SR-121785-6Melf/ -• ~
DEC 17 1985
C/ED:EDD:EF:mb
Council Meeting: December 17, 19135
Santa Monica, California
T0: The Mayor and City Council
FROM: City Staff
SUBJECT: Recommendation to Authorize City Manager to Negotiate
and Execute Leases for 4636 Square Feet of Commercial
Space in Downtown Parking Structure No. 2
INTRODUCTION
This report recommends that the City Council authorize the City
Manager to negotiate and execute two (2) leases for a total of
4636 square feet of commercial retail space in Downtown Parking
Structure No. 2 pursuant to the terms outlined in this report.
BACKGROUND
On January 22, 1985, the City Council adopted terms and procP-
lures for the leasing of 6,700 square feet of retail space in
Downtown Parking Structure No. 2. Following the Council meeting,
City staff proceeded to advertise the availability of the retail
space with local commercial leasing brokers, with paid advertise-
ments published in the Evening Outlook, and recently with the
procurement of commercial broker services through Ed Flores Real-
ty. To date 890 square feet of commercial space has been leased.
All persons inquiring about the space are directed to inspect the
site and are informed of the City's requirement that all tenant
improvements be paid by the Lessee. Interested parties are then
requested to submit a formal proposal for leasing of the space
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specifying proposed lease terms, tenant improvements and local
credit references.
DISCUSSION
Based on the above process, it is recommended that Mr. G. Nabavi,
doing business as ITAL ART, and Claudio Carmona and Beth Guynn,
doing business as OCUMICHO, be granted commercial leases subject
to the terms proposed below. Specific lease terms are the prod-
uct of negotiations based on the City's stated terms and the ap-
plicant's proposal. The recommended financial terms take into
consideration the amount of capital improvements required, the
term of the City's lease, the condition of the lease premise, and
the estimated schedule for completion of all tenant improvements.
A summary description of the proposed lessees and lease terms is
provided below.
ITAL ART is an established Italian furniture store owned by Mr.
G. Nabavi. At this time Mr. Nabavi's main showroom and warehouse
facility is located in El Monte, California. Under the terms of
the proposed lease, Mr. Nabavi will operate a showroom facility
only at the premise and will not be allowed to use the facilities
for storage or warehouse facilities. All deliveries to store
patrons will be made directly from the warehouse facility.
Under the terms of the proposed lease, Mr. Nabavi will make all
tenant improvements which include the installation of an acousti-
cal ceiling, floor coverings, an upgraded electrical system, and
various oth?r improvements associated with the furnishing of a
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furniture showroom. The following terms are proposed for granting
a lease to Mr. Nabavi:
o monthly rent - $3000 subject to an annual C.P.I. adjust-
ment with no cap;
o amount of lease space - 3636 square feet;
o term of lease - 5 years with an option to extend for
additional 5 years with the minimum rent to be re-
established at the end of the first five years at the
then prevailing market rent;
o a rent deposit - equal to 3 months rent ($9000), payable
upon execution of the lease by the City; and
o a "grace period" - a sixty (60) day grace period is
recommended, effective upon the execution of the lease
by the City, against the payment of monthly rent to ac-
commodate the necessary construction schedule for tenant
improvements.
Under the terms of the City's agreement with Ed Flores Realty,
the firm is to receive a base broker's commission of $7980.
Fifty percent of the fee is to be paid upon execution of the
lease by both parties, with the remainder to be paid upon the
occupancy of the lease space by the lessee. These terms are con-
sistent with the current and prevailing industry standards for
broker commissions on the WPStside.
OCIMICHO - is a new art gallery jointly-owned by Mr. Claudio
Carmona and Ms. Beth ~uynn. Under the terms of the proposed
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lease, Mr. Carmona and Ms_ Guynn will make all tenant improvP-
mPnts which include the installation of floor coverings, an up-
graded electrical system, and various other improvements associ-
ated with the furnishing of an art gallery. The following terms
are proposed for the granting of a 1eaSP:
o monthly rent - $1100 subject to an annual C.P.I. adjust-
ment with no cap;
o amount of lease space - 1000 square feet;
o term of lease - 5 years;
o a rent deposit - equal to 2 months rent ($2200), payable
upon execution of the lease by the City; and
o a "grace period" - a sixty {6U) day grace period is
recommended, effective upon the execution of the lease
by the City, against the payment of monthly rent to ac-
commodate the necessary construction schedule for tenant
improvPmPnts.
The granting of a lease will not require the payment of a lease
commission as the lease was directly negotiated by City staff.
Over the next few months it is anticipated that staff will be
returning with an additional proposal for the granting of a lease
for the remaining 1000 square feet of space. At that time, Coun-
cil will once again have the opportunity to review and approve
the proposed lessee and lease terms.
BUDGET/FISCAL Ity1PACT
Given the above recommPndPd lease terms, it is anticipated that
during FY 1985-86 the City General Fund Account Number 01-904-
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077--000--000 will receive an additional total lease revenue of
$18,450. On an annual basis thereafter, it is anticipated that
the City General Fund will receive a total income frorr~ these
leases of $49,200 plus annual C.P.I. adjustrr~ents recommended as
part of the lease terrr~s. Funds are currently available in the
General Fund Professional Services account, City Planning Divi--
Sion, (01--200--266--000--506) to pay the required broker fee of
$7980.
RECOMMENDATION
It is recorr~rr~erided that the City Council authorize the City Man-
ager to negotiate and execute corr~rr~ercial leases with the above
referenced lessees consistent with the terms outlined in this
report.
Prepared by: Ernesto R. Flores, Manager
Economic Developrr~ent Division
Corr~munity & Economic Development Department
Attachments: Lease Agreerr~ents
Addendum to Lease Agreement -- Option to Extend
ERF : Dib
carmona
Reference Contract
Nos. 4625 and
4626 (CCS).