Adopted by City Council on:
Table of Contents
I. Guideline Objectives
II. Preferred Uses
III. Design Guidelines
IV. Local and Non Formula Preference
V. Renewal Options
VI. Term of Years
VII. Expansion of Leaseholds
VIII. Diversity of Tenancies
IX, Labor Peace
X. Rental Rates
XI. Common Area Maintenance Costs
XII. Facility Condition Review
XIII. Tenancy Relationships
XIV. Tenant Recruitment
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I. GUIDELINE OBJECTIVES
The objectives of the Santa Monica Pier Leasing and Licensing Guidelines are as follows: (i)
promote and maintain the compatible uses of City-owned property available for lease and license
located on the Santa Monica Pier in a manner supporting an attractive, safe and accessible
environment for visitors and the residential community; (ii) preserve and enhance the Preferred
Uses set forth in Section II of the Guidelines through operation of the facility in a manner
supporting this diverse and affordable public recreational and community asset; (iii) promote high
quality of goods, food and services provided by the commercial operators; (iv) establish the
pricing of leasehold and license occupancy consistent with optimizing the Preferred Uses and
assisting in the support of fiscal self-sufficiency of the Pier; (v) assure access to and use of City-
owned properties by the general public for the Preferred Uses through a leasing and licensing
program that promotes the orderly management of tenancies and licenses; (vi) preserve and
promote the unique, eclectic and community recreational character of the Pier; and (vii) preserve
and promote the history of the Pier.
II. PREFERRED USES AND CURRENT OPERATORS
Current uses of City-owned structures and deck area on the Santa Monica Pier are diverse,
and have been intended to preserve the Pier as a unique community recreational resource. The
Pier is an internationally recognized attraction serving residents and visitors representing a broad
range of incomes, ages and lifestyles. The current lease and license agreements represent the
implementation of the Santa Monica Pier Development Program adopted in 1988. These
Guidelines supersede all previously adopted Leasing Guidelines.
Diversity will be maintained but focused on those purposes that support the historic character
of the Pier and offer choices of services and pricing within the general use categories while
retaining the intended emphasis on low density, unique recreational and entertainment-oriented
activities. Preferred Uses include, but are not limited to, a range of entertainment and
commercial products and services that will appeal to and serve both the residential community
and area visitors.
Buildings and deck area on the Santa Monica Pier available for lease or license, and
associated Preferred Uses for each, as of the date of adoption of these Guidelines, consist of the
following:
A. 1600 Oceanfront Walk - 4,533 sq. ft enclosed structure area.
Current Operator: Santa Monica Pier Aquarium
Term: 5-year lease with two 5-year options, commencing July 1,2003.
Preferred Use: marine research and educational facility accessible to the public.
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B. 200 Santa Monica Pier - 8,236 sq. ft enclosed structure area
Current Operator: Santa Monica Pier Carousel
Term: Carousel is operated under a two-year Council approved Management Agreement
with Roth Management Company commencing July 1, 2003, and terminating June 30,
2005. Special event booking, promotion and monitoring of special events is administered
under a one-year Council approved Management Agreement with Kids Play commencing
July 1, 2003, on a month to month holdover.
Preferred Use: public access to Carousel at Council approved supported pricing, with
evening and off-hours use of the Carousel building for parties, receptions and special
events.
C. 200 Santa Monica Pier - 260 sq. ft gift shop within Carousel Building
Current Operator: Airport Concessions Inc.
Term: Sixty month Lease & Concession Agreement, commencing May 1, 2003, and
terminating on April 30, 2008.
Preferred Use: Carousel-related and general souvenir, gift items and books featuring local
history and themes.
C-l 200 Santa Monica Pier - Additional Leasing Opportunity for food service that respects the
historic uses of the carousel, and subject to identifying space in the carousel and its
integration with the other uses.
D. 250 Santa Monica Pier- 6,069 sq. ft enclosed structure and 1,033 sq. ft patio area
Current Operator: Vacant
Preferred Use: Preference for creative, cultural and/or performing arts venue with non-
formula food service.
