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Santa 1~dOniCH
City Council IVdeeting: September 8, 2009
Agenda Item: -~J~
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Cinema Development at 1320 Fourth Street
Recommended Action
Staff recommends that the City Council authorize. the City Manager to enter into
exclusive negotiations with Metropolitan Pacific Capital Inc. in partnership with AMC
Entertainment Inc. to develop and operate a multiplex cinema on the site of Parking
Structure No. 3 located at 1320 Fourth Street. Staff also is seeking conceptual direction
from the Council that public parking should not be planned as part of the project.
Executive Summary
The City Council-appointed Promenade Uses Task Force concluded in 2004 that the
existing cinemas in the Bayside District are outdated and most likely will become less
competitive in the near future unless they can provide. amenities that newer theaters
offer. Recognizing the physical challenge of creating new cinemas on the Third Street
Promenade, the Task Force encouraged cinema development outside of, but near to,
the Third Street Promenade as a means to expand the vitality of the District.
Pursuant to Council direction, staff issued a Request for Proposals (RFP) to redevelop
the site of Parking Structure No. 3 for contemporary cinema, ground-floor retail or
restaurant space and subterranean parking. The RFP gave. preference to proposals
that adhered to Council-adopted criteria, including .ground-level retail uses,
contemporary cinemas and public parking; preservation or a modest increase to the
total number of cinema seats in Santa Monica; and maximization of the availability of
public parking.
Council is being asked to authorize the City Manager to negotiate and. execute an
Exclusive Negotiating Agreement with Metropolitan Pacific and AMC Entertainment Inc.
(Developer) for a cinema development with ground-floor pedestrian uses on the site of
Parking Structure No. 3. Although the RFP gave preference to proposals that
maximize on-site public parking, staff recommends that the development not include
public parking because it will cause a significant increase in the necessary building
height, will reduce pedestrian retail frontage, will be expensive to construct, and will
create an inefficient layout.
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Background
In the late 1980's, the City recognized that a key ingredient to the revitalization of the
Third Street Promenade was to create an entertainment district to serve as an attraction
for movie-goers and to 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. The strategy was
successful in attracting new cinemas to Downtown Santa Monica, and cinemas played a
key role in the revitalization of the Third Street Promenade and supported Downtown's
evolution as a retail, dining and entertainment destination. Three cinema companies,
AMC, Mann and Laemmle, now operate four cinema complexes in the Bayside District,
with a total of 21 screens and over 5,500 seats.
The continued success of cinemas in the Bayside District is threatened by both internal
and external factors. The existing Bayside cinema complexes offer between four and
seven screens each, which puts 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 movie theaters in
Santa Monica do not offer stadium seating, state-of-the-art technology, enhanced food
service and other amenities that newer cinemas offer.
Since 2002, several new cinemas have opened in nearby communities which offer more
choices and amenities. Contemporary cinemas at the Howard Hughes Center,
Downtown Culver City, Westside Pavilion, Century City, The Grove, Hollywood and
Sherman Oaks directly compete with Santa Monica cinemas. Movie attendance in
Santa Monica has gradually declined from approximately 2.0 million patrons annually
during the 1990s to approximately 1.4 million patrons in 2007. Tliis represents a 30
percent decline in movie attendance in Santa Monica, while movie attendance fell by
approximately five percent during the same period nationwide. If the local trend
continues, Santa Monica is at risk of losing its ability to attract first-run releases.
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All of the Promenade cinemas are in buildings whose sites and configurations are not
large enough to accommodate current stadium-style movie complexes. Recognizing
the challenge of creating new cinemas on the Third Street Promenade, as well as an
opportunity to expand the energy of the Downtown District, the Promenade Uses Task
Force foresaw the opportunity to combine the cinema strategy with the Downtown
Parking Strategic. Plan, suggesting. that options to enhance the cinema experience "may
include combining cinema development with the Downtown parking structure
reconstruction and expansion program."
Development of a cinema project on the site of Parking Structure No. 3 was seen as a
way to fulfill the Promenade Uses Task Force's objective to ensure the continued
operational viability of Santa Monica's cinemas to serve residents and to support a
diversity of activities in the district. Parking Structure No. 3 is a 30,000-square foot
parcel located at 1320 4th Street, near the geographical center of the Downtown District.
The site contains afive-story public parking structure with 324 parking spaces.
Commercial and bank uses surround the site to the north and south.
Discussion
In February 2008, Council authorized staff to solicit proposals for redevelopment of
Parking Structure No. 3 into a mixed-use project that would include astate-of-the-art
cinema, ground-floor retail or restaurant space and subterranean parking. The RFP
gave preference to proposals that adhered to Council-adopted criteria, including
ground-level retail uses; contemporary cinemas and public parking; preservation or a
modest increase to the total number of cinema seats in Santa Monica; and
maximization of the availability of public parking.
