SR-111307-8D~r
~ ~;tYaf City Council Report
Santa Monica
City Council Meeting: November 13, 2007
Agenda Item: ~ ~'~
To: Mayor and City Councii
From: Andy Agle, Director of Housing and Economic Development
Subject: Authorization to Request Proposals
Structure No. 3 for Subterranean
Cinema Development
Recommended Action
to Redevelop the Site of Parking
Parking, Ground Floor Retail and
Staff recommends that the City Council authorize the solicitation of proposals to
redevelop the site of Parking Structure No. 3, located at 1318-20 Fourth Street; for
subterranean parking, ground-floor retail, and cinema development.
Executive Summary
Development of cinemas along the Third Street Promenade was a key strategy in the
revitalization of the Downtown and supported Downtown's evolution as a retail, dining
and entertainment district. In the past decade, new cinema complexes have been built
nearby which offer movie-goers more choices and better amenities than are available in
Santa Monica. In 2004, the Promenade Uses Task Force recognized this trend and the
threat it posed to the future sustainability of the cinema market in Santa Monica. The
Task Force's report encouraged the City to support the upgrading of cinemas in order to
sustain the diversity of activity within the Downtown and to ensure that Santa Monica
residents have opportunities to enjoy movies locally. The Promenade Uses Task Force
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process immediately foliowed the efforts of the Downtown Parking Task Force process,
which called for the construction of some additional parking and reconstruction of
Parking Structures Nos. 1, 3 and 6. The Promenade Uses Task Force foresaw the
opportunity to combine these efforts and suggested that options to enhance the cinema
experience "may include combining cinema development with the Downtown parking
structure reconstruction and expansion program." A recently received, unsolicited
proposal from Metropolitan Pacific Capital, LLC and Mann Theaters is ofFering a way to
achieve the City's goal of upgrading a Third Street Promenade cinema by expanding
onto the site of Parking Structure No. 3. Staff believes that this proposal presents an
excellent opportunity and recommends that the City solicit proposals to determine
private sector interest in a project of this kind on this site. There are no fiscal impacts
associated with this item at this time. Fiscal impacts will be determined if and when a
project is proposed.
Discussion
Backqround
In the late 1980's the City recognized that a key ingredient for the revitalization of the
Third Streef Promenade was to create an entertainment district to serve as an attraction
for movie-goers and encourage co-location of restaurants and retail stores. The Zoning
Ordinance was amended to encourage cinemas to locate in the Downtown area by
restricting new cinema development outside Downtown. As shown on Attachment A,
the Bayside District now offers four cinema complexes and three cinema operators, with
a total of 21 screens and over 5,500 seats. Until recently, these four cinema complexes,
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plus the Landmark on Wilshire Boulevard, have been competitive with theaters in
Westwood, Century City, Hollywood, Culver City, and West Hoilywood.
However, the continued success of cinemas in the Bayside District is threatened from
both internai and external factors. The existing Bayside cinema complexes only offer
between four and seven screens each, which potentially could put them at a
disadvantage in competition for first-run movies, as movie distributors prefer to offer
their product to theaters that can show movies on multiple screens at multiple times.
Furthermore, existing theaters in Santa Monica do not offer stadium seating and other
amenities that new theaters offec
Since 2002, several new cinemas have opened which offer more choices and amenities
and directly compete with Santa Monica cinemas. Contemporary cinemas at the
Howard Hughes Center and in Culver City directly compete with the Santa Monica
cinemas, and have been joined by new cinemas at Westside Pavilion, Century City and
the Grove. Both Mann Theaters and AMC Theaters are on long-term leases which
expire within the next 15 to 20 years. If cinema patrons and distributors favor other
cinema centers, the economic viability of existing operations in Santa Monica wiil
decline, the operators may decide to leave Santa Monica, and Santa Monica residents
will be forced to travel outside the City to see first-run films.
Based on preliminary studies by the City's economic consultant, Allan D. Kotin and
Associates, it is estimated that, annually, there are about 1,250,000 people who attend
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cinema in the Bayside District; they spend about $1,250,000 on parking; between 50
and 70 percent of the movie patrons eat at nearby restaurants; and movie patrons
spend, on average between $2 and $5 per person on concessions at the movie theater.
