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sr-032012-7aCity Council Meeting: March 20, 2012 Agenda Item: _, ik To: Mayor and City Council From: David Martin, Director of Planning and Community Development Subject: Development Agreement 07 -006 to allow a 285 -room hotel that includes the retention and adaptive reuse of a City Landmark office building (Santa Monica Professional Building) and 15,600 sf of ground -floor retail /restaurant space at 710 Wilshire Boulevard. Recommended Action Staff recommends that the City Council: • Certify the Final Environmental Impact Report prepared for the project in accordance with CEQA; . • Adopt a Resolution adopting the Mitigation Monitoring Program and Statement of Overriding Conditions for the project; and • Introduce for first reading an ordinance which approves the proposed Development Agreement Executive Summary The applicant, Maxser and Company, proposes a Development Agreement to allow a new 285 -room hotel that includes the retention and adaptive reuse of a City Landmark office building (Santa Monica Professional Building) at 710 Wilshire Boulevard. The project also includes 15,600 sf of ground floor retail /restaurant space. The project site is located within two Zoning Districts and within the LUCE Downtown Core designation. It should be noted that the LUCE states that pending preparation of the Downtown Specific Plan, applicable land use designations will apply. For reference, the 1984 land use designations of the project site are General Commercial and General Commercial with Downtown Core. Pursuant to the City's LUCE Interim Ordinance No. 2356 (CCS), this project requires approval of a Development Agreement because it is located within the Downtown and exceeds 32 feet in height. Community benefits have been negotiated as part of the Development Agreement including the following: • Historic Preservation and adaptive re -use of the Landmark Santa Monica Professional Building • Local hiring program for construction and permanent employment • 2 paid internships (except when taken for school credit) per school session for students of Santa Monica High or Santa Monica College • Transportation infrastructure fee in amount of $244,000 • Transportation Demand Management measures beyond that required by the existing Municipal Code such as: • AVR of 1.75 after 3`d year from Certificate of Occupancy • Transit pass subsidy: Free for first 3 months of employment and 50% subsidy thereafter • Financial incentives to use transit • Unbundled parking for commercial tenants • Secure long -term bicycle parking for employees and hotel guests (64 spaces) • 'Bicycle check" services for hotel guests • 20 bicycles for shared use by hotel guests • Reserved bicycle sharing area if such a program is created by the City • Rental car availability for hotel guests • 2 reserved car share spaces • Discounted rates for hotel meeting rooms for Santa Monica -based organizations • Ground floor "public use" paseo between Landmark and new hotel building • Sustainability Features • Commitment to achieve LEED Silver certificate or equivalent • Photovoltaic panels on the roof deck • "EV ready" parking spaces • Non - potable water system, if certain conditions and commitments from the City are met • Shared parking Background Project Background The project site is located in the Downtown Core land use designation and Downtown District of the Land Use and Circulation Element (LUCE) of the General Plan. Project development compliance is limited to the LUCE while other aspects of the project such as height, parcel coverage, setbacks, and other standard zoning requirements will be established by the Development Agreement. As proposed, the project does not comply with the Zoning development standards. On July 24, 2007, the applicant filed a Development Agreement application for a mixed - use project consisting of 284 hotel rooms, 16 multi - family units, and 26,000 square feet of ground floor commercial space ( "Original Project'). The Original Project was also proposed to be eight stories with a maximum height of 84 feet. The project was initially 2 filed as a Development Agreement in order to facilitate the rehabilitation of the Landmark building by allowing the transfer of maximum allowable floor area across the several parcels of the subject property and in order to exceed the maximum allowable height in the Zoning District. Early discussions with staff focused on the excessive mass and scale of the building, particularly along 7th Street and in relation to the Landmark building. There were concerns that the project did not provide an appropriate transition from the higher intensity of the Downtown Core towards the edges of adjacent neighborhoods, given its location at the perimeter of the Downtown District. Early comments from the community meeting and float -up discussions in 2009 with the Landmarks Commission and Planning Commission (June 10, 2009) provided near unanimous direction that the project needed to be adjusted in order to retain the integrity of the Landmark and have greater compatibility with the surrounding area. Prior to the City Council float -up discussion on May 25, 2010, the applicant revised the plans to include reducing the number of floors from eight stories to six stories with a partial seventh story, significantly reducing the building mass along 7th Street and Wilshire Boulevard, and moving the multi - family units to an adjacent parcel with frontage on Lincoln Boulevard. Since those early discussions, the applicant has continued to refine the project design and held additional courtesy discussions with the Landmarks Commission, where the project has been very well received. An Environmental Impact Report was prepared for the project and completed in December 2011. On March 11, 2011, the LUCE Interim Ordinance establishing interim development procedures pending implementation actions of the LUCE went into effect and required that projects over 32 feet in height within the Downtown Core be developed pursuant to a Development Agreement. The Development Agreement application already filed for the project is consistent with the provisions of the LUCE Interim Ordinance. 3 Landmark Background The Santa Monica Professional Building at 710 Wilshire Boulevard was designated as a Landmark on August 8, 2005. The Landmarks Commission identified the building as historically representative of the eastern terminus of the Central Business District and found that the Santa Monica Professional Building, constructed in 1928, is an excellent example of the high rise Spanish Colonial Revival style commercial /office building. The building embodies a number of distinguishing architectural characteristics including intricate ornamentation in relief, particularly surrounding the main entrance, sixth floor elevations, and the form and architectural details of the penthouse wings. The six -story with penthouse building was originally designed for medical and dental offices but retail uses have historically occupied the ground floor while upper stories accommodate numerous professional offices. The building's main entrance faces north with ground floor retail entrances along the primary north and west elevations. The upper stories of the building are configured in a "Y "- shaped plan centered on the square - shaped first story. A recessed, "Y "- shaped penthouse wing is located on the roof. Discussion Project Description The applicant proposes a mixed -use hotel /commercial project consisting of: • Adaptive re -use of an existing, seven -story (82 feet) designated City Landmark office building (Santa Monica Professional Building) into a 55 -room hotel use with approximately 6,900 square feet of ground floor retail uses including an approximately 4,000 square foot restaurant; • Construction of a new six -story building (70 feet) with a partial seventh story (81 feet) hotel building with 230 guest rooms, approximately 8,700 square feet of ground floor retail space including an approximately 3,500 square foot restaurant, approximately 7,500 square feet of meeting /banquet rooms including a 550 C! square foot bar, and a roof -top swimming pool with approximately 2,400 square feet of bar /food service, pool, and fitness amenities on the partial seventh floor; • A ground -floor open -air retail paseo of approximately 5,200 square feet, and a landscaped second -floor podium level open space of approximately 5,300 square feet; and • 285 -325 parking spaces in a four -level subterranean parking garage (note that current plans show 290 spaces). Figure 1: Project Site Plan m 7TH STREET The height of the new building is proposed between 56 -81 feet and a maximum of seven stories, of which the seventh floor is a partial floor for use as a roof -top pool and associated food service /bar amenities. With the exception of the partial seventh floor, the maximum proposed height would be 70 feet, compared to the existing Landmark building height of 82 feet. The new and Landmark buildings would be connected by a second -floor pedestrian bridge. The new building would range in height from 60 feet at Wilshire Boulevard, 70 feet along 7th Street although there are significant building setbacks, primarily 70 feet along the 7th Court Alley elevation, and a maximum of 81 feet 5 at the southern portion of the building for roof top amenities. The total proposed floor area for the hotel project is 165,000 square feet, the maximum allowable floor area. Figure 2: Project Elevations — Top (Wilshire); Bottom (7th Street) Proiect Design In early meetings with the applicant, staff emphasized a massing strategy that respects the surrounding development conditions — where the scale of the surrounding neighborhood is generally one to three -story buildings punctuated by a few high -rise buildings, including the Landmark building — and provides appropriate transitions along 7th Street, the south property line, and 7th Court alley. In this sense, the proposed project continues an established context of generally low -scale development mixed with higher buildings on selected sites. The size of the project site also represents one of the few remaining opportunities in the Downtown area for a hotel development with 2 sufficient site area to design substantial building stepbacks, roofline variation across the site, sufficient separation between a new building and the Landmark, and ground floor open space. Building Mass and Design Compatibility In response to early input from the community, Landmarks Commission, and Planning Commission, the applicant made significant changes to the project design prior to the City Council float -up discussion on the project. The changes included removing two stories from the vast majority of the new hotel building so that it is predominantly a six - story building with a partial, outdoor seventh floor. The mass was redistributed with significant building stepbacks along the 7th Street elevation and placing the majority of new building mass along the southern portion of the site to provide a more sensitive context for the Landmark structure. The project uses were also streamlined to focus primarily on a hotel use with supportive ground floor retail /restaurant uses. These changes served to reduce the perceived mass of the project considerably and have resulted in a project that does not overwhelm the Landmark building and is sensitive to the surrounding context. Subsequent to the first Planning Commission hearing on January 25, 2012, the applicant further refined the project design on the East and South elevations in response to comments by the Planning Commission. On the East elevation, which faces the alley and would be visible from Lincoln Boulevard, the applicant continued to reference the upper beltway on the Landmark building by stepping back the upper floor and setting back the ground floor to create landscape opportunities on the alley. The net effect is a series of vertical bays that helps to break up the monotony of a long elevation. On the South elevation, the applicant pulled back the stair tower 10 feet from the.alley and added slot windows to address the blank walls on that elevation. 7 Figure 2: Project Rendering from 7 "YWllshire Figure 3: East (Top) and South (Bottom) Elevations Pedestrian Orientation The project has strong pedestrian orientation through the strong podium already established by the Landmark building and further referenced throughout the project. The inclusion of the ground floor retail paseo allows the public access into the site from 7th Street or Wilshire Boulevard. Along 7th Street, there is a widened sidewalk area that E ... all PAR U an 01 Pedestrian Orientation The project has strong pedestrian orientation through the strong podium already established by the Landmark building and further referenced throughout the project. The inclusion of the ground floor retail paseo allows the public access into the site from 7th Street or Wilshire Boulevard. Along 7th Street, there is a widened sidewalk area that E allows space for outdoor dining to occur, which would aid in activating the street. As indicated in the Development Agreement, this "Public Use Area" would be open to the public from 8:00 a.m. to 10:00 p.m. with the ability to secure the area outside of those hours. The ground floor retail and restaurant uses facing the paseo but also along the edges of the project on Wilshire boulevard and 7th Street help to reinforce the project's pedestrian orientation. Moving the vehicle driveway to the southern end of the site also ensures that the pedestrian experience along 7th Street would be minimally interrupted. Overall, the ground floor design is consistent with LUCE urban form policies to create open and inviting development (LU15.4), to provide active commercial uses on the ground floor (LU15.7 and LU15.9), and to create ground floor gathering spaces (LU15.12). The project's ground floor uses would activate the sidewalk and provides the physical improvement of a ground floor paseo, which includes water features, built - in and non - permanent furniture, patterned paving, and wider sidewalks for the community as a benefit to the downtown area. Figures 3 and 4: Project Renderings from 71h Street showing hotel entrance and paseo entrance 9 Project Parking The project proposed to provide 285 -325 parking spaces, 110 -150 spaces less than the 435 spaces that would be required by Code. While current plans show 290 spaces, the applicant would like to retain the flexibility to account for potential loss of spaces as detailed construction drawings are prepared and also to increase the number of spaces based on projected demand from off -site users, given the site's current use as a surface parking lot. The applicant submitted a shared parking study that was peer reviewed by the City's consultant. The peer review concluded that it would be appropriate to consider shared parking for the project given the multitude of uses on the project site with different peak periods of parking demand. The shared parking analysis relied on peak parking demand ratios from an Urban Land Institute /International Council of Shopping Centers national study on shared parking along with empirical research on comparable Santa Monica area hotels. The shared parking model estimated that the highest demand for parking during the year would occur at 9:00 p.m. on a July weekend. During the peak hour, the model predicted that there would be a 22% reduction in parking demand because of shared parking resulting in a peak demand of 249 spaces. In order to most effectively serve the parking demand for the project, a 5% contingency buffer was added resulting in a peak demand of 262 spaces for the proposed project. The project's 10 290 spaces exceed the 262 spaces that would be needed under predicted peak demand conditions. While the project provides more parking than would be theoretically necessary due to on -site shared parking, the applicant has also agreed to share parking with off -site users if spaces are available within the parking garage. Having the potential to share parking with off -site users is consistent with LUCE Goal D11 to, "Address parking needs comprehensively, identifying shared parking opportunities," and LUCE Policy D8.10 which requires, "...new incentivized development to participate in shared parking and TDM strategies." Providing the opportunity for shared parking would also provide flexibility while circulation and parking issues are being studied as part of the Downtown Specific Plan. Zoning and General Plan Comparison A project designed pursuant to existing Zoning would have a maximum floor area of 93,750 square feet. However, if the existing Landmark building were taken into account as existing allowable floor area, the maximum allowable floor area would be 102,985 square feet. The proposed project includes a total of 164,000 square feet of floor area. As the existing applicable 1984 land use designations will continue to apply pending preparation of the Downtown Specific Plan, the Development Agreement must comply with existing General Plan designations in terms of height and FAR. Below is a chart that provides the differences between the proposed project, the current zoning, and General Plan: Figure 5: Comparison between project site zoning, General Plan, and proposed project Existing Use Address Zoning_ General Plan 1984 Proposed Project Landmark Parcel (710 Wilshire) C3CI General Commercial with Downtown Core Landmark structure Building Height 56' 84' 82' FAR 2.5 3.5 3.4 (existing) Rental Car Agency (718 Wilshire), C3C General Commercial With Downtown Core New Hotel Building Building Height 56' 84' 60' -70' FAR 2.5 3.5 approx. 3.5 rounded u Parkin Lots 1213 -1233 7m Street C3' General Commercial New Hotel Building° Buildin Height 45' 84' 60 -70' 71h Street); 81' max. FAR 1.5 3.0 approx. 3.0 rounded u 11 An additional chart detailing the project's compliance with some key development standards of the Zoning Code is included as Attachment 1. As can be determined from both charts, relative to existing Zoning Code requirements, the project requests additional height, FAR, and reduced parking requirements — these deviations from Zoning should be considered in weighing the scale of the community benefits provided by the project. Development Agreement Overview A development agreement is a contract between the City and a developer that authorizes the type and amount of development that may occur within a specific period of time. Development agreements provide developers with guaranteed development rights in exchange for community benefits. A development agreement must comply with the Land Use and Circulation Element, but can establish different development standards than provided by zoning regulations. A development agreement can provide greater latitude to advance local planning policies compared to the Development Review Permit process. While a development agreement is an alternative to the standard development approval process, in practice it is similar to other public review processes where the City Council makes the final decision with the exception that the City Council has more discretion in imposing conditions and requirements on the proposed project since the Development Agreements are adopted by ordinance and are negotiated contracts. Proposed Development Agreement The proposed development agreement is included as Attachment 10. The following is a summary of the contents: Article 1 Definitions Defines key terms contained in the Development Agreement Article 2 Description of the Project Describes the project components including vested rights, building design, permitted uses, 12 Article 3 Construction Article 4 Project Fees, Exactions, and Conditions Article 5 Effect of Agreement on City Laws and Regulations development standards, community benefits, and transportation demand management. Discusses construction mitigation and permitted hours. Sets forth requirements of the project in terms of fees and exactions and project conditions. Sets forth the laws and regulations governing the proposed project. Article 6 Design Review Sets forth the requirements for Design Review of the project. Note that the proposed Development Agreement creates a new hybrid design review body that accounts for the unusual situation of a project that spans several parcels, one of which is a Landmark parcel. Article 7 City Technical Permits Describes the requirement of the City in processing building permit and other technical permit applications needed for the construction of the project. Article 8 Amendment and Sets forth the conditions under which the Modification Agreement may be modified. Article 9 Term Sets forth the term of the Agreement. Article 10 Periodic Review of Sets forth the requirements for the periodic Compliance review of the Agreement with respect to compliance with its provisions. Article 11 Default Outlines the circumstances, cure, and consequences of a breach of the Agreement by either party. Article 12 Mortgages Article 13 Transfers and Assignments Sets forth the rights of a lender on the property. Ensures that the Agreement remains in effect upon the transfer and /or assignment of property. 13 Article 14 Indemnity to City Article 15 General Provisions Outlines the Developer and City rights and obligations in the event of a claim for damages. A list of provisions common to all Agreements. Development Agreement Highlights While much of the Development Agreement is part of the City's standard template, the nature of Development Agreements is that they are negotiated case -by -case with the applicant and address the specific project being proposed. The following highlight some of the unique aspects of the proposed Development Agreement: Permitted Uses Section 2.5 of the DA provides assurance that the existing on -site uses may remain until redevelopment of the subject property. This section also specifies a definition of Restaurant consistent with the existing Zoning Ordinance but also acknowledges the ongoing Zoning Ordinance Update. This section of the Development Agreement provides the applicant the ability to make a one -time election as to whether the old or new Zoning Ordinance definition of restaurants will apply. During the Planning Commission hearings, concerns were also raised about allowing non - active uses such as banks and similar financial institutions on the ground floor. As a result, the Development Agreement includes language that limits the continuous linear frontage of such uses with flexibility to exceed this linear frontage provided through a Conditional Use Permit process. Alcohol Service for Hotel and Restaurants Section 2.6 of the DA establishes areas of the hotel where alcohol may be served and in effect, will guarantee that the site can have alcohol service in the form of mini bars, room service, sales from the hotel gift shop, in all common areas of the hotel (e.g. manager's reception), the second floor bar, rooftop service areas, and a wine storage /tasting room. Exhibit F of the Development Agreement, establishes the terms 14 and conditions under which alcohol may be served. These conditions are consistent with those typically imposed for Conditional Use Permits for alcohol service in hotels. For the areas of the hotel that include outdoor service areas, staff recommends more restrictive alcohol service hours in line with recent CUPs issued for bars adjacent to residential neighborhoods. While the applicant has cited recent examples of less restrictive hours for certain Downtown hotels, staff believes that there is a difference between hotels located in the heart of Downtown where the most intensive activity occurs (e.g. Ocean Avenue or the Promenade) and the subject property's location on the perimeter of the Downtown. Therefore, staff recommends earlier closing times for alcohol service in the outdoor service areas to minimize potential issues related to noise and disruptive behavior. Similarly, alcohol service in the project's restaurants is also requested by the applicant and Exhibit G, H, and I to the DA establish the terms and conditions under which on -site restaurants may serve alcohol. These conditions are consistent with Alcohol Exemption permits that have been issued for restaurants located in the Bayside Commercial District, with slight modification of hours to reflect the type of restaurant. The DA provides that any deviation from the terms and conditions establishes for alcohol services will require the applicant to obtain a Conditional Use Permit. Parking Section 2.9 of the DA states that the project will provide 285 -325 parking spaces, which is less than that required by Code. Rental vehicle storage that would occur on the P4 level would not be counted towards the total number of parking spaces. However, should a rental vehicle agency not operate in the hotel, the DA allows the area to be used for off -site parking, if approved through a Minor Modification process. Further, as described in the Community Benefits section, the parking could be made available to off -site users at market rates. 15 Construction Hours Section 3.2 of the DA outlines the hours that construction may occur, in accordance with the City's Noise Ordinance. The applicant may seek alternative construction hours pursuant to the City's existing processes allowing such requests to be made. Outside Building Permit Issuance Date Section 3.3 of the DA describes the time limits by which a building permit must be obtained for the project or the Agreement is automatically terminated. This was previously an area where staff and applicant did not have agreement; however, since the Planning Commission hearing, staff and applicant have come to agreement on an initial time limit of six years from the effective date of the DA with the potential to request one one -year extension from the Planning Director, upon demonstration that substantial progress has been made towards obtaining a building permit. This would allow the applicant up to seven years to obtain a building permit. Recently approved Outside Building Permit Issuance Dates have ,varied but the last Development Agreement that also included rehabilitation of a Landmark had a permit issuance date of three years with possibilities of two one -year extensions from the Planning Director (i.e. potentially five years total). There was also another Development Agreement with a longer permit issuance date of seven years to provide additional time for a religious organization to conduct fundraising activities. A recently approved Development Agreement had four years to commence construction with possibility of a one -year administrative extension. However, commencing construction and issuance of a building permit are different standards and therefore, staff does not believe this to be an appropriate comparison. Typically, commercial projects receive only one year to obtain a building permit with a possible 6 -month administrative extension before a discretionary extension must be requested. Exceptions in the Code exist for projects in the Coastal Zone or for Affordable Housing Projects. The unique situation of converting a Landmark office building into a hotel supports the proposal for an initial time limit of six years, a time limit longer than what is established in the Code. Development Agreements by their very 16 nature are individual negotiated contracts and therefore, provisions of each Agreement are tailored for the specific circumstances of the proposed project. Therefore, the proposed time limits do not set a precedent for future Development Agreements given the unique aspect of the proposed project including the rehabilitation and adaptive re- use of the Landmark building into a hotel. The rehabilitation of the Landmark building presents a number of design, permitting, and financing requirements that differ from a typical entitlement and therefore staff believes the longer guaranteed period of six years to obtain a building permit is reasonable. Requests for extensions from the Planning Director are subject to a number of findings including the applicant demonstrating substantial progress towards obtaining a building permit. Additionally, from the date a building permit is obtained, pursuant to the City's normal procedures (SMMC 8.08.070) for permit issuance, the amount of time to complete construction varies depending on building permit valuation with the maximum amount of time set at 48 months for projects with valuation over $20M. The building permit will expire if construction does not commence within six months of permit issuance or if work is abandoned for six months or more. Up to three six -month extensions of time to complete construction may be granted by the Building Official. Landmarks Commission Review of 718 Wilshire (Rental car building) Demolition Permit Section 3.8 of the DA recognizes that the Landmarks Commission reviewed the demolition permit for 718 Wilshire Boulevard on August 9, 2010 and that further review will not be required during the Outside Building Permit Issuance Date. Staff believes this is a reasonable provision because the Landmarks Commission reviewed the demolition permit application (10PC0895) at its hearing on August 9, 2010 and did not take any action. Pursuant to SMMC Section 9.04.10.16.010(d)(2), no application for the designation of a structure of merit, a landmark or a historic district was filed within 60 days of the City's receipt of the completed demolition permit application on July 22, 2010 and the building was studied in the Environmental Impact Report and determined not to be a historic resource. Further, the Agreement will contain an Outside Building frl Permit Issuance Date and up until that Date, the Developer should be able to rely upon the approved Agreement when expending resources and incurring liabilities without the risk of having the Project potentially altered by subsequent actions of the City. Additionally, as specified in Government Code Section 65864(a), the purpose of the Development Agreement Statutes is to "make maximum efficient utilization of resources at the least economic cost to the public" by avoiding "[t]he lack of certainty in the approval of development projects [that] can result in a waste of resources, escalate the cost of housing and other development to the consumer, and discourage investment in and commitment to comprehensive planning." Design Review Process Article 6 of the DA establishes a new hybrid design review body for the design review of this project due to its unique situation of spanning a Landmark and several non - Landmark parcels. The creation of the design review body is permitted through the Development Agreement because both the Landmarks Commission and Architectural Review Board are created by Article 9 of the Municipal Code and are not charter bodies, as is the case with the Planning Commission. The applicant expressed discomfort with the project being subject to design review by two separate entities (i.e. Landmarks Commission and Architectural Review Board) with both appealable to separate bodies (i.e. Landmarks Commission to City Council; Architectural Review Board to Planning Commission). Staff agreed that such a process could potentially lead to a lengthy review process and inconsistent decisions. Staff and the applicant discussed several alternative processes and came to agreement on the creation of a Joint Design Review Body (JDRB) that would be comprised of four members of the Landmarks Commission and three members of the Architectural Review Board with a requirement that each body must select at least one registered architect. The reason for the composition of including more one more Landmarks Commission member is because the project includes a prominent Landmark building and the necessity to make findings pursuant to the Secretary of the Interior's Standards for the project. The rehabilitation of the Landmark building and the conversion of the entire property into a hotel is a major focus M of the project and the enhanced experience of the Landmarks Commission in issuing Certificates of Appropriateness, reviewing the relationships between Landmarks and new construction, and greater familiarity with applying the Secretary of the Interior's Standards will be a benefit to the JDRB. The criteria for issuance of the Certificate of Appropriateness and Architectural Approval would not be altered and would be those already established within the Municipal Code (SMMC 9.36.140 and 9.32.140). While acknowledging that the major focus of the project is the rehabilitation of the Landmark building, the other focus is also the compatibility of the whole project in the neighborhood context and the architectural quality of the new construction. For that purpose, the Architectural Review Board's expertise has been included in the composition of the JDRB. The only changes to existing procedures are to allow the Certificate of Appropriateness to be valid through the Outside Building Permit Issuance Date, as established in the DA and limiting the ability of the Joint Design Review Body to eliminate a connection between the Landmark building and New Construction. The purview of the Joint Design Review Body with respect to the Architectural Approval would also prevent the approval from effectively changing the overall building height, number of stories, or floor area by greater than two percent. This restates the existing purview of the Architectural Review Board. The two percent limit is proposed because staff believes the location, mass, and form of the buildings requires further refinement but the plans presented are sufficiently developed and in conformance with LUCE urban form policies to not likely warrant a major project redesign through the design review process. This Joint Design Review Body would ensure that the project design is reviewed in its totality as a Landmark building and as a broader project in the context of the surrounding neighborhood. The decision of the Joint Design Review Body would be appealable only to the City Council. 19 W 11=0 MT Section 9.2 of the DA details the term of the Development Agreement. Staff and the applicant agree that the term should be 20 years. This represents the period within which all the provisions of the Development Agreement would be in effect, unless otherwise specified, and provides guarantees to the Developer the ability to rebuild the project should it be destroyed or damaged in the future. It should be noted that the Conditions of Approval for this project would survive the term of the DA (i.e. would apply for the life of the project). Community Benefits Community benefits are required in the LUCE for projects that request additional height and FAR above a base tier. While the LUCE Tiers or an equivalent have not yet been established for Downtown, the project nevertheless requests height that exceeds the 32' base established in the LUCE Interim Ordinance and therefore, is required to provide community benefits. Community benefits are intended to insure that the project contributes towards the community's core social, cultural, transportation, physical, and environmental goals, ensuring the long -term compatibility of the project with the surrounding and broader community. As indicated in Section 2.7 of the DA, the applicant and City staff have agreed on a wide range of community benefits. Historic Preservation The project includes the rehabilitation and adaptive re -use of the Landmark building, converting it from an office building to a 55 -room hotel. The applicant estimates that the rehabilitation work will cost $11M. The specific details would be outlined in the Certificate of Appropriateness but exterior alterations would aim to restore the integrity of the Landmark by removing alterations that have occurred over the years. Further, the applicant would explore restoration of the project's publicly accessible spaces to the extent feasible. As part of the preservation of the building, the applicant has also agreed to a Performance Bond for the Landmark Building that would cover the City's costs in the event that the building permit expires, the project was abandoned, or the Me] Developer failed to obtain a Certificate of Occupancy. The inclusion of the performance bond addresses a significant issue that has been raised previously by the Landmarks Commission in finding ways to safeguard the integrity of Landmarks should construction or rehabilitation work stop for an extended period. Transportation Demand Management Plan (TDM Plan) Aside from more basic TDM measures that include participation in well - established regional trip reduction programs or those already required by the existing Transportation Management Ordinance, the project includes the following TDM measures that are considered community benefits: • Average Vehicle Ridership (AVR) Target of 1.75 by the third year after Certificate of Occupancy • Bicycle parking o Secure long -term storage for employees and hotel guests of 64 bikes o Visitor bicycle parking of 16 bikes o Hotel guest "bike check" service 0 20 bicycles for shared use by hotel guests with vouchers for off -site rentals available if required by additional demand o On -site shower and locker facilities • Ease of rental car availability for hotel guests to discourage renting from other places and driving to the hotel • Public transit subsidy that would provide new employees with a free transit pass for the first. three months of employment with a 50% ongoing subsidy thereafter • Preferential parking and financial incentives for carpooling • Unbundled parking for commercial tenants • Carshare service if such a service is commercially available It should be noted that for reasons of financial feasibility particularly for smaller businesses, the TDM Plan focuses measures that require a financial incentive such as 21 carpool incentives or the transit subsidy on the larger on -site employers such as the hotel and restaurants of greater than 1,500 gross square feet. Transportation Infrastructure Fee The applicant has agreed to pay a fee of $244,000 that would contribute towards capital improvements for transit infrastructure including bicycle facilities, pedestrian network completion, vehicle network improvements, and transit improvements. The DA includes that the fee must be used within five years and is intended to fund capital improvements for transportation. The Transportation Infrastructure Fee that has been negotiated in the Development Agreement is based on the draft nexus study for a forthcoming ordinance that would implement such a fee. It is anticipated that the nexus study will be formally released for public review in the next few weeks. Therefore, the fee and its applicability have not yet been publicly reviewed and are still subject to change. Staff believes that the amount negotiated is appropriate in the context of the range of community benefits that the applicant has also agreed to provide. Bicycle Sharing Area The applicant has agreed to reserve space within the project's Public Use Area for a future bike -share station should one be implemented by the City or other operator. The reserved space would only be necessary should such a program ever be initiated and is not intended to replace guest bicycle parking, however, the station could also be moved around the project site as necessary to accommodate on -site activities. LEED® Silver Certification or equivalent The applicant seeks to achieve, at minimum, a LEED Silver rating or equivalent. The Development Agreement also provides flexibility on the rating system to be used depending on when design approval is obtained. 