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SR-062408-8CCity Council Meeting: June 24, 2008 Agenda Item: "'C- To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Amendment of Bayside Leasing Guidelines Recommended Action Staff recommends that the Council- approve amendments to the Bayside Leasing Guidelines. Executive Summary The Bayside District Corporation Board of Directors has reviewed the Bayside Leasing Guidelines, adopted July 8, 2003 and amended April 10, 2007, and is recommending that they be amended to reflect a number of changes, including changes to use preferences for outdoor dining, activities in the center courts, and vending from carts. The amendments also clarify the process for approving leases and licenses and provide that the City Manager may only execute those lease and license agreements that are recommended by the Board. Background The City Council first approved Bayside Leasing Guidelines in 2001.- The objectives of the Leasing Guidelines are: to maintain the compatibility of use of City-owned properties and public rights-of-way located within the Bayside District for purposes which contribute to pedestrian orientation, outdoor -dining and neighborhood residential services; to establish. and implement procedures for managing and preserving the Preferred Uses of City owned properties; and to assure access and use of the public properties by the general public for the Preferred Uses through a leasing and licensing program that promotes orderly and .periodic changes in tenancy. These leasing guidelines allow for the City Manager to execute lease and license agreements that are in conformance to the Guidelines and are for terms not to exceed five years. Since their adoption, the Leasing Guidelines have been amended in 2003 and in 2007. Discussion The Bayside District Board of birectors Land and Assets Committee first began reviewing the Bayside Leasing Guidelines in April 2007. At its meeting March 27, 2008, the Board recommended that the Leasing Guidelines effective April 10, 2007, be amended to reflect the following: 1. An Objective Statement has been expanded to emphasize that the Guidelines encourage and support the success of independent, non-formula entrepreneurs who will offer the public quality service and value. 2. Section 1.A., regarding Outdoor Dining, encourages quality furnishings to be used in outdoor diriing settings. 3. Section 1.B., regarding Center Court, clarifies use of these areas for concierge services visitor amenities, including security, and outdoor dining, subject to future regulations to be established by the City. 4. Section 1.C., regarding the Pavilions, encourages informal seating, if barriers are not otherwise required by the City dr the Alcohol and Beverage Commission. 5. Section 1.D., regarding retail space in the parking structures, continues the preference for uses that are neighborhood serving. 6. Section 1.F., regarding vending, modifies the language to reflect the operation of the Master Cart Operator and eliminates language that specifies product type. 7. Section II eliminates the preference for "local" businesses, as the Board determined that the term was difficult to prescribe in today's retail environment. This section retains a preference for non-formula businesses. 8. Section III regarding Lease Terms, Options and Renewals, introduces language that provides for bonus points during the recruitment process for existing tenants who had provided "exemplary service" within the given product type. This new language is similar to language in the Pier Leasing Guidelines. 9. Section VII is a new section that reflects Bayside's commitment to sustainable environmental practices. The new section encourages "lessees and licensees to adhere to sustainable business practices in all aspects of their operations, in accordance with City, State and Federal regulations and consistent with best practices that seek to `reduce, reuse and recycle' non-renewable resources." 2 10. Section XI, XII and XII address Tenant Recruitment, Evaluation Criteria and Delegation of Authority. The amended language clarifies. that the Board is to review and approve Requests for Proposal prior to their distribution and that responses to RFPs are to be reviewed by a Review Team consisting of staff from the City and Bayside who will make recommendations to the Land and Assets Committee who in turn .will make recommendations to the Board. Both the Committee and Board may ask to review pertinent information from the proposals to help inform their decisions. A formal recommendation of the Bayside Board of Directors is required before staff may present a lease or license to the City Manager for execution. Commission Action The