Maintaining cinemas in the Downtown is important to the City's economy, to the
diversity of uses in the Downtown and to the convenience of Santa Monica movie-
goers.
To support cinema activity and to preserve the Bayside District's competitive advantage,
adequate parking is needed. The EIR for the Downtown Parking Program, approved by
Council May 9, 2006, calls for the consfruction of new parking structures and the
reconstruction of parking on the sites of Parking Structure Nos. 1, 3 and 6(Attachment
B). In the report to Council on June 8, 2004, the Promenade Uses Task Force noted
that "movie theaters are essential to the success, vitality and mixture of uses of the
Bayside District.... Locating new theaters on other downtown streets could heip to
enliven the entire District....Options may include combining cinema development with
downtown parking structure reconstruction and expansion program."
With the assistance of Ira J. Mitchell, cinema consultant, staff has been meeting with
cinema operators. Both Mann Theaters and AMC Theaters have expressed interest in
upgrading their cinema presence within Santa Monica. In addition, other cinema
operators not currently located in Santa Monica have approached the City and
expressed interest in finding downtown locations.
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Metropolitan Pacific Capital, LLC in a joint venture with Mann Theaters recentiy
presented to staff a concept for upgrading their Santa Monica facility. Currently, Mann
operates six screens with 1,526 seats at 1313 Third Street Promenade. They propose
to retain the existing entrance on the Third Street Promenade and construct 10 theaters
with approximately 2,240 seats and 35,000 sq. ft. of ground-floor retail on Arizona
Avenue and Fourth Street by bridging Fourth Court and constructing. two levels of
cinema over subterranean public parking on the site of Parking Structure No. 3.
The proposed project offers several potential benefits to the community. These benefits
include retaining a cinema entrance on Third Street Promenade, which supports the
Promenade's place as the central retaii-entertainment destination within Downtown.
The project would also create ground-floor retail space along Arizona Avenue and
Fourth Street, expanding the energy of the Promenade to these adjacent streets that
are currently challenged by blank walis and parking at street level. Furthermore, there
is a possibility that a private development may succeed in encouraging adjacent owners
to participate in the project, thus creating a more efficient site for development and
parking.
In combination with these public benefits, the proposal also raises several issues,
including parking availability. Dedicating the site of Parking Structure No. 3 for cinema
development and only reserving the subterranean area for public parking may not
achieve the fuli parking program that the Downtown Parking Plan envisioned for the
site. This could place pressure on the City to properly plan for additional parking on its
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remaining city-owned land. As the City's efforts to acquire property in support of the
Downtown Parking Plan are still underway, this creates an element of uncertainty
relative to the overall parking pian. Another issue for consideration is that making only
one site available for new cinema development will not fully satisfy the need to
modernize the cinemas in the Bayside District, nor satisfy existing demand for upgraded
cinema facilities. If one cinema operator is able to upgrade successfully using the
Parking Structure 3 site, other cinema operators could be at a competitive disadvantage
until other opportunities arise.
Solicitation of Proposals
To help address some of the issues identified above, staff recommends soliciting
proposals for Parking Structure 3, pursuant to the following guidelines:
• The City will consider proposals for the P arking Structure 3 site which inciude
ground-level pedestrian-oriented space, contemporary cinemas and public parking.
• Preferential consideration will be given to proposals that incorporate creative
approaches to maximize the availability of public parking.
• Preferential consideration wiil be given to proposals that would result in preservation
of or modest increases in the total number of cinema seats in Santa Monica.
Previous Council Actions
In considering the recommendations of the Promenade Uses Task Force, Council
identified upgraded cinemas as a top priority for the Downtown. On May 9, 2006, the
Council certified the Downtown Parking EIR.
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Alternatives
As an alternative to soliciting proposals for the reconstruction of Parking Structure No. 3
for subterranean parking, ground-floor retail and cinema development, the City, acting
as its Redevelopment Agency, could:
1. Enter into an Exclusive Negotiating Agreement leading to an Owner Participation
Agreement through sole source negotiations with Metropolitan Pacific Capital
LLC and Mann Theaters, specifically for Parking Structure No. 3, as the property
is located within the Earthquake Redevelopment Project Area. Staff does not
recommend this alternative as if forecloses on opportunities to review other
potentially creative proposals for the site. In addition, it does not provide for the
open process that is normally associated with the City's disposition of property.