22 Sustainability Features The project would have 5,260 square feet of photovoltaic panels on the roof deck. The panels would generally be located around the edge of the roof surrounding the central courtyard. The project would also provide 30 "EV ready" parking spaces that are intended to allow for future electric vehicle charging stations to be installed as the demand for such system arises. The Development Agreement further provides for the possible installation of a non - potable water system should the City be able to confirm in writing: a construction schedule for delivery of non - potable water to the subject property within 18 months of building permit issuance, a funding source or financing mechanism for construction of non - potable water delivery to the subject property, sufficient capacity of non - potable water to meet anticipated demand, and an approved utility rate schedule for non - potable water. Shared Parking As discussed in the Parking section above, the project currently includes 290 parking spaces, however, the Development Agreement provides that the parking may range between 285 — 325 parking spaces to account for the demands of the project site. A parking demand study was prepared by the applicant and peer reviewed by the City's consultant. The City's consultant found that the peak parking demand of the project would be 262 spaces, inclusive of a 5% contingency. Given that the existing use is a large surface parking lot that is well -used by surrounding buildings, the applicant would like the flexibility to potentially add more parking to the project and make it available at market rates to off -site users, such as neighborhood residents and adjacent businesses. Local Hiring — Construction Jobs A local hiring provision to facilitate the hiring of local workers during construction will be implemented and is attached to the Development Agreement as Exhibit J -1. The local hiring program for construction outlines recruitment and hiring steps that the applicant must follow to demonstrate compliance with the program. W Local Hiring - Permanent Jobs The agreement includes a local hiring policy for permanent jobs. This community benefit is significant in not only encouraging employers to hire qualified local residents but also as a component of the City's comprehensive trip reduction strategy by allowing existing residents the opportunity to live and work in Santa Monica. The Planning Commission commented on ensuring the ease of implementing such a policy to increase its chances for success. To that end, the local hiring policy includes the requirement for the hotel operator to establish a First Source Hiring Coordinator that would be responsible for administering the program. In addition, the local hiring policy also includes an alternative to the advanced recruitment period for subsequent hirings (i.e. openings that occur after the initial hiring period). The policy allows the Operators to maintain a list of targeted job applicants that is not more than a year old. The following outlines the local hiring policy for permanent jobs: • Would apply to hotel and restaurant (greater than 1,500 gross square feet) employees only • Priority given to low- income individuals identified as Santa Monica residents who's income does not exceed 80% of median income of the Los Angeles Metropolitan Statistical Area • Hotel and Restaurants would be required to implement good faith efforts for best recruitment practices including: • Advertise locally in newspaper • Consult with and notify non - profit organizations, trade unions, apprenticeship programs, and local first source hiring programs to refer eligible applicants for job opportunities for a specific period of time before advertising to the general public • Santa Monica residents receive preference for interviews before non - Santa Monica residents o Sponsor or participate in local job fairs • Recruitment would occur with local first - source hiring resources and local newspaper for 30 days prior to general open recruitment o For subsequent vacancies that occur due to normal attrition (e.g. retirement, resignation), the advanced period of local advertising would be reduced to seven days and alternatively, the operator would have the option of referring to a list of not more than a year old • All things being equal, Hotel and Restaurants would be required to hire Santa Monica residents which still allows business operator the discretion to hire the most qualified applicant • Compliance is operator having record of having gone through good faith efforts • Largest employer's First - Source Hiring Coordinator shall outreach to smaller tenants on the project site to offer information and assistance in implementing a first - source hiring program Internship Program The Developer will be required to provide two paid internships per school session, on an ongoing basis, for the students of Santa Monica High School or Santa Monica College. The internships also target students from low- income households with verification of income eligibility to be undertaken by the schools. If the internship is being taken for school credit, the internship would be unpaid. Discounted Community Meeting Space At least 12 times per year (or on average once per month), the banquet or meeting rooms would be made available Santa Monica -based non - profits or community organizations at a reduced rate. The rates to be charged are similar to those charged for comparable City facilities and would be adjusted annually for CPI. The DA requires that the hotel operator provide written facility guidelines for the meeting space before Certificate of Occupancy. Ground Floor Open Space The applicant has identified the ground floor retail paseo between the Landmark building and New Construction and the area in front of the hotel entrance as public use 25 areas. The public use areas would be designed with artistic elements that include patterned paving, landscaping, and water features. Bicycle parking facilities such as bike racks and space a future bike share pod are located within the public use area. These areas would be in addition to the outdoor dining areas associated with adjoining restaurant uses. These Public Use Areas would be publicly accessible open space on private property. The DA includes the provision that the property owner has the discretion to limit access to the Public Use Areas between the hours of 10:00 p.m. and 8:00 a.m. This particular benefit is supportive of the LUCE policies to create smaller ground floor gathering places and is a key component in creating the open and inviting environment into the project from the ground floor. Financial Feasibility Analysis The applicant's consultant, PKF Consulting, provided a financial feasibility analysis that was peer reviewed by the City's consultant. The financial feasibility analysis analyzed the project and reduced project alternative. The City's peer reviewer agreed with the substantive conclusions of the applicant's analysis but found that in order to achieve the feasibility levels that the applicant had indicated, the Average Daily Room Rate (ADR) would need to be increased from $235, assumed in the applicant's report, to $294. The City's consultant did not analyze the feasibility of the hotel to operate at the higher ADR, which would place the hotel in the full - service upscale tier. The peer review found that the 10.1% profit margin assumed by the applicant to be on the conservative, lower end of the profit margin scale. The peer review found the reduced project to be financially infeasible. Living Wage Background When the project had its float -up discussions, there was nearly unanimous direction from the City Council that the Development Agreement include a living wage provision. The City has an existing Living Wage Ordinance but like the vast majority of cities in California and around the nation, the Ordinance is limited to "business assistance" living 26 wage where the requirement is triggered only if a private project receives public funding assistance, is a City contractor, or is providing a service on City property. Santa Monica's Living Wage Ordinance applies to all contractors providing services to the City in excess of $54,200. The FY2011 -12 wage rate is $13.54/hr. There are several other mechanisms under which living wage rates have been imposed. In researching living wage laws of general application, staff found that only San Francisco and Santa Fe, New Mexico have a comprehensive, citywide living wage requirement that is broadly applied to all employees and is not specific to an industry. San Francisco's minimum wage ordinance establishes a minimum wage rate of $10.24 that applies to all employees who work more than two hours a week. Similarly, Santa Fe's living wage ordinance establishes a minimum wage rate of $10.29/hr that applies to all employers. Another method of achieving living wage in a development context is through Community Benefit Agreements, which are private agreements between the Developer and affected neighborhoods, community organizations, and similar entities. This has been a model applied to large Los Angeles developments such as Staples Center and Hollywood & Vine where the agreements stated those developments would voluntarily be subjected to the City of Los Angeles Living Wage Ordinance. The application of a living wage provision in a Development Agreement context where only private financing is used has been rare. The only recent local example of a Development Agreement that included a privately- funded hotel was in the City of West Hollywood where the Developer agreed to comply with West Hollywood's living wage ordinance. Proposed Wage Rate The hourly wage represented in the proposed Development Agreement ($10.64/hr with benefits of $1.25/hr and $11.89/hr without benefits) is modeled after an addition to the Airport Hospitality Enhancement Zone ordinance that was adopted by the City of Los Angeles in 2007 and went into effect in 2008. If has been adjusted to represent 2011 wages and provides different wage rates based on whether healthcare benefits are 27 included in the wage rate or not. As stated in the Los Angeles ordinance, the purpose of including a living wage provision in the Airport Hospitality Enhancement Zone was to acknowledge the significant benefit that hotels on Century Boulevard ( "Century Corridor hotels ") gained from Los Angeles' public investment in the airport area. The Century Corridor hotels wage rate was viewed by staff as a comparable basis for the living wage provision in the proposed Development Agreement because of the similarity to Downtown hotels benefitting, to some degree, from the City of Santa Monica's public investment in the Downtown, Beach, Pier, and Civic Center area. As a point of comparison, the City of Los Angeles' living wage ordinance for LAX airport workers applies to all contractors /subcontractors who have service agreements with the City of Los Angeles and establishes a wage rate of $10.42 /hr with benefits and $14.97/hr without benefits. This wage rate applies to workers at LAX who are employed through service contracts with the City. These wage rates were not found to be a comparable basis for the proposed hotels' living wage provision because of their establishment in the City's broader living wage ordinance for contractors doing business with the City, not unlike Santa Monica's own living wage ordinance. The airport worker rates are not to be confused with the living wage amendment to the Airport Hospitality Enhancement Zone (i.e. Century Corridor hotels), which covered hotel workers on private property. The purpose of the living wage provision in the Development Agreement is to ensure that the proposed hotel provides its workers fair and reasonable compensation comparable to similar Santa Monica hotels and hotels in nearby communities without putting the proposed hotel at a competitive disadvantage. The provision would apply to the employee classifications listed in the provision without any adjustments for tips received, which are the sole property of the employee as provided by State law. Other employee classifications would receive at least the minimum wage of $8.00 /hr, as established by the State, or compensation as determined by the Hotel Operator. FU Tipped and Non - Tipped Workers Representatives of Unite Here, Local 11 submitted a legal opinion to the Planning Commission challenging the distinction between tipped and non - tipped workers in the proposed living wage provision, relying principally on Labor Code Section 351. Based on the statutory and case authority provided by the union and additional research, there does appear to be some legal risk in distinguishing between tipped and non - tipped workers. However, other than noting the risk, staff cannot predict how a court might rule. The arguments raised and the case authority relied on apply to laws or regulations of general applicability. Whether the same conclusion would be reached in the context of a project- specific development agreement has not been formally addressed or resolved. At the Planning Commission hearing on this matter, staff invited representatives of Unite Here, Local 11, representatives of the property owner, and any other interested party to provide further legal analysis on this issue and its appropriate application in this context. To date, staff has not received further legal analysis directly on this issue. Addressing the provision towards the listed employee classifications is to acknowledge positions, including entry-level positions, that have traditionally earned lower wages than other employees who customarily receive tips and therefore, derive a significant portion of their income from tips. There is a pronounced lack of data to determine the average tips earned by hotel employees, however, establishing different wage rates for varying classes of employees appears to be prevalent in labor contracts for the hotel industry. In a review of wage rates for union hotels in Santa Monica, most classes of employees who customarily receive tips had minimum wage rates of $8.00 /hr. However, other positions that do not receive tips or receive tips to a lesser degree (e.g. buspersons) had higher minimum wage rates. As shown in the PKF wage study, the union and non -union hotels appear to indicate the minimum wage rate of $8.00 /hr applies to many positions that would normally receive tips but is not uniform across all tipped positions. Continuing to ensure that employees who would customarily receive tips will receive at least the minimum wage would be consistent with the purpose of the 29 living wage provision that the proposed hotel pay wages that are comparable with other Santa Monica hotels. Response to Planning Commission's Recommendation At the Planning Commission's February 15, 2012 hearing, the Commission recommendations included the following four modifications to the living wage provision: • Increase the base wage rate — the Commission indicated that the wage would need to exceed the prevailing wage rate of non -union hotels in order to be considered a project benefit • Delete the exemption for tipped employees • Change the start date for which the living wage rate can be adjusted from June 1, 2015 to Certificate of Occupancy • Extend the term of the living wage provision to run for the life of the project Staff and the applicant have negotiated a change to the start date for adjustments to the living wage rate to completion of the subterranean parking garage or sometime thereafter. The language now provides that each time a decision on adjusting the living has been made, whether by the City Manager or through Major Modification (i.e. DA amendment), the Developer may not submit a new request sooner than three years after making the most recent request. Staff and the applicant also have negotiated an extension to the term of the living wage provision so that it would run for 15 years after Certificate of Occupancy. Staff and the applicant have replaced the exemption for tipped employees with a list of employee classifications. As to the Commission's recommendation to increase the wage rate, the proposed wage rates are within the range of a wage survey for union and non -union hotels prepared by PKF Consulting, which is provided as Attachment 6. Representatives of the property owner have submitted a legal analysis (see Attachment 7) which concludes that the City does not have the authority to mandate a much higher minimum wage rate than proposed in the development agreement, which would exceed wages paid by 30 comparable hotels. At the Planning Commission hearing, certain Union representatives had advocated for a minimum wage of approximately $15.00 per hour. Courts have concluded that ordinances which are so onerous as to virtually force business owners into a collective bargaining agreement in order to pay lower wages can violate the National Labor Relations Act. These decisions are heavily facts specific and as with the challenge raised by Unite Here, Local 11, have not arisen in the context of a project specific development agreement. However, the owner's representatives have raised legitimate issues of concern. The proposed wage rate is in the middle of the rates for surveyed union hotels and above the rates for surveyed non -union hotels. Table 1 summarizes the range of wage rates that were found in the PKF study along with the City's own living wage ordinance. The wage rates established in "business assistance' living wage ordinances are typically higher, presumably because of their application only to private entities that receive some form of public assistance (e.g. subsidies, contract for services, funding). However, in situations such as a development agreement where only a private entity and funding is involved, an appropriate standard could be to review the range of wage rates already occurring in the industry. This is the basis of the proposed living wage provision. Table 1: Comparison of Wage Rates Santa Monica Hotel Wage Survey PKF Stud LA- Orange County -San Diego Benefits & Compensation Survey PKF Stud Proposed Development Agreement Non - tipped Employees Non - tipped Employees (Union and Non- For listed employee Union: $9.15 - $14.10/hr Union at Beaches) classifications: Non - Union: $9.50- $10.25 /hr $11.41/hr $10.64/hr + $1.26/hr benefits Tipped Employees Tipped Employees (Union and Non- or $8.00 /hr Union at Beaches) $11.891hr without benefits $8.17/hr DUCE Consistency The project is located in the Downtown Core land use designation and within the LUCE Downtown District. The LUCE vision for the Downtown Core seeks to maintain and 31 enhance the Downtown area as a thriving, mixed -use urban environment in which people can live, work, be entertained, and be culturally enriched. The Downtown Core designation and District allows for the broadest mix of uses and activities, and seeks to provide new housing units in mixed -use projects. The proposed Development Agreement is consistent with the objectives, policies, general land uses and programs specified in the general plan and any applicable specific plan, in that consistent with LUCE Policy D1.5, the project focuses new investment on a site that is transit - accessible, can accommodate mixed -use development, contributes to a pedestrian- oriented environment, and can support substantial community benefits. The Policy further identifies the subject property stating that new investment should include the preservation of the Landmark building. Additionally, Policies D7.5 and D7.6 specifically reference the need for new buildings to respect the context and character - defining features of historic resources and that the Secretary of the Interior's Standards shall be used as a tool for preserving character - defining features of historic resources. The project is consistent with this policy as it includes the rehabilitation and adaptive re -use of the Landmark building, ensuring the long -term viability of a historic resource. The project will also be required to obtain a Certificate of Appropriateness for alterations to the Landmark building and Architectural Approval for the new building, which will require findings consistent with the Secretary of Interior's Standards. Policy D1.6 establishes, among others, Wilshire as a new perimeter of the Downtown with the intent of providing transitions between the higher intensities of the Downtown and lower intensity residential areas to the north. The proposed project is consistent with this policy with a reduced scale on Wilshire and 7th Street placing more of the mass towards the southern end of the project site, away from the adjacent residential neighborhood to the north. The Downtown District also includes Policy D7.2 that encourages local- serving uses as part of an overall trip reduction strategy. The ground floor retail /restaurant uses are intended not only to serve hotel guests but also provide 32 convenient services within walking distance of the adjacent residential communities in Downtown and north of Wilshire. Consistent with Policy D9.1 which seeks to design and manage streets to be an integral part of the urban open space in the Downtown, the project would widen sidewalks on 7th Street and provide the opportunity for outdoor dining that would help to activate the street. The implementation of a Transportation Demand Management (TDM) plan in efforts to reduce vehicle trips in the area and reduce associated parking demand is consistent with LUCE Circulation Policy T19.2 which seeks appropriate TDM requirements for new development. Furthermore, the project is consistent with LUCE's overall land use policies by providing community benefits for the area, including but not limited to, preservation and adaptive re -use of a Landmark building; a transportation infrastructure, contribution that would support capital improvements for transit infrastructure including bicycle facilities, pedestrian network completion, vehicle network improvements, and transit improvements; a local hiring program for construction and employment; internships for local high school and college students; ground floor open space; shared parking; and a TDM plan that provides bicycle facilities for a variety of on -site users and transit subsidies for employees. Environmental Analysis In accordance with the California Environmental Quality Act (CEQA), an Environmental Impact Report (EIR) was prepared to determine the environmental effects of the proposed project. The EIR studied two project options because the project applicant had previously included a parcel on the east side of 7th Court ( "Lincoln Parcel ") that would contain up to 24 units of housing. Development Scenario 1 included the hotel, retail /restaurant, and housing on the Lincoln Parcel. Development Scenario 2 included only the hotel and retail /restaurant. However, since the preparation of the EIR, the applicant has chosen to remove the Lincoln Parcel from the project. Development Scenario 2 — the hotel only project option — studied the project that was the basis for Development Agreement negotiations. In accordance with Section 15082 of the CEQA 33 Guidelines, a Notice of Preparation was published on March 5, 2009 for a 30 -day comment period which indicated the City's intent to prepare an EIR for the project. On July 18, 2011 a Notice of Completion and Public Availability was published for the Draft EIR which commenced a 45 -day public comment period. The areas studied in the Draft Ii1171'iL. RrM4 • Aesthetics /Shadows • Air Quality • Construction Effects O Historic Resources - • Geology • Greenhouse Gas Emissions • Hazards and Hazardous Materials • Land Use and Planning • Neighborhood Effects • Noise • Transportation/Traffic The Final EIR, which was published in December 2011, contains all comments and responses to comments received during the comment period and analyzes the project. Based upon a California Court of Appeals decision in December 2010 on the West Sunnyvale Neighborhood v City of Sunnyvale case, the EIR also includes analyses to determine the project's traffic impacts at time of project approval (approval year plus project). The Final EIR continues to provide an analysis of the incremental traffic impacts of the project on future operating conditions to 2020 (Cumulative Base plus Project). In the document, mitigation measures were identified in the areas of Construction Effects (Traffic, Noise and Air Quality), Historic Resources, Geology (Excavation), and Hazards and Hazardous Materials (Soil Testing) to reduce potential impacts to less than significant levels. To ensure that these measures are properly enacted, a mitigation monitoring program is necessary and will be enforced during the construction and operation of the project, if approved. The proposed mitigation measures are provided in the Final EIR. 34 Significant and unavoidable impacts were identified in the areas of Construction Effects (Groundborne Vibration) and Transportation/Traffic. Unavoidable and Significant Adverse Construction Effects (Groundborne Vibration) Section 4.3 of the Final EIR studied the environmental impacts related to construction. Construction effects related to groundborne vibration were found to be significant due to the proximity of a multi - family building immediately to the east of the project site, which is considered a sensitive receptor. Since the primary means of reducing groundborne vibration is to increase the distance between the source and receiver, no feasible mitigation is available since construction activities must take place on the project site. Unavoidable and Significant Adverse Traffic Impacts Intersections As discussed in Chapter 4.11 of the EIR, there were a total of 30 intersections studied within the City of Santa Monica. The proposed project would generate an estimated total of 136 weekday AM peak hour trips, 166 weekday PM peak hour trips, and 174 weekend peak hour trips. When taking into account existing uses on the subject property, the project would generate 77 net new weekday AM peak hour trips, 102 net new weekday PM peak hour trips, and 121 net new weekend peak hour trips. Approval Year plus Proiect Under the approval year plus project analysis, the proposed project would have significant impacts at two of the 30 intersections, including the following: • Lincoln Boulevard and 1 -10 Westbound Off -Ramp (Weekday AM and Weekend Midday) • Lincoln Boulevard and 1 -10 Eastbound On -Ramp (Weekend Midday) Level of Significance After Mitigation Under the approval base plus project analysis, mitigation measures (widening southbound Lincoln Boulevard) are considered infeasible due to secondary impacts 35 including loss of a pedestrian sidewalk and also because the intersections are controlled by Caltrans. The City is currently in discussions with Caltrans to obtain conceptual approval to make "minor capacity enhancements' at the freeways and has applied for Metro Call for Projects grant to fund intersection improvements that would include Developer contributions as local match. If conceptual approval can be obtained and funding secured, these improvements could be in place by 2018. However, because funding is not yet committed, impacts at both intersections remain significant and unavoidable. Cumulative Base plus Project Under the cumulative base plus project analysis, the proposed project would have a significant impact at three of the 30 intersections that were analyzed under City of Santa Monica significance criteria, including the following: • Lincoln Boulevard and Santa Monica Boulevard (Weekend Midday) • Lincoln Boulevard and 1 -10 Westbound Off -Ramp (Weekday AM and PM; Weekend Midday) • Lincoln Boulevard and 1 -10 Eastbound On -Ramp (Weekend Midday) Level of Significance After Mitigation Under the cumulative base plus project analysis, mitigation measures for Lincoln Boulevard and 1 -10 Westbound Off -Ramp and 1 -10 Eastbound On -Ramp, discussed above in the approval year plus project analysis, were determined to be infeasible for the same reasons. Mitigation measures for the Lincoln Boulevard and Santa Monica Boulevard intersection included widening northbound and southbound approaches. This mitigation measure was found to be infeasible due to the significant amount of right -of -way acquisition that would be necessary, resulting in the potential loss of pedestrian sidewalks and bus stop areas in a high pedestrian traffic area. Therefore, impacts at all three intersections remain significant and unavoidable. Trip Reduction for 710 Wilshire The project includes a comprehensive Transportation Demand Management Plan as a project feature including: • Average Vehicle Ridership (AVR) Target of 1.75 by the third year after Certificate of Occupancy • Bicycle parking • Secure long -term storage for employees and hotel guests of 64 bikes • Visitor bicycle parking of 16 bikes • Hotel guest "bike check" service • 10 bicycles for shared use by hotel guests • On -site shower and locker facilities • Public transit subsidy that would provide new employees with a free transit pass for the first three months of employment with a 50% ongoing subsidy thereafter • Preferential parking and financial incentives for carpooling • Unbundled parking for commercial tenants • Carshare service if such a service is commercial available These features were accounted for by the use of trip generation rates from the Travel Demand Forecasting Model developed for the LUCE. These trip generation rates are different from standard ITE rates in that they are intended to represent Santa Monica conditions and account for future trip reduction measures required of individual projects and also as the result of citywide programs. Appendix I of the EIR details how the LUCE trip generation rates were determined. Of the measures proposed to be included in the project, the components that exceed that already required by the City's existing Transportation Management Ordinance include: achieving an AVR of 1.75 within 3 years of Certificate of Occupancy for the project, payment of a Transportation Infrastructure Fee in the amount of $244,000, and providing free transit passes for the first three months of employment with a 50% ongoing subsidy thereafter. 37 Comments on Draft EIR There were 17 letters received on the Draft EIR during the 45 -day public review period, including one from the applicant, three from agencies (Caltrans, SCAQMD, Native American Heritage Commission), one from the Landmarks Commission, and the remainder from members of the public. Issues of concern were wide ranging but primarily focused on the traffic analysis, air quality analysis, and historic resources mitigation. Responses to all comments received are included in the Final EIR. Alternatives Studied The EIR studied three alternatives to the proposed project designed to reduce potential adverse environmental impacts. In addition to the No Project Alternative, a Reduced Project Alternative and Mixed -Use Residential /Commercial Alternative were studied. Reduced Project Alternative Under the Reduced Project Alternative, the Landmark building would be rehabilitated and adaptively reused as a 55 -room hotel but the new hotel building would include 119 hotel rooms and 10,000 square feet of retail. The new hotel building would be four stories in height. As compared to the proposed project, the Reduced Project Alternative would have incrementally less Aesthetics impacts because the new hotel building would be four stories compared to the proposed project's six stories. The Reduced Project Alternative would also generate substantially fewer net new peak hour trips as compared to the proposed project: 4 net new trips during the weekday AM peak hour (compared to 77 for the proposed project), 10 trips during the weekday PM peak hour (compared to 102 for the proposed project), 23 trips during the weekend peak hour (compared to 121 for the proposed project). Under this Alternative, traffic impacts would be less than significant at all intersections with the exception of Lincoln Boulevard and 1 -10 Eastbound On -Ramp. It should be noted that while this project has lesser environmental impacts than the project, it may meet the project objectives to a lesser extent than the proposed project, particularly with respect to the project objectives relying on financial returns. RN Mixed -Use Residential /Commercial Alternative Under the Mixed -Use Residential /Commercial Alternative, the existing retail, restaurant, and office uses in the Landmark building would be retained and a new six -story building would be constructed on the remainder of the project site to include 125 for -sale residential dwelling units and 20,000 square feet of ground floor retail. The Reduced Project Alternative would generate fewer net new peak hour trips as compared to the proposed project: 41 net new trips during the weekday AM peak hour (compared to 77 for the proposed project), 60 trips during the weekday PM peak hour (compared to 102 for the proposed project), 54 trips during the weekend peak hour (compared to 121 for the proposed project). Under this Alternative, traffic impacts would continue to be significant at two intersections: Lincoln Boulevard and 1 -10 Westbound Off -Ramp and Lincoln Boulevard and 1 -10 Eastbound On -Ramp. It should be noted that while this project has fewer traffic impacts than the proposed project, it may meet the project objectives related to financial returns to a lesser extent than the proposed project. Further, this Alternative does not meet the project objective to rehabilitate and convert the Landmark building into a hotel. Environmentally Superior Alternative The Reduced Project Alternative would reduce environmental impacts to Aesthetics and Traffic and is therefore, considered the Environmentally Superior Alternative. This Alternative also meets the majority of the project objectives. However, pursuant to a financial feasibility analysis prepared by the applicant (see Attachment 4) and peer reviewed by the City's consultant (see Attachment 5), this Alternative was found to be financially infeasible. Statement of Overriding Considerations Due to the significant and unavoidable impacts of the project with respect to Construction Effects (groundborne vibration) and Traffic, approval of the proposed project will require the City Council to adopt a Statement of Overriding Considerations. The benefits of the proposed project have been discussed earlier in this staff report and 39 would be incorporated into the Council resolution adopting the Statement of Overriding Considerations and Mitigation Monitoring Program. Commission Action The project was heard by the Planning Commission on January 25, 2012 and February 15 2012. At their January 25, 2012 meeting, the Planning Commission voted 5 -0 to recommend that the City Council certify the Environmental Impact Report and to continue the Development Agreement for issues related to community benefits, project design, and additional time to review the living wage provision. At their February 15, 2012 meeting, the Planning Commission voted 6 -0 to recommend that the City Council approve the Development Agreement with the following conditions: • Outside Building Permit Issuance Date (5 years + two 1 -year administrative extensions) • Transportation Infrastructure Fee of $244,000 • Living Wage • Increase the base wage rate — the Commission indicated that the wage would need to exceed the prevailing wage rate of non -union hotels in order to be considered a project benefit • Delete the exemption for tipped employees • Change the start date for which the living wage rate can be adjusted from June 1, 2015 to Certificate of Occupancy o Extend the term of the living wage provision to run for the life of the project • Add specific conditions to address the interior elevations (building elevations facing the hotel's interior courtyards) and artistic design elements in the project design • Increase in the number of maximum parking spaces (i.e. over 325 spaces) would be considered a major modification • Require that the project be "purple pipe ready" for the highest water use areas of the hotel (e.g. laundry, water features) ME • Adjust the language in the carshare service community benefit to ensure that the hotel operator cannot create a financial barrier for the carshare service to lease parking spaces in the garage • Require that the hotel operator appropriately maintain the shared bicycles for hotel guest use 6 Explore additional community benefits such as increasing the Transportation Infrastructure Fee, a contribution to an endowment fund for education, and a contribution to parks /open space Staff has met with the applicant to respond to the Commission's action and has agreement on all of the Commission's direction with the exception of some the living wage conditions, as described in fuller detail in the Living Wage section above. While additional community benefits, such as a financial contribution to parks /open space were explored in the course of the Development Agreement negotiations, as indicated in the Community Benefits and Financial Feasibility Analysis sections above, staff believes that the range and scale of community benefits proposed in the Development Agreement are appropriate. In coming to this conclusion, staff considered the historic preservation of the Landmark building the primary community benefit but also considered the types of benefits that would have the greatest benefit for Downtown and the immediately surrounding neighborhood. Public Outreach Community Meeting A community meeting to review the concept plans was held by staff on April 16, 2009. In general, the project design shown in the concept plans was well- received by meeting attendees. Attendees commended the developer and architect for being receptive to City staffs concerns by making appropriate adjustments to the building mass and pedestrian orientation of the project. Although no, specific concerns were verbally expressed regarding the scale, massing, or height of the project, one written comment was received that expressed concern that the project does not provide significant M community benefit and that a tall and massive building would block light and change the character of the city. The only comment related to project design was to incorporate more landscaping within and around the site and consider options for "greening" the alley. Some suggestions were also provided regarding potential public benefits that the project could provide including contributions towards improvements in Reed Park, contributions to the Boys and Girls Club, and making the pool and health club accessible to the public. The major point of community discussion was the project's impact on existing 7th Street congestion and the project's circulation plan including truck loading access on the alley and the potential loss of metered and off - street parking on 7th Street during construction and in the long -term. At the time of the meeting, the Strategic and Transportation Planning Division had reviewed the concept plans and expressed concern with the project circulation, particularly the loading functions and how residents of the deed - restricted housing will cross the alley and access the subterranean parking. Since then, the project plans have been revised to address all site circulation issues including loading and vehicle ingress and egress. Other general comments received included one comment that the property owner should make efforts to allow the existing small businesses displaced by the project the opportunity to move into the new building. The project plans include provisions to accommodate existing tenants if they choose to move back to the new project. Landmarks Commission The applicant has made courtesy preliminary presentations to the Landmarks Commission on three separate occasions: May 11, 2009, April 12, 2010, and December 12, 2011. The early discussion on the project focused around the project's compatibility with the Landmark building and concerns that: 1) the project should reference but not overtly replicate the forms and proportions of the Landmark building and 2) that the new hotel building overwhelmed the Landmark in terms of volume, mass, and height. In EN response, the applicant revised the project in early 2010 and presented the revised plans at the April 2010 Landmarks Commission meeting. At that meeting, the applicant presented a revised project that had fewer stories than the original project (six with a partial seventh story compared to eight), reduced height (70' with an 81' partial seventh story compared to 82' Landmark), reduced floor area, elimination of residential uses from the top floor, elimination of specialty market, devoting the Lincoln Parcel to housing, and reducing unnecessary parking on the project site. At the December 2011 Landmarks Commission meeting, the applicant presented a further revised project that eliminated the Lincoln Parcel (thereby eliminating residential uses from the project) and provided further refinements to the project design. The Landmarks Commission has reacted positively to the changes that the applicant has made to the project since the early float -up discussions and commended the applicant on being responsive to the early public input. The Commission also expressed appreciation at the applicant's willingness to provide regular status updates as the project's design has evolved. 