Bayside District Board of Directors reviewed and recommended amendments to the Bayside Leasing Guidelines at its meeting March 27, 2008. Alternatives Council may approved the amendments, as recommended by the Bayside Board of Directors, or approve other language. If Council introduces new concepts, staff recommends that Council delay approval of the amendments until the Bayside Board has an opportunity to review the alternatives. Financial Impacts & Budget Actions There is no financial impact resulting from the recommended action. Prepared by: Miriam Mack, Economic Development Manager Forwarded to Council: Name Andy Agle, Director Housing and Economic Development Attachment A: Proposed Bayside Leasing Guidelines, March 27, 2008 3 Attachment A Attachment A BAYSIDE DISTRICT LEASING GUIDELINES draft updated Mav 21, 2008 .GUIDELINE OBJECTIVES The purpose of the Bavside Leasing Guidelines is to establish the tvpe and nature of private uses that the City of Santa Monica ("City") and Bavside District Corporation ("BDC") seek for the leasing and licensing opportunities that are available within the City's public facilities within the BaVSide District. Given that the leasing and licensing opportunities are limited the City and BDC seek to encourage and support the success of independent, non-formula entrepreneurs who will offer the public quality service and value. The designated uses and process for selecting lessees and licensees are intended to mAAaintain the compatibility of use of City-owned properties and public right- of-ways located within the Bayside District for purposes which contribute to pedestrian orientation, outdoor dining; and neighborhood residential services; establish and implement procedures for managing and preserving the Preferred Uses of City-owned properties and rights-of-way; and assure access and use of these public properties by the general public for the Preferred Uses through a leasing and licensing program that promotes orderly and periodic changes in tenancy at fair market rates. 1. PREFERRED USES Current uses of City-owned structures and right-of-ways in the Bayside District are diverse, and have been intended to enhance the open-air casual dining experience on Third Street Promenade and support those purposes that serve broader neighborhood community interests and needs in the Bayside District. Diversity is maintained through outdoor dining licensing agreements, commercial activities providing services that may otherwise not be offered to the visitors and neighborhood residents in the Bayside District, and educational and recreational opportunitiesasc~s for otherwise underserved segments of the community. City-owned structures and public right-of-ways in the Bayside District that are and will become available for lease or license and associated Preferred Uses are as follows: P~Outdoor Dining A~4 Outdoor Dining Licenses located within the public right-of-way adjacent to restaurants on Third Street Promenade, Arizona Avenue, Santa Monica Boulevard, Broadway, and Second Street; - ^^+~„ +^*^~'^^ ~ Q~n ~ ^ +o^+ ^,,,+ Gnu ^„+,+^^. ,+,..,^^ ~e^+n All restaurants within the Bayside District are encouraged to provide outdoor dining in accordance with City rules and regulations. Because the Bayside District enloys high visitor use, to ensure durability and sustain high standards of maintenande, these Guidelines encourage use of quality furniture and fixtures in designs that enhance the ambiance of the Third Street Promenade. Outdoor Dining Licenses are exempt from the requirements of these Guidelines regarding Tenant Recruitment, Evaluation Criteria and Delegation of Authority, and new and renewed licenses may be presented to the City Manager for execution without review by the Bayside District Board of Directors. P f A 1 1 ® M -+ +/ .,f +h.,+ 'll .+ ~I'+n ~.nrJ c ni° hi.4h +hg r ic,.,... .... ......... ................... ... ........_ .. ..... ..... ~~~__.. ._ ~.._ __. __ .___.. _.. .d h ff + h f tr' aow vc..... ...y ... ..........~.., p.. ....- ~.. _...._ ._-.._ _. _r _. ~_. _.. rJ # '.+ +~.+inn ref +h° Drnm°n~^I° nnr.l Q.nvd.d° Il'^+rir~ pc... ` ....... ...... ... .... ........... ... ..._ ._... _..~__ _..._ _~~_.__ -.__..