Term: one to five years depending upon the amount of capital investment.
E. 256 Santa Monica Pier - 3,035 sq. ft enclosed structure and 1,073 sq. ft patio area
Current Operator: Rusty's Surf Ranch
Term: 20-year lease, commencing November 1,1994.
Preferred Use: lunch and dinner restaurant with alcohol service, and with evening music
and entertainment.
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F. 258 Santa Monica Pier - 2,557 sq. ft enclosed structure and 1,392 sq. ft patio area
Current Operator: Santa Monica Pier Seafood
Term: 23-year lease, commencing May 1, 1991.
Preferred Use: limited or full service non-formula family-oriented restaurant with or
without alcohol service.
G. 301 Santa Monica Pier - 4,534 sq. ft enclosed structure and 2,198 .sq. ft patio area
Current Operator: Bubba Gump Shrimp Co. Restaurant
Term: 25-year lease, commencing May 6, 2002.
Preferred Use: full service family-oriented restaurant with or without alcohol service.
H. 310 Santa Monica Pier - 1,292 sq. ft enclosed structure
Current Operator: Blazing Saddles Bicycle Rentals and Sales
Term: 43-month lease, commencing April 1, 2000, with eighteen month option to extend
from October 31,2003, to April 30, 2005.
Preferred Use: recreation-oriented bicycle rentals, with ancillary sales of bicycle-related
gear and merchandise. Under Pier Multi-Use Service Building proposal, floor area for this
tenant may be reduced to accommodate food service commissary.
I. 312 Santa Monica Pier - proposed 250 sq. ft kiosk within Central Plaza Multi-Use Facility
(construction estimated to be completed in 2007).
Preferred Use: retail and/or non-formula food service operation
J. 330 Santa Monica Pier - 1,525 sq. ft enclosed structure and 584 sq. ft patio area
Current Operator: Surf View Cafe
Term: month to month holdover tenancy terminable on 120 days' prior written notice.
Lease commenced on July 1,2001, and terminated on May 31,2004.
Preferred Use: limited service non-formula convenience restaurant without alcohol
servIce.
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K. 350 Santa Monica Pier - 8,603 sq. ft enclosed structure and 641 sq. ft patio area
Current Operator: Playland Arcade
Term: 30-year lease, commencing July I, 1990.
Preferred Use: amusement and self-operated games arcade with ancillary retail sales.
L. 370 Santa Monica Pier - 10,985 sq. ft gross deck area
Current Operator: Vacant.
Term: <to be discussed>.
Preferred Use(s): Mixed use specialty retail, non-formula food service (with or without
alcohol) and possibly with a portion of the site open and accessible to the public.
M. 380 Santa Monica Pier -75,000 sq. ft gross (56,891 sq. ft net) deck area
Current Operator: Santa Monica Amusements/Pacific Park
Term: 50-year lease, commencing May 26, 1996 and as amended and restated effective
September 26, 2002.
Preferred Use: amusement rides and games with ancillary retail sales and food and
beverage sales with or without alcohol service.
N. 401 Santa Monica Pier - 6,204 sq. ft enclosed structure and 2,217 sq. ft patio area
Current Operator: Mariasol Restaurant
Term: 35-year lease, commencing April 1, 1993.
Preferred Use: limited or full service family-oriented restaurant with or without alcohol
servIce.
O. 404 Santa Monica Pier - 292 sq. ft enclosed structure
Current Operator: Santa Monica Pier Bait & Tackle
Term: 60 month lease. Existing lease commenced June 1, 2001 and is currently on a
month to month holdover tenancy.
Preferred Use: fishing bait and tackle sales with ancillary retail sales, fast food and
convenience food.
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P. Municipal Pier Deck Area
The licensing opportunities on the Municipal Deck consist of Rotating Vending Carts,
Other License Opportunities, and a future licensing opportunity for a Gangway on the
Municipal Pier.
The term "Rotating Vending Carts" means and refers to those portable carts required to be
removed from the Municipal Pier Deck at the close of the business day and may rotate
locations on a weekly basis.
P-l. Rotating Vending Carts.