43 Financial Impacts & Budget Actions There are no immediate financial or budget impacts associated with the action recommended in this report. Subject to Council approval of the DA, the City will realize revenue enhancements in the form of project — related fees, sales taxes, transient occupancy tax, business license taxes and property taxes. Staff will return to Council to request approval of all budget actions associated with approval of the DA. Prepared by: Jing Yeo, Special Projects Manager Approved: Y v L' David Martin Director, Planning and Community Development Forwarded to Council: Rod Gould City Manager Attachments: 1. Zoning Compliance Chart 2. Resolution Certifying the EIR 3. Resolution Adopting the Statement of Overriding Considerations and Mitigation Monitoring Plan 4. PKF Financial Feasibility Analysis and Fiscal Impact Analysis, March 2011 5. HR &A Peer Review of PKF Financial Feasibility Analysis and Fiscal Impact Analysis, September 2011 6. PKF Wage Survey, January 6, 2012 7. Legal Memorandum submitted by Applicant regarding Living Wage and National Labor Relations Act, February 27, 2012 8. Declaration of Bruce Baltin, PKF Consulting, signed March 1, 2012 9. Draft Ordinance 10. Development Agreement and Exhibits 11. Project Plans 12. Final EIR and Mitigation Monitoring Program !Ell ATTACHMENT ZONING COMPLIANCE CHART Development Standard Current Zoning Proposed Project Compliant Building Height 45 — 56 feet 60 -81 feet No Number of Stories Unlimited due to hotel 7 stories Yes FAR 1.5 to 2.5 3.1 FAR No Building Envelope Ste backs above 30 feet. Complies Yes Parking 435 spaces 285 -325 spaces No 45 ATTACHMENT RESOLUTION CERTIFYING THE EIR Cm. I_ 'Iit_T91:I IT, I: ON rrc'. RESOLUTION ADOPTING THE STATEMENT OF OVERRIDING CONSIDERATIONS AND MITIGATION MONITORING PLAN 47 ATTACHMENT 4 PKF FINANCIAL FEASIBILITY ANALYSIS AND FISCAL IMPACT ANALYSIS, MARCH 2011 m FEASIBILITY ANALYSIS OF TWO DEVELOPMENT SCENARIOS FOR A PROPOSED HOTEL AT 710 WILSHIRE BOULEVARD IN SANTA MONICA, CALIFORNIA Prepared for: Mr. Alexander /. Corby 710 Wilshire Blvd., #409 Santa Monica, CA 90401 Prepared by: PKF Consulting Los Angeles, California March 2011 UPDATE File no. 51868 PKF April 5, 2011 CONSULTING USA Mr. Alexander J. Gorby 710 Wilshire Boulevard, #409 Santa Monica, CA 90401 Dear Mr. Gorby: In accordance with your request, we have analyzed two scenarios of the feasibility of developing a moderately priced hotel in the City of Santa Monica. The proposed hotel is located at 710 Wilshire Boulevard in Santa Monica, California. The fieldwork and data collection for this study were undertaken in December 2010 and January and February 2011. In preparing this report, we have assumed the following: • Scenario One — Proposed Project • 285 guestrooms, including 55 rooms in the adaptive reuse of the Landmark Building and 230 rooms in a new construction portion of the hotel. • 7,351 square feet of retail, 7,712 square feet of restaurant, and 7,703 square feet of meeting space. i 286 parking spaces in a 3.5 -level subterranean parking garage.' • Scenario Two — Current Zoning Regulations • 132 guestrooms, including 55 rooms in the adaptive reuse of the Landmark Building, 77 rooms in a new construction portion of the hotel. • 10,225 square feet of retail, 7,712 square feet of restaurant, and 6,821 square feet of meeting space. • Approximately 150 parking spaces in a 2 -level subterranean parking garage.' • Both Scenarios would be constructed commensurate with general industry- standards for the cost and quality of a mid -level full- service hotel. • In each scenario, the proposed hotel will open in January 2014 The number of parking spaces is based upon a parking demand analysis prepared by Linscott, Law & Greenspan, Engineers. 'The number of parking spaces is based upon a parking demand analysis prepared by Linscott, Law & Greenspan, Engineers. PKF Consulting USA 1 865 S. Figueroa Street, Suite 3500 1 Los Angeles, CA 90017 TEL: 213 - 680 -09001 FAX: 213 - 623 -8240 w .pkfc.com Feasibility Analysis Page 12 Our analysis covers these two scenarios, each with varying room counts and amenities. This study was performed to test the feasibility of developing new, privately- financed lodging facilities in the City of Santa Monica. Our analysis includes a review of the Santa Monica lodging market, an estimation of potential ADR and occupancy for each scenario based on its projected operation relative to the Santa Monica market, a projection of cash flows and derivation of value, and a cost and feasibility analysis. The following table is a summation of our conclusions: Development Feasibility Conclusion with Market Value Land Scenario 1 Scenario 2 Hotel Type Full Service Full Service Keys (Hotel Rooms) 285 132 Square Feet of Buildings 202,620 148,070 Average Daily Rate $235.00 $245.00 Occupancy 80% 82% Land Basis — current improvements $20,050,000 $20,050,000 Development Costs $92,250,000 $53,250,000 Total Development Budget $112,300,000 $73,300,000 Value upon Completion $123,700,000 $59,300,000 Value per Key $434,035 $449,242 Entrepreneurial Profit $11,400,000 ($14,000,000) Percent of Development 10.2% - 19.1° Scenario One provides for a 10.2 percent return, which is within the range of market parameters. However, we conclude that it is not financially feasible to develop Scenario Two. We further conclude that the development of a full- service hotel will generate a profit that falls within the lower end of the range that hotel owners reasonably expect to receive for such a project, while a reduced -size full- service hotel results in a substantial loss and is therefore deemed to be financially infeasible. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 13 EXECUTIVE SUMMARY INTRODUCTION PKF Consulting USA has been asked to assess the financial feasibility of two scenarios of rehabilitating an existing structure and constructing new lodging facilities in Santa Monica considering land value, the cost of construction, operating costs, and reasonable profit expectations. In preparing this study, we evaluated two scenarios. For each scenario, we evaluated the positioning of the subject property relative to the Santa Monica lodging market and estimated the subject's performance and positioning. Our estimates of the property's performance and development costs incorporate current trends and are presented in 2011 dollars. The first scenario is a 285 -room full- service moderately - priced property with ancillary amenities and facilities. The development scenario is a proposed new full- service 285 -room hotel at an estimated average daily rate (ADR) of $235.00 and an 80 percent occupancy factor. We have also presented a second scenario, the program as set forth under current zoning. The reduced - development scenario reflects similar public facilities as the proposed 285 - room scenario, with lower room counts, reduced structure height and less parking. Typically, similar facilities with lower room availability result in a higher ADR positioning and occupancy rate. The two scenarios are summarized below: Summary of Scenario Scenario One Two Hotel Type: Full Service Full Service Keys: 285 132 Square Feet of Buildings: 161,881 new building 107,033 new building 41,094 Landmark building .41,094 Landmark building Parking Spaces: 286 150 Average Daily Rate: $235.00 $245.00 Occupancy: 80% 82% PKF Consulting USA Our analysis is presented as follows: • Market overview and penetration of subject under each scenario; • Review of development costs and estimation of land value; • Projection of operating cash flows and estimation of value upon completion; and, • Conclusion of feasibility. METHODOLOGY In order to test the feasibility of the two scenarios, our first step is to review the Santa Monica market and estimate the potential positioning of the subject under each scenario. Next, we have utilized a development budget as prepared by Morley Builders for the cost 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 14 of rehabilitating the Landmark building and constructing the proposed facility. This includes an allocation for development of improvements and soft costs. We have utilized a sales analysis to develop an estimate of land value. The next step is then to develop an opinion of value for the completed facility based on comparable property operations and discounting the projection of revenue and expenses. The net difference between the total development cost and the value upon completion yields the overall feasibility of the project. PRESENTATION OF SCENARIOS We have evaluated two separate scenarios. For each scenario, there are different room counts, total floor area calculations, and parking facilities. In each case, we have penetrated the property into the competitive market and projected occupancy, ADR, and operating performance. The following table summarizes the two scenarios: Development Feasibility Conclusion Scenario One Two Hotel Type Full Service Full Service Keys (Hotel Rooms) 285 132 Square Feet of Buildings 202,620 148,070 Average Daily Rate $235.00 $245.00 Occupancy 80% 82 We have also assumed the following: • Scenario One includes 7,351 square feet of ground floor retail, 7,712 square feet of restaurant space, and 7,703 square feet of meeting space. • Scenario Two includes 10,225 square feet of retail, 7,712 square feet of restaurant, and 6,821 square feet of meeting space. We have incorporated these assumptions into the positioning, development cost, and estimate of operating performance for each scenario. SANTA MONICA MARKET The following presents a summary of the Santa Monica lodging, inventory. We have presented the room count and allocation to the following categories for each property: ❑ Downtown versus Non - Downtown ■ Downtown area generally defined as Wilshire Boulevard to the north, Lincoln to the east, 1 -10 to the south, and Ocean Avenue to the west. ❑ By tier • Limited Service - Affordable (up to $172 ADR) • Limited Service — Moderate ($173 to $250) 710 ff'ilshire Boulevard, Santa Monica, California Full Service — Moderate ($173 to $250) Full Service — Upscale ($250 to $375) Full Service — Luxury ($375 +) The following presents a summation of this data. Hotel Room Count Location 2 Tier Georgian Hotel 84 i Downtown i Full service/upscale Huntley, fmr Radisson' 204 i Downtown Full service/upscale Hotel Shangri La 71 Downtown Full service/upscale Fairmont Miramar' 302 I Downtown Full service/upscale Holiday Inn SM Beach Q The Pier I 132 I Downtown Limited Service/moderate Pacific Sands Hotel* 57 I Downtown I Limited service/affordable Travelodge Santa Monica Beach* I 30 I Downtown I Limited service/affordable American Youth Hostel ( 163 Downtown i Limited service/affordable Ocean View Hotel, fmr Best Western 1 66 Downtown i Limited service/affordable Cal Mar Hotel Suites 36" Downtown Limited service/affordable Carmel Hotel I 102 1 Downtown Limited service/affordable American Motel I 9 Downtown Limited service/affordable Shutters On The Beach i 198 Non Downtown I Full servicelluxury Casa Del Mar 1 129 Non Downtown i Full servicelluxury Hotel Oceana Santa Monica 70 1 Non Downtown I Full service/upscale Marrio¢JW.Le Merigot Hotel &Spa Loews Santa Monica Beach Hotel 175 342 Non Downtown Non Downtown Full service/upscale Full Viceroy Santa Monica 162 Non Downtown service/upscale I Full service/upscale I Sheraton Hotel Delfina Santa Monica 310 f Non Downtown Full service/moderate Doubletree Santa Monica 252 Non Downtown I Full servicelmoderate Village Motel 8 Non Downtown 1 Limited service/moderate The Ambrose ( 77 Non Downtown I Limited service/moderate Hotel California 26 Non Downtown Limited service/affordable Ocean Lodge Beach Hotel 20 Non Downtown i Limited service/affordable Ocean Park Inn 28 1 I I Non Downtown 1 Limited service/affordable Limited Santa Monica Motel 32 Non Downtown service/affordable Sea Shore Motel I 25 I Non Downtown i Limited service/affordable Sea View Motel 17 Non Downtown I Limited service/affordable Bayside Hotel 45 Non Downtown Limited service/affordable Best Western Gateway Hotel Santa Monica 123 I Non Downtown Limited service/affordable Comfort Inn Santa Monica 108 Non Downtown 1 Limited service/affordable Days Inn Santa Monica 68 Non Downtown Limited service/affordable Holiday Motel 14 1 Non Downtown i Limited service/affordable Ocean Park Hotel 44 Non Downtown i Limited service/affordable Ocean Park Hotel, fmr Pavilions Motel 44 1 Non Downtown I Limited service/affordable Palm Motel 26 I Non Downtown I Limited service/affordable Rest Haven Motel 13 Non Downtown I Limited service/affordable Travelodge Santa Monica Pico - I S4 1 Non Downtown I Limited service/affordable Total 3,661 *Pacific Sands and Travelodge Santa Monica under redevelopment and will reopen later this year as the Shore Hotel. ' Consistent with the City of Santa Monica's new LUCE (July 2010), the Fairmont and Huntley are considered to be within the Downtown area. Based on our analysis, we have allocated the properties within Santa Monica to five categories: Limited - Service Affordable, Limited - Service Moderate, Full- Service Moderate, Full- Service Upscale, and Full- Service Luxury. There are 25 limited- service properties, of 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 16 which 23 meet the definition of affordable lodging, defined as ADR of $1723 or below. When we review the full- service properties in Santa Monica, there are a total of 13 properties. These ranged in ADR in 2010 from approximately $180 to $460. This means no full- service hotels meet the criteria for affordable lodging (up to $172). Historical Performance The following presents PKF's Trends for Santa Monica from 1989 to 2010. Our set, defined as a sample set of properties within the market, typically represents 70 to 80 percent of the total rooms in Santa Monica. In our professional judgment, it serves as a representative set of the aggregate performance of Santa Monica. Please note, our set does typically present the higher rated 60 to 80 percent of the market, but remains a fairly consistent set of what two- thirds to three - fourths of Santa Monica's rooms are achieving. As can be seen, occupancy has exceeded 70 percent annually since 1991 (except for 1995), including four years above 80 percent in the 90's and more recently above the 80 percent mark in 2006 through 2008 and again for 2010. This reflects an extremely successful set of properties, posting the highest 2010 occupancy out of the 26 submarkets PKF Consulting tracks in Los Angeles County. This level of demand relative to supply has 3Rate as defined by Santa Monica City Council Staff Report dated September 9, 2008 for Agenda Item #6 -D at pp. 17 -18; the Santa Monica City Council Statement of Official Action for Appeal No. 08 -006 & 007 at Condition 47; and Santa Monica City Council Resolution No. 10347, Section 7(e). 710 Wilshire Boulevard, Santa Monica, California Santa Monica ADR Growth Average Percent Year Occupancy Daily Rate Change 1989 72.8% $ 88.00 1990 66.5 95.47 8.50% 1991 73.6 106.44 11.5 1992 74.5 103.77 -2.5 1993 72.8 103.78 0.0 1994' 71.3 112.96 8.8 1995 64.1 116.23 2.9 1996 72.9 121.64 4.7 1997 82.8 144.13 18.5 1998 80.9 160.75 11.5 1999 82.4 173.63 8.0 2000 82.2 188.39 8.5 2001 70.2 201.51 7.0 2002 74.7 190.98 -5.2 2003 75.4 189.99 -0.5 2004 77.8 207.83 9.4 2005 77.9 229.66 10.5 2006 81.4 249.99 8.9 2007 81.7 270.24 8.1 2008 81.5 295.10 9.2 2009 75.8 244.58 -17.1 20102 81.5 250.23 2.3 CAAG 5.1% ' Reduction of rooms due to earthquake damage. 2 2010 based on year -to -date through November data. PKF Consulting USA As can be seen, occupancy has exceeded 70 percent annually since 1991 (except for 1995), including four years above 80 percent in the 90's and more recently above the 80 percent mark in 2006 through 2008 and again for 2010. This reflects an extremely successful set of properties, posting the highest 2010 occupancy out of the 26 submarkets PKF Consulting tracks in Los Angeles County. This level of demand relative to supply has 3Rate as defined by Santa Monica City Council Staff Report dated September 9, 2008 for Agenda Item #6 -D at pp. 17 -18; the Santa Monica City Council Statement of Official Action for Appeal No. 08 -006 & 007 at Condition 47; and Santa Monica City Council Resolution No. 10347, Section 7(e). 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 17 resulted in significant rate capture and upward repositioning of existing and new supply. The set presents a compounded average annual growth rate of 5.1 percent in ADR for the period, ending at an estimated ADR of $250 in 2010. This points towards a high level of demand and a continued ability to achieve ADR growth. Accordingly, for both scenarios, our projections of ADR and occupancy rates have moved slightly higher in this updated report. In addition, the positioning for this hotel has been upgraded slightly based on the further project analysis reflected in this report. We have estimated the following positioning for the two scenarios: Scenario One Scenario One presents a 285 -room full- service property with complementing restaurant, Meeting space, and retail amenities. The property will have 7,703 square feet of meeting space, or 27 square feet per room, which is close to the Sheraton at 32 square feet per room and below the Doubletree at 39 square feet per room. This scenario includes a pool, fitness center, and amenities and facilities consistent with a full- service hotel. Given the subject's amenities and room count under this scenario, we estimate a stabilized occupancy of 80 percent at $235 ADR. This is presented in current (2011) dollars and assumes a 2014 opening date. The stabilized ADR is calculated by taking the fifth year of operation (2018) and deflating to 2011 at 3.0 percent estimated inflation. The following presents the projected 10 -year operating performance for Scenario One. Scenario One Projected Operating Performance Annual Rooms Inflated Year Available Occupied Occupancy ADR 2014 104,025 72,818 70.0% $257.00 2015 104,025 79,059 76.0 264.00 2016 104,025 83,220 80.0 272.00 2017 104,025 83,220 80.0 281.00 2018 104,025 83,220 80.0 289.00 2019 104,025 83,220 80.0 298.00 2020 104,025 83,220 80.0 307.00 2021 104,025 .83,220 80.0 316.00 2022 104,025 83,220 80.0 325.00 2023 104,025 83,220 80.0 335.00 2024 104,025 83,220 80.0 345.00 Stabilized ilrn 1 104,025 83,220 80.01 $235.00 This positions the property approximately $15 to $25 above the Holiday Inn and Sheraton Delfina and slightly above the level of estimated stabilization of the Doubletree Guest Suites, reflecting a newly- constructed moderately - priced full - service lodging facility. This positions the property above all limited- service properties in the market, except the Ambrose, and below all other full - service properties in the market. We find 80 percent reasonable, given that the Sheraton Delfina, Doubletree Guest Suites, and Holiday Inn (the three mid -level full - service properties in the market), have averaged 79.7 percent occupancy over the past five years (2004 to 2009). We find it reasonable to position the subject at this level based on its projected ADR and addition of supply to the market. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 18 Scenario Two Scenario Two presents a 132 -room full - service property with complementing restaurant, 6,821 square feet of meeting space, and retail amenities. The property will feature 10,225 square feet of retail and approximately 52 square feet of meeting space per room. Like Scenario One, this scenario includes a pool, fitness center, and amenities and facilities consistent with a full- service hotel. Given the subject's amenities and room count under this scenario, we estimate a stabilized occupancy of 82 percent at $245 ADR. This is presented in current (2011) dollars and assumes a 2014 opening date. With a smaller room count, the subject should be able to drive additional rate during peak periods, while utilizing its higher meeting space ratio to attract additional group demand. The reduced size is expected to impact the type of groups that the subject can accommodate, focusing on smaller groups and corporate meetings. The following presents the projected 10 -year operating performance for Scenario Two. Scenario One Projected Operating Performance Annual Rooms Inflated Year Available Occupied Occupancy ADR 2014 48,180 34,690 72.0% $268.00 2015 48,180 37,100 77.0 276.00 2016 48,180 39,510 82.0 284.00 2017 48,180 39,510 82.0 293.00 2018 48,180 39,510 82.0 301.00 2019 48,180 39,510 82.0 310.00 2020 48,180 39,510 82.0 320.00 2021 48,180 39,510 82.0 329.00 2022 48,180 39,510 82.0 339.00 2023 48,180 39,510 82.0 349.00 2024 48,180 39,510 82.0 360.00 Stabilized 48,180 39,510 82.0% $245.00 (2011) This positions the property approximately $15 to $40 above the three existing moderately - priced full- service properties in Santa Monica. This positions the property above all limited - service properties in the market and below all upscale and luxury full - service properties in the market. We find 82 percent reasonable given the smaller room size and the historical performance of the market. We find it reasonable to position the subject at a higher ADR and occupancy versus Scenario One, given the higher ratio of amenities and meeting space and reduced room count. The next step is to estimate the total project cost under each scenario. 710 Wilshire Boulevard, Santa Monica, California W COST APPROACH The general procedure for the Cost Approach is outlined below: • Estimate the value of land through an analysis of comparable land sales on a price per square foot basis (if applicable); • Estimate development costs for the new improvements, including all direct and indirect costs associated with the building; and • Add the estimated cost of personal property (furniture, fixtures, and equipment) and soft costs that may be included in the total property value, including working capital, and pre- opening expenses. STARTING BASIS We have been provided with an appraisal of the land and existing improvements at 710 Wilshire Boulevard and adjoining addresses comprising the project site. The appraisal was prepared by Curtis- Rosenthal, Inc. and concludes to an as -is value of $20,050,000. We have utilized this as the starting basis. As a check of reasonableness, this equates to $334 per square foot if we allocate the total value to land. We find this reasonable, given the following sales. Analysis of Comparable Land Sales Date Size (SF) Price Per SF 2/5/2007 7,492 $2,730,000 $364.39 1/10/2007 3,049 975,000 319.78 7/20/2006 .11,495 4,080,000 354.94 7/18/2006 8,189 4,000,000 488.46 4/28/2006 3,397 2,030,000 597.59 6/6/2005 5,279 1,625,000 307.82 5/26/2005 4,792 1,440,000 300.50 2/11/2005 32,234 12,700,000 393.99 We have not updated our list of comparable sales within the subject's area within the past 24 months since we received the appraisal. We have utilized eight land sales, all of which occurred between 2005 and 2007. Each sale was chosen based on its proximity and size relative to your family's property. The sales were found using COSTAR COMPS, an online database of comparable land and property sales. The comparable sales range in size from 3,397 to 32,234 square feet and range in value from $300.50 to $597.00 per square foot. The average sales price is $389.58 per square foot. Direct and Indirect Costs For each scenario, a direct development cost estimate was formulated by Morley Builders. The following presents a summary of estimated direct costs. This will be followed by a presentation of indirect costs. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 110 Indirect Costs Based on our review of the estimates by Morley and Marshall Valuation Services and data collection from the owner's representatives, we have identified the following indirect costs in order to derive total development cost. The two scenarios are presented in the following tables. We have noted the basis for each expense item within the chart. 710 Wilshire Boulevard, Santa Monica, California Scenario t (Proposed) Scenario II (Per SMMC) Project Description Construction Type Type 1 Type 1 /Type III Floors 6 w/ partial 7th 3 w/ partial 4th Rooms (New addition + Landmark) 230 + 55 = 285 286 77 + 55 = 132 150 Parking Spaces New Addition Construction Cost: Parking Garage $47,192 /per space $47,233 /per space Ground Floor Commercial $303.23 /per sq.ft. $300.42 /per sq.ft. Guest Rooms $164,228 /per room $168,683 /per room On & Off Site $60.21 /per sq.ft.* $71.91 /per sq.ft.* Total Construction Cost: $62,632,053 $31,126,709 Landmark Rehabilitation Cost: '- Rehabilitation and Conversion Cost $278.41 /per sq.ft. $278.41 /per sq.ft. Parking N/A N/A Site Work $133.03 /per sq.ft.* $133.03 /per sq.ft.* Total Rehabilitation Cost: $10,908,239 $10,908,239 Total Project Hard Cost: $73,540,292 - ':. $42,034,948 Prorated Project Guest Room Cost: *. Sq.ft. includes: Outdoor site, podium level and roof improvements. Indirect Costs Based on our review of the estimates by Morley and Marshall Valuation Services and data collection from the owner's representatives, we have identified the following indirect costs in order to derive total development cost. The two scenarios are presented in the following tables. We have noted the basis for each expense item within the chart. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 111 Scenario 1 — 285 Room Hotel & Ancillary Facilities Cost Estimate Direct Costs Existing Improvements Basis - Appraisal $20,050,000 Redevelopment budget - hard costs - Morley $73,500,000 Personal Property (FF &E) @ $30,000 /room 8,550,000 102,100,000 Total Direct Costs Indirect Costs Insurance, Developer Admin & Overhead ($230,000 +$237,000+ $1,061,000) 1,528,000 Legal, Title, and Escrow Fees ($10k/month - 27 months + $250,000 testing) 520,000 Real Estate Taxes 592,000 Contingency Fees - 5 percent Direct Costs - 5,105,000 Pre - Opening Expenses and Working Capital ($5,000 /room) 1,425,000 9,170,000 Total Indirect Costs Total Development Cost before Financing 111,270,000 Financing Costs (60% costs @ 1.5 points) 1,001,000 112,271,000 Total Direct and Indirect Costs with Financing Total Cost Estimate $112,271,000 Round to $112 300,000 per key $394,000 Source: PKF Consulting Scenario 2 Cost Estimate Direct Costs Existing Improvements Basis - Appraisal $20,050,000 Redevelopment budget- hard costs - Morley $42,000,000 Personal Property (FF &E) @ $30,000 /room 3,960,000 66,010,000 Total Direct Costs Indirect Costs Insurance, Developer Admin & Overhead ($230,000 +$237,000+ $1,061,000) 1,528,000 Legal, Title, and Escrow Fees ($1 ok/month - 27 months + $250,000 testing) 520,000 Real Estate Taxes 592,000 Contingency Fees - 5 percent Direct Costs 3,301,000 Pre - Opening Expenses and Working Capital 660,000 6,601,000 Total Indirect Costs Total Development Cost before Financing 72,611,000 Financing Costs 653,000 73,264,000 Total Direct and Indirect Costs with Financing Total Cost Estimate $73,264,000 Round to $73,300,000 per key $555,300 Source: PKF Consulting Conclusion of Development Costs Based on the above analysis, the following table summarizes the respective development cost estimates: 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 112 Summary of Development Scenarios Scenario Scenario 1 Scenario 2 Type Full Service Full Service Keys 285 132 Square Feet 202,620 148,070 Starting Basis $20,050,000 $20,050,000 Per Key $70,350.88 $151,893.94 Development ! $92,250,000 $53,250,000 -. Per Key $323,684 $403,409 Total cost $112,300,000 $73,300,000 Per Key .$394,035 $555,303 PKF Consulting USA In order to test the reliability of these cost estimates, the following tables present actual development cost budgets for five full - service and boutique hotels, including only hard and soft costs, but not land value. These budgets are from proposed and actual projects within the past five years. These serve as a comparison to the shaded rows, which exclude the starting land and Landmark building basis. Actual Development Budgets — Boutique and Full Service Hotels (Direct and Indirect Costs) Project Number of Units Cost Cost Per Key Hotel A - Carlsbad 250 $55,566,000 $222,264 Hotel B — Palm Springs 200 54,525,648 272,628 Hotel C - Carlsbad 75 21,600,150 288,002 Hotel D — San Diego 250 90,000,000 360,000 Hotel E -Malibu 146 75,000,000 513,699 The comparable budgets range from $222,264 to $513,699 per key. Each property differs from the subject in terms of location, facilities, and market orientation. Based on the pricing of these development budgets, we find $394,000 to $555,300 per key reasonable for Scenarios One and Two. This development estimates are designed to present reasonable cost assumptions for mid- level full - service hotels in Santa Monica. Based on current positioning of comparable lodging facilities within the market, and the projected similar quality level of a proposed lodging facility for Scenarios One and Two, we find that the development cost estimates are reliable for each scenario. VALUATION OF HOTEL FOR EACH SCENARIO The next step is to develop an estimate of value of the hotel under each scenario. A common technique often used in estimating value by the Income Capitalization Approach is the discounted cash flow method (DCF). In the DCF, the value of a property is the present value of the net operating income of the property in each year of a holding period (here assumed to be ten years) and the value of the property when sold at the end of the holding period (the reversion). The present value of these elements is obtained by applying a market - derived discount rate. The value of the reversion is obtained through the capitalization of the adjusted income in the eleventh year, which should be a normalized 710 Wilshire Boulevard, Santa Monica, California 13 or typical year, with a deduction for the costs of sale. The cash flow projection over the holding period is based on the stabilized year estimate, adjusted to reflect such factors as change in room rates, occupancy, inflation, and the fixed and variable components of each revenue and expense item. The subject has been valued under the two scenarios based on an opening date of January 1, 2014. Each valuation period consists of ten calendar years followed by a reversion. It is assumed that the property will be sold at the end of the final year of the holding period. The value of the property at that time is obtained through capitalization of the net operating income of the property in the year immediately following the last year of the holding period (2024), adjusted to reflect the real estate taxes which would occur upon the sale. To estimate the net operating income in 2024, we first added back property taxes to the tenth year cash flow estimate. This calculation yielded an estimated pre -tax operating income. This pre -tax operating income was inflated to 2024 value dollars at 3.0 percent. We then capitalized this net income by the terminal capitalization rate. Lastly, to obtain the net proceeds upon sale of the property, we have deducted a sales commission of 1.5 percent. Our calculation of the proceeds upon the sale is outlined below. BASIS OF PROJECTIONS For each scenario, we have prepared statements of estimated operating results. To prepare estimates of future operating results for the proposed hotels, the starting point or basis is the best estimate of results that could be achieved with good management in a representative year or stabilized market, calculated in 2011 dollars. Scenario One — 285 -room Full- Service Hotel We estimate that during a representative year, the subject property could achieve a stabilized occupancy of 80 percent at an average daily room rate of $235.00, stated in 2011 dollars. From this base, we considered the effects of inflation, and occupancy levels for the projection period for a ten -year operating period, from January 2014 through December 2023. The underlying rationale and assumptions used in preparing these estimates are presented in this section. Comparable Hotels We have used information on the operating performance of five comparable facilities. This information is primarily obtained from confidential statistics compiled as a basis for the PKF Consulting USA publication Trends in the Hospitality Industry. Our comparable hotels consist of five full- service hotels, with three in California and two on the East Coast, and are all considered comparable to the subject due to their size, facilities and rate. The hotels range in room count from 235 to 360 rooms, at an average of 290 rooms. Given that the information is provided to us on a confidential basis, we cannot disclose the identity of the comparable hotels. The comparables posted a consolidated performance of 78 percent 710 Wilshire Boulevard, Santa Alonica, California Feasibility Analysis Page 114 occupancy at $236 ADR. We therefore find that an assumed 80 percent occupancy at $235 ADR is reasonable for Scenario One. While five comparable hotels have been included in our write -up of the estimated annual operating results, numerous additional sources were utilized in our analysis and to confirm the reasonableness of our projections going forward. Summary data pertaining to the comparable hotels is provided on the following pages. 710 Wilshire Boulevard, Santa Monica, California 7th &Wilshire Scenario One Operating Results of Comparable Hotels Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Rooms Food & Beverage Other _Operated Departments Total Departmental Expenses Departmental Profit Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses Hotel A Ratio Per Room P.O.R. 72.1% $62,742 $216.95 22.1% 19,230 66.49 5.2% 4,506 15.58 0.6% 535 1.85 100.0% 87,012 300.88 67.8% 1 58,952 1 203.85 46.8 % 40,679 19.4% 12,173 42.09 65.0% 12,500 43.22 75.2% 3,387 11.71 32.2% 28,060 97.03 67.8% 1 58,952 1 203.85 Gross Operating Profit - 46.8 % 40,679 8.7% 7,612 26.32 5.2% 4,532 15.67 4.0% 3,519 12.17 3.0% 2,610 9.02 21.0 % 18,274 63.19 Gross Operating Profit - 46.8 % 40,679 140.66 3,956 13.68 0% 1,731 5.99 6.5% 5,687 19.67 2,610 1 9.03 Base Management Fee 30% Fixed Expenses _ Property Taxes Insurance _ Total Fixed Expenses Net Operating Income Before Reserve 37.2% 32,381 111.97 Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California Hotel B Ratio Per Room [:j45% 3,956 13.68 0% 1,731 5.99 6.5% 5,687 19.67 Net Operating Income Before Reserve 37.2% 32,381 111.97 Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California Hotel B Ratio Per Room I P.O.R. 71.1% $76,293 $258.37 25.7% 27,576 93.39 0.4% 384 1.30 2.9% 3,124 10.58 100.0% 107,377 363.64 70.8% 76,004 257.39 Ratio Per Room 16.1 % 12,318 41.72 64.2 / 17,717 60.00 348.4% 1,338 4.53 29.2% 31,373 106.25 70.8% 76,004 257.39 49.6% 53,259 1 180.37 2.5% 1 2,686 9.10 Ratio Per Room 6.0% 6,425 21.76 7.7% 8,304 28.12 4.0% 4,292 14.54 3.5% 3,724 12.61 21.2 % 22,745 77.03 49.6% 53,259 1 180.37 2.5% 1 2,686 9.10 43.5% 46,670 158.05 Hotel C Ratio Per Room 1.1 % 1,181 4.00 2.5% 2,721 9.22 3.6% 3,903 13.22 43.5% 46,670 158.05 Hotel C Ratio Per Room I P.O.R. 71.1% $60,935 $228.52 23.7% 20,282 76.06 5.0% 4,264 15.99 0.3% 262 0.98 100.0% 85,742 321.56 66.4% 56,914 213.44 20.4% 12,447 46.68 67.2% 13,632 51.12 64.5 ° / 2,750 10.31 33.6 ° / 28,829 108.12 66.4% 56,914 213.44 37.8% 1 32,423 1 121.59 2.1% 1 1,813 6.80 8.5% 7,254 27.20 13.1% 11,242 42.16, 4.2% 3,618 13.57 2.8% 2,377 8.91' 28.6% 24,491 91.85 37.8% 1 32,423 1 121.59 2.1% 1 1,813 6.80 32.1% 27,491 1 103.10 15 3.2% 2,749 10.31 0.4% 370 1.39 3.6% 3,119 11.70 32.1% 27,491 1 103.10 15 7th &Wilshire Scenario One Operating Results of Comparable Hotels Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Ratio Per Room I P.O.R. 64.7% $60,819 Rooms 31.7% 29,840 20.2% 14,127 50.55 Food & Beverage 2.6% 2,433 66.0% 23,823 85.24 Other Operated Departments 51.4% 2,013 7.20 Total Departmental Expenses 35.9% 39,963 142.99 Departmental Profit Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Uti I ity Costs Total Undistributed Operating Expenses Hotel E Ratio Per Room I P.O.R. 64.7% $60,819 $212.46 31.7% 29,840 104.24 1.0% 912 3.19 2.6% 2,433 8.50 100.0% 94,005 328.38 16 Weighted Average Ratio Per Room 22.5% 13,687 47.81 68.3% 20,387 71.22 100.2% 914 3.19 37.2% 34,9881 - 122.22 16 Weighted Average Ratio Per Room P.O.R. 67.9% $66,750 $236.07 27.6% 27,162 96.06 2.9% 2,836 10.03 1.5% 1,514 5.35 100.0% 98,261 347.52 64.1% 71,3301 255.23 1 1 62.8%1 59,016 1 206.161 1 66.4% 1 65,2501 230.77 19.5% 12,990 45.94 66.1% 17,954 63.50 72.9% 2,067 7.31 33.6% 33,011 116.75 64.1% 71,3301 255.23 1 1 62.8%1 59,016 1 206.161 1 66.4% 1 65,2501 230.77 Gross Operating Profit 1 45.4% 1 50,5341 1 43.8% 1 41,156 F 143.77 1 44.9%1 44,149T_71 56.14 Base Management Fee 1 2.5% 1 2,7781 1 3.0% 1 2,779 9.71 1 2.6% 1 2,5261 8.93 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard Santa Monica, California 7.1% 7,934 28.39 4.0% 4,476 16.01 4.5% 5,037 18.02 3.0% 3,349 11.98 18.7% 1 20,795 74.41 Gross Operating Profit 1 45.4% 1 50,5341 1 43.8% 1 41,156 F 143.77 1 44.9%1 44,149T_71 56.14 Base Management Fee 1 2.5% 1 2,7781 1 3.0% 1 2,779 9.71 1 2.6% 1 2,5261 8.93 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard Santa Monica, California 9.4% 8,812 30.78 4.9% 4,646 16.23 2.1% 1,950 6.81 2.6% 2,452 8.57 19.0% 17,8601 62.39 Gross Operating Profit 1 45.4% 1 50,5341 1 43.8% 1 41,156 F 143.77 1 44.9%1 44,149T_71 56.14 Base Management Fee 1 2.5% 1 2,7781 1 3.0% 1 2,779 9.71 1 2.6% 1 2,5261 8.93 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard Santa Monica, California 7.7% 7,555 26.72 6.9% 6,763 23.92 3.9% 3,826 13.53 3.0% 2,957 10.46 21.5% 21,100 74.63 Gross Operating Profit 1 45.4% 1 50,5341 1 43.8% 1 41,156 F 143.77 1 44.9%1 44,149T_71 56.14 Base Management Fee 1 2.5% 1 2,7781 1 3.0% 1 2,779 9.71 1 2.6% 1 2,5261 8.93 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard Santa Monica, California 39.9% 1 44,383 158.81 1.6% 1,726 6.18 1.5% 1,648 5.90 10% 3,374 12.07 39.9% 1 44,383 158.81 40.4% 1 38,005 132.76 0.0% 39 0.13 0.4% 334 1.17 0.4% 372 1.30 40.4% 1 38,005 132.76 39.0% 1 38,304 135.47 1.9% 1,912 6.76 1.4% 1,407 4.98 3.4% 3,319 11.74 39.0% 1 38,304 135.47 Feasibility Analysis Page 117 STABILIZED YEAR ESTIMATE As indicated previously, we have estimated the performance of the subject for a stabilized year of operation. This estimate is primarily based on our review of the performance of other comparable hotels. The support for our stabilized year estimate is detailed in the following paragraphs, and is stated in calendar year 2011 dollars. Departmental Revenues and Expenses In the Uniform System of Accounts for Hotels, revenues to the facility are categorized by the department from which they are derived. In the case of the subject, these include income from rooms, food and beverage, telephone, spa, other operated departments, and rentals and other income. In the Uniform System of Accounts for Hotels, only direct operating expenses associated with each department are charged to the operating departments. General overhead items, which are applicable to the overall operation of the facility, are classified as undistributed operating expenses. Direct or departmental revenues and expenses, which typically vary with occupancy, are generally analyzed on a per occupied room (POR) or ratio basis, while undistributed expenses, which are more fixed in nature, are typically analyzed on a per available room (PAR) basis. Room Revenue and Expense Room revenue is based on the number of occupied rooms multiplied by the ADR for each respective year as presented in this report. As indicated in our previous analyses, we estimated that the stabilized occupancy rate of the subject would be 80.0 percent, with an ADR of $235.00 (expressed in 2011 dollars). 285 Rooms x 365 Days x 80.0% Occupancy x $235.00 = $19,557,000 (rounded) The following is a table illustrating average daily rate, annual occupancy and annual rooms revenue commencing January 1, 2014 (the anticipated date of opening). 710 I1 rlshire Boulevard, Santa A2onica, Califomia Estimated Rooms Revenue Average Annual Rooms Year Daily Rate Occupancy Revenue 2014 $257.00 70.0% $18,715,000 2015 264.00 76.0 20,872,000 2016 272.00 80.0 22,636,000 2017 281.00 80.0 23,385,000 2018 289.00 80.0 24,051,000 2019 298.00 80.0 24,800,000 2020 307.00 80.0 25,549,000 2021 316.00 80.0 26,298,000 2022 325.00 80.0 27,047,000 2023 335.00 80.0 27.879.000 710 I1 rlshire Boulevard, Santa A2onica, Califomia Feasibility Analysis Page 118 Room expense consists of salaries and wages, employee benefits, commissions, contract cleaning, guest transportation, laundry and dry cleaning, linen, operating supplies, reservation costs, uniforms, complimentary benefits, and other items related to the rooms department. The operating results for the comparable hotels have a range of 16.1 percent to 22.5 percent of room sales, or a range of $41.72 to $50.55 per occupied room. Based on our analysis of comparable properties, we estimate that for a stabilized year of operation the rooms department expense for the subject will be 46.00 POR or 19.6 percent of room revenue. This estimate is within the range of comparables on a POR basis and in line with industry standards on a ratio basis. Rooms Expense Per Occupied Room Ratio to Rms Revenue Comparables A $42.09 19.4% B 41.72 16.1% C 46.68 20.41 D 50.55 20.2 E 47.81 22.5 Weighted Average 45.94 19.5 Food and Beverage Revenue and Expense Food and Beverage revenue is typically generated by the sale of meals to both hotel guests and outside patrons in the restaurants and lounges; room service; banquet revenues, including banquet room and audio /visual rental income; and other associated revenues. At the comparable properties, the food and beverage revenue ranged from $66.49 to $129.21 per occupied room. We have projected food and beverage revenue of $85.00 per occupied room for the subject during a representative year, stated in 2011 dollars. Proposed food and beverage operations at the subject hotel are assumed to include a three - meal restaurant and bar, cafe, lobby lounge, 7,703 square feet of meeting space, and room service. As such, this revenue estimate is reflective of the facilities proposed at the subject and consistent with the revenues achieved by the comparable properties. Per Uccumed Koom Comparables A $4,518,965 $ 66.49 B 8,575,984 93.39 C 6,206,237 76.06 D 13,000,134 129.21 96.06 Stabilized Food and Beverage expense includes the cost of food and beverages, payroll and related expenses, and other items such as laundry, linen, china, glassware, silverware, uniform costs, supplies, and other miscellaneous items. Food and beverage expenses at the 710 Wilshire Boulevard, Santa Monica, California 19 comparable properties range from 64.2 percent to 68.3 percent. We have estimated food and beverage expenses at 72.0 percent of food and beverage revenues in a representative year. This is above the comparables and reflects the expected higher restaurant sales versus banquet sales projected for the subject. Ratio to F &B Rev. Comparables A 65.0 B 64.2 C 67.2 D 66.0°! 