SR-0 (21)
C/~il-C>O S~I:ll'h
COUtlCIL ~1TG' 3/27/84
ATTACHHENT A
Santa Monica, Ca11"'ornia
TO:
Mayor and City Council
RE:Contract No. 2303.3379.,3861 (eeS)
FROM- City Staff
SUBJECT: Reco~nend2tion to Approve Expansion of Surf View Cafe
Lease P ren I se s
I r'troductl on
T~is report explains the rationale for expandl1g the Surf View Cafe lease premises
on the Santa Monica PIer, Includes architectural dra~ings of the expanslo~ (Exhibit
A), oroposes an increase to the mlnimu~ monthly rent in Droportio~ to the additional
square footage and describes an invest~ent recapture progran for firty percent (50%)
of t~e total Investnent In the lease ::necnlses.
.Background
In January, 1983, the City Council approved the asslgn"ent or the Surr View Cafe
lease from 11s Ca'l1den to the present leasehold O'frner, Mr. SUh
Durir.g t~e following
ten (10) months, Mr. Suh has ooerated the business longer hours and SIX to seven days
per week resulting In an 18% Increase in sales over those reDorted by the prevIous
operator for the same months in 1982, and a 25% increase In sales for the sane ,ontns
In 1981.
In order to increase sales further, Mr. Suh has appl led for a beer and wine license.
ThiS license has been issued with the condition that the prooerty meet County Health
Departnent regulations, which requires one ~en's and one wo~en's publ IC restroo~
within any bUilding serving alcohol_
To co~ply ~Ith thIs regulatlcn, Mr. Suh croposes to extend t~e lease pre-Ises in t~e
rear by 161 square feet. Mr. Suh also Droposes to extend the rear patio by 282 square
feet ~hic~ wi 11 bring the patio boundry fence flush with t~e rear wall or the new
extension (see ExhIbit A). Neither the building nor patio extensIon WI 11 affect
parkl;'9 or any other Lessee or City operation. It \'1111 be located 011 "dead"
Space (see photos, Exhibit 8).
The addition of these handicap-accessible public restroons will be a significant
i~Qrove~e~t to t~e lease prer-ises and will ,elp to alleviate tre PIer's overall
p~oblem of Insufficlel1t restroom facIlIties
The benefits of additional restroor71s to the Pier as \'1e11 as t"e likell:,ood of
ge~eratlng more revenue to the City, based on increased gross sales fro, beer
and Wine, are the basts of staff's decision to proceed with this action at the
present time rather than to defer It to t~e Pier Restoratlo~ Corporation (PRe).
The PRe has been advised of the proposed expansion and the ter~s described
herein and have not expressed any concerns or proble~s.
Rent and ~ecapture
The Surf View Cafe currently covers 1,749 square feet (building and patio) T,e
~lnlmUT ronthly rent IS 5574 plus ten percent (10%) of the a~rual sales over $68,380
T,e current nlnlru~ ronthly rent is therefore 33 cents per squa~e Toot
Staff reconmends increasing the Surf View Cafe's ~ini7um nont~ly rent and therefore
the minlmun annual sales In proportion to the number of additional square feet at the
Same rate Der square foot that IS currently charged
The mlni~um monthly rent would increase from $574 to $720 (S574 plus 443 sq. ft. x
33') The ~lnl~U~ annual sales would increase from $68,880 to S86,400 (S720 ~er
month x 12 r7Ionths diVided by lO~n (see Table A).
Staff further reco~,.l1ends a recapture vrogram \-Inl ch \'1111 perml t ,'ir. Suh to receive
credit for fifty percent (50~) of hiS Investment by applYing fifty percent (50~) of
the percentage overage on sales against the invest~ent credit until the balance is
zero or June 30, 1986, whichever cores first
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Th.s recapture ~rogra~ will be nontransferable. If the Surf View Care lease is
aS5'g,eo. the reca;Jture progra:ll ,-/ill be car-celled and the credit balarce. .f anY,'
~il II ,ot be due to the assignee or Mr Suh, the assigror.
per~ltteo on up to 55,000 ~aXI:llU~.
For exa~~le, the total invest"'ent 15 estl:ll3teo at $10,000. RecaDture "Iouid be
Estlnated FY 1984-85 Gross Sales
Reco~mended Min. Annual Sales
Sales Overage
10% or Sales Overage
One-halr Paid to City
One-half Applied to RecaDture Credit
Balance or Recapture Credit 6/30/85
~Esti~ated FY 198)-B6 Gross Sales
'Reco~~ended Min. ~nnu21 Sales
Sales O'/erage
10~ or Sales Overage
;mou~( Appl led to Recanture Credit Balance
Percentage Overage Paid to City
Balance of Recapture Credit 6/30/86
"'Uslng estilT'ated CPI Increase of 4%
5150,000
86,400
63,600
6,360
3,180
3,180
$ 1,820 ($5,000 minus $3,180)
$/56,000
89,356
66,144
6,614
1,820
4,794
$ -0-
All rece'')ts subnl tted !Jy ilr Suh in SL;pport of the total investr.ent l1US: be
confl r~ed by the C.ty Engineer orlor to C0l111encement or the recapture prosra~.
Reconmended maxlnum recapture for this project is 55,000
C,tV, County and State Agency Approvals
Ap~rovals or support from the City Land~arks Commission, Architectural Review
Board, BUilding Departnent, County Health Department, State Coastal CO~~15sic~
ex?ectcd oy ADrl I, 1984
and the PRC wi 11 be sought With all final approvals or statenents of sup~ort
FinanCial AnalYSIS
ThiS pro~ect will not i~pact FY 1983-84 budget
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the latter of two dates' July, 1984, or upon conpletlon and review of cO~5tructio~
The recapture prog ral1 \v I II beg I n
The Surf View Cafe lease ter~ expires June 30, 1991
For the balance of the lease
ter~, beginning July, 1984 (seve~ years), t~e City Will receive a guaranteed
$12.264 (plus yearly CPI increases) additional rent due to the Increase In the
~Inlnum ",onthly re~t.
The Increase of approximately eig~t patio tables plus the additional reven~e fro~
beer and wine should Increase thiS Lessee's a~nual gross sales of ~hich the City
receives ten percent.
Over the next t~o fiscal years, a ~axlnum of 55,000 will be withheld from t~e
percentase overage due the City In order for thiS Lessee to recoup fifty percent
of hiS Invest~ent.
Keco~~er.datlon
Staff respectfully recormends that Counel I
1. Approve the expansion of the Surf View Cafe lease preMises by 443 square feet
to include public handicap-accessible restrooms and additIonal Datio space.
2. Increase the mlnlmun monthly rent to 5720 and increase the minimu~ annual
sales to 586,400 beginning July l, 198h.
3 Approve the recaPture program with maximum recapture of 55,000 to be co~pleted
when the balance is zero or June 30. 1986, whichever cones first.
4. Direct the City Attorney to prepare appropriate lease docu~ents.
Prepared by: Susan Mullin
Manager, ClEO-Pier Operations
Attaeh~ents
Exhibit A, Architectural Floor Plan
Exhibit B, Photo of EXisting Elevation
Table A, Co~parlson of Current & Reco~~ended Rent
-4-
Staff Re'Jort - ~'arch 27, 1984
Surf View Cafe Expansion of Lease PremiseS
EX~lblt B
?~oto of the exterior elevation
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