Current Operation: Up to eleven individual vending cart operations providing retail and
food from designated locations on the Santa Monica Pier.
Term: 36-month licenses, cancelable on 30 days notice.
Preferred Uses for Rotating Vending Carts: Pier and/or beach-oriented retail sales and
non formula food service. Emphasis should be upon unique, locally/regionally produced
crafts and other items that reflect creativity, a local/regional identity and/or cultural
diversity and/or sustainability, and are not otherwise available on the Pier through the non-
cart leaseholds.
P-2. Other License Opportunities.
(a) Trolley Kiosk (vending stand) located adjacent and east of278 Santa Monica Pier.
Current Operator: Airport Concessions Inc.
Term: 60 month license. Current license terminates April 30, 2008.
Preferred Use: Pier related souvenir and sundries featuring Pier trademark licensed
products.
(b) Beachcomber Gifts (license area) located adjacent and east of 350 Santa Monica
Pier.
Current Operator: Marlene Gordon
Term: 60 month license. Current license terminates July 31, 2009. At the
conclusion of the license term, the suitability of the space for continuation of a
license will be reevaluated to determine whether the license area should be
removed, relocated or incorporated into new leasehold opportunity.
Preferred Use: Sale of Beach clothing, beach related items and novelty items.
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(c) Oatman Rock Shop (vending stand) located at 321 Santa Monica Pier.
Current Operator: Christine and John Volaski
Term: 60 month license. Current license expired June 30, 2005; license on a month
to month holdover.
Preferred Use: Sale of rocks, gems, roses and gift items. In addition, there shall be
an emphasis on uses which promote the historical character and eclectic elements
of the Pier, preserve the good-will associated with the presence of owners who
share their knowledge of the history of the Pier with the public, and who otherwise
promote the Guideline Objectives, including subsections I (vi) and (vii) thereof.
(d) Churro Man Company Inc. (cart) located along the north rail, adjacent and west of
321 Santa Monica Pier.
Current Operator: Murray Gould
Term: 60 month license. Current license expired June 30, 2004; license on a month
to month holdover.
Preferred Use: Sale of food items consisting of churros, pretzels, pre-packages
beverages and frozen lemonade. In addition, there shall be an emphasis on uses
which promote the historical character and eclectic elements of the Pier, preserve
the good-will associated with the presence of owners who share their knowledge of
the history of the Pier with the public, and who otherwise promote the Guideline
Objectives, including subsections l(vi) and (vii) thereof.
(e) Thermal Base Photo (cart) located along the north rail, across from 350 Santa
Monica Pier.
Current Operator: Rosan Alvarez
Term: 60 month license. Current license expired June 30, 2004; license on a month
to month holdover.
Preferred Use: Computerized photographs, novelty photos and related items. In
addition, there shall be an emphasis on uses which promote the historical character
and eclectic elements of the Pier, preserve the good-will associated with the
presence of owners who share their knowledge of the history of the Pier with the
public, and who otherwise promote the Guideline Objectives, including
subsections I (vi) and (vii) thereof.
P-3 Gangway.
Operation of a gangway to service commercial boating activities, with or without the
installation of a breakwater, following the completion of feasibility studies analyzing
economic, environmental and other issues to inform policy makers about conditions under
which a gangway can be financed, constructed, operated and maintained.
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Q. Temporary Licenses.
From time to time, there may be temporary licenses for the use of the Pier in a manner
consistent with the Guideline Objectives.
III. DESIGN GUIDELINES
The historic character and eclectic, thematic appearance of the Pier are overriding aesthetic
elements to be retained, preserved and enhanced. The City has adopted Design Guidelines to
serve as an architectural standard for the Pier. All public and private structural modifications,
vending carts and other improvements proposed on the Pier will be subject to review for
consistency with the Design Guidelines, without exception. If tenants or City make modifications
to structures on the Pier deck or build new structures to implement the Preferred Uses, as a
mutually agreed condition of a lease or license, the SMPRC and City shall first review and
approve the proposed scope of work and improvement design in accordance with the Design
Guidelines. All necessary architectural reviews, licenses and building permits must be obtained,
and the work inspected for compliance with applicable codes.
