SR-410-001-03
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SEP 1 8 1990
C/ED:EPD:PC:DG:RS
Council ueeting: September 18, 1990
Santa Monica, California
TO: The Mayor and city council
FROM: city Staff
SUBJECT: Recommendation to Authorize City Manager to Negotiate
and Execute Three Third street Promenade Pavilion
Leases
INTRODUCTION
This report recommends that city Council authorize the City
Manager to negotiate and execute leases with three tenants for
the two pavilions located on the Third Street Promenade. For the
past year, Bayside District Corporation staff and city staff have
searched for suitable tenants for these unique spaces. Profiles
of the new tenants and the terms of their Lease Agreements are
provided within this report.
BACKGROUND
At the earliest stages of conceptual development of the new Third
street Promenade, Roma Design Group in association with Halcyon
Ltd. and Jaykim Engineers Inc. envisioned two pavilions in the
middle of the Promenade road housing activities that would
capture the flavor and activity of the Farmers I Market on an
ongoing basis, and create a "lantern" quality to attract people
to the friendly and safe environment of the Promenade. The final
design of the pavilions, ",hich t'las approved by City Council on
october 27, 1987, supported this concept in architectural design
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SEP 1 S 1990
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through a decorative frame of rOll-up glass doors topped with a
copper roof and train station-like clock.
Upon completion of construction of The Third street Promenade in
fall of 1989, the Bayside District Corporation (BDe), which has
primary marketing responsibility for the area, turned its
attention to developing a marketing strategy to solicit suitable
tenants for the pavilions. Three months of advertizing and
evaluating applicants failed to produce an appropriate mix of
tenants. Since the real estate market was in major flux at this
time, the Bayside District Corporation staff and City staff opted
to wait a few months to observe how the marketplace would evolve
before renewing marketing efforts.
In spring of 1990, the Bayside District corporation (BDC) resumed
its search for tenants. Though a combination of marketing
strategies, including publication of multiple ads and personal
solicitation of proposals, BDC focused its efforts on finding
businesses which fullfilled the original intentions of the
architects in terms of function and flavor, and which also
supported local community interests and values, and which
reflected the quality of new business investments on the Third
street Promenade.
DISCUSSION
In May 1990, the Executive Board of BDC proposed three
candidates for pavilion spaces to City staff. Staff conducted an
evaluation of their financial capability, developed a
construction estimate and schedule, and established the lease
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terms and conditions. Once each candidate's financial viability
was confirmed, negotiations for tenant improvements and other
lease terms proceeded.
The following is a brief description of the tenants, their
pavilion location, and the terms of their leases.
1) THE FLOWER CONCIERGE - the entire south pavilion.
Ellen Galeski purchased the Flower Concierge in January 1989,
then only a mobile flower service. In December of 1989, upon the
recommendation of the Santa Monica Area Chamber of Commerce, Ms.
Galeski was invited to occupy the south pavilion on a temporary
basis. Weathering all the construction idiosyncracies with
aplomb, the BDC and City staff believe her service would be a
permanent asset to the District.
The Flower Concierge will occupy all 750 square feet of space in
the south pavilion. The lease term is five (5) years at $3.00
per square foot monthly for the first year, which increases to
$3.50 per square foot the second year, and $4.00 per square foot
the third year. The fourth and fifth year rates will be adjusted
annually according to the Consumer Price Index for the Los
Angeles-Anaheim-Riverside area. The lease term begins September
1990, and may be extended for an additional five-year term.
AIls Newsstand
newsstand will
is
200 square feet on the east side of the
north pavilion.
owned and operated by Allen
stocked with a comprehensive
Brooks. The
collection of
2)
AL'S NEWSSTAND -
be
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foreign magazines and newspapers, top quality national
publications, best seller paperbacks, candy and sundries.
This newsstand will be Mr. Brook's third: the first opened in
1975 at the corner of Fairfax and Oakwood; the second opened in
April 1989 on South Beverly Drive in Beverly Hills. The Beverly
Hills newsstand is a tenant of the city of Beverly Hills, so Mr.
Brooks is familiar with City government as landlord. Both
operations are very successful.
AI's Newsstand will occupy 200 square feet on the east side of
the north pavilion. His lease is for five (5) years, with an
option for an additional five (5) -year term. The monthly per
square foot rate for the first year is $3.75, increasing to $4.50
in the second year, and $5.50 in the third year. The rate will
remain the same in the fourth and fifth years, except for annual
Consumer Price Index increases. Providing tenant improvements are
complete, Allen hopes to be open for business by October 1, 1990.
3) CAFE PROMENADE - 550 square feet on the west side of the
north pavilion.
Jan Rosa and Anna Pieczyska have owned and operated P & R
European Bakery on the Promenade at Gallerie Gourmets for almost
six years. In that time they earned the reputation of producing
exguisi te pastries, sweets, and chocolates such that a large
percentage of their business is catering to some of the finest
restaurants in Los Angeles. They intend to create a European
-styled kiosk, offering fine pastries, cappuccino and espresso
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coffee. At the other end of the pavilion, they plan to open a
juice bar.
Both Mr. Rosa and Ms. Pieczyska are from Poland. Ms. Pieczyska
formally studied pastry baking at Bialystok Trade School from
1970 to 1974, and baked for the family pastry shop in Lomza,
Poland for the next five years. In 1979, she was engaged as the
assistant to the chef for pastry in the staff of Mr. Vique, King
of Belgium, for four years. In 1983 Ms. Pieczyska immigrated to
the united states and became the pastry chef for perino's
Restaurant in Los Angeles. She and Mr. Rosa opened P & R
European Bakery in 1985.
Cafe Promenade will occupy 550 square feet of the west side of
the north pavilion. Because of the costly tenant improvements
and trade fixtures the tenants are installing, their lease term
is for ten (10) years with an option for an additional five (5)
years. The monthly per square foot rate for the first year is
$3.25, the second year $3.50, the third year $3.75, the fourth
year $4.00, and the fifth year $4.25. In years 6 through 10 the
rate remains $4.25 per square foot with annual Consumer Price
Index increases. The commencement date depends on the date
tenant improvements are complete, perhaps sometime in October.
BUDGET IMPACT
When rent is collected from all three tenants, the City can
anticipate a monthly rental income of $4,787.50 in the first
year. Rental income for FY 1990-91 is projected to be
$27,400.00. Rental income for FY 1991-92 is projected to be
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$63,650.00.
All rental income will be deposited in revenue
account #01-130-224-00000-077-10218.
Security deposits the equivalent of two month's rent were
collected from each tenant. This totals $9,575.00 and is being
held in the General Fund balance sheet.
RECOMMENDATION
staff respectfully recommends that City Council authorize the
city Manager to negotiate and execute leases with Cafe Promenade
and AI's Newsstand for space in the north pavilion, and with The
Flower Concierge for space in the south pavilion and increase the
General Revenue budget by $27,400.00.
prepared By: Darrell George, Acting Manager
Ruta Skirius, Senior Administrative Analyst
ccinpav
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