__. . B. Center Court • Three (3) Center Courts, one court located mid-block on each block of the Promenade totaling 1,875 square feet (625 square feet each) Current Use:9peratier~: c+r°°+ n°.f^rm°. ^r°^ ^n,+ programmed special event space (i.e. holiday decorations) a concierge cart or other services/facilities for visitors street performers are allowed in the Center Court of the 1300 Block only. Preferred Use: Programmed special event space (i.e. hoiiday decorations), a concierpe cart or other services/facilities for visitors visitor amenities including security stations and street performers (in the Center court of the 1300 Block onl .Ancillary outdoor dining area with table service if feasible, for existing Promenade restaurants is encouraged subject to regulations set forth. in the Santa Monica Municipal Code. ^ ~ ^ ^^°c' s^°^~°' °~~°^+. °^'^ w........ r-^-__ C. Pavilions Two (2) Pavilions 4~ies,~s located in the center median of the Third .Street Promenade - 1,575 square feet Current Operation: Visitor-serving_commerciallretail ahcl; food service uses, South Pavilion 1400-A Third Street Promenade, 250 sg. ft 1400-B Third Street Promenade 500 sg. ft North Pavilion 1257 Third Street Promenade 212.5 sg. ft 1260 Third Street Promenade 550 sg. ft ^^~ ^^'~^o cw"otw*.'g^ Preferred Use: Restaurant/cafe use with outdoor dining, '~ with or without alcohol-service, to that-wE+~ appeal to and serve both the residential community and area visitors and cumulatively provide for diverse food and beverage offerings, price points, hours of operation, aesthetic ambiance and any other factors deemed to enhance the character and pedestrian orientation of the Promenade and Bayside District. Informal seating is encouraged in any common area described as part of the leasehold provided the seating area is not required to be enclosed by a barrier in accordance with the City's Municipal Code or the Alcohol and Beverage Commission. u^~^~°.~°r :~:,.±..^!!~~ ^~^°^`°"'° Alternately, retail lease space for specialty items may be considered when vacancies occur 4 and as market demand warrants. ~" " ...c~., _. c:'c"'° +„ +"° ,. °^+ r°+°;~ V,^rL ~D. Seven{7~ Parking Structure Leased Premises +^+~''^^ ''^ ~" °^~ °~° +°°+ Current Use:9pera4ter~: Neighborhood and- community oriented commercial, educational, and recreational senrices- Parkinq Structure No. 5 1454 Fourth Street, 841 sq. ft 1450 Fourth Street 675 sg. ft 1448 Fourth Street, 276 sg. ft 1444 Fourth Street, 412 sg. ft 1440 Fourth Street, 3,078 sg. ft Parkinq Structure No: 6 1433 Second Street, 1,134 sg. ft. 1429 Second Street, 825 sg. ft. Preferred Use: Neiahborhood and community oriented commercial, educational and recreational services retail or restaurant uses with outdoor dining that operate in a manner that animates the pedestrian experience. E: Other Current Use' A shoe shihe stand owned by the Bavside District Corporation, located oh the 1300 Block of Third Street Promenade. T°rm• Civ° . r I°nc° Tcmr. TTrc~:°cia.zcvac Preferred Use: Neighborhood and community oriented commercial services that may otherwise not be offered to residents in the Bayside District. F. Vending Cart License - Operatiorr of a retail and food vending cart program from designated public right-of- way locations. Current Operation: Master Cart Licensee Program which provides a minimum of 2245 and a maximum of 3224 individual carts to operators subject to sublicense agreements. Vending carts operate solely along Third Street Promenade, and are predominately general merchandise carts. In addition, Master Cart Operator offers- three carts for artists and one concierge cart for the Bayside District Corporation. .Preferred Use: Expansion of Vending Cart Program by individual vendors to include designated Transit Mall .locations, where feasible, and other these locations allowed ~~'°,~,+~-Rtie~k~in the Santa Monica Municipal Code_ Sectien h'°n+ t~ fMrfh°r !`nw n'1 nnrnvnl ('nrF nr°nrom alll cmnh oc'~ .. n . .... ..,.. ... ~., r. ., ...... .....,.. N. .. ~ ....... .. ....~...-._.__ .Jn+'n of nirl°n+nl fnn.d nrJ h .oerasc° °nrd'n +h n+ n'm'~ v°c dupncn,.t~.... cf °..:.n.4'ny r°c+.+w wn+ off°r'r.~~ hn.. rlmnrl° ~rFc nr.~I nr~FF n-~r+c ~nrJ nird can+nl nrlc nrd n°c. TM~~r~r~yet Drnm°nnnln \7r~n r7ir.n - ('nr4 P--re+ner~ade- Vending cart operators are encouraged to offer products and services that enhance the special qualities of the Promenade and create an experience that is uniquely "Santa Monica". II. PREFERENCE FOR INDEPENDENT NON-FORMULA BUSINESSES The leasing and licensing of all City-owned properties and rights-of-way within Bayside District will be subject to a preference for fecal independent, non-formula businesses. and community services that are financially and operationally capable of providing the Preferred Uses. Such preference will be .reflected in bonus ratings for responses received from leeall~-ewmed independent businesses as part of a public Tenant Recruitment process. A formula business is defined as a business having three or more sites outside the City of Santa Monica that requires, by contractual or other arrangement the maintenance of standardized service, decor, uniforms, facility design and format substantially identical to another operation. III. LEASE