66.1 Other Operated Departments Revenue and Expense Other Operated Departments can vary significantly among the comparable properties and the subject depending on the nature of the additional revenue generators. Other expected operated departments at the subject property include revenue from parking, telephone and internet, business services, guest laundry, in -room entertainment, and the sundries shop. The comparable hotels had a range of other operated department revenue from $1.30 to $15.99 per occupied room. Based upon the various components of this line item, we have estimated the income for the subject to be approximately $20.00 per occupied room in a representative year of operations. The subject is projected to achieve above the range of comparables due to a higher estimate of parking revenue, supplemented by other revenue from sources as listed above. Comparables A $15.58 B 1.30 C 15.99 D 14.01 Other Operated Department Expenses include payroll costs, employee benefits, and other operating supplies of such other operated departments. The comparables' other operating expenses ranged from a 51.4 percent to a 348.4 percent expense ratio. For a representative year of operations, we have estimated expenses at approximately 65 percent of revenues for the subject, which is within the range of the comparables and reflects the projected revenue levels at the subject. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 120 72.9 Rentals and Other Income Rentals and Other Income generally reflects the net revenues associated with the rental of offices and stores, concessions, commissions, cash discounts earned, forfeited advance deposits, service charges, interest income, cancellation charges and other. For a representative year of operation, we have estimated rental and other income of approximately $5.00 POR, plus $4.00 per square foot per month for the retail component of the subject. With 7,351 square feet of retail, this equates to $353,000 in annual retail income. When we factor in all rental and other income, the resulting estimate is $9.25 FOR or $769,000 for a representative year. Per Occupied Room Ratio to O.O.0 Comparables A $1.85 75.2 B 10.58 348.4 C 0.98 64.5 D 4.38 51.4 72.9 Rentals and Other Income Rentals and Other Income generally reflects the net revenues associated with the rental of offices and stores, concessions, commissions, cash discounts earned, forfeited advance deposits, service charges, interest income, cancellation charges and other. For a representative year of operation, we have estimated rental and other income of approximately $5.00 POR, plus $4.00 per square foot per month for the retail component of the subject. With 7,351 square feet of retail, this equates to $353,000 in annual retail income. When we factor in all rental and other income, the resulting estimate is $9.25 FOR or $769,000 for a representative year. Undistributed Operating Expenses Undistributed Operating Expenses are operating expenses that are not chargeable to a particular operating department and are presented as undistributed operating expenses, in accordance with the Uniform System of Accounts for the Lodging Industry. These expenses include administrative and general, marketing, property operations and maintenance, and energy and utilities. These expenses are relatively unaffected by fluctuations in occupancies and ADR. Excluding management fees, which are a fixed percentage based on a contract agreement and market parameters, these expenses are analyzed primarily on a dollar amount per available room (PAR) basis. Administrative and General This category includes the salary and wages of the general manager and administrative staff; cash overages and shortages; credit card commissions; bad debt expense; security; data processing costs; accounting payroll expense; and professional fees. It should be noted that, according to the most recent edition of the Uniform Systems of Accounts for the Lodging Industry, general liability insurance is no longer included in this line item. Instead, 710 Wilshire Boulevard, Santa Monica, California Per Occupied Room Per Da Comparables A $1.85 $345 B 10.58 2,662 C 0.98 220 D 4.38 1,209 E 8.50 1,573 Weighted Average 5.35 1,202 Subiect Stabilized Year $9.25 $2.107 Undistributed Operating Expenses Undistributed Operating Expenses are operating expenses that are not chargeable to a particular operating department and are presented as undistributed operating expenses, in accordance with the Uniform System of Accounts for the Lodging Industry. These expenses include administrative and general, marketing, property operations and maintenance, and energy and utilities. These expenses are relatively unaffected by fluctuations in occupancies and ADR. Excluding management fees, which are a fixed percentage based on a contract agreement and market parameters, these expenses are analyzed primarily on a dollar amount per available room (PAR) basis. Administrative and General This category includes the salary and wages of the general manager and administrative staff; cash overages and shortages; credit card commissions; bad debt expense; security; data processing costs; accounting payroll expense; and professional fees. It should be noted that, according to the most recent edition of the Uniform Systems of Accounts for the Lodging Industry, general liability insurance is no longer included in this line item. Instead, 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 121 it is included under the fixed charges "insurance" line item. Administrative and general expenses at the comparables range from $6,407 to $8,812 per available room with ratios to total revenue ranging from 6.0 percent to 9.4 percent of total revenues. We have estimated an administrative and general expense for the subject property of $7,200 per available room, which is 7.1 percent of revenues. This is within the range of the comparable properties on a per available room basis and on a ratio to total revenue basis. Administrative and General Marketing This expense includes the cost of advertising, printing of brochures, salary associated with sales and marketing personnel, and other costs associated with an ongoing sales and promotion program. Marketing expenses for the comparables ranged from $4,476 to $11,242 per available room. The amount spent on marketing depends on the location, reputation, and brand association of the property. Our projections assume the subject will pay specified fees for brand benefits such as chain marketing, access to and representation on the operator's global distribution system. As such, we have estimated an expense of approximately $7,500 per available room, which equates to 7.4 percent of total revenues. Marketing Per Available Room Ratio to Total Rev. Comparables A $4,532 5.2 B 8,304 7.7% C 11,242 13.1% D 4,476 4.0% E 4,646 4.9% Waiphtad Avarnpp 6.763 6.9% Property Operations and Maintenance Property operations and maintenance expenses are a function of building age and usage. This category includes the engineering salaries, wages and benefits, maintenance of the building, grounds and landscape, electrical and mechanical equipment, engineering, refrigeration, operating supplies, cleaning, waste removal and uniforms. The comparable hotels posted expenses ranging from $1,950 to $5,037 per available room. Property operations and maintenance expenditures for the subject are estimated at approximately $3,500 per available room in 2011 dollars in a representative year, which is 3.4 percent of revenues and incorporates efficiencies for the subject's mixed -use development. 710 Wilshire Boulevard, Santa Monica, California Per Available Room Ratio to Total Rev. Comparables A $7,612 8.7% B 6,425 6.0% C 7,254 8.5% D 7,934 7.1% E 8,812 9.4% Weighted Avera e 7,555 7.7% Subject Stabilized Year $7,200 7.1% Marketing This expense includes the cost of advertising, printing of brochures, salary associated with sales and marketing personnel, and other costs associated with an ongoing sales and promotion program. Marketing expenses for the comparables ranged from $4,476 to $11,242 per available room. The amount spent on marketing depends on the location, reputation, and brand association of the property. Our projections assume the subject will pay specified fees for brand benefits such as chain marketing, access to and representation on the operator's global distribution system. As such, we have estimated an expense of approximately $7,500 per available room, which equates to 7.4 percent of total revenues. Marketing Per Available Room Ratio to Total Rev. Comparables A $4,532 5.2 B 8,304 7.7% C 11,242 13.1% D 4,476 4.0% E 4,646 4.9% Waiphtad Avarnpp 6.763 6.9% Property Operations and Maintenance Property operations and maintenance expenses are a function of building age and usage. This category includes the engineering salaries, wages and benefits, maintenance of the building, grounds and landscape, electrical and mechanical equipment, engineering, refrigeration, operating supplies, cleaning, waste removal and uniforms. The comparable hotels posted expenses ranging from $1,950 to $5,037 per available room. Property operations and maintenance expenditures for the subject are estimated at approximately $3,500 per available room in 2011 dollars in a representative year, which is 3.4 percent of revenues and incorporates efficiencies for the subject's mixed -use development. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 122 Property Operation and Maintenance Per Available Room Ratio to Total Rev. $2,610 3.0% Comparables A $3,519 4.0% B 4,292 4.0% C 3,618 4.2% D 5,037 4.5% E 1,950 2.1% Utility Costs Energy and utility costs include electric, fuel, steam, water, and sewer charges. The cost of utilities at the comparable hotels ranged from $2,377 to $3,724 per available room. We have estimated energy and utility costs of $3,000 in a representative year of operation, equal to 2.9 percent of total revenues. Ratio to Total Rev. Comparables A $2,610 3.0% B 3,724 3.5% C 2,377 2.8°! D 3,349 3.0% E 2,452 2.6% Subject Stabilized Year 1 $3,000 1 2.9% Fixed Charges Management Fees A management fee is an expense item representing the value of the management services. It is a variable operating expense normally expressed as a percentage of total revenues. Management fees for properties of this type typically range from 2.5 to 5.0 percent, and as such, we find a 3.0 percent expense level reasonable. This equates to a base management fee of $872,000 in a representative year. Real Estate Taxes The subject property is in the real estate taxing jurisdiction of the Los Angeles County Tax Assessor's Office. In California, Proposition 13 limits property taxes to one percent of the assessed value plus city, special district, and county bonds. Assessed values are further limited to a two percent increase per year, except upon sale or major alterations of the property. Based on this methodology and an estimated assessment rate of 1.1 percent, the subject's real estate taxes equate to $1,282,000 in a representative year. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 123 Insurance Insurance expense includes coverage for liability and buildings and contents, and has been on the rise in the last few years. Insurance expense for the comparable properties ranged broadly from $334 PAR to $2,721 PAR. Based on the subject's proposed facilities and our knowledge of industry trends, this expense at the subject property is estimated to be $500 per available room in 2011 dollars for a representative year of operation. This is within the range of the comparables. Insurance Comparables A $1,731 B 2,721 C 370 D 1,648 E 334 Subject Stabilized Year 1 $502 Reserves for Replacement An additional item not typically listed on an owner's income statement is the amount required for the periodic replacement of certain short -lived items such as carpeting, draperies, and other furniture, fixtures and equipment. For a new hotel, reserves are often lower in the first few years, because very little capital improvements will be necessary. We have increased the reserves gradually over the first three full years of the projection period to build up reserves as the building ages. We have projected reserves for replacement of two percent in 2014, three percent in 2015, and four percent in 2016 and each year thereafter. STABILIZED YEAR OPERATING RESULTS Presented on the following page is an estimate of the subject hotel's stabilized year operating results expressed in current value 2011 dollars. This estimate is based on the foregoing analysis. For this twelve -month period, revenues are projected to total approximately $29,064,000. Gross operating profit, which does not include management fees, property taxes, direct assessments, insurance, or reserves for replacement, totals approximately $13,018,000, or 44.8 percent of total revenue. The comparables range from 37.8 percent to 49.6 percent GOP, with an average of 44.9 percent. Net operating income for the subject in a stabilized year, after the deduction of a management fee, property taxes, insurance, and a reserve for capital replacement, is projected to be $9,558,000 or 32.9 percent of total revenue. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 124 7th & Wilshire Scenario One Representative Year of Operation Number of Units: Number of Annual Rooms Available: Number of Rooms Occupied: Annual Occupancy: Average Daily Rate: Revenue Per Available Room: Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Rooms Food & Beverage Other Operated Departments Total De artmental Expenses Stated in 2011 Dollars 19.6% 13,432 285 5,093,000 72.0% 17,870 104,025 1,082,000 65.0% 3,796 83,220 10,003,000 34.4% 35,098 80.0 855,000 2.9% 3,000 $235.00 6,043,000 20.8% 21,204 $188.00 Amount Ratio Per Room P.O.R. $19,557,000 67.3% $68,621 $235.00 7,074,000 24.3% 24,821 85.00 1,664,000 5.7% 5,839 20.00 769,000 2.6% 2,698 9.24 29,064,000 100.0% 101,979 349.24 3,828,000 19.6% 13,432 46.00 5,093,000 72.0% 17,870 61.20 1,082,000 65.0% 3,796 13.00 10,003,000 34.4% 35,098 120.20 Departmental Profit F--19,061,000 65.6% 1 66,881 1 229.04 Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses Gross Operating Profit 1 F--1-3-,O-1-8-, 000 44.8 % 1 45,677 1 156.43 Base Management Fee I r 872 000 3.0% 3,060 1 10.48 Fixed Expenses Property Taxes Insurance Total Fixed Expenses 1,282,000 143,000 4.4% 1 0.5% 4,498 502 15.40 1.72 2,052,000 7.1% 7,200 24.66 2,138,000 7.4% 7,502 25.69 998,000 3.4% 3,502 11.99 855,000 2.9% 3,000 10.27 6,043,000 20.8% 21,204 72.61 Gross Operating Profit 1 F--1-3-,O-1-8-, 000 44.8 % 1 45,677 1 156.43 Base Management Fee I r 872 000 3.0% 3,060 1 10.48 Fixed Expenses Property Taxes Insurance Total Fixed Expenses 1,282,000 143,000 4.4% 1 0.5% 4,498 502 15.40 1.72 1,425,000 4.9% 5,000 17.12 Net Operating Income 70,727,000 36.9% 37,618 128.83 1 7,763,000 4.0% 4,081 13.98 FF &E Reserve $9,558,000 32.9% $33,537 $114.85 Net Operating Income After Reserve Source: W Consulting 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 125 ESTIMATED ANNUAL OPERATING RESULTS The previous analysis provided for the income and expenses incurred in the operation of the subject in a stabilized year. In the following analysis, we provide estimated income and expenses for the subject during each year of the ten -year holding period anticipated for a typical investor. Our estimate of the performance for the subject in the stabilized year is used as a basis for our analysis, considering the effects of inflation, business development, and varying occupancy. Inflation To portray price level changes during the holding period, we have assumed an inflation rate of 3.0 percent throughout the projection period. This rate reflects the consensus of several well- recognized economists for the current long -term outlook for the future movement of prices and is consistent with the inflation rates of the 1990s and early 2000s. All expenses except for property taxes are projected to increase at 3.0 percent throughout the holding period. It should be noted that inflation is caused by many factors and unanticipated events and circumstances can affect the forecasted rate. Therefore, the estimated operating results computed over the projection period can vary from the actual operating results, and the variations may be material. Statement of Estimated Annual Operating Results The estimated annual operating results for the proposed hotel from January 1, 2014 to December 31, 2023 are presented on the following pages. 710 Wilshire Boulevard, Santa Monica, California 7th & Wilshire Scenario One Projected Operating Results Calendar Years Number of Units. Number of Annual Rooms Available: Number of Rooms Occupied: Annual Occupancy: Average Daily Rate: Revenue Per Available Room: Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Rooms Food & Beverage Other Operated Departments Total Departmental Expenses Departmental Profit Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses GrossOperating Profit Base Management Fee Fixed Expenses _ Property Taxes Insurance ...,, Total Fixed Expenses Net Operating Income FF &E Reserve Net Operating Income After Reserve Source: PKF Consulting 2014 285 3,922,000 104,025 5,148,000 72,820 1,034,000 70.0 10,104,000 $257.00 6,602,000 $179.90 24.4% Amount Ratio $18,715,000 67.2% 6,764,000 24.3 1,591,000 5.7% 783,000 2.8% 27,853,000 100.0% 17,749,000 1 63.7% 285 3,922,000 21.0 5,148,000 76.1 1,034,000 65.0% 10,104,000 36.3% 17,749,000 1 63.7% 11,147,000 1 40.0% 836,000 1 3.0 285 2,242,000 8.0% 2,336,000 6.4% 1,090,000 3.9% 934,000 3.4% 6,602,000 23.7% 11,147,000 1 40.0% 836,000 1 3.0 8,794,000 1 31.6% 557,000 1 2.0 710 Wilshire Boulevard, Santa Monica, California 2015 285 1,361,000 4.9% 156,000 0.6% 1,517,000 5.4% 8,794,000 1 31.6% 557,000 1 2.0 710 Wilshire Boulevard, Santa Monica, California 2015 285 104,025 79,060 76.0 $264.00 $200.64 Amount Ratio $20,872,000 67.2% 7,564,000 24.4% 1,780,000 5.7% 642,000 2.7 %< 31,058,000 100.0% 1,987,000 4,201,000 20.1 5,560,000 73.5% 1,157,000 65.0% 10,918,000 35.2% 20,140,000 64.8% 104,025 83,220 80.0% $22,636,000 67.3% 6,200,000 24.4% 1,929,000 5.7% 285 2,310,000 7.4% 2,406,000 7.7% 1,123,000 3.6% 962,000 3.1 6,801,000 21.9% 104,025 83,220 80.0% $22,636,000 67.3% 6,200,000 24.4% 1,929,000 5.7% 2017 285 4,438,000 7.1 5,904,000 g345% 1,254,000 11,596,000 2017 285 2,379,000 7.1 2,478,000 7.4% 1,156,000 3.4% 991,000 2.9% 7,004,000 20.8% 2017 285 4,571,000 104,025 6,081,000 83,220 1,292,000 80.0 11,944,000 $281.00 7,214,000 $224.80 Amount Ratio $23,385,000 67.3% 8,446,000 24.3% 1,987,000 5.7% 918,000 2.6 34,736,000 100.0 22,792,000 65.6 285 4,571,000 19.5% 6,081,000 72.0% 1,292,000 65.0% 11,944,000 34.4% 22,792,000 65.6 26 2018 285 2,450,000 7.1% 2,552,000 7.3 1,191,000 3.4% 1,021,000 2.9% 7,214,000 20.8% 26 2018 285 4,708,000 104,025 6,264,000 83,220 1,331,000 80.0% 12,303,000 $289.00 7,432,000 $231.20 Amount Ratio $24,051,000 67.3% 8,700,000 24.3% 2,047,000 5.7/ 946,000 2.6% 44,000 100.0% 23,441,000 65.6 36.8 4,708,000 19.6% 6,264,000 72.0% 1,331,000 65.0% 12,303,000 34.4 23,441,000 65.6 13,339,000 1 42.9% 15,056,000 1 44.7% 15,578,000 1 44.8% 16,009,000 1 44.8% 932,000 1 3.0% 1,010,000 1 3.0% 1 042,000 3.0 % 1,072 000 1 3.0% 36.8 2,524,000 7.1 2,629,000 7.4% 1,227,000 3.4% 1,052,000 2.9% 7,432,000 20.8% 13,339,000 1 42.9% 15,056,000 1 44.7% 15,578,000 1 44.8% 16,009,000 1 44.8% 932,000 1 3.0% 1,010,000 1 3.0% 1 042,000 3.0 % 1,072 000 1 3.0% 10,774,000 1 34.7% 932,000 1 3.0 36.8 1,473,000 4.7% 160,000 0.5% 1,633,000 5.3% 10,774,000 1 34.7% 932,000 1 3.0 12,379,000 1 36.8 1,502,000 4.5% 165,000 0.5 1,667,000 1 5.0 12,379,000 1 36.8 1,346,000 1 4.0% 170,000 0.5% $11,033,000 32.8% 12,834,000 1 36.9% 1,389,000 1 4.0% 811,445,000 32.9 1,532,000 4.4% 170,000 0.5% 1,702,000 4.9 % 12,834,000 1 36.9% 1,389,000 1 4.0% 811,445,000 32.9 13,199,000 1 36.9 1,430,000 4.0% $11,769,000 1 32.9% E1,563,000 4.4% 175,000 0.5 1,73$000 4.9% 13,199,000 1 36.9 1,430,000 4.0% $11,769,000 1 32.9% 7th & Wilshire Scenario One Projected Operating Results Calendar Years Number of Units: Number of Annual Rooms Available: Number of Rooms Occupied: Annual Occupancy: Average Daily Rate: Revenue Per Available Room: Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Rooms Food & Beverage Other Operated Departments Total Departmental Expenses Departmental Profit Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses Gross Operating Profit Base Management Fee Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income FF &E Reserve Net Operatin Income After Reserve Source: PKF Consultin 2019 285 4,849,000 104,025 6,452,000 83,220 1,370,000 80.0 12,671,000 $296.00 7,654,000 $238.40 Amount Ratio $24,800,000 67.3% 8,961,000 24.3% 2,108,000 5.7% 974,000 2.6% 36,843,000 100.0% 24,172,000 1 65.6% 285 4,849,000 19.6% 6,452,000 72.0% 1,370,000 65.0% 12,671,000 34.4% 24,172,000 1 65.6% 16,518,000 1 44.8 1,105,000 1 3.0% 285 2,599,000 7.1% 2,708,000 7.4% 1,264,000 3.4% 1,083,000 2.9% 7,654,000 20.8% 16,518,000 1 44.8 1,105,000 1 3.0% 13,638,000 1 37.0 1,474,000 1 4.0 $12,164,000 1 33.0% 710 Wilshire Boulevard, Santa Monica, California 2020 285 1,594,000 4.3% 1 181,000 0.5% 1,775,000 4.8% 13,638,000 1 37.0 1,474,000 1 4.0 $12,164,000 1 33.0% 710 Wilshire Boulevard, Santa Monica, California 2020 285 4,995,000 104,025 6,645,000 83,220 1,412,000 80.0% 13,052,000 $307.00 7,884,000 $245.60 Amount Ratio $25,549,000 67.3% ". 9,230,000 24.3 2,172,000 5.7%'.. 1,003,000 2.6 37,954,000 100.0%'. 24,902,000 65.6 285 4,995,000 19.6% 6,645,000 72.0 1,412,000 65.0% 13,052,000 34.4% 24,902,000 65.6 77,078,000 44.8% 1,139,000 1 3.0 285 2,677,000 7.1% 2,789,000 7.3% 1,302,000 3.4% 1,116,000 2.9% 7,884,000 20.8% 77,078,000 44.8% 1,139,000 1 3.0 14,067,000 1 37.1 1,518,000 1 4.0% 2021 285 1,626,000 4.3 °/ 186,000 0.51 1,812,000 4.8 14,067,000 1 37.1 1,518,000 1 4.0% 2021 285 5,145,000 104,025 6,845,000 83,220 1,454,000 80.0% 13,444,000 $316.00 8,121,000 $252.80 Amount Ratio $26,298,000 67.3% 9,506,000 24.3% 2,237,000 5.7% 1,033,000 2.6% 39,074,000 100.0% 25,630,000 J 65.6% 285 5,145,000 19.6% 6,845,000 72.0% 1,454,000 65.0% 13,444,000 34.4% 25,630,000 J 65.6% 77,509,000 1 44.8% 1,172,000 3.0 285 2,758,000 7.1 2,873,000 7.4% 1,341,000 3.4 1,149,000 2.9 8,121,000 20.8% 77,509,000 1 44.8% 1,172,000 3.0 14,486,000 37.1 1,563,000 4.0 2022 285 1,659,000 4.2% 192,000 0.5% 1,851,000 4.7% 14,486,000 37.1 1,563,000 4.0 2022 285 5,299,000 104,025 7,050,000 83,220 1,498,000 80.0 13,847,000 $325.00 8,364,000 $260.00 Amount Ratio $27,047,000 67.3% 9,792,000 24.4% 2,304,000 5.7% 7,064,000 2.6% 40,207,000 100.01 26,360,000 1 65.6 37.1 5,299,000 19.6% 7,050,000 72.0% 1,498,000 65.0% 13,847,000 34.4% 26,360,000 1 65.6 17,996,000 44.8 1,206,000 1 3.0 %. 37.1 2,840,000 7.1% 2,959,000 7.4% 1,381,000 3.4% 1,184,000 2.9% 8,364,000 20.8 17,996,000 44.8 1,206,000 1 3.0 %. 14,901,000 37.1 1,692,000 4.2% 197,000 0.5% 1,889,000 4.7% 14,901,000 37.1 5,458,000 104,025 1,608,000 4.0 1,542,000 80.0% $13,293,000 33.1% 27 2023 285 5,458,000 104,025 7,261,000 83,220 1,542,000 80.0% 14,261,000 $335.00 8,615,000 $268.00 Amount Ratio $27,879,000 67.3 10,085,000 24.3 2,373,000 5.7% 1,096,000 2.6% 41,433,000 100.0% 18,557,000 44.8% 1,243,000 3.0% 5,458,000 19.6 7,261,000 72.0 1,542,000 65.0 14,261,000 34.4% 18,557,000 44.8% 1,243,000 3.0% 2,926,000 7.1 3,048,000 7.4% 1,422,000 3.4% 1,219,000 2.9 8,615,000 20.8% 18,557,000 44.8% 1,243,000 3.0% 1,657,000 1 4.0% $13,728,000 33.1 1,726,000 4.2% 203,000 0.5% 1,929,000 4.7% 1,657,000 1 4.0% $13,728,000 33.1 Feasibility Analysis Page 128 Value Conclusion — Scenario One For the purposes of our analysis, we have used a terminal capitalization rate of 8.5 percent and a discount rate of 11.0 percent. We have considered investor survey input, published in PKF Consulting's Hospitality Investment Survey 2010, Korpacz and RERC's Investor Survey, Third Quarter 2010 and Fall 2010, respectively. These surveys present capitalization rates. Typically, in today's investment environment, there is a 50 basis point adjustment applied to the going -in capitalization rate to derive the terminal capitalization rate. This accounts for the 10 -year holding period. The results of the investment surveys are summarized in the following tables. Capitalization and Discount Rate Results 7th & Wilshire Scenario One Valuation - Discounted Cash Flow Overall Capitalization Rate Range Average Unrounded PKF Consulting USA Number of Projected Hospitality Investment Survey 2010 7.0%-15.0% 10.0% Full- Service Hotels (TTM NCI) NOI PV Factor P r icewaterho u se Coope rs 2014 12 Korpacz Real Estate Investor Survey 6.0%-14.0% 9.5 Third Quarter 2010 24 9,842,000 Full- Service Lodging Segment 7,987,988 2016 Real Estate Research Corporation 11,033,000 0.731191 Real Estate Report 8.0%-10.0% 9.0% Fall 2010 0.658731 7,539,176 All Hotels 60 11,769,000 The following table presents the 10 -year stream of net operating income (NOI), as well as the reversion of the property at the end of year 10. Based on the resulting calculations, we have derived a prospective market value of the subject under Scenario One, as presented in the table below. 710 Wilshire Boulevard, Santa Monica, California 7th & Wilshire Scenario One Valuation - Discounted Cash Flow Unrounded Number of Projected 11.00% Present Period Months NOI PV Factor Value 2014 12 $ 8,237,000 0.900901 $7,420,721 2015 24 9,842,000 0.811622 7,987,988 2016 36 11,033,000 0.731191 8,067,235 2017 48 11,445,000 0.658731 7,539,176 2018 60 11,769,000 0.593451 6,984,329 2019 72 12,164,000 0.534641 6,503,371 2020 84 12,549,000 0.481658 6,044,331 2021 96 12,923,000 0.433926 5,607,632 2022 108 13,293,000 0.390925 5,196,563 2023 120 13,728,000 0.352184 4,834,789 Reversion 163,274,417 0.352184 57,502,715 $123,688,849 ROUNDED $123,700,000 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 129 Scenario Two — 132 -room reduced Full- Service Hotel The following present our estimates of cash flows for the hotel in Scenario Two for a ten - year period beginning January 2014. Our estimates of revenues and expenses vary from Scenario One based on the reduced room count. Incorporating the reduced room count, we have reflected an ADR of $245 in 2011 dollars and 82% occupancy, and adjusted revenues, expenses, and undistributed expenses. We find it reasonable that the subject will achieve a higher occupancy and ADR with its reduced room count and comparable amount of restaurant and meeting space. From this base, we considered the effects of inflation, and occupancy levels for the projection period for a ten -year operating period, from January 2014 through December 2023. The underlying rationale and assumptions used in preparing these estimates are presented in this section. Comparable Hotels We have used information on the operating performance of five comparable facilities. Our comparable hotels consist of five full - service hotels primarily located in Southern California and are all considered comparable to the subject due to their size, facilities and rate. The hotels range in room count from 112 to 239 rooms at an average of 148 rooms. Given that the information is provided to us on a confidential basis, we cannot disclose the identity of the comparable hotels. The comparables posted a consolidated performance of 80 percent occupancy at $254 ADR. Please note, Scenario Two provides a mix of improvements that is fairly atypical for a hotel. The retail and meeting space ratio to rooms is at the higher end of what full- service hotels typically present. As such, the comparables present a wider range in operations and facilities. While five comparable hotels have been included in our write -up of the estimated annual operating results, numerous additional sources were utilized in our analysis and to confirm the reasonableness of our projections going forward. Summary data pertaining to the comparable hotels is provided on the following pages. 710 Wilshire Bouleivrd, Santa Monica, California 7th & Wilshire Scenario Two Operating Results of Comparable Hotels Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Rooms Food & Beverage Other Operated Departments Total Departmental Expenses Hotel A Ratio Per Room P.O.R. 82.6 % $72,035 $242.18 9.5% 8,280 27.84 7.4% 6,447 21.68 0.5% 459 1.54 100.0% 87,221 293.23 Hotel B Ratio Per Room 26.1% 18,810 63.24 103.0% 8,525 28.66 64.9% 4,185 14.07 36.1% 31,520 105.97 Hotel B Ratio Per Room I P.O.R. 91.8% $63,868 $212.03 4.3% 2,971 9.86 0.2% 169 0.56 3.6% 2,531 8.40 100.0% 69,539 230.85 30 Hotel C Ratio Per Room 77.4% 11,087 36.81 103.7 % 3,080 10.22 110.31 1 0.62 20.6% 14,353 47.65 30 Hotel C Ratio Per Room I P.O.R. 62.6% $72,184 $235.71 29.5% 33,992 111.00 6.4% 7,412 24.20 1.5% 1,756 5.73 100.0% 115,344 376.65 Departmental Profit 1 1 63.9% 1 55,701 187.26 79.4% 55,186 183.20 56.8% 65,518 213.94 Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses 9.2% 8,013 55.42 L4316,972 29,612 96.70 4.7% 3,243 10.59 2.4% 49,826 162.70 Departmental Profit 1 1 63.9% 1 55,701 187.26 79.4% 55,186 183.20 56.8% 65,518 213.94 Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses Gross Operating Profit 1 41.8% 1 36,419 722.44 61.1% 42,477 141.01 37.6 % 36,438 118.99 Base Management Fee 1 3.5% 1 3,053 10.26 1 6.6% 4,584 15.22 1 4.0%1 4,613 1 15.06 Fixed Expenses Property Taxes Insurance Total Fixed Expenses 9.2% 8,013 19.41 5.8% 5,077 J64.842 4.7% 4,061 7.46 2.4% 2,130 5.69 22.1% 19,281 42.19 Gross Operating Profit 1 41.8% 1 36,419 722.44 61.1% 42,477 141.01 37.6 % 36,438 118.99 Base Management Fee 1 3.5% 1 3,053 10.26 1 6.6% 4,584 15.22 1 4.0%1 4,613 1 15.06 Fixed Expenses Property Taxes Insurance Total Fixed Expenses 8.4% 5,848 19.41 4.2% 2,899 9.62 3.2% 2,246 7.46 2.5 °/ 1,715 5.69 18.3% 12,708 42.19 Gross Operating Profit 1 41.8% 1 36,419 722.44 61.1% 42,477 141.01 37.6 % 36,438 118.99 Base Management Fee 1 3.5% 1 3,053 10.26 1 6.6% 4,584 15.22 1 4.0%1 4,613 1 15.06 Fixed Expenses Property Taxes Insurance Total Fixed Expenses 12.1% 13,996 45.70 4.7 % 5,472 17.87 6.3% 7,287 23.80 2 2,325 7.59 25.2 ° / 29,080 94.96 Gross Operating Profit 1 41.8% 1 36,419 722.44 61.1% 42,477 141.01 37.6 % 36,438 118.99 Base Management Fee 1 3.5% 1 3,053 10.26 1 6.6% 4,584 15.22 1 4.0%1 4,613 1 15.06 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income 35.2% 30,712 703.25 52.1°/ 36,213 120.22 25.8% 29,7957E797.29 Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 1.8% 1,603 5.39 1.2% 1,052 3.54 3.0% 2,655 8.93 Net Operating Income 35.2% 30,712 703.25 52.1°/ 36,213 120.22 25.8% 29,7957E797.29 Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 1.9 % 1,326 4.40 0.5°/ 354 1.18 2.4% 1,680 5.58 Net Operating Income 35.2% 30,712 703.25 52.1°/ 36,213 120.22 25.8% 29,7957E797.29 Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 0.8% 949 3.10 0.9% 1,081 3.53 1.8% 2,030 6.63 Net Operating Income 35.2% 30,712 703.25 52.1°/ 36,213 120.22 25.8% 29,7957E797.29 Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 7th 8' Wilshire Scenario Two Operating Results of Comparable Hotels Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Ratio Per Room I P.O.R. 75.8% $82,384 Rooms 18.4% 19,960 17.1% 13,365 49.25 Food & Beverage 1.3% 1,390 70.8% 14,901 54.91 Other Operated Departments 78.4% 3,868 14.25 Total Departmental Expenses 30.6% 32,134 118.41 Departmental Profit Undistributed Expenses _ Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses Hotel E Ratio Per Room I P.O.R. 75.8% $82,384 $270.10. 18.4% 19,960 65.44 4.5% 4,893 16.04 1.3% 1,390 4.56 100.0% 108,628 356.14 Weighted Ave rage Ratio Per Room 23.2% 19,078 62.55 79.9% 15,939 52.26 50.6% 2,476 8.12 34.5% 37,493 122.92 Weighted Ave rage Ratio Per Room P.O.R. 75.3% $74,112 $253.68 18.4% 18,127 62.05 4.8% 4,766 16.31 1.4% 1,400 4.79 100.0% 98,405 336.83 72,9821 268.93 1 1 65.5% 1 71,135 233.22 66.5 % 1 65,404-177223.87 20.7% 15,350 52.54 81.3% 1.4,735 - 50.44 61.2% 2,916 9.98 33.5% 33,001 112.96 72,9821 268.93 1 1 65.5% 1 71,135 233.22 66.5 % 1 65,404-177223.87 Gross Operating Profit 50.6% 1 53,197T7196.03 31.3% 1 33,95 1 43.2% 1 42,470 145.37 Base Management Fee 1 3.0% 1 3,153 11.62 1 3.9% 1 4,261 13.97 3.9% 1 3,839 13.14 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net O eratin Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 8.0% 8,413 31.00 5.1% 5,332 19.65 3.2% 3,372 12.42 2.5% 2,668 9.83 18.8% 19,785 72.91 Gross Operating Profit 50.6% 1 53,197T7196.03 31.3% 1 33,95 1 43.2% 1 42,470 145.37 Base Management Fee 1 3.0% 1 3,153 11.62 1 3.9% 1 4,261 13.97 3.9% 1 3,839 13.14 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net O eratin Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 12.8% 13,914 45.62 8.1% 8,769 28.75 7.9% 8,614 28.24 5.4% 5,881 19.28 34.2 % 37,179 121.89 Gross Operating Profit 50.6% 1 53,197T7196.03 31.3% 1 33,95 1 43.2% 1 42,470 145.37 Base Management Fee 1 3.0% 1 3,153 11.62 1 3.9% 1 4,261 13.97 3.9% 1 3,839 13.14 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net O eratin Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 10.0% 9,807 33.57 5.5% 5,426 18.57 4.9% 4,840 16.57 2.9% 2,860 9.79 23.3% 22,934 78.50 Gross Operating Profit 50.6% 1 53,197T7196.03 31.3% 1 33,95 1 43.2% 1 42,470 145.37 Base Management Fee 1 3.0% 1 3,153 11.62 1 3.9% 1 4,261 13.97 3.9% 1 3,839 13.14 Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net O eratin Income Before Reserve Source: PKF Consulting 710 Wilshire Boulevard, Santa Monica, California 41.9% 1 44,004 162.15 4.0% 4,242 15.63 1.7% 1,798 6.62 5.7 % 6,039 22.25 41.9% 1 44,004 162.15 24.1% 1 26,228 85.99 1.7% 1,870 6.13 1.5% 1,597 5.24 3.2% 3,467 11.37 24.1% 1 26,228 85.99 35.6% 1 35,050 119.97 31 2.4% 2,322 7.95 1.3% 1,259 4.31 3.6% 3,581 12.26 35.6% 1 35,050 119.97 31 Feasibility Analysis Page 132 STABILIZED YEAR ESTIMATE As indicated previously, we have estimated the performance of the subject for a stabilized year of operation. Room Revenue and Expense Room revenue is based on the number of occupied rooms multiplied by the ADR for each respective year as presented in this report. As indicated in our previous analyses, we estimated that the stabilized occupancy rate of the subject would be 82.0 percent, with an ADR of $245.00 (expressed in 2011 dollars). 132 Rooms x 365 Days x 82.0 % Occupancy x $245.00 = $9,679,000 (rounded) The following is a table illustrating average daily rate, annual occupancy and annual rooms revenue commencing January 1, 2014 (the anticipated date of opening). Room expense consists of salaries and wages, employee benefits, commissions, contract cleaning, guest transportation, laundry and dry cleaning, linen, operating supplies, reservation costs, uniforms, complimentary benefits, and other items related to the rooms department. The operating results for the comparable hotels have a range of 17.1 percent to 26.1 percent of room sales, or a range of $36.81 to $63.24 per occupied room. Based on our analysis of comparable properties, we estimate that for a stabilized year of operation the rooms department expense for the subject will be $52.00 POR or 21.2 percent of room revenue. This estimate is within the range of comparables on a POR basis and in line with industry standards on a ratio basis. This is approximately $6 higher POR than Scenario One and reflects the reduced room count and higher ratio of fixed costs. 710 Wilshire Boulevard, Santa Monica, California Estimated Rooms Revenue Average Annual Rooms Year Daily Rate Occupancy Revenue 2014 $268.00 72.0% $ 9,297,000 2015 276.00 77.0 10,240,000 2016 284.00 82.0 11,221,000 2017 293.00 82.0 11,576,000 2018 301.00 82.0 11,893,000 2019 310.00 82.0 12,248,000 2020 320.00 82.0 12,643,000 2021 329.00 82.0 12,999,000 2022 339.00 82.0 13,394,000 2023 349.00 82.0 13,789,000 Room expense consists of salaries and wages, employee benefits, commissions, contract cleaning, guest transportation, laundry and dry cleaning, linen, operating supplies, reservation costs, uniforms, complimentary benefits, and other items related to the rooms department. The operating results for the comparable hotels have a range of 17.1 percent to 26.1 percent of room sales, or a range of $36.81 to $63.24 per occupied room. Based on our analysis of comparable properties, we estimate that for a stabilized year of operation the rooms department expense for the subject will be $52.00 POR or 21.2 percent of room revenue. This estimate is within the range of comparables on a POR basis and in line with industry standards on a ratio basis. This is approximately $6 higher POR than Scenario One and reflects the reduced room count and higher ratio of fixed costs. 710 Wilshire Boulevard, Santa Monica, California 33 Comparables Per Occupied Room Ratio to Rms Revenue A $63.24 26.1% B 36.81 17.4% C 55.42 23.5% D 49.25 17.1% E 62.55 23.2% Weighted Avera e 52.54 20.7% Food and Beverage Revenue and Expense Food and Beverage revenue is typically generated by the sale of meals to both hotel guests and outside patrons in the restaurants and lounges; room service; banquet revenues, including banquet room and audio /visual rental income; and other associated revenues. At the comparable properties, the food and beverage revenue ranged from $9.86 to $111.00 per occupied room. We have projected food and beverage revenue of $90.00 per occupied room for the subject during a representative year, stated in 2011 dollars. Proposed food and beverage operations at the subject hotel are assumed to include a three - meal restaurant and bar, cafe, lobby lounge, 6,821 square feet of meeting space, and room service. As such, this revenue estimate is reflective of the facilities proposed at the subject. This estimate is towards the upper end of the range of the comparables and reflective of the higher ratio of restaurant and meeting space to guestrooms. Furthermore, we find the total amount of $3,556,000 reasonable compared to Scenario One at $7,074,000. Comparables A $ 927,377 $27.84 B 392,175 9.86 C 4,724,926 111.00 D 5,032,638 77.59 E 2,355,332 65.44 Food and Beverage expense includes the cost of food and beverages, payroll and related expenses, and other items such as laundry, linen, china, glassware, silverware, uniform costs, supplies, and other miscellaneous items. Food and beverage expenses at the comparable properties range from 70.8 percent to 103.7 percent. Comparables C, D, and E, which present the most comparable food and beverage revenue levels, present an average food and beverage expense of 79.2 percent. We have estimated food and beverage expenses at 79.0 percent of food and beverage revenues in a representative year. This is within the range of comparables and reflects the specific projected revenue level of the subject. We find 79 percent reasonable as it relates to Scenario One's projection of 72 percent. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 134 Food & Comparables A 103.0 B 103.7 C 87.1% D 70.8 E 79.9 Stabilized Other Operated Departments Revenue and Expense Other Operated Departments can vary significantly among the comparable properties and the subject depending on the nature of the additional revenue generators. Other expected operated departments- at the subject property include revenue from parking, telephone and internet, business services, guest laundry, in -room entertainment, and the sundries shop. The comparable hotels had a range of other operated department revenue from $0.56 to $24.20 per occupied room. Based upon the various components of this line item, we have estimated the income for the subject to be approximately $25.00 per occupied room in a representative year of operations. The subject is projected to achieve slightly above the range of comparables due to a higher estimate of parking revenue supplemented by other revenue from sources as listed above. Other Comparables A $21.68 B 0.56 C 24.20 D 18.19 E 16.04 Other Operated Department Expenses include payroll costs, employee benefits, and other operating supplies of such other operated departments. The comparables' other operating expenses ranged from a 43.8 percent to a 110.3 percent expense ratio. For a representative 'year of operations, we have estimated expenses at approximately 60.0 percent of revenues for the subject, which is within the range of the comparables and reflects the projected revenue levels at the subject. Other Comparables A 64.9% B 110.3 C 43.8 D 78.4% E 50.6 Weighted Average 61.2 710 Wilshire Boulevard, Santa Monica, California 35 Rentals and Other Income Rentals and Other Income generally reflects the net revenues associated with the rental of offices and stores, concessions, commissions, cash discounts earned, forfeited advance deposits, service charges, interest income, cancellation charges and other. For a representative year of operation, we have estimated rental and other income of approximately $5.00 POR, plus $4.00 per square foot per month for the retail component of the subject. With 10,225 square feet of retail, this equates to $491,000 in annual retail income. When we factor in all rental and other income, the resulting estimate is $17.50 POR or $688,000 for a representative year. Undistributed Operating Expenses Undistributed Operating Expenses are operating expenses that are not chargeable to a particular operating department and are presented as undistributed operating expenses, in accordance with the Uniform System of Accounts for the Lodging Industry. These expenses include administrative and general, marketing, property operations and maintenance, and energy and utilities. These expenses are relatively unaffected by fluctuations in occupancies and ADR. Excluding management fees, which are a fixed percentage based on a contract agreement and market parameters, these expenses are analyzed primarily on a dollar amount per available room (PAR) basis. Administrative and General This category includes the salary and wages of the general manager and administrative staff; cash overages and shortages; credit card commissions; bad debt expense; security; data processing costs; accounting payroll expense; and professional fees. It should be noted that, according to the most recent edition of the Uniform Systems of Accounts for the Lodging Industry, general liability insurance is no longer included in this line item. Instead, it is included under the fixed charges "insurance" line item. Administrative and general expenses at the comparables range from $5,848 to $13,996 per available room with ratios to total revenue ranging from 8.4 percent to 12.8 percent of total revenues. We have estimated an administrative and general expense for the subject property of $9,000 per available room, which is 8.0 percent of revenues. This is within the range of the comparable properties and reflects an upward adjustment from the $7,200 PAR estimated for Scenario One to reflect the smaller room count. 710 Wilshire Boulevard, Santa Monica, California Per Occupied Room Per Da Comparables A $1.54 $141 B 8.40 915 C 5.73 669 D 3.76 668 E 4.56 449 Weighted Average 4.79 568 Subiect Stabilized Year $17.50 $1.886 Undistributed Operating Expenses Undistributed Operating Expenses are operating expenses that are not chargeable to a particular operating department and are presented as undistributed operating expenses, in accordance with the Uniform System of Accounts for the Lodging Industry. These expenses include administrative and general, marketing, property operations and maintenance, and energy and utilities. These expenses are relatively unaffected by fluctuations in occupancies and ADR. Excluding management fees, which are a fixed percentage based on a contract agreement and market parameters, these expenses are analyzed primarily on a dollar amount per available room (PAR) basis. Administrative and General This category includes the salary and wages of the general manager and administrative staff; cash overages and shortages; credit card commissions; bad debt expense; security; data processing costs; accounting payroll expense; and professional fees. It should be noted that, according to the most recent edition of the Uniform Systems of Accounts for the Lodging Industry, general liability insurance is no longer included in this line item. Instead, it is included under the fixed charges "insurance" line item. Administrative and general expenses at the comparables range from $5,848 to $13,996 per available room with ratios to total revenue ranging from 8.4 percent to 12.8 percent of total revenues. We have estimated an administrative and general expense for the subject property of $9,000 per available room, which is 8.0 percent of revenues. This is within the range of the comparable properties and reflects an upward adjustment from the $7,200 PAR estimated for Scenario One to reflect the smaller room count. 710 Wilshire Boulevard, Santa Monica, California 36 Comparables Per Available Room Ratio to Total Rev. A $5,077 A $8,013 9.2% B 5,848 8.4% C 13,996 12.1% D 8,413 8.0% E 13,914 12.8% Weighted Average 9,807 10.0% Marketing This expense includes the cost of advertising, printing of brochures, salary associated with sales and marketing personnel, and other costs associated with an ongoing sales and promotion program. Marketing expenses for the comparables ranged from $2,899 to $8,769 per available room. The amount spent on marketing depends on the location, reputation, and brand association of the property. Our projections assume the subject will pay specified fees for brand benefits such as chain marketing, access to and representation on the operator's global distribution system. As such, we have estimated an expense of approximately $6,500 per available room, which equates to 5.8 percent of total revenues. This reflects a reduction from Scenario One as the subject has a significantly reduced room count to fill and a reduced focus on group and transient marketing. to Comparables A $5,077 5.8% B 2,899 4.2% C 5,472 4.7% D 5,332 5.1% E 8,769 8.1% Subject Stabilized Year 1 $6,500. _. _.. 1__ _ 5.8% Property Operations and Maintenance Property operations and maintenance expenses are a function of building age and usage. This category includes the engineering salaries, wages and benefits, maintenance of the building, grounds and landscape, electrical and mechanical equipment, engineering, refrigeration, operating supplies, cleaning, waste removal and uniforms. The comparable hotels posted expenses ranging from $2,246 to $8,614 per available room. Property operations and maintenance expenditures for the subject are estimated at approximately $5,000 per available room in 2011 dollars in a representative year, which is 4.4 percent of revenues. This equates to $660,000 versus $998,000 estimated for Scenario One, and incorporates the fixed component and similarly sized public area of Scenario Two relative to Scenario One. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 137 Utility Costs Energy and utility costs include electric, fuel, steam, water, and sewer charges. The cost of utilities at the comparable hotels ranged from $1,377 to $3,099 per available room. We have estimated energy and utility costs of $3,000 in a representative year of operation, equal to 2.7 percent of total revenues, similar to Scenario One on a PAR basis. Costs to Comparables Per Available Room Ratio to Total Rev. Comparables 2.4% B 1,715 A 'C $4,061 4.7% B 2,668 2,246 3.2% C 5.4% 7,287 6.31 D 3,372 3.2% E 8,614 7.9% Weighted Average 4,840 4.9% Utility Costs Energy and utility costs include electric, fuel, steam, water, and sewer charges. The cost of utilities at the comparable hotels ranged from $1,377 to $3,099 per available room. We have estimated energy and utility costs of $3,000 in a representative year of operation, equal to 2.7 percent of total revenues, similar to Scenario One on a PAR basis. Costs to Comparables A $2,130 2.4% B 1,715 2.5% 'C 2,325 2.0% D 2,668 2.5% E 5.881 5.4% Subject Stabilized Year 1 $3,000 1 2.7% Fixed Charges Management Fees A management fee is an expense item representing the value of the management services. It is a variable operating expense normally expressed as a percentage of total revenues. Management fees for properties of this type typically range from 2.5 to 5.0 percent, and as such, we find a 3.0 percent expense level reasonable. This equates to a base management fee of $447,000 in a representative year. Real Estate Taxes The subject property is in the real estate taxing jurisdiction of the Los Angeles County Tax Assessor's Office. In California, Proposition 13 limits property taxes to one percent of the assessed value plus city, special district, and county bonds. Assessed values are further limited to a two percent increase per year, except upon sale or major alterations of the property. Based on this methodology and an estimated assessment rate of 1.10000 percent, the subject's real estate taxes equate to $615,000 in a representative year. Insurance Insurance expense includes coverage for liability and buildings and contents, and has been on the rise in the last few years. Insurance expense for the comparable properties ranged 710 Wilshire Boulevard, Santa Monica, California FeasihilityAnalysis Page 138 broadly from $299 PAR to $1,081 PAR. Based on the subject's proposed facilities and our knowledge of industry trends, this expense at the subject property is estimated to be $800 per available room in 2011 dollars for a representative year of operation, This is within the range of the comparables and reflects an upward adjustment for the reduced room count. Insurance Comparables A $1,052 B 354 C 1,081 D 1,798 E 1,597 Reserves for Replacement An additional item not typically listed on an owner's income statement is the amount required for the periodic replacement of certain short -lived items such as carpeting, draperies, and other furniture, fixtures and equipment. For a new hotel, reserves are often lower in the first few years, because very little capital improvements will be necessary. We have increased the reserves gradually over the first three full years of the projection period to build up reserves as the building ages. We have projected reserves for replacement of two percent in 2014, three percent in 2015, and four percent in 2016 and each year thereafter. STABILIZED YEAR OPERATING RESULTS Presented on the following page is an estimate of the subject hotel's stabilized year operating results expressed in current value 2011 dollars. This estimate is based on the foregoing analysis. For this twelve -month period, revenues are projected to total approximately $14,911,000. This equates to a per occupied room revenue of $377, approximately eight percent higher than Scenario One, which had a projected revenue of $349 POR. Gross operating profit, which does not include management fees, property taxes, direct assessments, insurance, or reserves for replacement, totals approximately $6,353,000, or 42.6 percent of total revenue. This is lower than the 44.8 percent NOI in Scenario One and reflects a reduced economy of scale as the room size is lowered. This is within the range of comparables, which present an average GOP of 43.2 percent. Net operating income for the subject in a stabilized year, after the deduction of a management fee, property taxes, insurance, and a reserve for capital replacement, is projected to be $4,588,000 or 30.8 percent of total revenue. 710 Wilshire Boulevard, Santa Monica, California Feasibility Analysis Page 139 7th & Wilshire Scenario Two Representative Year of Operation Number of Units: Number of Annual Rooms Available: Number of Rooms Occupied: Annual Occupancy: Average Daily Rate: Revenue Per Available Room: Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departmental Expenses Rooms Food & Beverage Other Operated Departments Total Departmental Expenses Departmental Profit Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses Gross Operating Profit Base Management Fee Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income FF &E Reserve Net Operating Income After Reserve Source: PKF Consulting 710 Wilshire Boulevard, Santa Alonica, California Stated in 2011 Dollars 21.2% 15,561 132 2,809,000 79.0% 21,280 48,180 593,000 60.0% 4,492 39,508 5,456,000 36.6% 41,333 82.0 3,102,000 20.8% 23,500 $245.00 $200.90 Amount Ratio Per Room P.O.R. $9,679,000 64.9% $73,326 $244.99 3,556,000 23.8% 26,939 90.01 988,000 6.6% 7,485 25.01 688,000 4.6% 5,212 17.41 14,911,000, 100.0% 112,962 377.42 2,054,000 21.2% 15,561 51.99 2,809,000 79.0% 21,280 71.10 593,000 60.0% 4,492 15.01 5,456,000 36.6% 41,333 138.10 9,455,000 63.4! 1 71,629 239.32 1,188,000 8.0% 9,000 30.07 858,000 5.8% 6,500 21.72 660,000 4.4% 5,000 16.71 396,000 2.7% 3,000 10.02 3,102,000 20.8% 23,500 78.52 F777j53,000 j 42.6% 1 48,1291 160.80 4-47,0001 3.0% 1 3,386 11.31 616,000 106,000 722,000 4.1% 0.7% 4,667 803 15.59 2.68 4.8% 5,4701 18.27 5,184,000 1 34.8% 1 39,273 131.22 596,0001 4.0% 1 4,515 15.09 $4,588,000 1 30.8% 1 $34,758 1 $116.13 FeasibilityAnalysis Page 140 ESTIMATED ANNUAL OPERATING RESULTS The previous analysis provided for the income and expenses incurred in the operation of the subject in a stabilized year. In the following analysis, we provide estimated income and expenses for the subject during each year of the ten -year holding period anticipated for a typical investor. Our estimate of the performance for the subject in the stabilized year is used as a basis for our analysis, considering the effects of inflation, business development, and varying occupancy. Inflation All expenses except for property taxes are projected to increase at 3.0 percent throughout the holding period. Statement of Estimated Annual Operating Results The estimated annual operating results for the proposed hotel from January 1, 2014 to December 31, 2023 are presented on the following pages. 710 Wilshire Boulevard, Santa Monica, California 7th & Wilshire Scenario Two Projected Operating Results Calendar Years Number of Units: Number of Annual Rooms Available: Number of Rooms Occupied: Annual Occupancy: Average Daily Rate: Revenue Per Available Room: Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues De amnental Expenses Roams Food & Beverage Other Operated Departments Total De artmental Expenses Departmental Profit Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Casts Total Undistributed Operating Expenses Gross Operating Profit Base Management Fee Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income FF &E Reserve Net Operating Income After Reserve Source: PKF Consulting 2014 132 2,108,000 48,180 2,845,000 34,690 569,000 72.0 5,522,000 $268.00 3,390,000 $192.96 Amount Ratio $9,297,000 64.6% 3,412,000 23.7% 948,000 6.6% 726,000 5.0% 14,383,000 - 100.0% 8,861,000 61.6 132 2,108,000 22.7° 2,845,000 83.4% 569,000 60.0% 5,522,000 38.4% 8,861,000 61.6 5,471,000 1 38.0 431,000 1 3.0% 132 1,298,000 9.0% 938,000 6.5% 721,000 5.0% 433,000 3.0% 3,390,000 23.6 5,471,000 1 38.0 431,000 1 3.0% 4,272,000 1 29.7% 288,000 1 2.0 $3,964,000 27.7% Full Year of Operation 710 Wilshire Boulevard Santa Monica, California 2015 132 E653,000 4.5% 115,000 0.8% 768,000 5.3% 4,272,000 1 29.7% 288,000 1 2.0 $3,964,000 27.7% Full Year of Operation 710 Wilshire Boulevard Santa Monica, California 2015 132 5,914,000 48,180 966,000 37,100 743,000 77.0% 446,000 $276.00 3,492,000 $212.52 Amount Ratio $10,240,000 64.8% 3,758,000 23.8 1,044,000 6.6% 761,000 4.8% 15,803,000 100.0% 2,242,000 3,046,000 626,000 21.9% 81.1% 60.0% 5,914,000 37.4% 966,000 9,889,000 62.6 6,397,000 1 40.5% 474,000 1 3.0% 132 1,337,000 8.5% 966,000 6.1 743,000 4.7% 446,000 2.8% 3,492,000 22.1% 6,397,000 1 40.5% 474,000 1 3.0% 5,097,000 1 32.3 474,000 1 3.0 $4,623,000 29.3 2016 132 707,000 4.5% 119,000 0.8 %'' 826,000 5.2% 5,097,000 1 32.3 474,000 1 3.0 $4,623,000 29.3 2016 132 2,382,000 48,180 3,257,000 39,510 687,000 82.0 6,326,000 $284.00 3,596,000 $232.88 Amount Ratio $11,221,000 64.9% 4,122,000 23.8% 1,145,000 6.6 798,000 4.6 17,286,000 100.0% 10,960,000 63.4 132 2,382,000 21.2 3,257,000 79.0 687,000 60.0% 6,326,000 36.6 10,960,000 63.4 7,364,000 1 42.6 519000 3.0% 132 1,377,000 8.0% 995,000 5.8 765,000 4.4% 459,000 2.7% 3,596,000 20.8% 7,364,000 1 42.6 519000 3.0% F-6-,00-2700-07- ,002 000 34.7 691,000 4.0 $5,311,000 30.7% 2017 132 721,000 4.2% 122,000 0.7% 843,000 4.9% F-6-,00-2700-07- ,002 000 34.7 691,000 4.0 $5,311,000 30.7% 2017 132 2,453,000 48,180 3,354,000 39,510 708,000 82.0% 6,515,000 $293.00 3,704,000 $240.26 Amount Ratio $11,576,000 64.9% 4,246,000 23.8% 1,179,000 6.6% 822,000 4.6°/ 17,823,000 100.0% 11,308,000 63.4 132 2,453,000 21.2% 3,354,000 79.0% 708,000 60.1% 6,515,000 36.6% 11,308,000 63.4 41 2018 132 1,419,000 8.0% 1,024,000 5.7% 788,000 4.4% 473,000 2.7% 3,704,000 20.8% 41 2018 132 2,527,000 48,180 3,455,000 39,510 729,000 82.0% 6,711,000 $301.00 3,815,000 $246.82 Amount Ratio $11,893,000 64.9% 4,373.,000 23.9% 1,215,000 6.6 847,000 4.6 18,328,000 100.0% 11,61],000 63.4% 34.8 2,527,000 27.2 3,455,000 79.0% 729,000 60.0% 6,711,000 36.6% 11,61],000 63.4% 7,604,000 42.7% 7,802,000 42.6% 535,000 3.0% 550,000 1 3.0% 34.8 1,461,000 8.0 1,055,000 5.8% 812,000 4.4% 487,000 2.7% 3,815,000 20.8% 7,604,000 42.7% 7,802,000 42.6% 535,000 3.0% 550,000 1 3.0% 6,207000 34.8% 713,000 1 4.0% 34.8 736,000 4.1 126,000 0.7% 862,000 4.8% 6,207000 34.8% 713,000 1 4.0% 6,371 000 34.8 751,000 4.1% 130,000 0.7% 881,000 4.8% 6,371 000 34.8 733,000 1 4.0 $5,638,000 1 30.8% 7th & Wilshire Scenario Two Projected Operating Results Calendar Years Number of Units: Number of Annual Rooms Available: Number of Rooms Occupied: Annual Occupancy: Average Daily Rate: Revenue Per Available Room: Revenues Rooms Food & Beverage Other Operated Departments Rentals and Other Income Total Revenues Departrnental Expenses Rooms Food & Beverage Other Operated Departments Total De artmental Ex enses Departmental Profit Undistributed Expenses Administrative & General Marketing Property Operation and Maintenance Utility Costs Total Undistributed Operating Expenses Gross operating Profit Base Management Fee Fixed Expenses Property Taxes Insurance Total Fixed Expenses Net Operating Income FF &E Reserve Net Operating Income After Reserve Source: PKFConsuttin 2019 35.0 132 21.3% 48,180 79.0% 39,510 60.0% 82.0 36.6% $310.00 20.81 $254.20 Amount Ra[io $12,248,000 64.9° 4,505,000 23.9% 1,251,000 6.6% 872,000 4.6% 18,876,000 100.0% 11,964,000 63.4 35.0 2,603,000 21.3% 3,558,000 79.0% 751,000 60.0% 6,912,000 36.6% 11,964,000 63.4 8,034,000 42.6 566,000 1 3.0 35.0 1,505,000 8.0 7,087,000 5.8 836,000 4.41 502,000 2.7% 3,930,000 20.81 8,034,000 42.6 566,000 1 3.0 6,568 000 1 34.8 755,000 1 4.0 $5,813,000 1 30.8 710 Wilshire Boulevard, Santa Monica, California 2020 35.0 766,000 4.1 134,000 0.7% 900,000 4.8 6,568 000 1 34.8 755,000 1 4.0 $5,813,000 1 30.8 710 Wilshire Boulevard, Santa Monica, California 2020 35.0 132 21.2% 48,180 79.0% 39,510 60.0% 82.0% 36.6% $320.00 20.8% $262.40 Amount Ratio $12,643,000 64.9% 4,640,000 23.8% 1,289,000 6.6% 898,000 4.6% 19 470 000 100.0 12,351,000 63.4% 35.0 2,681,000 21.2% 3,665,000 79.0% 773,000 60.0% 7,119,000 36.6% 12,351,000 63.4% 8,304,000 T 42.7% 584,000 1 3.0 35.0 1,550,000 8.0% 1,119,000 5.7% 861,000 4.4% 517,000 2.7% 4,047,000 20.8% 8,304,000 T 42.7% 584,000 1 3.0 6,801,000 34.9% 779,000 4.0% 2021 35.0 781,000 4.0% 138,000 0.7% 919,000 60.0% 6,801,000 34.9% 779,000 4.0% 2021 35.0 132 21.2% 48,180 79.0% 39,510 60.0% 82.0 36.6 $329.00 20.8% $269.78 Amount Ratio $12,999,000 64.9% 4,779,000 23.9% 1,327,000 6.6% 925,000 4.6% 20,030,000 100.0 12,698,000 63.4 35.0 2,761,000 21.2% 3,775,000 79.0% 796,000 60.0% 7,332,000 36.6 12,698,000 63.4 8,529,000 42.6 601,000 1 3.0% 35.0 1,597,000 8.0% 1,153,000 5.8% 887,000 4.4% 532,000 2.7% 4,169,000 20.8% 8,529,000 42.6 601,000 1 3.0% 6,990000 34.9% 801,000 4.0% 2022 35.0 796,000 4.0% 142,000 0.7% 938,000 4.7% 6,990000 34.9% 801,000 4.0% 2022 35.0 132 21.2% 48,180 79.0% 39,510 60.0% 82.0 36.6% $339.00 20.8% $277.98 Amount Ratio $13,394,000 64.9% 4,922,000 23.9% 1,367,000 6.6% 953,000 4.6% 20,636,000 100.0% 13,084,000 63.4 35.0 2,844,000 21.2% 3,888,000 79.0% 820,000 60.0% 7,552,000 36.6% 13,084,000 63.4 8,790,000 42.6 619 000 3.0% 35.0 1,644,000 8.0% 1,188,000 5.8% 914,000 4.4% 548,000 2.7% 4,294,000 20.8% 8,790,000 42.6 619 000 3.0% 7,213,000 35.0 812,000 3.9% 146,000 0.7% 958,000 4.6%j 7,213,000 35.0 132 21.2% 825,000 4.0 39,510 60.0% $6,388,000 1 31.07/6 42 2023 132 21.2% 48,180 79.0% 39,510 60.0% 82.0% 36.6% $349.00 20.8% $286.18 Amount Ratio $13,789,000 64.9% 5,070,000 219% 1,408,000 6.6% 981,000 4.6% 21,248,000 100.0% 9,046,000 42.6 637,000 1 3.0 2,929,000 21.2% 4,005,000 79.0% 845,000 60.0% 7,779,000 36.6% 9,046,000 42.6 637,000 1 3.0 1,694,000 8.0% 1,223,000 5.8% 941,000 4.4% 565,000 2.7% 4,423,000 20.8% 9,046,000 42.6 637,000 1 3.0 850,000 1 4.0% $6,579,000 31.0% 829,000 3.9% 151,000 0.7% 980,000 4.6% 850,000 1 4.0% $6,579,000 31.0% 43 Value Conclusion — Scenario Two The following table presents the 10 -year stream of NOI, as well as the reversion of the property at the end of year 10. Based on the resulting valuation, we have derived a prospective market value of the development under Scenario Two, as presented in the table below. We have utilized the same terminal capitalization rate and discount rate, which we find reasonable give the subject's positioning and location. ENTREPRENEURIAL PROFIT Entrepreneurial profit is not an estimate of the general contractor's profit, which has already been accounted for, but is the profit to the developer for combining the factors of production in the development of a property. Profit margins vary widely, depending on many factors. The profit margin for a hotel would typically range from 10.0 to 20.0 percent of total development costs. It is important to remember that entrepreneurial profit is necessary as it reflects a theoretical amount needed to attract a developer to construct a property and to attest to the feasibility of a development. DEVELOPMENT FEASIBILITY CONCLUSION Based on our estimates of development costs and valuation of the proposed facilities, Scenario One demonstrates a profit of $11,400,000 or 10.2 percent of the development budget, while Scenario Two demonstrates a loss of $14,000,000, or 19.1 percent of the development budget. Therefore, the change in room count for the full- service property from 285 to 132 is the difference between a feasible and infeasible development for the subject site. Please note that the profit or loss represents the investment return or loss over a three -year period, as the hotel value represents the value upon completion while the costs reflect current cost levels. 710 Wilshire Boulevard, Santa Monica, California 7th & Wilshire Scenario Two Valuation - Discounted Cash Flow Unrounded Number of Projected 11.00% Present Period Months NOI PV Factor Value 2014 12 $ 3,985,000 0.900901 $ 3,590,090 2015 24 4,624,000 0.811622 3,752,942 2016 36 5,312,000 0.731191 3,884,089 2017 48 5,495,000 0.658731 3,619,727 2018 60 5,640,000 0.593451 3,347,065 2019 72 5,815,000 0.534641 3,108,936 2020 84 6,023,000 0.481658 2,901,029 2021 96 6,190,000 0.433926 2,686,005 2022 108 6,389,000 0.390925 2,497,618 2023 120 6,581,000 0.352184 2,317,726 Reversion 78,512,333 0.352184 27,650,825 $59,356,053 ROUNDED $59,400,000 ENTREPRENEURIAL PROFIT Entrepreneurial profit is not an estimate of the general contractor's profit, which has already been accounted for, but is the profit to the developer for combining the factors of production in the development of a property. Profit margins vary widely, depending on many factors. The profit margin for a hotel would typically range from 10.0 to 20.0 percent of total development costs. It is important to remember that entrepreneurial profit is necessary as it reflects a theoretical amount needed to attract a developer to construct a property and to attest to the feasibility of a development. DEVELOPMENT FEASIBILITY CONCLUSION Based on our estimates of development costs and valuation of the proposed facilities, Scenario One demonstrates a profit of $11,400,000 or 10.2 percent of the development budget, while Scenario Two demonstrates a loss of $14,000,000, or 19.1 percent of the development budget. Therefore, the change in room count for the full- service property from 285 to 132 is the difference between a feasible and infeasible development for the subject site. Please note that the profit or loss represents the investment return or loss over a three -year period, as the hotel value represents the value upon completion while the costs reflect current cost levels. 710 Wilshire Boulevard, Santa Monica, California 44 Development Feasibility Conclusion with Market Value Land Scenario 1 Scenario 2 Hotel Type Full Service Full Service Keys (Hotel Rooms) 285 132 Square Feet of Buildings 202,620 148,070 Average Daily Rate $235.00 $245.00 Occupancy 80% 82 Land Value —Actual Cost Basis $20,050,000 $20,050,000 Development Costs $92,250,000 $53,250,000 Total Development Budget $112,300,000 $73,300,000 Value upon Completion $123,700,000 $59,300,000 Value per Key $434,035 $449,242 Entrepreneurial Profit $11,400,000 ($14,000,000) Percent of Development 10.2% -19.1 Therefore, Scenario One is viewed as economically feasible, while Scenario Two is not. We thank you for the opportunity to conduct this study and look forward to discussing our findings with you. Sincerely, PKF Consulting USA Bruce Baltin Senior Vice President 710 INIshire Boulevard, Santa Monica, California STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS This report is made with the following assumptions and limiting conditions: Economic and Social Trends - The consultant assumes no responsibility for economic, physical or demographic factors which may affect or alter the opinions in this report if said economic, physical or demographic factors were not present as of the date of the letter of transmittal accompanying this report. The consultant is not obligated to predict future political, economic or social trends. Information Furnished by Others - In preparing this report, the consultant was required to rely on information furnished by other individuals or found in previously existing records and /or documents. Unless otherwise indicated, such information is presumed to be reliable. However, no warranty, either express or implied, is given by the consultant for the accuracy of such information and the consultant assumes no responsibility for information relied upon later found to have been inaccurate. The consultant reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available. Hidden Conditions - The consultant assumes no responsibility for hidden or unapparent conditions of the property, subsoil, ground water or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions. Hazardous Materials - The consultant has not been provided any information regarding the presence of any material or substance on or in any portion of the subject property or improvements thereon, which material or substance possesses or may possess toxic, hazardous and /or other harmful and /or dangerous characteristics. Unless otherwise stated in the report, the consultant did not become aware of the presence of any such material or substance during the consultant's inspection of the subject property. However, the consultant is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the value of the subject property. The value estimated in this report is predicated on the assumption that no such material or substance is present on or in the subject property or in such proximity thereto that it would cause a loss in value. The consultant assumes no responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this report assumes the subject property is in compliance with all federal, state and local environmental laws, regulations and rules. Zoning and Land Use - Unless otherwise stated, the projections were formulated assuming the hotel to be in full compliance with all applicable zoning and land use regulations and restrictions. Licenses and Permits - Unless otherwise stated, the property is assumed to have all required licenses, permits, certificates, consents or other legislative and /or administrative authority from any local, state or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. Engineering Survey - No engineering survey has been made by the consultant. Except as specifically stated, data relative to size and area of the subject property was taken from sources considered reliable and no encroachment of the subject property is considered to exist. Subsurface Rights - No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated. Maps, Plats and Exhibits - Maps, plats and exhibits included in this report are for illustration only to serve as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced or used apart from the report. Legal Matters - No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate consultants. STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS (continued) Right of Publication - Possession of this report, or a copy of it, does not carry with it the right of publication. Without the written consent of the consultant, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with proper written qualification and only in its entirety for its stated purpose. Testimony in Court - Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance of said hearing. Further, unless otherwise indicated, separate arrangements shall be made concerning compensation for the consultant's time to prepare for and attend any such hearing. Archeological Significance - No investigation has been made by the consultant and no information has been provided to the consultant regarding potential archeological significance of the subject property or any portion thereof. This report assumes no portion of the subject property has archeological significance. Compliance with the American Disabilities Act - The Americans with Disabilities Act ( "ADA ") became effective January 26, 1992. We assumed that the property will be in direct compliance with the various detailed requirements of the ADA. Definitions and Assumptions - The definitions and assumptions upon which our analyses, opinions and conclusions are based are set forth in appropriate sections of this report and are to be part of these general assumptions as if included here in their entirety. Dissemination of Material - Neither all nor any part of the contents of this report shall be disseminated to the general public through advertising or sales media, public relations media, news media or other public means of communication without the prior written consent and approval of the consultant(s). Distribution and Liability to Third Parties - The party for whom this report was prepared may distribute copies of this appraisal report only in its entirety to such third parties as may be selected by the party for whom this report was prepared; however, portions of this report shall not be given to third parties without our written consent. Liability to third parties will not be accepted. Use in Offering Materials - This report, including all cash flow forecasts, market surveys and related data, conclusions, exhibits and supporting documentation, may not be reproduced or references made to the report or to PKF Consulting in any sale offering, prospectus, public or private placement memorandum, proxy statement or other document ( "Offering Material ") in connection with a merger, liquidation or other corporate transaction unless PKF Consulting has approved in writing the text of any such reference or reproduction prior to the distribution and filing thereof. Limits to Liability - PKF Consulting cannot be held liable in any cause of action resulting in litigation for any dollar amount which exceeds the total fees collected from this individual engagement. Legal Expenses - Any legal expenses incurred in defending or representing ourselves concerning this assignment will be the responsibility of the client. ATTACHMENT HR &A PEER REVIEW OF PKF FINANCIAL FEASIBILITY ANALYSIS AND FISCAL IMPACT ANALYSIS, SEPTEMBER 2011 U61 A 28100 28th Street, Suite :3" }5, Santa Monica, CA 90405 T; 310 -581 -0906 I f. 310-581 -09,10 ) vvxv F.hraadvi,;ors.com MEMORANDUM To: Jing Yea, City of Santa Monica From: Paul J. Silvern and David Berneman, HR &A Advisors, Inc. William H. Whitney, Whitney & Whitney, Inc. Date: September 9, 2011 Re: Financial Feasibility Peer Review of the 710 Wilshire Hotel Project and the Smaller Hotel Alternative Executive Summary Introduction At the request of The City of Santa Monica ( "City "), HR &A Advisors, Inc. (HR &A) and Whitney & Whitney, Inc. (W &W) conducted an independent peer review of the March 2011 version of a financial feasibility analysis prepared by PKF Consulting ( "Updated PKF Report "), for a new 285 -room hotel development to be located at 710 Wilshire Boulevard ( "Project ") in the City. The Updated PKF Report also includes analysis of a second development scenario for a smaller 132 - room hotel ( "Smaller Hotel Alternative").' The Project is being proposed by Mr. Alex Goby ( "Applicant "), who is the owner of the existing, seven -story Santa Monica Professional Building (710 Wilshire Boulevard), a designated City landmark; an adjacent two -story retail and office building (718 Wilshire Boulevard); and five adjacent lots situated to the rear of the two buildings along Seventh Street that are currently used for surface parking, all of which together comprise the proposed development site ( "Project Site "). The City's land use regulations require consideration of "community benefits" to exceed the otherwise applicable zoning regulations, which would be required to develop the Project. The difference in financial gain achievable from these more generous development standards is an issue for both the City's determination about the value of requested community benefits, and the Applicant's willingness to provide them. The Updated PKF Report was provided to supply information relevant to these issues, and the City therefore has an interest in obtaining independent professional review of that information. Accordingly, this memorandum was prepared to assist the City in evaluating the information in the Updated PKF Report. Following this Executive Summary, the memorandum presents our assessment of the financial feasibility analysis presented in the Updated PKF Report, and our own analysis of the Project's net general economic and net fiscal impacts, based on the development budget and operating revenues from alternative assumptions developed by HR &A and W &W. Our approach to conducting the peer review included an analysis of both the Updated PKF Report and a previous ' The Project and the Smaller Hotel Alternative are sometimes also referred to herein collectively as the "Hotel Development Scenarios." HR &.A Auvisoes, Wc. PKF Report Peer Review I 1 version of that document dated March 2010 ( "Original PKF Report "); review of an appraisal report prepared by Curtis - Rosenthal, Inc. ( "Appraisal Report "); assembly and review of other information and data supplied by the Applicant; review of more recent lodging market data prepared by PKF and other lodging industry consultants and third party data sources; examination of data about the existing Project Site's improvements that was supplied by the City; replication and testing of the financial analysis in the Updated PKF Report; and application of our own experience analyzing hotel developments and our familiarity with Santa Monica market. Overview of the Project and the Smaller Hotel Alternative The proposed Project includes 285 hotel rooms, of which 55 rooms would be located within an adaptive reuse of the existing, landmark Santa Monica Professional Building, and 230 rooms would be constructed in a new six -story and partial seventh story building on the existing surface parking lots. The Project also includes retail, restaurants, meeting space and a subterranean parking garage. Development of the Project would require City approval of more generous development standards than are currently allowed by the City's existing zoning regulations, but which are consistent with the recently approved update to the Land Use and Circulation Elements of the City's General Plan. The Smaller Hotel Alternative would conform to existing zoning regulations. It would include 132 hotel rooms, of which 55 would also be located in adaptive reuse of the existing Santa Monica Professional Building, and the remaining 77 rooms would be constructed in a new three to four story building on the existing surface parking lots. This scenario also includes retail, restaurants, meeting space and a subterranean parking garage. Both Hotel Development Scenarios are assumed to commence construction in 2012, open in 2014, and achieve stabilized occupancy in 2016. Market Analysis Review Conclusions According to the Updated PKF Report, Santa Monica continues to enjoy one of the best - performing hotel markets in all of Los Angeles County, despite the temporary effects of the 2007- 2009 national recession. The overall occupancy rate returned to 80 percent in 2010, although average daily room rates (ADR) have not recovered as quickly as the occupancy rate. The Project is intended to be positioned within the reportedly under - served Full Service- Moderate quality and price tier in the City's lodging market, which according to the PKF Report has an ADR range of $173 -$250. The Project's room count, facilities and amenities are stated to be consistent with market expectations for this type of lodging facility. The Updated PKF Report pegs the Project ADR at a$235 (201 1 $) value that is reported as about $15 above the ADR for the Holiday Inn at Santa Monica Pier, about $25 above the Sheraton Delfina Hotel and slightly above the Doubletree Hotel. In this regard, it should be noted that the Sheraton Delfina and Doubletree are considered to be the only existing hotels in the Full Service- Moderate tier in the City's lodging inventory. In contrast, according to the Updated PKF Report, the Smaller Hotel Alternative would have to be positioned as a boutique product, due to its smaller scale, but above - average retail, dining and meeting space facilities. The Updated PKF Report assumes it could achieve an ADR of $245 (in 2011 $) and 82 percent occupancy in the stabilized year. The estimated ADR is one of the most critical variables for projecting financial feasibility of a hotel development. We believe the rate assumed in the Updated PKF Report for the Project is overly conservative. Considering the Project's superior location on Wilshire Boulevard, one of the HIP &A ADVISORS, INC. PKF Report Peer Review 12 most recognized street names in the world, its proximity to the Third Street Promenade and nearly all of the downtown area and Pacific Palisades, among other locational advantages, the Project's extensive proposed historic rehabilitation work, and its new construction element, we believe the Project would achieve a much higher ADR premium above the identified local existing comparables. But as we will discuss, this probably puts the Project into the Full Service - Upscale price tier. Development Budget, Net Operating Income and Financial Feasibility Review Conclusions The Updated PKF Report concludes that the Project would achieve a marginally acceptable 10.2 percent return on total development cost (i.e., feasible), but an unacceptable -19.1 percent return on cost for the Smaller Hotel Alternative (i.e., infeasible). "Return" is calculated as the Net Present Value of the sum of Net Operating Income (NOI) over a 10 -year holding period and the net proceeds from selling the hotel in the 10th year, based on projected 1 1'h year NOI. "Total Development Cost" is the sum of the current value of the existing improvements plus all costs of construction, professional fees and other indirect costs, and financing costs. Land value is based on the Appraisal Report and development costs are based primarily on estimates developed by the Morley Builders construction company. Annual "Net Operating Income" is the difference between annual operating revenues from all sources and annual operating costs. The annual operating revenues and costs were based on professional judgments after taking into account revenues and costs for a set of five "comparables" — i.e., hotel developments with similar characteristics, even though not all of which are located in the Santa Monica market area, or even California. Our review of the development costs, annual operating revenues and costs, and financial return calculations lead us to conclude that: The $20.0 million land value included in the analysis is significantly overstated, because the market value relies on an "as -is" appraisal of the existing improvements assuming they would continue to operate as professional office and retail space. Instead, the 718 Wilshire building would be demolished and the Santa Monica Professional Building would be gutted and converted to a hotel use. The appraisal also includes a questionable $6.0 million addition to value based on the "underutilization" of the existing parking lots. While it could be argued that no land value at all should be included in the feasibility analysis, because the Project involves a voluntary conversion from one use to another by a longer -time owner of the property (i.e. no new acquisition cost), our own financial feasibility analysis includes a value of $13.8 million, derived from the appraisal, to represent the value of the land and the building shell that will be contributed to the Hotel Development Scenarios. The development budgets for each Hotel Development Scenario omit certain other costs that should have been included, including architectural and engineering fees (except for the new construction portion of development, which was included), City permits and fees (except for the new construction portion), a soft cost contingency and construction loan points and construction loan interest cost (except for the new construction portion). The net effect of reducing the assumed land value and adding these costs is about a $400,000 net increase in total development cost for the Project, but about a $1.9 million reduction in cost for the Smaller Hotel Development, because the downward adjustment in land cost is larger than the upward adjustment for other development budget line items. After accounting for the applicable changes in the development budget noted above, and correcting the present value calculation to 2011 versus 2013, and explicitly including the cost of sale in the "reversion" calculation, we determined that the Project is not feasible, using the I -III& : ADVISORS, INC. PKF Report Peer Review 1 3 feasibility threshold in the Updated PKF Report, using the assumed $235 ADR, or even an ADR of $250, which defines the top end of the Full Service - Moderate price tier. We further determined that the ADR would have to increase to $294 to achieve at least a 10 percent return on cost, which the Updated PKF Report identifies as the threshold for feasibility. This means the Project would have to be positioned in the Full Service - Upscale price tier. Although we believe the significantly better location of the Project relative to the comparables used in the Updated PKF Report might justify the $59 ADR premium this implies, it is beyond the scope of this analysis to fully vet the feasibility of operating the Project at the Full Service - Upscale tier. Table 1 compares of the HR &A/W &W analysis that achieves the stated feasibility threshold as compared with the analysis in Updated PKF Report. • After making applicable adjustments to the feasibility analysis for the Smaller Hotel Alternative, including a higher ADR of $307 to maintain the scale relationship in the Updated PKF Report between its ADR and the Project ADR required to achieve feasibility (i.e., 1.043 x $294), we conclude that scenario would not meet the Updated PKF Report's feasibility threshold, because the cost of developing it far exceeds the present value of potential profit from net operating income and eventual sale proceeds (- 16.2 %). Even eliminating the land costs altogether from the development budget still renders this scenario infeasible. This conclusion about the infeasibility of the Smaller Hotel Alternative is similar to the conclusion reached in the Updated PKF Report, although the specific numerical values are different. We further determined that this scenario would only be feasible with an ADR (i.e., $403) closer to those that are only achievable by oceanfront hotels. HFF.A ADVISORS, INC. PKF Report Peer Review 1 4 Table 1 Development Budget, Net Operating Income & Financial Feasibility 710 Wilshire Project & Smaller Hotel Alternative HR &AIW &W PKF' Difference PROJECT Development Costs Total Development Costs $112,710,254 $112,311,292 $398,962 Operating Revenues 2023 -ADR $418 $335 $83 Operating Expenses 2023 -Total Expenses $28,587,198 $22,876,000 $5,711,198 Net Operating Income 2023 - NOI After Reserve $17,070,743 $13,728,000 $3,342,743 Reversion 2023 -Sale $203,033,067 $163,274,417 $39,758,650 2023 -Sale (2011 $) $58,035,139 $57,502,715 $532,424 Cumulative 10 -Year NOI and Reversion (2011 $) $124,077,664 $123,687,948 $389,716 Return Metrics Entrepreneurial Profit (2011 $) $11,367,410 $11,376,656 - $9,246 Profit Margin 10.1% 10.1% 0.0% SMALLER HOTEL ALTERNATIVE Development Costs Total Development Costs $71,380,429 $73,300,000 - $1,919,571 Operating Revenues 2023 -ADR $437 $349 $88 Operating Expenses 2023 -Total Expenses $15,265,000 $12,202,000 $3,063,000 Net Operating Income 2023 - NOI After Reserve $8,240,865 $6,579,000 $1,661,865 Reversion 2023 -Sale $98,010,111 $78,512,333 $19,497,778 2023 -Sale (2011 $) $28,015,291 $27,650,825 $364,466 Cumulative 10 -Year NOI and Reversion (2011 $) $59,803,147 $59,348,683 $454,464 Return Metrics Entrepreneurial Profit (2011 $) - $11,577,283 - $13,951,317 $2,374,034 Profit Margin -16.2% -19.1% 2.9% Based on assumptions provided by PKF. Source: PKF Consulting HIR A Awvlsons, INC. PKF Report Peer Review 1 5 Economic Impact Analysis Conclusions The Updated PKF Report does not provide projections of general economic impact on the City economy (i.e., jobs and economic output) from the Project's construction or annual operation once development is completed. Neither does it include analysis of the economic impacts from the existing office and retail improvements. Therefore, HR &A/W &W developed new projections based on our version of the feasibility analysis for the Project, including the adjusted development budget and higher ADR. The new economic impact analysis includes: (1) estimated impacts from continued annual operation of the existing office and retail improvements in the absence of the proposed new development; (2) projected construction and annual operation impacts of the Project; and (3) annual operation of the Project net of the impacts from the existing improvements, as discussed above. The analysis utilizes an IMPLAN input - output economic model tailored to the specifics of the City's economy. We conclude that the existing improvements, Project construction, Project operation, and Project operation net of the existing improvements, would result in the following economic impacts (all dollar values are stated in constant 2011 dollars -- i.e., without the effects of inflation): • The existing professional office and retail improvements support 120 direct jobs on -site and 171 total jobs in the City's economy, including the "multiplier effect" on direct jobs. This translates to $15.6 million in direct economic output and about $23.0 million in total economic output. • The Project's direct investment of $86.2 million in hard construction costs and furnishings would support 614 direct construction jobs and 904 total jobs in the City's economy, and about $126.4 million in total economic output in the City's economy. • On an annually recurring basis, based on the HR &A/W &W version of the Project's financial feasibility, the Project would generate 267 direct, on -site jobs, 391 total jobs, about $36.3 million in direct economic output and $54.6 million in total economic output in the City's economy. • After deducting the recurring annual economic impacts of the existing improvements, the net economic impacts of the Project would be 220 total jobs and about $31.6 million in total economic output in the City's economy. Fiscal Impact Analysis Conclusions The Updated PKF Report does not provide projections of City tax revenues, City service costs or the net fiscal impact to the City for the Project. Neither does it include analysis of the fiscal impacts of the existing office and retail improvements. Therefore, HR &A/W &W developed new projections based on our version of the feasibility analysis for the Project, including the adjusted development budget and higher ADR. The new fiscal impact analysis includes: (1) the impacts of the existing office and retail improvements; (2) the Project, based on certain alternative assumptions developed for the HR &A/W &W financial feasibility analysis; and (3) the net difference between the Project and the existing improvements. We conclude that the Project would generate the following fiscal impacts for the City, with all dollar values stated in constant 2011 dollars (i.e., without the effects of inflation): • The existing improvements generate an annual average of about $135,000 in revenue, or a cumulative total of $1.8 million, if these improvements were to continue operating as -is over the financial feasibility analysis period to 2023. The existing improvements generate annual average City service costs of about $59,000, and $773,000 cumulatively over the period to 2023. Thus, the net fiscal impact of the existing improvements is an annual average of RS, INC. PKF Report Peer Review 1 6 $75,000, and $979,000 cumulatively over the projection period. The existing improvements also generate an annual average of about $6,700 for the City's Redevelopment Agency, $2,800 for the Santa Monica - Malibu Unified School District and $240 for Santa Monica College. Based on the revised operating characteristic of the Project as reflected in the HR &A/W &W financial feasibility analysis, we project that the Project would generate an annual average of about $2.6 million in General Fund revenue, or a cumulative total of $33.8 million over the financial feasibility analysis period to 2023. It would also generate an annual average of about $222,000 for the City's Redevelopment Agency, $95,000 for the Santa Monica - Malibu Unified School District (SMMUSD) and $8,000 for Santa Monica College (SMC). Further, the Project would require annual average City General Fund services costing about $173,000, and $2.2 million cumulatively over the period to 2023. Thus, the Project would result in an average annual net General Fund fiscal impact of about $2.4 million, and $31.5 million cumulatively over the projection period. Subtracting General Fund revenues associated with the existing improvements from those associated with the Project results net average annual General Fund revenues of about $2.5 million, and $32.0 million cumulatively through 2023. After accounting for the cost of General Fund services provided to the Project Site, both for the existing improvements and the Project, the annual average "net -net" fiscal impact of the Project is about $2.4 million and $30.6 million cumulatively over the analysis period to 2023. HRIS A ADVISORS, INC. PKF Report Peer Review 1 7 I. Introduction At the request of The City of Santa Monica ( "City "), HR &A Advisors, Inc. (HR &A) and Whitney & Whitney, Inc. (W &W) conducted an independent peer review of the March 2011 update of a report entitled "Feasibility Analysis of Two Development Scenarios for a Proposed Hotel at 710 Wilshire Boulevard in Santa Monica, California, prepared PKF Consulting ( "Updated PKF Report ")? The Updated PKF Report includes analysis of a new 285 -room hotel development, with associated retail and restaurant uses and subterranean parking, to replace existing office and retail buildings to be located at 710 Wilshire Boulevard ( "Project ") in the City. The Updated PKF Report also includes analysis of a second development scenario for a 132 -room hotel ( "Smaller Hotel Alternative "), also with associated retail, restaurants and subterranean parking. Applications for entitlements to develop the Project have been submitted by Alex Gorby ( "Applicant "). HR &A and W &W have extensive experience performing similar new development financial feasibility peer review assignments for the City, and analyzing the feasibility of new hotel development in general. A summary of HR &A's and W &W's qualifications are included as Attachment A. This memorandum presents the methodology used in conducting the peer review, our findings and conclusions regarding the financial feasibility of the two Hotel Development Scenarios, and supplemental analysis on economic and fiscal impacts of the Project. Several Appendices include additional information and calculation details. The remaining sections of this memorandum are organized as follows: II. Project Description provides a more detailed description of the Project and the Smaller Hotel Alternative. III. Peer Review Methodology, summarizes the approach we took in performing the peer review, and notes some of the data sources we relied on. IV. Lodging Market Analysis Review, summarizes the market information presented in the Updated PKF Report, and provides our assessment of that information, and the implications of alternative assumptions that we believe are warranted. V. Development Budget, Operating Budget and Financial Feasibility Review, summarizes the information included in the Updated PKF Report, provides our assessment of that analysis, and the financial feasibility implications of. alternative assumptions that we believe are warranted. VI. Economic Impact Analysis, presents new analysis not contained in the Updated PKF Report about the general economic impacts of the Project in the City's economy, and the net impacts after taking into account the impacts resulting from the existing improvements on the site. VII. Fiscal Impacts Analysis, presents new analysis not contained in the Updated PKF Report about the tax revenues, public service costs and net fiscal impacts of the 1 The original PKF Report, which HR &A and W &W also reviewed, was dated March 2010 ( "Original PKF Report "). It was revised by PKF Consulting to account for changes in certain physical parameters in the Project, and improved lodging industry market conditions. The primary focus of this memorandum is the Updated PKF Report, but we also discuss certain Information in the Original PKF Report, as relevant. ADVISORS, INC. PKF Report Peer Review 1 8 Project, including impacts to the City's General Fund and Redevelopment Agency, Santa Monica - Malibu Unified School District and Santa Monica College, and the "net -net" General Fund fiscal impacts after taking into account the impacts resulting from the existing improvements on the site. II. Project Description The Project Site includes three adjacent parcels along Wilshire Boulevard between Seventh Street and Seventh Court, and four contiguous parcels immediately to the southeast, which altogether comprises about 52,500 square feet. The 710 Wilshire parcel includes the existing Santa Monica Professional Building, a seven - story, 34,178 square feet, "Y "- shaped retail and office building that was originally constructed in 1928 -29 and has been designated a local historic landmark. The 718 Wilshire parcel is developed with a two -story retail and office building with approximately 6,500 square feet. The proposed Project consists of a new 285 -room hotel, including 55 rooms located within an adaptive reuse of the existing Santa Monica Professional Building, and 230 rooms to be constructed in a six -story (and partial seventh story) building on the existing surface parking lots and the existing 718 Wilshire property. The Project also includes ground floor retail, restaurants, and meeting space, and a subterranean parking garage. Development of the Project would require City approval of more generous development standards than are currently allowed by the City's existing zoning regulations, but which are consistent with the recently approved update to the Land Use and Circulation Elements of the City's General Plan. The Smaller Hotel Alternative would conform to existing zoning regulations. It would include 132 hotel rooms, of which 55 would also be located in adaptive reuse of the existing historic office building and the remaining 77 rooms would be constructed on existing surface parking lots. This scenario also includes ground floor retail, restaurants, meeting space and a subterranean parking garage. The basic physical characteristics of the two Hotel Development Scenarios are compared in Table 2. roc. PKL Report Peer Review 1 9 Table 2 Characteristics of the Two Hotel Development Scenarios Both Hotel Development Scenarios are assumed to commence construction in 2012, open in 2014, and achieve stabilized occupancy in 2016. The City's interim land use regulations, following recent adoption of updates to the Land Use and Circulation Elements (LUCE) of the City's General Plan, require that the City receive "community benefits" from the Project in order for its development to exceed the otherwise applicable zoning regulations. The difference in the Applicant's financial gain that is achievable from these more generous development standards is an issue for both the City's determination about the nature and value of requested community benefits, and the degree to which it is financially feasible for the Applicant to provide them. The Updated PKF Report was provided to supply information relevant to both "feasibility" issues, and the City therefore has an interest in obtaining independent professional review of that information. Accordingly, this memorandum was prepared to assist the City in evaluating the feasibility information in the Updated PKF Report. III. Peer Review Methodology HR &A's and W &W's independent peer review consisted of thoroughly reviewing several documents provided by the Applicant, a tour of the existing site with the Applicant, assembly of data and information about the existing improvements, meetings and discussions with PKF and other members of the Applicant's project team, and discussions with City staff about the development as proposed. The documents provided by the Applicant that we reviewed included: • The Original PKF Report3 • The Updated PKF Report 3 The Original PKF Report includes additional explanatory information and analysis that was not included or updated in the Updated PKF Report (e.g., no updated economic or fiscal impact analysis). As noted above, where relevant, we comment on some of this information in the assessment that follows. HR &A ADVISORS, INC. PKF Report Peer Review I 1 Project Smaller Hotel Alternative Hotel Type Full Service Full Service 6 and Partial 3 and Partial Number of Stories 7th 4th Keys (Hotel Rooms) 285 132 Total Floor Area 202,620 148,070 Landmark Building 41,094 41,094 New Construction 161,526 106,976 Retail Floor Area 7,351 10,225 Restaurant Floor Area 7,712 7,712 Meeting Space Floor Area 7,703 6,821 Subterranean Parking Levels 3.5 2.0 Parking Spaces 286 150 Source: PKF Consulting Prepared by: HR &A Advisors, Inc.; Whitney & Whitney, Inc. Both Hotel Development Scenarios are assumed to commence construction in 2012, open in 2014, and achieve stabilized occupancy in 2016. The City's interim land use regulations, following recent adoption of updates to the Land Use and Circulation Elements (LUCE) of the City's General Plan, require that the City receive "community benefits" from the Project in order for its development to exceed the otherwise applicable zoning regulations. The difference in the Applicant's financial gain that is achievable from these more generous development standards is an issue for both the City's determination about the nature and value of requested community benefits, and the degree to which it is financially feasible for the Applicant to provide them. The Updated PKF Report was provided to supply information relevant to both "feasibility" issues, and the City therefore has an interest in obtaining independent professional review of that information. Accordingly, this memorandum was prepared to assist the City in evaluating the feasibility information in the Updated PKF Report. III. Peer Review Methodology HR &A's and W &W's independent peer review consisted of thoroughly reviewing several documents provided by the Applicant, a tour of the existing site with the Applicant, assembly of data and information about the existing improvements, meetings and discussions with PKF and other members of the Applicant's project team, and discussions with City staff about the development as proposed. The documents provided by the Applicant that we reviewed included: • The Original PKF Report3 • The Updated PKF Report 3 The Original PKF Report includes additional explanatory information and analysis that was not included or updated in the Updated PKF Report (e.g., no updated economic or fiscal impact analysis). As noted above, where relevant, we comment on some of this information in the assessment that follows. HR &A ADVISORS, INC. PKF Report Peer Review I 1 • An appraisal of the Project Site's market value l • A compilation of reports5 analyzing the current physical condition of the Santa Monica Professional Building, including an estimate of the cost to remedy identified deficiencies, comply with current health and safety codes, and rehabilitate the building for continued use as a retail /office building in a way that would qualify for federal Historic Preservation Tax Credits and California's Mills Act preservation tax credit: • The current rent roll, property tax bills and utility bills for the existing improvements We also assembled published lodging market data from several different sources, including PKF, Smith Travel Services, PricewaterhouseCoopers, various commercial hotel guides, and related information from the Santa Monica Convention and Visitors Bureau.6 We reviewed and evaluated these data in combination with our own knowledge and experience with hotel markets in general and Santa Monica's market in particular, replicated and tested the financial feasibility analysis presented in the Updated PKF Report, and then prepared our own version of the financial feasibility analysis using certain alternative assumptions, as discussed below. For the economic impact analysis, we obtained economic data for the City provided by the Minnesota IMPLAN Group, calibrated an IMPLAN model to approximate the structure of the City's economy (discussed below), and performed analysis of the existing improvements, the Project, and the Project net of impacts associated with the existing improvements. For the fiscal impact analysis, we obtained taxable sales and gross receipts data for the existing improvements from the City's Finance Department. We then constructed case -study spreadsheet models to analyze the revenues and public service costs for the existing improvements, the Project, and the Project net of the fiscal impacts from the existing improvements. We also performed analysis of revenues to the City's Redevelopment Agency, the Santa Monica - Malibu Unified School District and Santa Monica College. The economic and fiscal analyses were prepared for the Project only, because we conclude that the Smaller Hotel Alternative would not be financially feasible. IV. Lodging Market Analysis Review In conducting our review of the market analysis underlying the financial feasibility analysis of the proposed Hotel Development Scenarios, we reviewed the relevant sections of the Updated PKF Report, the corresponding, and more detailed sections of the Original PKF Report, as well as other information prepared annually by PKF Consulting about the Los Angeles County lodging market and the Santa Monica submarket, and general lodging market estimates and forecasts developed by other lodging industry professionals. Site Characteristics. The Project Site has frontage along Wilshire Boulevard, one the most recognized Los Angeles metro area street names in the world. It is surrounded by one- to three - story commercial and office uses to the south, east and west. Commercial and residential structures up to seventeen stories are found within a block of the site. Across Wilshire Boulevard to the north 4 Curtis - Rosenthal, Inc., Appraisal Report, Multiple Tenant RetaillOffice Project (with underutilized Parking Lot), 770 Wilshire Boulevard (Santa Monica Professional Building), 778 Wilshire Boulevard, 7213-7233 7th Street, and 7278 Lincoln Boulevard, Santa Monica City, California 90407, File Number 7942 -10, prepared for [the Applicant], February 3, 2011. (Hereinafter, the "Appraisal Report "). 6 Various professional authors, Compilation of Professional reports Evaluating the Present Condition of [the 710 Wilshire Boulevard] City Landmark, prepared for the Applicant, May 2010. (Hereinafter referred to as "Compilation Report "). 6 Including Lauren Schlau Consulting, Economic & Fiscal Impacts of Tourism in Santa Monica in 2009, prepared for the Santa Monica Convention and Visitors Bureau, May 2010. (Hereinafter, the "SMCVB Report "). HR &d, ADVISORS, INC. PKF Report Peer Review I 1 1 of the site is Christine Reed Park, a public park. The park's tennis courts front Wilshire Boulevard across from the Project Site. The site is easily accessible from all directions by major arterial streets, Pacific Coast Highway (six blocks to the west) and the Santa Monica Freeway (five blocks to the south). The Project Site is located at the northern end of Santa Monica's downtown area, within four blocks of Third Street Promenade and five blocks of Palisades Park. Nearly all of the downtown area's shopping and entertainment resources, and a large employment base, are within a half - mile radius. Santa Monica Pier and the planned new Expo Line Light Rail station are just beyond this radius. The Project's upper floors would have unobstructed near- and long- distance views to the north, towards the Santa Monica Mountains and the Getty Center, the east toward downtown Los Angeles, the south towards Marina Del Rey, and partial ocean views to the West. City Lodging Market Inventory and Segmentation. According to the Updated PKF Repor ,7 the City's lodging inventory includes 38 hotels and motels with a total of 3,696 rooms.$ PKF Consulting categorizes about one -third of the inventory (i.e., 12 lodging facilities with 1,256 rooms) as being located in the "downtown" area ,9 which also applies to the Project Site. the other two- thirds of the inventory (26 facilities with 2,440 rooms) are in oceanfront and other "non - downtown" locations. PKF Consulting also segments the City's lodging market into five quality tiers, as shown in Table 3. About half the existing rooms in the downtown area are considered "Full Service - Upscale," with average daily room rates (ADR) between $250 and $375. These include the Georgian Hotel, Huntley (formerly the Radisson), Hotel Shangri La and Fairmont Miramar. The other half consists of Limited Service hotels. Table 3 Santa Monica Lodging Market Quality Level by Location Segmentation _ Average Daily Downtown Non - Downtown Total Rates Range Facilities Rooms Facilities Rooms Facilities Rooms Limited Service- Affordable Up to $172 7 463 16 717 23 1,180 Limited Service- Moderate $173 -$250 1 132 2 85 3 217 Full Service- Moderate $173 -$250 - - 2 562 2 562 Full Service- Upscale $250 -$375 4 661 4 749 8 1,410 Full Service -Luxury $375+ - - 2 327 2 327 Totals Number 12 1,256 26 2,440 38 3,696 Percent 31.6% 34.0% 68.4% 66.0% 100.0% 100.0% Source: PKF Consulting Prepared by: HR &A Advisors, Inc.; Whitney & Whitney, Inc. The only pending addition to supply is The Shore Hotel, which is the redevelopment of the former Travelodge Santa Monica and Pacific Sands Motel. This project will replace 72 existing Limited See generally, Updated PKF Report, pp. 4 -6. 8 This total is a minor correction to the room count total (3,661) shown in the table on page 5 of the Updated PKF Report, and a corresponding table in the Original PKF Report (p. 6). 9 An area bounded by Wilshire Boulevard, Lincoln Boulevard, the Santa Monica Freeway, and Ocean Avenue. HRS A ADVISORS, INC. PKF Report Peer Review 1 12 Service - Affordable rooms and add 92 Limited Service - Moderate rooms. Discussions with staff in the City's Planning and Community Development Department indicate that potential additional hotel developments have been discussed, in general, for a site owned by the City in the downtown area, and a site near the Bergamot light rail station, but no specific proposals have been submitted to the City. But, just recently, applications have been filed for a new 136 -room Hampton Inn & Suites at 501 Colorado Avenue and a new 136 -room Courtyard by Marriott at 1554 5th Street. In any event, the supply of new hotel rooms is not likely to change in any significant way during the course of the Project's entitlements proceedings. Santa Monica Lodging Market Historical Performance. According to the Updated PKF Report,70 Santa Monica continues to enjoy one of the best - performing hotel markets in all of Los Angeles County, despite the (hopefully) temporary effects of the 2007 -2009 national recession. According to PKF Consulting's 2010 lodging forecast for southern California, the strength of the City's lodging market derives from its direct proximity to the Pacific Ocean, vibrant atmosphere, and strong and diverse local business climate. It also benefits from a stable commercial guest segment, combined with high -end group and leisure travelers." A high barrier to new market entrants has tempered new supply and supported the repositioning of existing lodging properties to higher quality and price tiers over the years, of which The Shore Hotel is the latest example. The City also benefits from its long- established and very active Convention and Visitors Bureau. Over the past 20 years, the City's occupancy rate has consistently exceeded 70 percent, a common minimum threshold for a financially healthy hotel market. Since 2006, the City's occupancy rate exceeded 80 percent in all but the peak recession year of 2009, and quickly returned to that plateau in 2010. The overall ADR ($250) in 2010, however, was about the same as in 2006, after suffering a 17.1 percent decline in 2009 from an all -time high ($295) recorded in 2008. For 2011, PKF Consulting forecasts a 3.5 percent increase in the number of occupied rooms, a 6.0 percent increase in ADR and 6.4 percent increase in revenue per available room.7 2 Market Positioning for the Project and the Smaller Hotel Alternative. According to both the Original PKF Report and the Updated PKF Report,13 it appears to be the Applicant's intention to position the Project as a Full Service- Moderate property, which according to PKF's definition of market tiers, is a hotel with around 300 rooms, banquet and meeting space, full- service dining venues, and in the Santa Monica submarket, has an ADR range of $173 - $250.14 Using lodging market data through September 2009, which was not updated for the later version of the report, it was determined that there is sufficient demand to support a new Full Service - Moderate hotel, based on market penetration analysis, and this conclusion was reportedly concurred in by representatives of the City's Convention and Visitors Bureau. The Original PKF Report also demonstrates that the Project's proposed room sizes, room count and supply of amenity spaces (including a pool and fitness center) are generally consistent with the characteristics of competitive Full Service - Moderate hotels in the surrounding market area. Not 10 See generally, Updated PKF Report, pp. 6 -7. 11 PKF Consulting, 2011 Southern California Lodaina Forecast. p. 9. 12 Id. 13 See generally, Original PKF Report, pp. 13 -17 and Updated PKF Report, pp. 7 -8. 14 We note that the price breaks between these five quality tiers do not appear to have been revised since the completion of the Original PKF Report, which were themselves based on 2008 ADRs, despite some improvement in lodging market conditions since the end of 2010. AD5viSGRS, INC. PKF Report Peer Review 1 13 discussed, however, is the degree to which the Project characteristics are also consistent with Full Service - Upscale hotels, and hence a potentially higher price point. Having established that there is sufficient demand for a new Full Service- Moderate hotel, and that the proposed physical characteristics of the Project are consistent with this quality tier, both versions of the Original PKF Report estimated that the Project could be expected to achieve an ADR of $215, based on the average ADR at the Doubletree Hotel and Sheraton Delfina Hotel, the only two other existing Full Service - Moderate hotels in the City (but located south of the downtown area), and the Holiday Inn, which is actually a Limited Service- Moderate hotel, but was included to meet PKF's requirement for at least three properties in a set of comparables. The Project ADR was increased to $235 in the Updated PKF Report to reflect improved lodging market conditions in the intervening years. According to the Updated PKF Report, this positions the Project ADR at $15 -$25 above the Holiday Inn and Sheraton Delfina, and slightly above the Doubletree; and above the ADR for all of the City's Limited Service- Moderate hotels, except the Ambrose. In our view, this is an overly conservative conclusion about the potential ADR for the Project. The Project's location on Wilshire Boulevard, at the northern edge of the downtown area across the street from Reed Park, is superior to the congestion associated with the Doubletree's proximity to the freeway and Santa Monica High School, which is also directly across the street from the Sheraton Delfina, and the lack of neighborhood amenities around both sites. The Project Site has superior site access, and it is closer to a concentration of oceanfront hotels. It will feature a unique historically rehabilitated building fafade that will clearly differentiate it in the market, and all of its improvements will be newly constructed. As a result, we believe it would support a much higher ADR premium relative to the other existing Full Service - Moderate facilities. But as will be discussed below, we estimate that the Project will require an ADR within the Full Service - Upscale price tier to meet the feasibility threshold assumed in the Updated PKF Report. It is beyond the scope of this analysis to determine whether the Project could compete successfully, from a market perspective, in the higher price tier required for a financially feasible development. With respect to the Smaller Hotel Alternative, the Original PKF Report concludes that its count of 135 guest rooms and smaller amount of meeting space would not qualify it as a Full Service facility. Rather, a hotel of this scale is more typical of a luxury boutique or Limited Service - Moderate hotel. PKF Consulting opines that a boutique luxury hotel at the 710 Wilshire location would probably not compete successfully with comparable existing properties in the City's oceanfront area. Nevertheless, the Updated PKF Report assumes it would command an ADR of $245 (in 2011 $) and 82 percent occupancy at stabilization, based on review of five comparable boutique hotel facilities in a similar size range. In our own analysis, we maintain this some 4.3 percent spread between the Project ADR and the Smaller Hotel Alternative ADR. V. Development Budget, Operating Budget and Financial Feasibility Review This section of the memorandum evaluates three elements of the financial feasibility equation: (1) the estimated costs to develop each Hotel Development Scenario; (2) the revenues and expenses associated with annual operation, which produce projections of Net Operating Income (NOI); and (3) the translation of the development costs and NOI into estimates of financial feasibility. Development Costs. As presented in the Updated PKF Report, total development cost includes an allocation for "land value /cost," construction costs, "soft" costs (e.g., professional fees, permits, HELA ADVIKffl S, INC. PKF Report Peer Review 1 14 insurance, etc.), and financing costs.15 Our assessment of each of the PKF Report estimates for each of these development budget categories, and certain lines items that comprise them, are discussed below, focusing primarily on the Project. Land Value /Cost. The first element of the development budget is an estimate of existing land value, based on the Appraisal Report referenced previously, which concludes that the Project Site has an "as -is" value of $20,100,000 (i.e., assuming it is operated as a professional office building).ib While including a land value in a financial feasibility development budget is typical when evaluating the feasibility of a project in which a developer is actually purchasing (or has recently purchased) the development site for the intended new project, the two Hotel Development Scenarios are a very different case. Here, the developer is also the long -time owner of the Project Site and no property purchase is involved. In addition, the existing building will not, in fact, be used as a professional office building (i.e., the basis for the appraisal) as part of the Project, but will instead by gutted and redeveloped for use as a hotel. We discuss below some implications of these points and the effects that other choices about "land value" would have on the feasibility results. According to the Appraisal Report, the purpose in preparing it was to develop a professional opinion as to the market value of the "leased fee estate" -- i.e., the value of the entire Project Site, including the land under the existing commercial buildings and adjacent parking area, as an income property, of January 5, 2011.17 The appraisal is emphatic in pointing out that the possibility of the Project Site's conversion to hotel uses has no bearing in the determination of value.18 Effectively, the appraisal provides no indication of value that would have application to the property's use as a hotel site. It is, by definition, an estimate of the market value of the Project Site that is subject to the existing leases, even though the actual intended use of the property is for conversion to a completely different use. The Appraisal Report mentions the three standard approaches used by appraisers to determine market value, only two of which were utilized in this case. These approaches include: (1) the Cost Approach (not utilized); (2) Sales Comparison Approach (utilized); and (3) Income Capitalization Approach (utilized). However, our reading of the Appraisal Report indicates that a version of the Cost Approach was utilized, in fact, to determine the value of the parking lot area behind the existing improvements, as discussed further below. 15 See generally, Updated PKF Report, pp. 9 -12. 'a Note that an "as -is" appraisal is very different from a "highest and best use" appraisal, in which the valuation depends on the "reasonably probable and legal use that is physically possible, appropriately supported and financially feasible, and that results in the highest value." (The Appraisal Institute, The Appraisal of Real Estate, p. 269.). 17 The Project Site Appraisal also included analysis of property located across Seventh Court from the Project Site, at 1218 Lincoln Boulevard, which is no longer part of the two Hotel Development Scenarios. 18 "This [hotel] project mentioned above is not a part of the following appraisal analysis," Appraisal Report, p. 3 (emphasis in original). I P&A ADVISORS, INC. PKF Report Peer Review 1 15 The Sales Comparison Approach utilizes two different methods to value the entire property and then, inexplicably, adds a Cost Approach valuation to the parking lot area only, because it is "not currently being utilized to its maximum use. "19 It then values the "developable land site based on its value as vacant land, less the cost to construct a one level below -grade parking garage." This approach appears to conflict with the stated purpose for the appraisal — i.e., that it was to be an "as -is" appraisal of the existing property. The Sales Comparison approach is used to first estimate the value of the entire Project Site as if it were a vacant site, based on only five "comparable" land sales and the expert opinion of three real estate brokers, all of which lead to a conclusion that this value would total $13,125,000 (i.e., 52,500 s.f. total site area x $250 /s.f. _ $13,125,000). A second application of the Sales Comparison approach involves sales of "comparable" buildings (all of which include parking), but only one of which is actually located in the City. After adjusting each comparable's per - building square foot price for differences from the characteristics of the existing improvements, the Appraisal Report concludes with a value estimate of $13,800,000 (i.e., 42,550 building s.f. x $325/s.f. _ $13,800,000 (rounded)). The Sales Comparison approach then goes on to state that there is "additional value" associated with the 37,500 square foot surface parking area that is not already included and should be added in order to arrive at the full value. This is accomplished by, first, attributing the same $250 per square foot value for land which was arrived at for the entire property, even though that value includes Wilshire Boulevard frontage, which the parking lot area does not, or $9,380,000 (i.e., 37,500 square feet x $250 per square foot = $9,380,000 (rounded)). Then, the cost of providing a below - ground parking structure is deducted from this value, under the assumption that this would replace the surface parking area and make that land available for another use. The Appraisal Report estimates that the cost of the below - ground parking facility would cost $3,410,000. Therefore, after the deduction of this cost, the additional parking lot contribution to "as -is" value, according to the Appraisal Report, would be $6,000,000 (Land Value of $9,380,000 - Cost of Parking Structure of $3,410,000 = Additional Land Value of $6,000,000 (rounded)). This additional land value for the parking lot area is then added to the base value computed for the total Project Site value using the per - building square foot approach, to achieve a final "as -is" value of $19,8000,000 ( i.e., (Project Site value of $13,800,000 + "additional" parking lot value of $6,000,000 = Total Project Site Value of $19,800,000). The Income Approach to valuation is then applied to derive an alternative existing value for the Project Site based on capitalization of the net operating income (NOI) generated by the existing retail and office leases, after adjustments between existing rents and market rents. This approach is a detailed and well - documented analysis of rental income, operating costs, and the applicable capitalization rate for converting NOI to an estimate of market value. It concludes that the capitalized value is $14,100,000. But, the Appraisal Report then adds, again without explanation, the "additional value" for the parking lot area, using the some $6,000,00 value described above, for a total "as -is" value of $20,100,000. The Appraisal Report's concludes that this latter value of $20,100,00 should be given the greatest. weight in rendering the final opinion about "as -is" value. 