Loading...
SR-410-001-03 . , . f/tJ-~tJ/-05 . 6-~ 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 6~~ - 1 - SEP 1 S 1990 ..... . . 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 - 2 - . . 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 - 3 - . . 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 - 4 - . . 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 - 5 - . . $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 - 6 -