sr-120809-1gc7®
City Council Report
City of
Santa Monica
City Council Meeting: December 8, 2009
Agenda Item:. j ~~
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: 1800 Stewart Street Ground Lease Extension
Recommended Action
Staff recommends that the City's lease with CF Santa Monica Office. V.I., LP for
property located at 1800 Stewart Street be extended for 30 months, from July 1, 2030 to
January 1, 2033.
Executive Summary
In August 2007, the City agreed to an assignment of a ground lease from the Richlar
Partnership to "CF Santa Monica Office VI, LP," (Lessee) for premises located at 1800
Stewart Street. The Lease expires in 2030. The Lessee has requested a 30 month
extension of the term (from July 1, 2030 to January 1, 2033) in order to pursue their on-
going sublease negotiations and entitlements with Agensys, a Santa Monica cancer-
treatment firm, as permitted under the terms of the Lease. The Lessee and Agensys
are negotiating to use the site for astate-of-the-art clean manufacturing and research
lab and transit-oriented development. The extended lease would provide on-going
lease revenue to support transit operations within Santa Monica.
Background
The City acquired the nine-acre parcel located at 2525 Michigan/2715 Exposition
Boulevard/1800 Stewart Street from Southern Pacific Transportation Company in 1989
for purposes of supporting future transit development in Santa Monica. A portion of the
property (four acres), which covers 1800 Stewart Street, was subject to a.50-year
ground lease with The Richlar Partnership ("Richlar"), expiring July 1, 2030. The lease
was amended in November 2006, updating the method and time for establishing rental
adjustments for the remaining 25-year term. In August 2007, the City approved the
assignment of the lease from the Richlar Partnership to CF Santa Monica Office V.I., LP
("Lessee"). The lease revenues help to support transit operations within Santa Monica.
1
Discussion
After acquiring the lease for 1800 Stewart Street, the Lessee received administrative
approval for renovations to the site's existing buildings which consist of a 64,000 sq. ft
warehouse and a 60,000 sq. ft. two-story office building. Work began in early 2008. In
November 2008, the Lessee began negotiations to sublease the entire site to Agensys:
Agensys is a bio-tech firm that has been in Santa Monica since 1997. The company
currently employs 125 people and occupies 58,000 square feet across three sites in
Santa Monica. Agensys is one of the world's leading biotech firms. Agensys seeks to
consolidate its operations into one centralized location in Santa Monica and expand its
Santa Monica workforce to a total of 300 employees by 2012.
In February 2009, the parties agreed in principle to a long-term lease and in anticipation
of Agensys' specialized requirements, the Lessee ceased most of the construction
work. Agensys retained consultants. who began preparing detailed plans for the site.
All work halted in May 2009 when-the Exposition Construction Authority announced that
the site was being considered as a potential location for the Metropolitan Transit
Authority's Exposition Corridor Phase II Maintenance Facility. Several months passed
before the Exposition Construction Authority determined that this site would not be
among those considered for the maintenance yard.
Agensys proposes to use the site for astate-of-the-art clean manufacturing and
research facility. The transit-oriented development would support ridership of the Metro
Light Rail Expo Line. The plans envisioned by Agensys for use of the site are expected
to trigger requirements for a development agreement, pursuant to zoning ordinance
changes adopted by the City Council in September 2008. The agreement between the
Lessee and Agensys is expected to be conditioned upon City approval of a
development agreement that meets the requirements of both the Lessee and Agensys.
The Lessee has lost nearly one year in an effort to keep Agensys in Santa Monica and
faces the possibility of a development agreement process that will take another 12 to 18
months. If the development agreement process is ultimately unsuccessful, the Lessee
would have lost over two years of the remaining ground lease term, with only 18 years
2
remaining. As a result, the Lessee has requested that the City extend the expiration of
the ground lease from July 1, 2030 to January 1, 2033.
Environmental Analysis
Approval of the lease extension will have no environmental impacts. The environmental
impacts associated with any use of the site that requires a development agreement or
other entitlement will be subject to the appropriate level of environmental review. A
resulting transit-oriented development will contribute to the Sustainable City Plan's
environmental targets.
Financial Impacts & Budget Actions
There is no current financial impact. The lease will result in guaranteed income for the
City for 30 additional months, with increased adjustments at the end of every 30 month
period, thereby providing on-going lease revenues to support transit operations in Santa
Monica. The Lessee currently pays a base rent of $72,152.24 per month ($865,827 per
year).
Prepared by: Jennifer Taylor, Senior Development Analyst
Approved:
Forwarded to Council:
Aridy Agle, Dife~tor v ° +~ l P
Housing and Economic Development \ Ci
Attachments: 1800 Stewart Street Site Plan
3
Attachment A: 1800 Stewart Street Site Plan
Reference Amended
Lease No. 8654 (CCS).