TERMS, OPTIONS AND RENEWALS As vacancies arise either by lease expiration or earlier termination, available space will be dffered for Preferred Uses for non-renewable lease terms'up to five years if substantial new .capital investment in structures, structural improvements or equipment is not warranted. If a tenant is required to make substantial new capital investment in structures, structural improvements or equipment to implement the Preferred Use consistent with intended purposes of the premises, one to three five-year lease options may be offered varying with amortization -and financial requirements of the new capital investment. Lease renewals or options to extend the terms of occupancy will not be automatically offered to existing tenants upon expiration of agreements. As vacancies arise either by natural expiration or earlier termination, recruitment for each opportunity site will be conducted in accordance with these Leasing Guidelines. Current operators who are financially and operationally capable of providing the Preferred Uses may respond to .the public Tenant Recruitment process in the same manner as any prospective new operator. It is recognized, however, that reliability and continuity of quality commercial services are valuable assets to the public experience of the Promenade and Bayside District. In order to support and encourage businesses within the Bayside. District to .operate and maintain their premises in an exemplary manner, such businesses will be subject to a renewal preference reflected in bonus ratings for responses received as part of a public Tenant Recruitment process. The term "exemplary manner" refers to those tenants who meet all of the following criteria: (i) provide on a consistent basis a high quality product within the business category with excelleht customer service; (ii) maintain their premises in a first class and attractive manner and (iii) comply with all lease or license provisions as well as all applicable local, state and federal laws and regulations. Outdoor Dining Licenses will be issued for five-year terms, and will be extended or renewed for existing restaurants and cafes operating in good standing. Good standing shall mean that the licensee has operated the License Area in accordance with its license in a manner that encourages its use by pedestrians and consistent with the Bayside Specific Plan, including but not limited to all zoning, design and operational standards established for the Bayside Commercial District. IV. EXPANSION OF LEASEHOLDS In order to provide access to diverse tenants capable of providing Preferred Use. on City-owned properties, the physical expansion of existing and new leasehold occupancies, other than for restaurants, will not be accommodated. V. DIVERSITY OF TENANCIES In order to promote operator diversity in the development and use of leasehold opportunity sites, the prospective grant of multiple leasehold areas to an individual tenantor operator will not be permitted. VI. LABOR PEACE Because the City has a financial or proprietary interest in the businesses operating from its leaseholds, some of which are in industries that have a history of labor/managemenfi conflict, the risk of interruption of rental revenue received by the City would be minimized if such businesses were assured of labor peace. An appropriate labor peace provision for. businesses engaged in visitor-serving commercial activities would minimize the City's exposure to revenue interruption and disruption of public enjoyment of the Promenade and Bayside District. New or substantially amended agreements for. leasehold operation shall provide that the tenant will not engage ih practices that impede employees' ability to organize and contract with a labor organization for the purpose of collective bargaining. Such prohibited practices include harassment, intimidation, "captive audience" anti-union meetings or illegal terminations of workers in retaliation for organizing. A substantial amendment is defined as a change of use of the property, an increase in seating or square footage of more than 25%, or an extension of .lease duration. Tenant engagement in prohibited practices shall constitute an event of default under the terms of lease. Affected leases would be those businesses having five or more full or part-time employees and engage in restaurant or visitor-serving activities. VII. SUSTAINABLE BUSINESS PRACTICES These Guidelines encourage lessees and licensees to adhere to sustainable business practices in all aspects of their operation in accordance with City State and Federal regulations and consistent with best practices that seek to "reduce reuse and recycle non-renewable resources. VIII. PERIODIC REVIEW OF