19 In our view, this issue should have received much more explanation in the Appraisal Report. The surface lot is clearly necessary to provide parking for the retail and office uses. To the extent that there is excess land area above and beyond the amount needed to meet those parking requirements, there may be a justification for separately valuing the excess land. But the Appraisal Report applies this analysis to the entire surface parking lot area of the Project Site. b RAA ADvis s, Irac. PKF Report Peer Review 1 16 The Updated PKF Report purports to validate this $20,100,000 value for use in the Project's development budget by citing eight comparable land sales, all of which occurred during the real estate market bubble years of 2005 -2007, and six of which are substantially smaller than the Project Site. The only sale of a comparably sized site is from 2005. Further, the average size of the eight comparison parcels is only 9,491 square feet, or less than one -sixth of the Project Site. In our view, the Sales Comparison approach using the additional parking lot value methodology is not supportable, either practically or conceptually, for the Project feasibility analysis. The approach also violates the "as is" principle by introducing the concept of an underground parking structure that can be implemented without impacting the value of the 37,500 square feet of land located on 7'h Street and disrupting the operation of the existing office program at the 710 Wilshire Property. Therefore, it is not an appropriate measure of "land value" for the proposed Project, and should not be considered as a component of the development budget. It is merely a measure of current asset value for the Project Site that may be important information to the Applicant, but it has no bearing whatsoever on the cost of developing the Project Site for an alternative hotel use in the future. It could be argued that, in this particular case, no land value should be included in the development budget, because there is no purchase transaction that is part of the development and it is the existing owner's choice to covert the property from one use to another. The financial feasibility analysis is being used in a City entitlements context, and not to support private financing, where the lender would be concerned about the market viability of the existing improvements as security for the loan. But we realize that not including any land cost /value in the feasibility analysis would be unusual. Alternatively, and considering that the "value" being contributed to this particular development consists of the Project Site land and the empty shell of the Santa Monica Professional Building, we believe that a more appropriate assumption would be to utilize the $13,800,000 value from the Appraisal Report that was based on comparable building sales and is similar to the value estimate based on vacant land ($13,125,000). Accordingly, this is the value we utilize in the HR &A/W &W version of the feasibility analysis. This assumption reduces the total development budget by $6,250,000. The same assumption applies to our analysis of the Smaller Hotel Alternative. Hard Costs. The Updated PKF Report's estimates of construction costs are attributed to a combination of a Morley Construction Company cost estimate for the historic rehabilitation of the existing Santa Monica Professional Building ($10,908,239) and an estimate for the new construction and subterranean parking derived from application of the Marshall & Swift Valuation Service cost factors ($62,632,053 for the Project and $31,126,709 for the Smaller Hotel Alternative). Although the details of these estimates were not included in the Updated PKF Report, we accept them as stated.20 The Morley estimate is similar to the estimate included in the Compilation Report, and the Marshall & Swift values are generally consistent with our own review of the company's estimation factors. We also accept the Updated PKF Report's estimate of $30,000 per room for furnishings, fixtures and equipment (FF &E). However, in our version of the feasibility analysis, we have added a five percent hard cost contingency.21 These adjustments were applied in our analyses for both of the Hotel Development Scenarios. 20 We note, however, that the parking construction cost per space for the two Hotel Development Scenarios, as shown in the table on page 10, are virtually the same, even though one scenario includes 286 spaces in 3.5 subterranean levels and the other scenario includes 150 spaces in two subterranean levels. In our experience, the cost for parking per space can increase substantially below two levels in underground structures, but it is beyond the scope of this analysis to make refinements to this cost factor. HF &A ADVISORS, INC. PKF Report Peer Review 1 17 Soft Costs. The Updated PKF Report's estimates of soft costs include some, but not all, of the costs that are typical. Although the Marshall & Swift valuation factors used in estimating the hard construction cost do include an allocation for architectural and engineering fees and local governmental permits and fees, these costs were explicitly excluded in the Morley estimate for the historic renovation of the Santa Monica Professional Building, according to the detailed cost estimate in the Compilation Report. Our version of the financial feasibility analysis includes these costs for that portion of the Project (i.e., professional fees at six percent x hard costs other than the new construction portion, and City permits and fees at four percent x hard costs other than the new construction portion). We also added a soft cost contingency (five percent x all other soft costs). These soft cost changes added $4.1 million to the development budget for the Project and $2.7 million to the cost of the Smaller Hotel Alternative. We accepted all of the other soft costs as presented. Financing Costs. The Updated PKF Report's development budget appears to understate the cost of development financing, by including only the permanent loan "points" and the portion of loan points and construction loan, interest for the new construction portion of the Project only,22 but not the Joan points or interest costs for the construction loan applicable to the remainder of the development costs. In our version of the feasibility analysis, we assume 1.5 additional percentage points for the construction loan, a loan amount equal to 70 percent of the sum of all other costs, a loan interest rate of seven percent, a construction period of 18 months, and an . average outstanding balance equal to 60 percent of the total Joan. The loan amounts are then applied to all hard costs except the cost of the new construction component. This translates to new total financing cost (including the permanent loan points) of about $4.6 million for the Project (versus $1.0 million in the Updated PKF Report) and $3.3 million for the Smaller Hotel Alternative (versus $0.7 million in the Updated PKF Report). Conclusions Regarding Development Costs. Table 4 compares our estimate of total development cost for the two Hotel Development Scenarios with the assumptions in the Updated PKF Report. It shows that by reducing the land cost amount, adding in missing values for architectural and engineering fees, City permits and fees, a soft cost contingency, and construction financing, total development cost for the Project would be about $400,000 higher, but about 1.9 million Jess for the Smaller Hotel Alternative, than was assumed in the Updated PKF Report.23 On a per -key basis, these revised total development costs are still within the range of comparable development budgets listed in the Updated PKF Report. 21 The Updated PKF Report included a five percent contingency under the "soft costs" section of its development budget, which appears to be equal to five percent of the subtotal of hard costs and soft costs. Thus, we have simply moved this contingency into the hard cost category, but its calculation includes the lower land cost assumption discussed above. 22 As with architectural and engineering fees, the Marshall & Swift construction estimation factors include a general allowance for construction financing, but this only applies to the new construction component of the Project and the Smaller Hotel Alternative. 23 Despite the fact that the rehabilitation of the existing Santa Monica Professional Building will be performed to a level that meets the Secretary of Interior's Standards for historic properties, making the Project eligible for federal Historic Preservation Tax Credits and potentially Mills Act property tax credits, we are informed by the Applicant's technical advisors that neither form of financial assistance is useable under the program rules that apply to this development. This conclusion is consistent with our own evaluation that the Mills Act would not produce any financial incentive for the Project. H€ &A ADViSGPS, 1INC. PKF Report Peer Review 1 18 Table 4 Development Cost Comparison 710 Wilshire Project & Smaller Hotel Alternative SMALLER HOTEL ALTERNATIVE Development Costs Site Costs HR &A!W &W PKF' PROJECT $48,294,695 $45,994,948 Development Costs $6,011,558 $6,601,000 Site Costs $13,800,000 $20,050,000 Direct Costs $86,194,807 $82,090,292 Indirect Costs $8,159,515 $9,170,000 Financing /Closing Costs $4,555,933 $1,001,000 Total Development Costs $112,710,254 $112,311,292 SMALLER HOTEL ALTERNATIVE Development Costs Site Costs $13,800,000 $20,050,000 Direct Costs $48,294,695 $45,994,948 Indirect Costs $6,011,558 $6,601,000 Financing /Closing Costs $3,274,176 $653000 Total Development Costs $71,380,429 $73,298,948 ' Based on assumptions provided by PKF. Source: PKF Consulting HR &AAdvisors Difference - $6,250,000 $4,104,515 - $1,010,485 $3,554,933 $398,962 - $6,250,000 $2,299,747 - $589,442 $2,621,176 - $1,918,519 Net Operating Income. The Updated PKF Report24 provides a complete schedule of assumptions about annual operating revenue and operating expense line items, which correspond to the uniform accounting standards for hotels, and these are projected over a presumed 10 -year holding period. The revenue line items include the average daily room rate and occupancy rate, which together generate the estimate of rooms revenue. Other revenue sources include food and beverage sales (e.g., restaurants, room service, meeting facilities and restaurants), other operated departments (e.g., telephone, guest laundry, in -room entertainment and parking), and rentals and other income (e.g., rental of offices an stores, various service charges, forfeiture and cancellation fees, interest earnings). With the exception of ADRs, which are pegged to local hotel rates deemed to be competitive, all of the other revenues are based on a set of "comparable" hotels. The comparables set is described only in general, and exhibit wide variation in their per -room and /or percentage -of- revenue characteristics. Nevertheless, we have accepted the resulting proportional relationships among these revenue categories in our version of the feasibility analysis (e.g., the ratio of food and beverage revenue to rooms revenue), although there is a distinct possibility that certain revenue sources, such as parking, could be understated given the unique attributes of the Santa Monica market. In our analysis, we have increased the assumed ADR to $294 (in 2011 $), which represents both a $59 ADR location premium above the ADR assumed in the Updated PKF Report, and the ADR that would be required to achieve a feasible development, based on the thresholds in the Updated 24 See generally, Updated PKF Report, pp. 13 -27 and 32 -42. [PC. PKF Report Peer Review 1 1 PKF Report. Due to the relationship between room revenues and other revenues, this higher ADR assumption leads to higher revenues in other hotel operating departments. For evaluation purposes we increased the assumed ADR for the Smaller Hotel Alternative to $307 to maintain the same 4.3 percentage point spread above the Project ADR that appears in the in the Updated PKF Report (i.e., $245 versus $235). The annual operating expenditures assumed in the Updated PKF Report are also derived from the set of "comparable" hotels. Here again, we accepted the proportional relationships among these expenditure categories in our version of the feasibility analysis, even though we have some concerns about the applicability of the comparables set. The only other change we made in our version of the NOI analysis was to correct the application of the three percent annual inflation factor that is utilized in the 10 -year projection of revenues and expenditures. We found in replicating the values in the Updated PKF Report cash flow model that even though annual inflation is stated as three percent, in some years slightly different values result, which may simply be a function of using unrounded computer calculations. Table 5 compares our resulting principal revenue and expenditure line item values for 2023, the last year of the cash flow projection, with corresponding values for that year in the Updated PKF Report, for both Hotel Development Scenarios. For the Project, this comparison shows that terminal year NOI After Reserve totals about $17.1 million, as compared with $13.7 million in the Updated PKF Report. For the Smaller Hotel Scenario terminal year NOI After Reserve totals about $8.2 million, as compared with $6.6 million in the Updated PKF Report. r!c. PKF Report Peer Review 1 20 Table 5 Operating Revenue, Expenses and Net Operating Income 710 Wilshire Project & Smaller Hotel Alternative HR &AIW &W PKF' Difference PROJECT Operating Revenues 2023 -ADR $418 $335 $83 2023 -Total Revenues $51,688,347 $41,433,000 $10,255,347 Operating Expenses 2023- Departmental E >penses $17,814,000 $14,261,000 $3,553,000 2023- Undistributed E>q)enses $10,773,198 $8,615,000 $2,158,198 2023- Total E>q)enses $28,587,198 $22,876,000 $5,711,198 Net Operating Income $9,729,000 $7,779,000 $1,950,000 2023 - NOI After Reserve $17,070,743 $13,728,000 $3,342,743 SMALLER HOTEL ALTERNATIVE Operating Revenues 2023 -ADR $437 $349 $88 2023 -Total Revenues $26,594,865 $21,248,000 $5,346,865 Operating Expenses 2023- Departmental E>yenses $9,729,000 $7,779,000 $1,950,000 2023 - Undistributed Expenses $5,536,000 $4,423,000 $1,113,000 2023 -Total E )penses $15,265,000 $12,202,000 $3,063,000 Net Operating Income 2023- NOI After Reserve $8,240,865 $6,579,000 $1,661,865 Based on assumptions provided by PKF. Source: PKF Consulting Prepared by HR &AAdvisors, Inc.; Whitney &Whitney, Inc. Financial Feasibility Results. The approach used in the Updated PKF Report25 to determine the financial feasibility of the two Hotel Development Scenarios consists of subtracting the total present value of each Hotel Development Scenario after 10 years of operation, and presumed sale in the 1 1'h year, from the total development cost. The resulting "entrepreneurial profit" value is stated to be expressed in terms of 2011 dollars and also shown as a percentage of total development cost. The present value calculation for each year's NOI includes a reserve for periodic replacement of building components, and utilizes an 11 percent discount rate derived from review of various real estate finance publications. The sale (or "reversion ") value is calculated by applying an 8.5 percent income capitalization rate (derived from the same real 2' See generally, Updated PKF Report, pp. 2, 28 and 43 -44. HP &A ADvls ©R5, Ir c. PKF Report Peer Review 1 21 estate industry sources) to the 1 1'h year NOI (including reserve).26 The Updated PKF Report concludes that the Project's resulting $11.4 million in entrepreneurial profit, and the 10.2 percent of total development cost that it represents, fall within the "lower end" of the full- service hotel development feasibility range,27 but that the -$14.0 million ( -19.1 %) result for the Smaller Hotel Alternative is infeasible. In our analysis, we utilize the same calculation approach, but different component values, as discussed above, before calculating entrepreneurial profit and the percentage of total development cost. In addition, we corrected what we believe was an error in the NOI and reversion value discounting as applied in Updated PKF Report, which actually utilizes 2013 present values, rather than 2011, and therefore overstates entrepreneurial profit for the Project. In addition, although the Updated PKF Report states that its reversion value includes a deduction for cost of sale equal to 1.5 percent of the sale amount, our review of the calculations indicates that this deduction was not, in fact, applied, but we explicitly do so in our analysis. Based on these changes, we conclude that the Project does not meet the minimum feasibility threshold at the $235 ADR assumed in the Updated PKF Report, because the resulting profit margin is -12.0 percent. Even with an ADR of $250, the top end of the Full Service - Moderate, the Project would fall below the Updated PKF Report's minimum feasibility threshold (- 6.4 %). As shown in Table 6, the conclusion of our feasibility analysis using an ADR ($294) required to meet the feasibility threshold in the Updated PKF Report is that the Project would generate entrepreneurial profit of $11.4 million, or 10.1 percent of total development cost, and thus meets the minimum threshold of feasibility presented in the Updated PKF Report.28 But realizing the ADR required to achieve financial feasibility, using the Updated PKF Report threshold, also means that the Project would be positioned in the Full Service - Upscale, versus Full Service- Moderate, price tier. It is beyond the scope of this analysis to determine whether the Project would be successful, from a competitive market perspective, in that tier. Based on our feasibility assumptions, the Smaller Hotel Alternative generates an entrepreneurial loss of -$11.6 million, or -16.2 percent of total development cost, and thus would not be feasible. Stated another way, to achieve the same positive feasibility threshold as the Project, the Smaller Hotel Alternative would have to achieve an ADR of about $403 (in 2011 $), which is comparable to the most expensive oceanfront hotels along Ocean Avenue, and is unrealistic, in our view. Even if no land cost /value is included, the Smaller Hotel Alternative would still be infeasible, as defined by the Updated PKF Report (i.e., entrepreneurial profit equal to 5.8 percent of total development cost). Thus, although our specific values differ somewhat from those reported in the Updated PKF Report, we concur with its basic conclusions that, using the stated minimum acceptable feasibility threshold, the Smaller Hotel Alternative would not be feasible. 26 This national cap rate may be conservative for Santa Monica. For example, information in one of the press reports about the 2009 sale of the Sheraton Delfina to Pebblebrook Hotel Trust implies a capitalization rate closer to 6.5 percent (Santa Monica Mirror, "Sheraton Delfina Purchased for $102.8 Million in Santa Monica," Nov. 22, 2010). If the Project's reversion cap rate had been 7.0 percent (i.e., a rate 0.5 percentage points higher for a sale 10 years from now is assumed, as is customary in the real estate analysis industry), the implied sale value of the Project and Smaller Hotel Alternative would be much higher, adding to the resulting present value of the entrepreneurial profit. 27 This is an understatement. The Updated PKF Report notes that the typical entrepreneurial profit percentage needs to be in the range of 10 to 20 percent, and thus a result of 10.2 percent could only be considered "marginally profitable," at best. 28 If, on the other hand, no land cost /value is included in the development budget, for the reasons discussed above, the entrepreneurial profit would total $27.8 million, or 25.9 percent of total development cost, well above the top end of the Updated PKF Report's feasibility range. HRB:A t DVISO S, INC. PKF Report Peer Review 1 22 Further calculation details for our analysis of the Project are included in Appendix B, and for the Smaller Hotel Alternative in Appendix C. Table 6 Financial Feasibility 710 Wilshire Project & Smaller Hotel Alternative .HR &AIW &W PKFi Difference PROJECT Reversion 2023 -Sale $203,033,067 $163,274,417 $39,758,650 2023 - Sale (2011 $) $58,035,139 $57,502,715 $532,424 Cumulative 10 -Year NOI and Reversion (2011 $) $124,077,664 $123,687,948 $389,716 Return Metrics Entrepreneurial Profit (2011 $) $11,367,410 $11,376,656 - $9,246 Profit Margin 10.1% 10.2% -0.1% SMALLER HOTEL ALTERNATIVE Reversion 2023 -Sale $98,010,111 $78,512,333 $19,497,778 2023 - Sale (2011 $) $28,015,291 $27,650,825 $364,466 Cumulative 10 -Year NOI and Reversion (2011 $) $59,803,147 $59,348,683 $454,464 Return Metrics Entrepreneurial Profit (2011 $) - $11,577,283 - $13,951,317 $2,374,034 Profit Margin - 16.2% - -19.1% 2.9% 1 Based on assumptions provided by PKF. Source: PKF Consulting Prepared by HR &AAdvisors, Inc., Whitney& Whitney, Inc. VI. Economic Impact Analysis The "economic impact" of the Hotel Development Scenarios refers to the incremental difference that their construction and annual operation upon completion of construction would make to the number of people employed, employee compensation earned (i.e., wages and benefits) and the resulting circulation of dollars through the City economy. The Original PKF Report included projections of the economic impacts resulting from annual operation of the Project only. However, that analysis did not net out the economic impacts of the existing Project Site improvements to show the incremental increase resulting from the Project. Although it was based on an earlier Project concept, we summarize the economic impact analysis for the Project that was included in the Original PKF Report, and then present our own analysis for the Project only (because we concur that the Smaller Hotel Alternative is infeasible), and then the Project impacts net of impacts associated with the existing Project Site improvements. The analysis further assumes the version of the Project's development budget and the annual financial performance of the Project that would be required to achieve financial feasibility, according to the threshold used in the Updated PKF Report. HP&A>` nvlsaRS, INc, PKF Report Peer Review 1 23 This analysis also differs from the analytic approach presented in the Original PKF Report in that it relies on the well - established IMPLAN input- output model, and detailed data on the structure of the City economy, rather than general multipliers that apply to Los Angeles County as a whole. The projections include the "direct" effects of the Project (i.e., the construction expenditures and annual operation revenues for the Project once it is completed), as well as the "multiplier effect" from the circulation of these direct expenditures within the City's economy. The Economic Impact Projections in the Original PKF Report. The Original PKF Report's projection of the annually recurring economic impacts of the then - applicable concept for the Project29 is based on estimates of hotel visitor spending in the City and application of a general multiplier attributed to the U.S. Commerce Department's RIMS II economic impact model, which is probably for the County of Los Angeles as a whole rather than for the City specifically.30 The analysis first estimated hotel guest lodging expense using the then- applicable stabilized year number of occupied annual room nights, an ADR of $215 and an occupancy factor of 1.4 persons per room, which translated to $153.57 of lodging expenditure per person. The analysis then used this value, and an estimate that lodging expense accounts for 46.3 percent of average daily visitor expenditures by City visitors who stay in hotels, as of 2004,31 to statistically adjust individual hotel guest expenditure line items (i.e., purchases for meals, beverages, transportation, etc.), to 2010 values, and compute an overall total of $37.7 million (in 2010 dollars). This value was then multiplied by the RIMS II economic multiplier value and results in a total economic output projection of $49.0 million in a stabilized year of operation, expressed in 2010 dollars. The analysis also includes a projection that the Project would generate $625.0 million in total economic output over the 2014 -2023 period corresponding to the financial feasibility analysis in Original PKF Report. As noted above, neither the stabilized year nor cumulative economic impact projections are net of the impacts associated with the existing Project Site improvements. Because the HR &A/W &W analysis discussed below are based on the later version of the Project concept, reflect the development budget, room rate and other changes discussed above; and rely on a different economic impact modeling projection approach, they cannot be compared directly with the results of the analysis in the Original PKF Report. IMPLAN Model of the City's Economy. IMPLAN32 is a widely accepted model that HR &A and many others, including public agencies, have used to estimate the economic consequences of new 29 See generally, Original PKF Report, pp. 28 -31. 30 The Original PKF Report discussion notes only that a multiplier of 1.3 was selected for use in the analysis after conferring with representatives of the Los Angeles County Economic Development Corporation. It does not state whether this is the Los Angeles County RIMS II value for the hotel and other overnight accommodations sector of the economy or something else. 31 Per the 2004 version of the Santa Monica Convention and Visitors Bureau's analysis of visitor spending 32 IMPLAN ( Impact Analysis for PLANning), a social accounting and impact analysis software program, was developed in 1979 by the U.S. Forest Service in cooperation with the Federal Emergency Management Agency and the U.S. Bureau of Land Management to assist the Forest Service in land and resource planning and management. The program was updated and improved over subsequent years. In 1992, IMPLAN was transferred under a technology transfer agreemenfto the Minnesota IMPLAN Group, Inc. (MIG), which is run by three of the key University of Minnesota staff members who worked on the original program and subsequently developed the current modeling system. HP. &A ADVISORS, INC. PKF Report Peer Review 1 24 investment in, or other changes to, a local or regional economy.33 It explicitly accounts for impact "leakage," or the fact that not all economic impacts are necessarily experienced inside the geographic area under study. The IMPLAN model can be used to generate estimates of direct, indirect and induced employment, compensation (i.e., wages and benefits) and total economic output (i.e., a summary measure of all spending and economic activity), for both the construction phase of a project, and annually, once it has been completed and occupied. In this analysis, all economic impact dollar amounts are expressed in constant 2011 dollars. "Employment" includes full -time and part -time jobs, and regardless of whether they are permanent or temporary. "Economic output" is a summary measure of economic activity that includes worker compensation, value added, business taxes and certain other factors. For analysis of the economic impacts of new development, "direct" impacts include the investment in construction and total annual revenue for the completed Project. The direct impacts occur primarily at the development site. "Indirect" impacts are those resulting from purchases of goods and services to support construction and businesses selling goods and services to the Project's commercial tenants. "Induced" impacts result when direct and indirect employees (related to both construction expenditures and new businesses) spend their compensation on consumer and other household - related goods and services. The indirect and induced effects are together sometimes referred to as the "multiplier effect" of the direct impacts associated with a development. HR &A obtained 2009 (latest available) data from the developers of the IMPLAN economic impact modeling system for employment, compensation (wages and benefits) and economic output for the five ZIP Codes that comprise the City's boundaries. Using data from other authoritative sources about the City's economy, certain adjustments were made to employment by industry sector. The adjustments result in a simulation of the structure of the City economy that can be used to test the impacts of new development or other changes on "final demand," expressed in terms of jobs or certain other economic variables, such as annual revenue generated by a new hotel development. Economic Impacts of the Existing Improvements. The economic impacts in the City economy that result from operation of the existing retail and office uses at the Project Site were estimated on the basis of information about each tenant space, as provided by the Applicant, and employment density factors utilized in HR &A's fiscal impact analysis of the LUCE Draft EIR alternatives, which results in an existing employment estimate of 120 jobs (see Appendix D). Entering the existing number of jobs by the industry sector associated with the type of business conducted in each tenant space into the IMPLAN model of the City's economy indicates that existing professional office and retail improvements generate 171 total jobs in the City's economy, including the "multiplier effect" on direct jobs. This translates to $15.6 million in direct economic output and $23.0 million in total economic output. These results are summarized in Table 7. Further calculation details are included in Appendix D. 33 HR &A has previously used IMPLAN to analyze the economic impacts of a wide range of projects throughout southern California and elsewhere in the U.S. The Santa Monica IMPLAN model described herein is also being used to estimate the economic impacts of Santa Monica Airport. HP& A ADVISORS, INC. PKF Report Peer Review Table 7 Estimate of Employment and Other Economic Impacts in the CITYOFSANTA MONICA From Annual Operation of the Existing 710 -718 Wilshire Improvements (all dollar amounts in 2011 $) Impact Category Direct Impact Indirect Impact Induced Impact Totallmpace Employment 120 21 30 171 Employee Compensation $4,921,511 $1,051,133 $1,303,933 $7,276,577 Total Economic Output $15,588,093 $3,569,662 $3,826,903 $22,984,658 ' Totals may not sum preciselydue to independent rounding. Sources: Maxser & Co., Ltd.; Minnesota IMPLAN Group, Inc. Prepared by HR &AAdvisors, Inc. Economic Impacts of New Construction. Applying the Updated PKF Report's estimate of construction costs ($86.2 million for hard costs, hard cost contingency and FF &E) to the calibrated IMPLAN model produces a projection that construction of the Project would support 614 direct construction jobs and 904 total jobs in the City's economy, and $126.4 million in total economic output in the City's economy. These results are shown in in Table 8. Calculation details are also included in Appendix D. Table 8 Projection of Employment and Other Economic Impacts in CITYOFSANTA MONICA From Construction of the 710 Wilshire Project (all dollar amounts in 2011 $) Impact Category Direct Impact Indirect Impact Induced Impact Total Impact Employment Construction 614 0 0 614 Other Development 0 96 194 291 Total 614 96 194 904 Employee Compensation $29,082,363 $5,226,337 $8,389,113 $42,697,812 Total Economic Output $86,194,803 $15,633,791 $24,610,093 $126,438,687 'Totals may not sum precisely due to independent rounding. Sources: PKF; Minnesota IMPLAN Group, Inc. Prepared by: HR&AAdvisors, Inc. Net Economic Impacts of Project Operations. The economic impacts of the completed Project are projected from the IMPLAN model based on the Project's total revenues in the 2016 stabilized year. Using the stabilized year revenue total from the HR &A/W &W financial feasibility analysis, the Project would result in the economic impacts shown in the middle panel of Table 9. These include 267 direct, on -site jobs (i.e., about 0.94 jobs per guest room), 391 total jobs, $54.6 million in total economic output in the City's economy. The resulting output multiplier is 1.5, compared to the 1.4 output multiplier utilized in the Original PKF Report. Additional calculation details are also included in Appendix D. After accounting for the recurring annual economic impacts of the existing improvements, the net economic impacts of the Project, as shown on the bottom panel of Table 9, would be 220 total jobs and $31.6 million in total economic output. KF&A ADVISORS, INC. PKF Report Peer Review 126 Table 9 Projection of Employment and Other Economic Impacts in the CITYOFSANTA MONICA From Annual Operation of the Existing 710 Wilshire and Proposed Project (all dollar amounts in 2011 $) Impact Category Directimpact I Indirectlmpact I inducedlmpact Total Impact' Operation Impacts from Employment 120 21 1 '0 171 Employee Compensation $4,921,511 $1,051,1331 $1,303,933 $7,276,577 Total Economic Output $15,588,0931 $3,569,6621 $3,826,9031 $22,984,658 Impacts from Operation of the Project Employment 267 1 61 1 63 391 Employee Compensation $10,441,706 $3,137,759 $2,743,366 $16,322,830 Total Economic Output $36,265,6111 $10,284,5551 $8,054,2081 $54,604,374 Net Now Impacts from Operation Employment 147 1 40 1 33 1 220 Employee Compensation $5,520,195 $2,086,6251 $1,439,4331 $9,046,253 Tots l Economic Output 1 $20,677,5181 $6,714,8931 $4,227,3051 $31,619,716 1 Totals may not sum preciselydue to independent rounding. Sources: PKF: Minnesota IMPLAN Group, Inc. Prepared by: HR &AAdmsors, Inc. VII. Fiscal Impact Analysis In addition to the general economic impacts in the City economy, the private investment in developing the Project, and its annual operation once completed, will also generate various tax and other revenues for the City, County, local school districts, the State of California and a variety of other "governmental agencies. This analysis focuses on the revenues that will accrue to the City of Santa Monica and local school districts only. These revenues result from a variety of taxes, some of which are unique to the City and therefore accrue entirely to the City (e.g., parking tax). Other revenues are shared between the City and other taxing entities (e.g., property tax and sales tax revenues). The new analysis presented herein assumes the version of the Project's annual financial performance that would be required to achieve financial feasibility, according to the threshold used in the Updated PKF Report. Tax Revenue Projections in the Original PKF Report. The Original PKF Report included a projection of annual tax revenues from the then- applicable concept for the Project 34 The tax revenue analysis projected that, in the 2016 stabilized year, revenues from the Project would total $4.5 million (in nominal dollars), most of which would accrue to the City's General fund and the balance to the City's Redevelopment Agency. The analysis further projects that over the 10 -year financial feasibility analysis period (i.e., to 2023), City revenues would total about $47.8 million. Almost two - thirds of the revenue total would derive from the Transient Occupancy Tax (TOT), which is the City's tax on the price of an occupied hotel room (currently 14 %). The tax revenue projections were based on current tax rates and formulas, and the operating revenue characteristics of the Project as assumed in the financial feasibility analysis. The taxes 34 See generally, Original PKF Report, pp. 22 -28. HRS,A Anvlsons, INc. PKF Report Peer Review 1 27 included in the analysis include the TOT, sale tax on hotel on taxable retail, food and beverage expenditures inside the hotel, utility user's tax (i.e., electricity, natural gas and telephone), business license tax (i.e., a tax per unit of gross hotel revenues), and parking tax (on the cost of hotel parking by hotel guest only). The projections also included sales tax from an estimate of $26.4 million in "indirect" hotel guest expenditures in the City, but outside of the hotel. The basis for that assumption is not fully presented.35 These tax revenue projections were not revised for the Updated PKF Report. Also, the analysis in the Original PKF Report did not include a projection of public services costs, and hence did not compute the net fiscal impact of either hotel development scenario. And, with the exception of the property tax estimate, it did not project City revenues net of the revenues derived from current operation of the existing improvements. The analysis presented below presents our own projection of Project tax revenues, service costs and net fiscal impacts, and net fiscal impacts net of the existing improvements. Net Fiscal Impact Estimation and Projection Approach. In our analysis, the tax revenue estimates and projections are based on a case study approach for the first round of Project - related spending only — i.e., the tax revenues derived directly from the Project's annual operations. It assumes that all of the tax rates and tax formulas now in place would continue over the period to 2023 that corresponds to the financial feasibility time period in the Updated PKF Report. The analysis also relies on calculation techniques that HR &A developed for analyzing the fiscal impacts of the recent update to the City's Land Use and Circulation Elements (LUCE), including allocations of average public service costs for non - residential development on a per - employee basis. Our analysis of City revenues includes all of the same revenues analyzed in the Original PKF Report, calculated as follows: • Property Tax (General Fund). The property tax applicable to the existing improvements and the Project would normally be a one percent levy on the assessed value of land and buildings, which is distributed among different local public agency accounts, plus a proportional share of voter - approved indebtedness and direct assessments. However, because the Project Site is located in the City's Earthquake Recovery Redevelopment Project Area, all of the one percent tax on assessed value is paid to City's Redevelopment Agency, except for a small pass - through amount that flows to the City's General Fund under applicable California Redevelopment Law property tax increment calculation regulations, as discussed below. The calculated shares of voter - approved indebtedness and special assessments applicable to the City are based on information contained in the Applicant's current property tax bills. • Property Tax Increment (Redevelopment). The City's Redevelopment Agency collects the incremental increase in assessed value since the Project Area was formed in 1994. For calculation convenience, we assume that 100% of the existing improvement assessed value, and 100% of the Project assessed value generates tax increment. The property tax increment received by City's Redevelopment Agency was derived using assessed value information from the Applicant's existing property tax bills, and the Project's hard construction cost, which is used as a proxy for assessed value for the Project, and the particular tax increment calculation rules under State law, as applied to the specifics of the Project Site. Portions of the total incremental increase in property tax is passed through to various entities, including 35 As noted above in the discussion of the economic impact analysis in the Original PKF report, estimates were made for total Project- related guest spending in the City, which totaled $37.7 million, of which $17.4 million was for lodging, leaving a balance of $20.3 million. Some of this non - lodging cost spending would occur within the hotel, and not all of the balance would be subject to sales tax (e.g., attractions admissions and certain grocery store charges). HR &.A ADMOP5, INC. PKF Report Peer Review 1 28 the County of Los Angeles and City, based on agreements set forth during the project areas' establishment. Twenty percent of the tax annual increment must be set -aside by the Redevelopment Agency to be used specifically for affordable housing purposes prior to the distributions of the pass - throughs to other public agencies. The total tax increment minus the 20 percent set -aside for affordable housing and the pass - throughs to other taxing entities, is referred to herein as the "net tax increment." All of the calculation details for the net tax increment plus housing set -aside estimate, and the pass- through amounts to the City general Fund, the Santa Monica - Malibu Unified School District (SMMUSD) and Santa Monica College (SMC) are included in Appendix D. Sales Tax. The City receives 1.5 percent out of the 9.25 percent36 tax applicable to retail and certain other sales within the City limits that are subject to the State sales and use tax. The balance of the tax goes to the County and the State of California, although the City does receive some additional portions of the State and County sales tax shares for special purposes, including public safety, road maintenance and public transportation projects. Taxable sales occur when the commercial tenants of the Project make a purchase within the City or when a purchase is made within the existing improvements or within the Project. For the existing improvements, taxable sales were estimated based on data provided by the City, multiplied by the tax rate. For the Project, taxable sales were estimated as 75 percent of the food and beverage line item in the cash flow statement, multiplied by the tax rate. The sales tax analysis also includes an estimate of the taxable spending made in the City by hotel guests outside of the Project. This estimate relies on a series of calculation assumptions that are detailed in Appendix E, and the hotel guest spending patterns in the SMCVB Report. • Transient Occupancy Tax (TOT). The City collects a 14 percent tax on the nightly charges for hotel rooms, and so this tax applies only to the Project. The Project's TOT tax revenue is projected based on the number of occupied rooms, the room rate and the tax percentage. Business License Tax. The City collects a tax on the gross receipts (i.e., sales) earned by businesses within its boundaries, according to a tax rate schedule that varies by type of business and business category. For the existing improvements, the tax is calculated on the basis of average sales per square foot, derived from 2007 U.S. Economic Census data for the City ($763), multiplied by the occupied floor area of the existing buildings, and the professional services tax rate ($5 per $1,000 of sales minus $60,000 per tenant). The business tax on landlord earnings is based on the Applicant's rent roll and the applicable tax rate ($1.25 per $1,000 of sales minus $60,000). For the Project, the tax is calculated on the basis of total gross revenues from hotel operation multiplied by the applicable tax rate ($1.25 per $1,000 of sales minus $60,000). Utility User's Tax. The City charges a 10.0 percent tax on the cost of electricity, natural gas, water, sewer, telephone and cable t.v. charges. For the existing improvements, the tax is estimated using a combination of national energy cost factors by land use and the corresponding amounts of floor area in the existing improvements, multiplied by the tax rate. For the Project, the tax is calculated based on the utilities line item in the cash flow statement. 