IV. LOCAL and NON FORMULA PREFERENCE
The limited size and density of commercial development and casual recreational ambiance are
important factors in defining the unique character of Santa Monica Pier. That unique character
must be preserved in order to protect the Pier's historic integrity and economic sustainability.
Therefore, leasing and licensing of City-owned buildings and Pier deck area will be subject to a
preference for locally owned, independent, non formula businesses and activities that are
financially and operationally capable of providing the Preferred Uses. Such preference will be
reflected in bonus ratings for responses received from locally owned independent businesses as
part of a public Tenant Recruitment process. A formula business is that which requires by
contractual or other arrangement the maintenance of standardized services, decor, uniforms,
facility design and format substantially identical to another operation.
V. RENEWAL OPTIONS
Lease or license renewals or options to extend the terms of occupancy will not be
automatically offered to existing tenants or licenses upon expiration of agreements. As vacancies
arise either by natural expiration or earlier termination, recruitment for each opportunity site will
be conducted in accordance with these Leasing Guidelines. Current tenants and licensees may
respond to the public Tenant and License Recruitment process in the same manner as any
prospective new operator. It is recognized, however, that reliability and continuity of quality
commercial services are valuable assets to the public experience of the Pier. Therefore, existing
tenants or licensees who operate in an Exemplary Manner as defined in Section XIV, below, will
be granted additional points during the selection process for each opportunity site.
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VI. TERM OF YEARS
As vacancies arise either by lease and license expiration or earlier termination, available space
will be offered for Preferred Uses for non-renewable lease terms up to five years if substantial
new capital investment in structures, structural improvements or equipment is not warranted.
If a tenant is required to make substantial new capital investment in structures, structural
improvements or equipment to implement the Preferred Use consistent with intended purposes of
the premises, lease terms of ten years to twenty-five years but may be offered longer term leases
depending upon amortization and financial requirements of the new investment.
VII. EXPANSION OF LEASEHOLDS
Minor physical expansion of existing leasehold occupancies (for example, enlargement of an
outdoor patio) may be approved for tenants who seek to enhance, improve or modify their
business operations consistent with the Preferred Uses through the investment of additional
capital in structures, structural improvements or equipment in a manner that does not limit or
diminish operator diversity on the Pier. Such expansion shall not diminish the opportunity for
tenant diversity, and must advance the Preferred Uses for the benefit of the public, the Pier and
the City. All physical expansion of existing leasehold occupancies are subject to the approval of
appropriate governmental entities such as, but not limited to, the City of Santa Monica,
Landmarks Commission of the City of Santa Monica, the Planning Commission and the
California Coastal Commission.
VIII. DIVERSITY OF TENANCIES
In order to promote operator diversity in the development and use of leasehold and license
opportunity sites, the prospective grant of multiple leaseholds and/or license areas to an individual
tenant, licensee or operator will not be permitted.
IX. LABOR PEACE
The City owns the Pier and has a financial or proprietary interest in Pier businesses engaged
in visitor-serving commercial activities. Some of these businesses are in industries that have a
history of labor/management conflict. Risk of interruption of rental revenue and common area
maintenance fees received by the City from Pier businesses would be minimized if such
businesses were assured of labor peace. An appropriate labor peace provision would minimize
the City's exposure to revenue interruption and disruption of public recreational enjoyment of the
Pier. Therefore, new or substantially amended agreements for leasehold operation shall provide
that the tenant will not engage in practices that impede employees' ability to organize and
contract with a labor organization for the purpose of collective bargaining. Such prohibited
practices include harassment, intimidation, "captive audience" anti-union meetings or illegal
terminations of workers in retaliation for organizing. A substantial amendment is defined as a
change of use of the property, an increase in seating or square footage of more than 25%, or an
extension of lease duration. Tenant engagement in prohibited practices shall constitute an event
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of default under the terms of lease. Affected leases would be those businesses having five or
more full or part-time employees and engage in restaurant or visitor-serving entertainment
activities such as arcades, amusement parks and nightclubs.