RENTAL RATES Lease rental rates will be established at independentlyappraised fair market rates or in accordance with .responses received to a public Request for Proposal process. Responses received for lease and license opportunities may exceed the minimum and percentage rents set forth in the Requests. Lease rates are considered secondary to establishing or retaining a Preferred Use, and pricing may be adjusted as necessary to maintain the preferred use of the leaseholds. Annual CPI adjustments will be made for the term of any new property lease or license. IX. FACILITY CONDITION REVIEW All City-owned structures will be inspected prior to new leasehold occupancy and brought by the City or new tenant to a decent, safe and sanitary condition appropriate for the Preferred Use. If tenants must make improvements to the structure to implement the Preferred Uses as a mutually agreed condition of a lease, the City will first review and approve the proposed scope of work and improvement design. All necessary building permits must be obtained; and the work inspected for compliance with applicable codes. Appropriate rental credits for the approved work performed may weuld be negotiated as part of the lease. X. TENANCY RELATIONSHIPS All City-owned property within the Bayside District appropriate and suitable for leasing or licensing by the City to individual occupants for the Preferred Uses. will be in accordance with agreements prepared by .the City. .Each tenant or licensee would be responsible at its expense for interior maintenance and repair and utility consumption, and the City would retain responsibility for maintenance and repair of roofs and building i exteriors. Subletting of space is explicitly prohibited, with the exception of vending cart agreements to individual cart operators issued by the licensee. XI. TENANT RECRUITMENT All City-owned property within the Bayside District appropriate and suitable for leasing or licensing will be subject to a public marketing and solicitation process to identify. prospective tenants and licensees with financial and experience qualifications for the Preferred Use of the available space.- Vacancies will be the subject of public Requests for Qualifications and/or Requests focProposals publicized utilizing: • Media advertising, including general circulation newspapers or local/limited circulation publications; • Direct mail to waiting list and/or other targeted individuals having expressed previous interest in leasehold occupancy or license operation for the available Preferred Used and Posting notice on the .Bayside District Corporation's, and City's ^^~~,-Re~~e nn^,,.^..o.,,o.,+ nor^.+.,,e^>>~ intereet web site. As appropriate, vacancies may also be publicized utilizing:. • Direct contact or outreach to prospective tenants • Dissemination by fax, a-mail or telephone to local commercial real estate brokers; and • Press releases and other direct marketing performed by the Bayside District Corporation, The Bavside District Board of Directors will review and approve Requests for Proposals prior to public dissemination by the City. The Request for Qualifications and/or Request for Proposals will set forth the Preferred Uses of the available space, proposed terms and conditions for the leasehold or license opportunity, and criteria for reviewing and rating responses. All respondents and prospective tenants will file a Lease Applicatioh. Information contained in the Lease Application will be utilized for evaluation and confirmation that the proposed tenancy is a Preferred Use for the available space, and verification of experience, references and financial capability to perform .leasehold obligations. Responses will also state preliminary terms and conditions for the proposed lease or license. Responses to Request for Qualifications and/or Request for Proposals will be analyzed and rated by a Rreview Tteam comprised of City staff and the Executive Director of the Bayside District Corporation, or his/her designee.-°«p,tisc^*,.~atve~¢''~~;=y:,=~ee;;,;~ The Rreview Tteam will provide its analysis and recommendation a5 to a preferred respondent, inclusive of appropriate bonus ratings for leea~independent, non-formula business respondents and complying tenant renewal proposals to the Bavside Board of Directors Land and Assets Committee who will make a recommendation to the Bavside Board of Directors.