The City received three proposals; however, one proposal did not include a developer
or proposed terms and was considered non-responsive. The two responsive proposals
were received from Metropolitan Pacific in partnership with AMC Theaters and from
Robertson Properties in partnership with ArcLight Cinemas. Both proposals show
development of 12 to 13 screens and 2,000 to 2,167 seats, with ground-floor retail.
3
Both proposals come from teams with successful track records of demonstrated ability
to develop and operate projects of similar scope and complexity. However, as the
Metropolitan/AMC proposal involves the replacement of existing cinema screens and
seats in the Bayside District, the proposal most closely aligns with the Council-approved
criteria, in particular the criterion that the development result in preservation or a modest
increase in the total number of cinema seats in Santa Monica. If Metropolitan/AMC is
unable to reach agreement with the City regarding business terms of the transaction, or
unable to complete the project according to a schedule of performance, including
securing entitlements, negotiations with Robertson/Arclight would be proposed.
Metropolitan/AMC Proposal
The Developer's concept includes 12 screens and 2,167 seats. However, the proposed
project results in a modest increase in the total number of cinema seats in Santa
Monica because AMC currently operates two other cinema sites in the District and they
propose to close the Loews/AMC Broadway cinema and remodel the AMC 7-plex with
reduced seating capacity. With the loss of 1,049 seats from the closure of the
Loews/AMC Broadway and the reduction in the number of seats from remodeling of the
AMC 7-plex, the net gain in seats is projected to be 570, an increase of approximately
10 percent over the total number of existing seats in the District.
Other noteworthy features of the proposed AMC Santa Monica concept include IMAX
and 3D technology; a restaurant and lounge that can be accessed by the general public
as well as AMC patrons; enhanced food and beverage service with specialized food
areas; additional ground-floor space that could be leased to an unaffiliated retail or
restaurant establishment; reserved seating; 50-inch theater seating platforms for
additional leg room; 21-inch risers for unobstructed views rather than the normal risers
of 18-inches; and state-of-the-art digital projection technology and theater sound
systems.
Preliminary ideas regarding cinema design include atwo-story transparent glass facade
on 4th Street; skylighting to bring natural light into the lobby, restaurant and food service
4
areas; and a publicly accessible, glass-enclosed elevator. The building is intended to
be LEED-certified with possible solar power for the signage. The proposal represents a
new design typology for AMC, with the intention that the AMC Santa Monica will be the
cinema operator's new flagship. If Council authorizes exclusive negotiations, the
Developer will work closely with the Planning and Community Development Department
through the conceptual design process in advance of initiating the entitlement process.
The total building area is estimated to be 78,500 square feet with construction costs
projected at $400 per square foot, including furniture, fixtures and equipmerit. If
exclusive negotiations are authorized, staff and consultants will carefully review the
economics of the proposal, to ensure that the City receives a fair rent for use of its
property. The estimated attendance for the new cinema is 850,000 to 1.2 million
admissions annually, with 300,000 annual admissions at the remodeled AMC 7-plex.
Based on historical movie attendance, it is estimated that the entire District is capable of
accommodating approximately 2.2 million admissions annually.
Metropolitan/AMC Qualifications
AMC Theaters is headquartered in Kansas City, Missouri. The firm was established in
1920 and currently operates 309 theaters with 4,628 screens in five countries.
Approximately 99 percent of AMC theaters are located in the United States and Canada
with the remaining theaters located in international markets such as Hong Kong, France
and the United Kingdom. AMC is awell-capitalized, privately held company that plans
to self-finance this project. Metropolitan Pacific Capital Inc. is a Santa Monica-based,
full-service real estate investment firm. Metropolitan Pacific specializes in commercial,
mixed-use, and residential development, redevelopment and investment. The
company's core business is the acquisition, redevelopment and management of urban
in-fill projects located in Southern California. Metropolitan Pacific and its predecessor
company have invested in, developed and managed in excess of $250 million of real
estate since 1980.. The financial background and capacity of the developer and
operators will be thoroughly reviewed during the negotiation process.
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Exclusive Negotiating Agreement
The Developer's proposal is responsive to the City's Request for Proposals. The
development team has the financial resources and development experience to complete.
the project. If Council concurs with staff's .recommendation to move forward with
negotiations with Metropolitan/AMC, then staff recommends that the City and Developer
enter into an Exclusive Negotiating Agreement (ENA). The ENA would establish a
schedule of performance for the Developer to pursue entitlements from the City and
Coastal Commission. In addition, during the term of the ENA, the parties would
negotiate lease terms, the City's financial contribution toward construction and operation
of subterranean parking, if any, the schedule for the closure of the Loews/AMC
Broadway theater, the schedule and scope of rehabilitation for the AMC 7-plex and
other related matters. The ENA would also require that the Developer make a good
faith deposit with the City and demonstrate evidence of financing prior to execution of
leases.
Cinema Development and Parking
The proposed project could be built with or without subterranean .public parking.
