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SR-03-09-2010-1Cc7 City of ' ~~~ Santa Monica City Council Meeting: March 9, 2010 Agenda Item: ~-'~- To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Modification of Lease Agreement for Civic Center Cafe Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a First Modification of Lease Agreement #8982 (CCS) with High Rise Goodies Restaurant Group d.b.a. Trimana Grill to restructure lease terms relating to the formula for base rent and the duration of validated patron parking for the cafe space in the-Civic Center Parking Structure. Executive Summary On September 23, 2008, the City Council authorized a Lease with the High Rise Goodies Restaurant Group (Tenant) to operate a cafe located at the Santa Monica Civic Center Parking Structure at 333 Civic Center Drive. Citing the downturn in the economy and a concern regarding the viability of the location, the Tenant requests a modification to the Lease that would adjust the base rent formula and increase validated patron parking from 40 minutes to 60 minutes. Background The design of the Civic Center Parking Structure included a cafe space to serve the breakfast and lunch needs of people working in and visiting the Civic Center. Following a series of RFPs seeking a food service operator for this location, the City selected High Rise Goodies Restaurant Group d.b.a. Trimana Grill (Tenant), whose proposal most closely met the City's operational expectations. The City Council authorized entering into a ten year lease with two five-year options The Tenant's plans are currently being reviewed by the Building and Safety Division. Subsequent to Council's approval of the lease, and in light of today's challenging 1 economic conditions, the owners of Trimana Grill had considered cancelling their plans for the Santa Monica Civic Center; however, because of the investment they have already made toward the realization of the Civic Center cafe, they would like to continue forward if certain terms of the lease can be modified to aid in the viability of this location. Discussion The proposed First Modification of the Lease is as follows: ® Modify the existing rent provision which currently requires the Tenant to pay the City the greater of base rent of $4,135 per month or 10 percent of gross sales. The revised rent provision maintains the payment of Percentage Rent at 10 percent of gross sales, but modifies the base rent as follows: o For the first year following the opening of business, only Percentage Rent will be due. This will allow the Tenant the opportunity to pay rent on a performance basis as the business establishes itself in an untested location and creates a customer base. o For Years 2 through 5, the Annual Base Rent will be calculated as seventy-five percent (75 percent) of the average of the first year's rental payments, while still retaining the percentage rent of 10 percent. o For the remainder of the Term and for the Option Periods, the. Annual Base Rent will be seventy-five (75 percent) of the previous three (3) years' average rental payments while retaining the percentage rent of 10 percent. ® Modify the existing parking validation provision to allow an additional 20 minutes of validated parking for cafe patrons, increasing the time from 40 minutes to 60 minutes. This modification is intended to help the Tenant stay competitive with other "grab and go" locations with adjacent short-term parking and help promote the cafe to visitors to the Civic Center The current state of the economy has resulted in landlords being more flexible in considering concessions to their tenants in order to facilitate opportunities for success in a difficult market. The proposed lease modifications address the cafe operator's concerns as well as the desires of employees and visitors for a quality, affordable food service amenity in the Civic Center. 2 Financial Impacts & Budget Actions Revenues associated. with this Lease will be credited to Revenue Account 01263.400770. Funds for the construction of structural and mechanical improvements are available in Account 0014017.589000 (Civic Center Parking Tenant Improvements). Prepared by: Elana Buegoff, Sr. Development Analyst Approved: AndyAgle, Dire or Housing. and Economic Development Forwarded to Council: Rod Gould City Manager 3 Reference Amended Contract No. 8982 (CCS).