- The recommendation of the Land and Assets Committee to the Bavside District Board of Directors may be to reject all responses, solicit additional information from one or -more respondent, or for the City to enter exclusive lease or license negotiations with a preferred respondent. As part of its deliberations prior to making a recommendation, the Land and Assets Committee and Board of Directors may request specific information to supplement the Review Team's oral or written presentation, including copies of all proposals received. The City will neither pay nor receive commissions for leasing of City-owned property, Staff will cooperate with commercial real estate brokers who are authorized to negotiate leases and licenses on behalf of prospective tenants. XII. EVALUATION. CRITERIA The Review Team will rank. the candidates and make its recommendation based on the strength of the prospective licensee, including donsistency of the business plan with the Preferred Use described in These Leasing Guidelines; the licensee's prior experience and likelihood of success to plan, construct, manage and maintain the operation, licensee's financial strength, an understanding of the licensee's past business practices based on references, the quality of the product and/or service, and other standard business considerations. VIII. DELEGATION OF AUTHORITY The Review Team will provide an oral or written report of its deliberations to the Bayside District Land and Assets Committee. The Land and Assets Committee will present its recommendation to the Board of Directors: ^^~ °°°~ +"° R^„^;,,° r,~^+^^+ n^^r,+'^ ~rts~re°nrd._Thn C2~.,.~. ~.dc+ ^n~. rrl'c. Ginn of c~~nnnrF ...ill h° or '°°°° ^'^^^n^°^*° The Board of Directors may accept the Land and Assets Committee's recommendation, request additional information, or reject all proposals and request modifications to the RFP and direct that the City conduct another public solicitation process. Upon recommendation of the Board of Directors, City staff will negotiate a Lease or License and report to the Board the terms contained in the Lease or License prior to its submittal to the City Manager for execution. The City Manager will execute leases and licenses of City-owned property recommended by the Board of Directors, prepared in accordance with these Leasing Guidelines, the objectives set forth in the Request for Proposal terms and conditions negotiated by the City, and on the basis of written agreements prepared and approved as to form by the City Attorney. Leases and licenses for terms of occupancy greater than five years (exclusive of option eriods will be referred to City Council for its approval. °1 nr ^°°~ '°~°°° ^n~ nir°-a~Sstaff will consider- the suggestions and/or recommendations of the Board in its negotiations and preparation of documents. ag;c~~ 5 APPENDIX A: LICENSEES AS OF MARCH 17, 2008 South Pavilion 1400-A Third Street Promenade 250 sg: ft., occupied by Mudra, Inc. a women's apparel store whose license expires February 29, 2009 1400-B Third Street Promenade, 500 sg. ft. occupied by Bussola, lnc., dba Locanda del Lago a restaurant, whose license expires April 1, 2011, with an additional five-year option. North Pavilion 2008 and who has two additional options that extend through July 31, 2015. 1260 Third Street Promenade, 550 sg. ft., occupied by Strouk Group, doing business as Mr. Marcel Pain. Vin et Fromage, a restaurant with with one five veer option Parking Structure No. 5 1450 Fourth Street 675 sg. ft:, occupied by Garbo Shoe Repair, whose lease expired August 31 1999 and who is on a month-to-month hold over. 1448 Fourth Street 276 sg ft. occupied by Peter's Barber Shop, whose lease expired Mav 1999 and who is on a month-to-month hold over. 1444 Fourth Street 412 sg. ft. occupied by Parking Concepts, Inc. who is the Gity's parking operator. 1440 Fourth Street, 3,078 sg. ft., occupied by The Dance Doctor, whose lease extends until September 30, 2012, with one five-near option ending on September 30, 2017. Parking Structure No. 6 1433 Second Street, Suite 101, 1,134 sg. ft. occupied by Bayside District Corporation, for storage. 1433 Second Street, approximately 3,850 sg. ft., occupied by the Santa Monica Police Departmeht Third Street Promenade Substation 1429 Second Street, 825 sg. ft. occupied by Willie & Gloria's, a hair salon, whose lease expired November. 1, 2006, and is on a month-to-month holdover. G. Other Current Use: Shine Time Shoe Shine, a shoe shine stand operated from a stand owned by the Bavside District Corporation, located on the 1300 Block of Third Street Promenade, whose license extends through September 20, 2012. Current Use: Provenzano Resources lnc., operator of the Master Gart Licensee Program. provides a minimum of 22 and a maximum of 32 individual carts to operators,. subject to sublicense agreements. Vending carts operate solely along Third Street Promenade, and are predominately general merchandise carts. In addition, Master Cart Operator offers three carts for artists and one concierge cart for the Bayside District