X. RENTAL RATES
Minimum rents, license fees and participation by City in percentage rents based on gross
receipts from commercial lease and license activities will be established at estimated fair market
rates and set forth in any public Request for Qualifications and/or Request for Proposals issued
for any available leasehold or license opportunities. Responses received for lease and license
opportunities may exceed the minimum and percentage rents set forth in the Requests. Lease and
license minimum rates maybe subject to an escalation clause based on the Consumer Price Index
for Los Angeles - Anaheim - Riverside, Orange County, published by the Bureau of Labor
Statistics of the United States Department of Labor.
Leaseholds with Preferred Uses for research and public educational purposes (e.g. Santa
Monica Pier Aquarium) and Operating Agreements subject to supported pricing standards (e.g.
Carousel) will be maintained without application of fair market rental rates. The City will seek to
reasonably minimize its costs associated with these activities by recovering Common Area
Maintenance costs from leaseholds, by participating in ancillary gross receipts from commercial
activities at educational facilities and the Carousel, and by making facilities subject to Operating
Agreements available for event rental at rates approved by the SMPRC and Council.
XI. COMMON AREA MAINTENANCE COSTS
Leasehold tenants shall pay as a condition of occupancy of Pier building or deck areas, a
proportionate share of the City's Common Area Maintenance ("CAM") cost to manage, maintain
and provide security to Santa Monica Pier. On January 1, 2000, the applied Common Area
Maintenance cost was modified to provide for a fixed CAM payment of $5.00 per leased square
foot per year, with biennial increases commencing July 1 based on CPI. Such biennial increases
shall not be less than three percent (3%) and no greater than six percent (6%) per annum.
XII. FACILITY CONDITION REVIEW
All City-owned structures and deck area available for lease or license will be reviewed prior
to new leasehold occupancy and brought by the Landlord, in its proprietary capacity, or new
tenant or licensee to a decent, safe and sanitary condition appropriate for the Preferred Use as a
condition to the lease or license. If tenants or licensees must make improvements to a building or
deck area to implement the Preferred Uses as a mutually agreed condition of a lease or license,
City staff will first review the proposed scope of work and improvement design for conformity to
the Design Guidelines and present the scope of work and improvement design to the SMPRC
Board for review and approval. The prospective tenant will provide the proposed scope of work
and preliminary improvement design in accordance with Tenant Recruitment procedures. All
improvements on the Pier shall be in accordance with the Design Guidelines. All necessary
building permits and governmental approvals (not limited to Landmarks Commission, Planning
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Commission and California Coastal Commission) must be obtained, and the work inspected for
compliance with applicable codes and approved plans and construction drawings. Appropriate
rental credits for the approved work performed may be negotiated as part of the lease.
XIII. TENANCY RELATIONSHIPS
All City-owned buildings and deck areas on Santa Monica Pier appropriate and suitable for
leasing or licensing by the City to individual tenancies or licensees for the Preferred Uses will be
in accordance with agreements prepared by the City. Each tenant or licensee will be responsible
for interior maintenance and repair and utility consumption at its sole expense, and the City will
generally retain responsibility for maintenance and repair of roofs and exterior of City buildings
and of the Pier deck and substructure unless otherwise specified in the lease or license. Structures
constructed by tenants for the Preferred Uses are subject to interior and exterior maintenance and
repair by the tenant at its sole expense. City shall have a right to inspect all tenant improvements
including fixed assets which shall revert to the City at the end of the lease term for the purpose of
determining maintenance and repair needs. Tenant shall be responsible to make repairs to, or
replace, such fixed assets at its sole expense. Subletting or assignment of license premises is
prohibited without exception.