Including subterranean public parking beneath the mixed-use cinema site would allow
for a portion of the parking identified in the Downtown Parking Strategic Plan to be
accommodated on the .site. However, there are several challenges related to
subterranean parking on the site, including:
® The height limit per the zoning ordinance in the BSC-2 Zone is 56 feet or 84 feet with
public parking. Without subterranean public parking, some of the movie theaters in
the complex could be located below grade, which would allow the entire complex to
be built within the zoning height limit. However, subterranean parking would require
a taller building.
® The cost of the subterranean parking is also an important consideration. As movie
theaters are typically loss-leaders that are unable to pay customary retail rents,-the
City's anticipated capitalized lease payments from the Developer would fund only a
small portion of the public parking costs.
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® The automobile entrance and exit to the subterranean public parking spaces would
require ground-level frontage that would otherwise be used for pedestrian-oriented
uses such as retail or restaurant space.
® The Downtown Parking Program calls for reconstruction of Parking Structures Nos.
1, 3 and 6, plus construction of up to two new structures, adding up to 1,712 new
parking spaces to the District. The Program anticipates that Parking Structure No. 3
with 324 parking spaces would be reconstructed to provide approximately 560
parking spaces. If the cinema development included subterranean parking, it would
require 5-7 levels below grade to construct all the replacement parking on-site.
Building parking so far below grade is anticipated to be prohibitively expensive. If no
parking is provided on-site, the full allocation from the Downtown Parking Strategy
would need to be constructed in other locations, should the full parking program be
pursued over time.
® Cinemas serve as activity generators for other uses in the District, including retail
shops and restaurants. The Park Once approach in the Bayside District encourages
patrons to park their cars in public parking structures and then walk to multiple
destinations. The approach not only creates pedestrian activity on the street, it also
encourages patrons to visit business establishments on the way to or from their
primary destinations. As on-site parking would be most coveted by cinema patrons
who might not walk the streets if they parked beneath the cinema, the beneficial
impacts of the cinema could be reduced.
In light of these considerations, staff recommends that the project not include public
parking.
Commission Action
Since one of the Bayside District Corporation's Board members submitted a proposal,
the Board was strictly prohibited from discussing the proposals. As a result, the Board
discussioh focused on the value of the project and the inclusion of subterranean
parking. The Board considered the project at its meetings on May 28, 2009 and July 14,
2009. The Board endorsed proceeding with the cinema project without on-site public
parking, provided that a parking strategy is developed prior to construction of the
cinema.
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Environmental Analysis
Authorization to negotiate and execute an ENA is exempt from CEQA. However, the
Cinema project will be subject to an Initial Study which will determine the level of
environmental analysis that will be required before the project can be considered for
discretionary approval. The City's proprietary approvals will also follow the completion
of environmental analysis.
Financial Impacfs ~ Budget Actions
Authorization to negotiate and execute an ENA will have no budgetary impact. If the
eventual development is approved and moved forward, there will be cost and revenue
impacts to the City. Such impacts will be detailed as part of the Council's consideration
if a lease agreement is proposed.
Prepared by: Erika Cavicante, Senior Development Analyst
Andy Agle, C
Housing and
Attachments:
Exhibit A: Comparison of Proposals
Exhibit B: AMC Theaters Floor Plan
Forwarded to Council:
City
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Exhibit A
Santa Monica Mixed-Use Development Cinema RFP Proposal Comparison Chart
Development Summary Metro olitan Pacific Ca ital Inc.IAMC Robertson Properties/Arcl.ight Cinema Company
Total screens, Seats 12 screens; 2,167 cinema seats (with a net gain of 570, see 13 screens; 2,000 cinema seats
below)
Cinema SF, Total Building SF 75,700 cinema sf; 78,500 total building sf 62,500 cinema sf; 90,000 total building sf
Project Description Intention is for this theater to be the flagship for the company. Project will enliven 4th Street by allowing visibility into the
Curvilineal transparent glass fapade at 4th Street. Possible solar cinema from the street by a transparent face. All reserved
power for signage. Street fa4ade will include anon-AMC retail seating, online seat selection, print-at-home ticketing,
tenant. Full service restaurant and bar; enhanced food and knowledgeable staff (all crew members must be at least 18
beverage; rooftop terrace. Reserved seating, online ticketing. years of age). Will include cinema-focused exhibits, black box
Wide seats, stadium-seating; state-of-the-art digital projection; auditoriums, wide seats and arm rests, art displays, gift shop,
IMAX and 3-D technology. Will strive forLEED certification. cafe with full bar, diverse programming. Will strive for highest
oossible LEED certification.
AMC controls both the Broadway 4 and the AMC 7. The intention Enhanced "lifestyle" cinemas. Existing ArcLights attract patrons
is to close the Broadway 4 and remodel the AMC7 with fewer from a wide area and will draw patrons from Santa Monica. Staff
seats. The net gain in seats between the AMC7 and the new is paid above minimum wage; they enhance the experience.
AMC Santa Monica is projected to be 570. Contemporary design aesthetic. Track record of community
outreach to residents and surrounding property owners.
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