2. Seek proposals for development of the recently acquired City-owned property at
Fifth Street and Arizona Avenue. This site is 45,000 sq. ft. In
combination with adjacent properties, the site could accommodate an industry-
standard, 18-screen cinema complex. A cinema complex of this size stands the
best chance of securing new releases for the Santa Monica cinema distribution
zone and therefore would guarantee Santa Monica's position as a cinema venue.
Until film distributors change their policy about issuing films by zones, moving
forward with a cinema development on the site of Parking Structure No. 3, and
then, at a later date at another location, could dilute the strength of the Santa
Monica film market (unless both cinemas are owned by the same company).
Lastly, seeking cinema development proposals for an 18-screen theater on Fifth
Street offers a better opportunity to expand more broadly the vitality of the Third
Street Promenade than does developing a smaller ten-screen theater on Fourth
Street. This alternative is not recommended because the City does not own a
site large enough to accommodate a larger cinema complex, and the City's
acquisition activities are still underway. It is also not recommended because it
concentrates a major activity-generator on one site in the Downtown.
3. Seek proposals for the same mixed-use development as described above, for all
three parking structure sites that are slated for reconstruction (Parking Structures
Nos. 1, 3 and 6) and for the property the City recently acquired at Arizona
Avenue and Fifth Street. Staff does not recommend this alternative as property
acquisition discussions on parcels adjacent to some of these City-owned sites
continue and it would be premature to consider cinema development on the sites.
In addition, such a broad solicitation could result in proposals that exceed the
City's desired level of cinema development.
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4. Wait to decide whether to solicit any development proposals until all potentiai
property acquisitions are complete or untii the update of the General Pian is
complete. Given the long-term risks of delayed action, staff does not recommend
this alternative.
5. Develop a cinema master plan for City-owned properties, as well as any
necessary adjustments to the Downtown Parking Plan, before proceeding with
any developer recruitment. As property acquisition activity is continuing, and in
light of the lohg-term risks of delayed action, staff does not recommend this
alternative. In addition, this alternative may not capitalize on the creativity and
expertise of private cinema operators.
Environmental Analvsis
In January 2006, the City prepared and certified a program environmental impact report
for the City of Santa Monica Downtown Public Parking Program (SCH No.
2002121122). This program EIR analyzed, in part, the environmental impacts of
incorporating cinema space into the future reconstruction of Parking Structure No. 3.
Any potential development proposal that the City considers for this site will be examined
in light of this program EIR to determine whether additional environmental review must
be undertaken and the extent of such review, if required.
Public Outreach
The Promenade Uses Task Force public process identified upgraded cinemas as a top
priority for the sustaining the health and diversity of the Bayside District. The Bayside
District Board at its Land and Assets Committee meeting on September 11, 2007, and
at its Board on September 27, 2007, discussed the proposed cinema strategy. Both
recommended that the City seek development proposals for cinema development on
Parking Structure No. 3.
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BudgeUFinancial
Capital expenditures associated with a future public-private development are unknown
at this time and would be the subject of in-depth analysis and negotiation, subject to
Council approval.
Prepared by:
Miriam Mack, Economic Development Manager
Approved:
Andy Agle, Director~./
Housing and Economic Development
Forwarded to Council:
mt Ewell
nager
Attachment A: Summary of Theaters in Bayside District (chart to show theater name,
location, screens, seats, year built, owned/leased)
Attachment B: Map of City-Owned Properties (Showing Location of Downtown Parking
Structures and Property discussed in this report)
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ATTACHMENT A
Movie Theatres - Santa Monica
Theatre Name Address Total No_ ScrePnc N~ cpar~ ve~. Q..:~+
AMC Santa Monica 7 1310 Third Street Promenade 7 1~g7p 19g9
Mann Criterion 6 1313 Third Street Promenade 6 1,526 1924,1989
Loews/AMC Broadway 4(1) 1441 Third Street Promenade 4 1,049
Laemmle Monica 4 Plex 1332 2nd Street 4 1,074 1 g6g
21 5,519
NOTES:
(1) Loews Cineplex Entertainment Corporation merged with AMC
Entertainment, Inc. on January 26, 2006.