XIV. TENANT RECRUITMENT
All City-owned buildings and deck areas on Santa Monica Pier appropriate and suitable for
leasing or licensing will be subject to a public marketing and solicitation process to identify
prospective tenants and licensees with financial and experience qualifications for the Preferred
Use of the available space. Vacancies will be the subject of public Requests for Qualifications
and/or Requests for Proposals publicized utilizing:
. Media advertising, including general circulation newspapers or local/limited circulation
publications
. Direct mail to waiting list and/or other targeted individuals having expressed previous interest
in leasehold occupancy or license operation for the available Preferred Use
. Posting notice on the Pier Restoration Corporation's, City's and Resource Management
Department's Internet web site
As appropriate, vacancies may also be publicized utilizing:
. Direct contact or outreach to prospective tenants
. Dissemination by fax, e-mail or telephone to local commercial real estate brokers
. Press releases and other direct marketing performed by the SMPRC
Requests for Qualifications and/or Requests for Proposals will be drafted by City, and
approved by the Leasing Committee and Board of the SMPRC prior to release.
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The Request for Qualifications and/or Request for Proposals will set forth the Preferred Uses
of the available space, proposed terms and conditions for the leasehold or license opportunity, and
criteria for reviewing and rating responses. The selection criteria may include any of the
following: (i) character, integrity, reputation, judgment, training, and experience of the
prospective tenant or licensee; (ii) ability, capacity, and skill of the prospective tenant or licensee;
(iii) capacity to perform; (iv) quality of the services or goods to be provided; (v) price of the
goods or services; (vi) financial resources; and (vii) length of tenure in an Exemplary Manner on
the Pier. The selection process shall grant additional points to those existing Pier tenants and
licensees that are deemed to have operated in an Exemplary Manner. The term "Exemplary
Manner" shall mean and refer to those Pier tenant or licensees who meet all of the following
criteria: (i) provide on a consistent basis a high quality product with excellent customer service;
(ii) maintains their premises or cart in a first class and attractive manner; and (iii) complies with
all lease or license provisions, as well as all applicable local, state and federal laws and
regulations.
All respondents and prospective tenants will file a Lease or License Application. Information
contained in the Lease or License Application will be utilized for confirmation that the proposed
tenancy is a Preferred Use for the available space, and for verification of experience, references
and financial capability to perform leasehold obligations. Responses will also state preliminary
terms and conditions for the proposed lease or license.
Responses to Request for Qualifications and/or Request for Proposals will be initially
analyzed and rated by a review team comprised of City staff and the Executive Director of the
SMPRC. Representatives of City Engineering Division and/or Planning and Community
Development and other consultants may be included as appropriate. The review team will
provide its analysis and recommendation as to a preferred respondent, inclusive of appropriate
bonus ratings for local independent business respondents and complying tenant renewal
proposals, to the Leasing Committee of the SMPRC. The recommendation may be to reject all
responses, solicit additional information from one or more respondents, or to enter exclusive lease
or license negotiations with a preferred respondent.
The Leasing Committee will consider the review team's analysis, and make its
recommendation to the SMPRC Board. The Board may authorize the City to enter exclusive
negotiations with a preferred respondent subject to specific terms and conditions, or reject all
proposals, or direct that additional information be solicited from one or more respondents prior to
making a determination.
City will conduct exclusive negotiations with each preferred respondent as authorized by the
SMPRC Board. The City Attorney will prepare all lease and license agreements for review and
execution by the prospective tenant or licensee. The executed agreement will be submitted to the
Leasing Committee for its review in terms of consistency with the Leasing Guidelines and
SMPRC Board authorization. If determined to be in accordance with the Leasing Guidelines and
authorization to enter exclusive negotiations, the lease or license will be recommended to the
SMPRC Board for approval. Upon approval of a lease or license by the SMPRC Board, the
agreement will be approved as to form by the City Attorney and transmitted to the City Manager
for execution.
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The City will neither pay nor receive commISSIOns for leasing of City-owned property.
However a consultant may be hired to assist in the recruitment process. Staff will also cooperate
with commercial real estate brokers who are authorized to negotiate leases and licenses on behalf
of prospective tenants.
Nothing in this Section XIV is intended to modify or alter the rights and responsibilities of the
parties pursuant to the terms of the Services Agreement between the City of Santa Monica and the
Santa Monica Pier Restoration Corporation entered into on April 21, 2004, bearing Contract
Number 8333 (CCS).
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