36 Under recent changes in State law enacted to finance the State's structural deficit, 1.25% is remitted to the City as sales tax revenue and another 0.25% is remitted as additional property tax. For calculation convenience this analysis treats the entire 1.5 percent as sales tax revenue. The total tax rate includes the additional transaction and use tax approved by City voters in November 2010. HRLA ADVISORS, INC. PKF Report Peer Review 1 29 Parking Tax. The City imposes a 10.0 percent tax on the gross revenue from parking. For the existing improvements, this tax applies to the monthly parking fees for commercial space tenants and daily or hourly fees for guests. The tax is calculated based on the Project Site parking manager's estimate of $1,723 in annual revenue per space and 130 spaces multiplied by the tax rate. For the Project, the tax applies to overnight guests and hotel visitors who park. It is calculated assuming that one -half of the Rental and Other Annual Income line item in the cash flow analysis is associated with parking revenue, multiplied by the tax rate. Two additional General Fund revenue categories are also included in our analysis, which were not included in the Updated PKF Report. • In -Lieu Motor Vehicle License Fee. Beginning in 2005, the State reduced the Motor Vehicle License Fee from two percent to 0.65 %. The State kept local government revenues whole by swapping the lost Motor Vehicle License Fee revenue for an equivalent amount of property tax revenue. In Santa Monica, the rebate is equal to approximately 0.031 % of citywide assessed valuation. This factor is multiplied by the current assessed value for the existing improvements, or the total hard construction cost for the Project. • Fines and Forfeitures. This includes, for example, parking ticket revenue. It is calculated as $15.52 per new employee (from 5 -year average tax and total City population & employees, weighted by hours per week in City), per the LUCE fiscal impact analysis. Our analysis of City service costs is based on the number of employees, factored for the percentage of time they are typically working in the City, and expressed as "resident - equivalents." For the existing improvements, the resident - equivalents calculation is based on the number of employees multiplied by 33 percent (i.e., eight hours per day). For the Project, the resident - equivalents calculation is based on the number of hotel employees, derived from the direct economic impact analysis discussed above, multiplied by 67 percent (i.e., 16 hours per day), to account for multiple shifts of workers. The total number of resident - equivalents is then multiplied by an overall cost per resident equivalent for all City General Fund services. This cost calculation factor, in turn, is based on a total City service population of 112,141 people, including all residents, in- commuting daytime workers, and in- commuting K -12 and Santa Monica College students, as well as the estimated number of daytime and overnight visitors to the City. Each General Fund departmental budget total for the 2010-11 fiscal year is then divided by the total number of resident equivalents to derives per- resident equivalent service cost factors, the sum of which is $2,131 in City cost per resident equivalent. This represents an average cost approach to estimating City service costs, and means that the cost of services delivered to the Project would be similar to the cost of services delivered everywhere in the City, even though the Project may have certain features that would reduce these average costs (e.g., the latest fire and life- safety protection systems and on -site security). All dollar amounts in this analysis are, once again, presented in constant 2011 dollars (i.e., without the effects of annual inflation). It should also be noted that secondary and tertiary sources of tax revenue would also be generated by the Project and the Smaller Hotel Alternative as a result of indirect and induced economic activity that result from expenditures for construction and operation of the completed hotel scenarios, but the amounts of these additional revenues, and the degree to which they will accrue to the City, are not susceptible to reliable, estimation. In addition, direct hotel construction could result in certain one -time tax revenues, the calculation of which also depends on factors that HF&A ADVISORS, INC. PKF Report Peer Review are unknown at this time.37 Therefore, the estimates presented here understate, to some degree, the actual tax revenues that the Project could produce for the City. All of the calculation details are included in Appendix E. Revenues and Service Costs Associated With the Existing Improvements. Based on the foregoing tax calculation assumptions, and the operating characteristics of the existing improvements, it is projected that the existing improvements generate an annual average38 of about $135,000 in General Fund revenue, or a cumulative total of $1.8 million, if these improvements were to continue operating as -is over the financial feasibility analysis period to 2023. Annual average revenues to the Redevelopment Agency would be about $6,700; $2,800 to SMMUSD; and $240 to SMC. We further project, based on the calculation method described above, that the existing improvements generate annual average City General Fund service costs of about $59,000, and $773,000 cumulatively over the period to 2023. Thus, the net fiscal impact of the existing improvements is an annual average of about $75,000, and $979,000 cumulatively over the projection period. These results are shown in Table 10. Table 10 Projection of Net Fiscal Revenues to the City of Santa Monica and Other Agencies from the Operation of the Existing Buildings at 710 Wilshire Existing Annual Recurring Revenues to City Total Annual Recurring Revenues City Service Costs Net Fiscal Revenues to the City Existing Redevelopment Property Tax Increment and Pass - Throughs Annual Recurring Revenues to Redevelopment Agency Annual Recurring Revenues to the Affordable Housing Fund Annual Recurring Revenues to SMMUSD Annual Recurring Revenues to SMC Total Annual Recurring Revenues to Other Agencies Annual Averages in Nominal $ in 2011 $ Totals 2011 -2023 in Nominal $ in 2011 $ $ 229,516 $ 134,737 $ 2,983,703 $ 1,751,581 $ 101,400 $ 59,450 $ 1,318,206 $ 772,854 $ 128,115 $ 75,287 $ 1,665,496 $ 978,727 Annual Averages Totals 2011 -2023 in Nominal $ in 2011 $ in Nominal $ in 2011 $ $ 11,229 $ 6,666 $ 145,972 $ 86,660 $ 5,198 $ 3,086 $ 67,579 $ 40,120 $ 4,799 $ 2,849 $ 62,392 $ - 37,041 $ 405 $ 240 $ 5,260 $ 3,123 $ 21,631 $ 12,842 $ 281,203 $ 166,944 37 For example, whether the Project Site is registered with the State's Franchise Tax Board in a way that allocates sales tax revenue related to the purchase of certain construction materials specifically to the City instead of going into a Countywide pool from which the City gets only a small share. It is also not clear whether development of the Project would result in a transfer of ownership that could trigger payment of the City's real estate transfer tax. 38 "Annual average' as used in this section of the memorandum refers to the average of the discounted tax revenue results calculated for each year over the period 2011-2023. For the existing improvements, the discount rate assumed is 9.7% and 10.9% for the hotel, based on first quarter 2011 survey results of real estate professionals, for suburban office and hotel development, respectively, as reported quarterly by the Real Estate Research Company. HIP AA ADVISORS, INC. PICF- Report Peer Review 1 31 Revenues and Service Costs Associated With the Project. Based also on the foregoing tax calculation assumptions, and the operating characteristic of the Project, we project that the Project would generate an annual average of about $2.6 million in General Fund revenue, or a cumulative total of about $33.8 million over the financial feasibility analysis period to 2023. Annual average revenues to the Redevelopment Agency would be about $222,000; $95,000 to SMMUSD; and $8,000 to SMC. We further project, based on the calculation method described above, that the Project improvements generate annual average City General Fund service costs of about $173,000, and $2.2 million cumulatively over the period to 2023. Thus, the Project would result in an average annual net fiscal impact of about $2.4 million on the General Fund, and $31.6 million cumulatively over the projection period. These results are shown in Table 11. Table 11 Projection of Net Fiscal Revenues to the City of Santa Monica and Other Agencies from the Operation of the Proposed Project The Project's "Net -Net" Fiscal Impacts. Subtracting the annual average net General Fund fiscal impacts of associated with the existing improvements from the average annual net General Fund fiscal impacts associated with the Project, as discussed above, results in a "net -net" average annual General Fund fiscal impact of about $2.4 million, and $30.6 million cumulatively through 2023. These results are summarized in Table 12. HR &A ADVIfiORS, IIVC. PKF Report Peer Review 132 Annual Averages Totals 2011 -2023 in Nominal $ in 2011 $ in Nominal $ in 2011 $ Project Annual Recurring Revenues to City Total Annual Recurring Revenues $ 5,478,308 $ 2,599,159 $ 71,218,008 $ 33,789,071 Less: City Service Costs $ 367,890 $ 172,547 $ 4,782,576 $ 2,243,108 Net Fiscal Revenues to the City $ 5,110,418 $ 2,426,613 $ 66,435,432 $ 31,545,963 Annual Averages Totals 2011 -2023 in Nominal $ in 2011 $ in Nominal $ in 2011 $ Project Redevelopment Property Tax Increment and Pass - Throughs Annual Recurring Revenues to Redevelopment Agency $ 429,235 $ 221,650 $ 5,580,053 $ 2,881,452 Annual Recurring Revenues to the Affordable Housing Fund $ 198,720 $ 102,616 $ 2,583,358 $ 1,334,005 Annual Recurring Revenues to SMMUSD $ 183,467 $ 94,739 $ 2,385,065 $ 1,231,610 Annual Recurring Revenues to SMC $ 15,467 $ 7,987 $ 201,068 $ 103,828 Total Annual Recurring Revenues to Other Agencies $ 826,888 $ 426,992 $ 10,749,544 $ 5,550,895 Sources: PKF, City of Santa Monica Prepared by HR &AAdvisors, Inc; Whitney& Whitney, Inc. The Project's "Net -Net" Fiscal Impacts. Subtracting the annual average net General Fund fiscal impacts of associated with the existing improvements from the average annual net General Fund fiscal impacts associated with the Project, as discussed above, results in a "net -net" average annual General Fund fiscal impact of about $2.4 million, and $30.6 million cumulatively through 2023. These results are summarized in Table 12. HR &A ADVIfiORS, IIVC. PKF Report Peer Review 132 Table 12 Projection of "Not-Net" Fiscal Revenues to the City of Santa Monica and Other Agencies from the Operation of the Proposed Project Minus the Existing Buildings at 710 Wilshire VIII. Conclusions By way of summary, we conclude the following, based on all of the foregoing information and analysis: The proposed Project would be financially feasible, as defined in the Updated PKF Report, and based on the amended development budget, annual cash flows and feasibility calculation details shown in the HR &A/W &W version of the feasibility analysis, only if the ADR is about $294 (201 1 $). This higher ADR implies a $59 ADR location premium over the ADR assumed in the Updated PKF Report, but it would be positioned the Project as a Full Service - Upscale rather than Full Service - Moderate hotel. • We concur in the conclusion of the Updated PKF Report that the Smaller Hotel Alternative would be infeasible, using that report's feasibility threshold, because the cost of developing it significantly exceeds the present value of potential profit that could be derived from achievable net operating income and eventual sale. • Based on the assumptions utilized in the HR &A/W &W version of the financial feasibility analysis, the planned investment in the Project's construction would support a total of 904 jobs and $126.4 million in total economic output in the City's economy. IN The Project's annual operation, at stabilization and assuming the revenues associated with an ADR of $294, would support a total of 391 jobs and $54.6 million in total economic output in the City's economy. After netting out the economic impacts of the existing improvements, the Project would support a net increase of 220 jobs and $31.6 million in total economic output in the City's economy. • The Project's annual operation, at stabilization and assuming the revenues associated with an ADR of $294, would generate an annual average net General Fund fiscal impact of $2.6 million, and a cumulative total net General Fund fiscal impact of $33.8 million. Average annual Project revenues to the City's Redevelopment Agency would be $222,000; average annual revenues to SMMUSD would be $95,000; and average annual revenues to SMC would be $8,000; and • After netting out the net fiscal impact of the existing improvements, the Project's "net -net" annual average General Fund fiscal impact would be $2.4 million, and its cumulative total "net -net" fiscal impact to 2023 would be $30.6 million. HREA ADVISORS, INC. PKF Report Peer Review 1 33 Annual Averages Totals 2011 -2023 in Nominal $ in 2011 $ in Nominal $ in 2011 $ "Net -Net" Annual Recurring Revenues to City Project Net Fiscal $ 5,110,418 $ 2,426,613 $ 66,435,432 $ 31,545,963 Less: Exsting Net Fiscal $ 128,115 $ 75,287 $ 1,665,496 $ 978,727 "Net -Net" Fiscal Revenues to the City $ 4,982,303 $ 2,351,326 $ 64,769,935 $ 30,567,236 Sources: PKF, City of Santa Monica Prepared by HR&AAdvisors, Inc; Whitney& Whitney, Inc. VIII. Conclusions By way of summary, we conclude the following, based on all of the foregoing information and analysis: The proposed Project would be financially feasible, as defined in the Updated PKF Report, and based on the amended development budget, annual cash flows and feasibility calculation details shown in the HR &A/W &W version of the feasibility analysis, only if the ADR is about $294 (201 1 $). This higher ADR implies a $59 ADR location premium over the ADR assumed in the Updated PKF Report, but it would be positioned the Project as a Full Service - Upscale rather than Full Service - Moderate hotel. • We concur in the conclusion of the Updated PKF Report that the Smaller Hotel Alternative would be infeasible, using that report's feasibility threshold, because the cost of developing it significantly exceeds the present value of potential profit that could be derived from achievable net operating income and eventual sale. • Based on the assumptions utilized in the HR &A/W &W version of the financial feasibility analysis, the planned investment in the Project's construction would support a total of 904 jobs and $126.4 million in total economic output in the City's economy. IN The Project's annual operation, at stabilization and assuming the revenues associated with an ADR of $294, would support a total of 391 jobs and $54.6 million in total economic output in the City's economy. After netting out the economic impacts of the existing improvements, the Project would support a net increase of 220 jobs and $31.6 million in total economic output in the City's economy. • The Project's annual operation, at stabilization and assuming the revenues associated with an ADR of $294, would generate an annual average net General Fund fiscal impact of $2.6 million, and a cumulative total net General Fund fiscal impact of $33.8 million. Average annual Project revenues to the City's Redevelopment Agency would be $222,000; average annual revenues to SMMUSD would be $95,000; and average annual revenues to SMC would be $8,000; and • After netting out the net fiscal impact of the existing improvements, the Project's "net -net" annual average General Fund fiscal impact would be $2.4 million, and its cumulative total "net -net" fiscal impact to 2023 would be $30.6 million. HREA ADVISORS, INC. PKF Report Peer Review 1 33 Appendix A Summary of HR &A Advisors and Whitney & Whitney, Inc. Qualifications HR &A ADVISORS, INC. Page 2 HPNA Advise, Act. 2800 213th Street, Suite 325, Santa :Monica, Cry 90405 T; 310 - 581 -0-010 1 F: 310.5131 -0910 J w-%vnv.hraativisors,cL)m SERVICES TO THE PUBLIC AND PRIVATE DEVELOPMENT COMMUNITY HR &A Advisors, Inc. (HR &A) is a full service economic development, real estate advisory and public policy consulting firm. Founded in 1976, the firm has a distinguished track record of providing realistic answers to complex housing, real estate, economic development, public finance and strategic planning problems. HR &A clients include Fortune 500 corporations, all levels of government, the nation's leading foundations and not - for - profit agencies. The firm has extensive experience working for the legal community in such roles as court - appointed special master, consent decree monitor, technical advisor and expert witness. HR &A practice lines include real estate analysis and advisory services, local and regional economic analysis, economic development program formulation and analysis, fiscal impact analysis, land use policy analysis, development impact fees, housing policy research and analysis, population forecasting and demographic analysis, and transportation system and other capital facilities analysis and financing. Among the qualities for which HR &A is widely known and respected are the impeccable quality of its analysis, ability to invent new analytic methods and approaches to suit the needs of a particular client, independent professional judgment honed through extensive exposure to the rigors of the public review process and the scrutiny of the judicial system, the ability to translate complex technical analysis for a variety of non - technical audiences, and the extensive involvement of its Partners in every project it accepts. HR &A's domestic and international consulting is provided by a staff of 20 people located in offices in the Los Angeles area and New York City. Staff members include public finance professionals, planners, economists, architects, lawyers and experienced project managers. Virtually every member of the firm has substantial public or private sector experience in financial and policy analysis, real estate development and planning. HR &A provides the following analytic services to the real estate development community Strategic Positioning and Project Management. HR &A has been retained by developers and public agencies to perform a variety of management assignments ranging from project conceptualization to management of the technical team responsible for project development. In addition to a thorough understanding of the development business, our clients particularly value our ability to think strategically about their projects. This has propelled the firm into the forefront of reuse planning for closed military bases and development of downtown and urban waterfront revitalization strategies. HR &A has been awarded multiple assignments to manage the interdisciplinary teams of architects, urban designers, engineers and others to develop market - sensitive urban development and redevelopment strategies such projects require. • Financial Feasibility Analysis. HR &A has frequently been retained to provide specialized analytic services in all areas of real estate feasibility analysis. This includes pro forma development and review, cash flow modeling, investment return analysis, deal structuring, and the identification of equity, debt and subsidy resources. We have led and /or been key participants in negotiating many different kinds of real estate transactions on behalf of private and public clients, including experience with public ground lease deals. €3R&A Auwiscrs, It�c. Services to the Public & Private Development Community Economic and Fiscal Impact Analysis. HR &A regularly prepares analyses of the impacts development projects and planning proposals may have on the revenues and expenditures of local public agencies, and /or the regional economies in which they are situated. HR &A has analyzed the impacts of high -rise office buildings, shopping centers, hospital campuses, regional performing arts centers, museums, convention centers, major airports, large single - family subdivisions and condominium developments, and mixed -use developments. Developer Negotiations. All of HR &A's principles and senior staff are very experienced negotiators, and the firm has particular expertise in negotiating real estate transactions, often in the context of public - private development projects. These services have been performed on behalf of both private and public real estate clients, owing to our keen understanding of each party's interests and needs. HR &A has been involved in all aspects of the formal real estate ne- gotiations process, from structuring the process through direct participation on behalf of clients and /or acting as technical advisor during the negotiation process. HR &A has participated in drafting Exclusive Negotiating Agreements, Memoranda of Understanding, Owner - Participation Agreements and Development Agreements, particularly with respect to financial terms and conditions. Other Socio- Economic Impacts Analyses. HR &A has a long history of experience in all aspects of population, housing, employment forecasting and analysis and public school impacts analysis. This includes special expertise in dealing with regional planning policies promoting "jobs- housing balance." The firm's population and public school enrollment forecasting has been relied on by several school districts in making long -term facilities decisions, and was cited in a State Appellate court case which determined that the Santa Barbara campus of the University of California was exempt from school impact fees. Developer Fees and Exactions. In the early 1980s HR &A was retained by several jurisdictions to design exaction systems in which the firm followed the basic principles of nexus and "fair share" later codified in the Nollon and Dolan decisions by the U.S. Supreme Court, the Ehrlich decision by the California Supreme Court and California Government Code Section 66000, et seq. More recently HR &A has been retained by a number of developers and developer /owner organizations to evaluate, critique and participate in seeking changes to adopted and proposed developer fee programs. The firm's technical rigor and thoughtfulness about these issues is respected by all sides in the continuing debate about this method of infrastructure financing. A related area of expertise is in the analysis of project impacts on school facilities, a topic of significant interest for many developers and school districts. HR&A ADVISORS, INC. Services to the Public & Private Development Community Summary of HR &A Advisors, Inc. Lodging Development Analysis Experience • Santa Monica Beach Hotel, Santa Monica, CA, for the Santa Monica Beach Hotel Development Partnership. HR &A structured a development proposal for a $200 million luxury hotel and community center proposed for a site on surplus State land. Following competitive selection of the proposal by the City Council, HR &A assisted the developers in transaction negotiations and securing all entitlements, including a Development Agreement. • Wilshire Grand Hotel- Office- Condominiums Property Redevelopment, Los Angeles, CA, for Hanjin International. HR &A prepared detailed net incremental economic and fiscal impact analysis for a mixed -use development that includes 1,500,000 square feet of office space, a 560 -room luxury hotel, 100 condominiums, and 275,000 square feet of Project- serving retail and amenity areas. • Sunset /Doheny Hotel, West Hollywood, CA, for WN Sunset, LLC. HR &A prepared economic and fiscal analysis for a mixed -use development including a 102 -room luxury hotel, fractional share units, condos and retail. • NBC Universal Evolution Plan, Los Angeles, CA, for NBC - Universal. HR &A prepared residual land value analysis, economic, fiscal and other socioeconomic impact analysis for a $3.0 billion mixed -use (film and TV production facilities, theme park expansion, regional retail, commercial office, 500 -room first class hotel, 2,900 dwelling units), multi -phase redevelopment of the Universal City property; and similar analyses for previous Master Plans for this site, which also included hotel development. • University Park Campus Development Plan, Los Angeles, CA, University of Southern California. HR &A prepared economic impact, fiscal impact and "urban decay' analysis for a plan for 2.5 million academic s.f., 350,000 s.f. commercial and retail facilities, a 150 -room hotel and 3,000 beds of student housing, to accommodate campus needs to 2030. • The Village at Westfield Topanga, Los Angeles, CA, for Westfield Corporation. HR &A prepared economic impact, fiscal impact and "urban decay" analysis for a mixed -use development (regional retail, high -rise office, 300 -room first class hotel) in the west San Fernando Valley. • Gaylord Hotel, Chula Vista, CA, for Gaylord Entertainment Company. HR &A prepared economic and fiscal impact analysis of a proposed 2,000 -room convention hotel with extensive specialty and other retail. • Teterboro Landing Redevelopment, Teterboro, N1 for Catellus, a ProLogis Company. HR &A analyzed economic and fiscal impacts of the proposed redevelopment of a 62 -acre site adjacent to Teterboro Airport with 900,000 square feet of mixed uses including a 150 -room hotel to serve users of the private commercial airport and visitors to the region. • Hudson Square Redevelopment, New York, NY for Trinity Real Estate. HR &A prepared economic feasibility analysis for the repositioning of a 300,000 square foot industrial loft building as a 350 - room hotel. • South Street Seaport Transformation, New York, NY for General Growth Properties. HR &A has, since 2005, provided comprehensive project management and development advisory services for a $1 billion project to transform a festival marketplace into a mixed -use, waterfront destination, including a 285 -room, five -star corporate hotel and 160 -room boutique hotel. • Benefits Assessment for Newark City Crossing, Newark, NJ. For a private landowner in Newark, HR &A conducted an independent benefits assessment of a proposal to activate Newark's Downtown Core and construct a dense downtown commercial and residential district, including a 200 -room hotel. • West Side Rail Yard Development Proposal, New York, NY, for Brookfield Properties. HR &A served as strategic real estate development advisor and project manager for a developer competition proposal to transform the West Side Rail Yard in Manhattan into a mixed -use development including office, residential, hotel (a 1,050 -room convention center hotel, a 225 -room boutique hotel, and a 750 -room premier business hotel) and community uses. HR &A ADVISOP.S, laC. Services to the Public & Private Development Community • Brooklyn Bridge Park O &M Financing Strategy, New York, NY, for Brooklyn Bridge Park Development Corporation (BBPDC). HR &A created a funding plan so that this new major urban park's operating and maintenance costs will be sustained by future commercial development located on the site. The economic model developed for this long -term, self - sustainable financing strategy included the ground rent and on -going tax revenue potential associated with hotel, retail, and housing development within the park. HIR&A ADVISORS, INC< Qualifications of Whitney & Whitney, Inc. William H. Whitney, Ph.D. has 40 years of experience as a real estate advisor. Prior to his re- establishment of Whitney & Whitney, Inc. in April 2000, he served as a Principal with Arthur Andersen for nine years, the last three years headquartered in Andersen's London office. His duties with Andersen included establishing an Andersen real estate consulting practice in Los Angeles and the Asia Pacific Region, and serving as a resource to the European and Middle East Real Estate and Hospitality consulting practices. - Mr. Whitney has extensive experience working on international assignments that deal with hotel - related issues. His background includes participating as a resource on engagements in over 35 countries throughout the world, including European, Asian, Middle Eastern and African locations such as South Korea, Brunei, Singapore, Palau, Guam, Trinidad and Tobago, Puerto Rico, China, Spain, The Netherlands, United Kingdom, India, Portugal, Dubai, Saudi Arabia, Greece, Egypt, Abu Dhabi, Malta, Tunisia, Jordan, Lebanon, Bahrain, Philippines, French Polynesia, India, and Turkey. Mr. Whitney's recent activities include the following consulting engagements: provision of development advisory services to the Queen Emma Land Company relating to the re- positioning of two resort hotels located in Waikiki, Honolulu, Hawaii; evaluation of a master plan for the development of a theme park, specialty retail center and resort hotels for Universal Studios, Dubai; evaluation of a master plan for development of a 900 - hectare property located on the South Lake in central Tunis, Tunisia for a Dubai investment company; evaluation of a proposed arena and master - planned community in conjunction with the 900 -acre Cal Expo State Fair site in Sacramento, California; for over 15 years served as the waterfront development and leasing advisor to the State of Hawaii for the redevelopment of its waterfront property in downtown Honolulu, Hawaii; market evaluation of a residential opportunity that would be developed in conjunction with a five -star hotel property near South Coast Plaza for the C. J. Segerstrom Company; market feasibility and concept evaluation for two resort properties situated on Jeju Island, South Korea for Korean Air Lines; evaluation of a resort master plan proposal for Sa'adiyat Island, a 2,600- hectare property located in Abu Dhabi, United Arab Emirates; evaluation of the economic and fiscal impacts of the proposed expansion of Westfield Santa Anita shopping center and five other shopping centers for Westfield Corporation, Inc.; market and financial studies for Castle & Cooke Homes Hawaii, Inc. related to the master plan for development of 28,000+ acres of Castle & Cooke /Dole lands located on the North Shore of Oahu, Hawaii; development advisory services for KAL related to the redevelopment of their Wilshire Grand Hotel located in downtown Los Angeles; and advisory services to the City of Albuquerque related to the operating projections for a proposed Sheraton "branded" hotel located in their downtown to support existing convention facilities. Mr. Whitney received his Ph.D. from the Graduate School of Management, University of California Los Angeles in Urban Land Economics (1975) and taught Real Estate Finance and Urban Land Economics at that university. He also performed graduate studies in Urban and Regional Planning at the University of Southern California (1964 -1967) and received an A.B. in Political Science from Williams College (1963). Mr. Whitney is an active member of the Urban Land Institute (ULI) and has served on their local Executive Committee in southern California managing their Technical Assistance Programs (TAPS). Recently, he was a contributing author to the ULI publication, Retail Development, 4th Edition. Summary of Whitney & Whitney, Inc. Lodging Development Analysis Experience • Review of Feasibility for a Proposed Downtown Convention Hotel, Albuquerque, New Mexico, for the City of Albuquerque, including an independent review of a PKF Consulting - prepared financial feasibility study for a 550 -room hotel with 23,000 s.f. of retail and restaurant space. • Review of Feasibility for the Wilshire Grand Hotel- Office - Condominiums Property Redevelopment, Los Angeles, California, for Hanjin International and AC Martin Partners, including the project's 560 -room luxury hotel and associated amenity areas. • Aviara Master Plan Review and Appraisal, Carlsbad, California, for Wells Fargo Bank including economic feasibility studies that led to changes in the master plan for the project and the mix of hotel and residential land uses. • Embarcadero Waterfront Redevelopment Program, San Diego, for the San Diego Unified Port District, including feasibility studies for redevelopment opportunities on the Port District's 620 -acre waterfront property, including the Seaport Village specialty retail center, the downtown marina, adjacent convention center /hotel complex, and redeveloping the B Street Pier into a passenger cruise ship terminal. • Lake Las Vegas Development Program, Henderson, Nevada, for Orix Corporation /Trans- continental Properties, Inc., including market validation studies, master plan reviews and an investment analysis for a 2,350 -acre resort complex that was planned to include six to eight major hotels, five golf courses, 300,000 square feet of retail space, and 3,200 residential units. • Lake Las Vegas Development Program Fiscal Impact Studies, Henderson, Nevada, for Transcontinental Properties, Inc., including fiscal impact of the 2,350 -acre master planned resort and residential community located in the Las Vegas metropolitan area. • Analysis of Mixed -Use Hotel and Residential Complexes, Cities of Atlanta, Pittsburgh and San Antonio and the Island of Tobago, in association with HVS, involving a series of market and financial studies that evaluated the development potential of mixed -use projects featuring a four /five star hotel with a 100 -250 unit residential component. • Market and Financial Study, Four Seasons Hualalai Resort, North Kona, Island of Hawaii, for Kajima Development Resources, Inc., including a series of market and financial studies for 1,000 residential units and a specialty retail complex to complement the 250 -room Four Seasons Hotel and two tournament -class golf courses. • Various Feasibility Studies for Mauna Lani Resort, a five -star resort property located on the Kohala Coast, Big Island of Hawaii, including market and financial studies for hotel projects, a residential marina, condominium residential units at golf course sites, and other commercial retail projects. • Market and Financial Feasibility Studies, West Maui, Hawaii, for Amfoc Property Development Corp., including market and financial feasibility studies and other development advisory services for the second phase of Kaanapali Resort's hotels, specialty retail /entertainment complex, golf facilities, and a variety of time - share, single - family and condominium residential products. • Analysis of Development Potentials for Waialae- Kahala Properties, Honolulu, Oahu, for Kamehameha Schools, including evaluation of both short- and long -term development opportunities for the Waialoe Country Club and beachfront properties currently occupied by hotel and condominium uses. • Real Estate Advisory Services related to disposition of two existing hotel leases, Waikiki, Honolulu, Hawaii, for Queen Emma Land Company. • Market /Financial Studies, La Paz Property, La Paz, Baja California Sur, for Cortez Properties, Inc., for a 4,400 -acre resort property with six miles of coastline located on the Sea of Cortez, including a review of development activities at a number of major Mexican resort hotel areas, including Cabo San Lucas and San Jose del Cabo. • Development Potentials for the Costa Dorado Development Program, Mazatlan, Mexico, for Salt - Ballard Properties, including residential, hotel and golf course uses. • Development Program Validation Study, Florence, Italy, for Immobiliare Novoli Spa, including market validation study of the proposed redevelopment of a 32- hectare property formerly utilized as an aircraft factory for 200,000 square meters of uses, including a regional headquarters for Fiat, general- purpose office space, a major courthouse facility, residential units, retail commercial space, a hotel, a university campus and parking. • Analysis of Privatization Opportunities, Various Locations, Greece, for the Greek Ministry of the National Economy, including site and operational reviews of existing resort hotels, casinos and marinas, and a critique of current policies governing their establishment and performance. • Resort Feasibility Study, Eastern Crete, Greece, for 3 D Development /Eastern Crete Development Company, including review of market feasibility of a proposed luxury resort development program of resort hotels, residential villas and condominiums, leisure facilities, marina facilities and a golf course. • Porto Karras Resort Investment Analysis, Sithonia, Halkidiki, Greece, including review of the potential for renovating and re- positioning the Porto Karras Resort Development consisting of hotels, casino, residential properties, vineyards /winery, commercial sites, golf course facilities and marina facilities. • Proposed Resort Development, Muscat, Oman, for Muscat Municipality, including a comprehensive review of tourism growth potentials and the likely nature of demand for hotel accommodations in Oman, and review of the prospects for the development of a specific hotel, golf course and marina development. • Resort Development Program, Alentejo, Portugal, for Costaterra Resort Landowner, including an initial reconnaissance study for a resort hotel with an 18 -hole championship golf course. • Dubai Festival City Development Program, Dubai, United Arab Emirates, for Al Futtaim Investments, including real estate advisory services for the first phases of a 1,200 -acre development with almost two million square feet of commercial retail /entertainment space, an Intercontinental Hotel and a residential community situated on an 18 -hole championship length golf course.. • Various Hotel, Casino and Mixed -Use Development Projects, Malta, for Mizzi, Doublet, Scerri & Co., including analysis of residential, office, retail and resort hotel space markets, and review of hotel redevelopment concepts for waterfront properties. Appendix B HR &A /W &W Financial Feasibility Model for the Project HR&A ADVISORS, INC. Site Costs Factor Sources Land valuation $263 psf 52,500 sf $13,800,000 HR&A Total Site Costs - $13,800,000 Direct Costs Landmark Renovations $319 psf 34,178 sf $101908,239 PKF New Building Improvements $370 psf 132,822 sf $49,135,141 PKF Parking $47,192 perspace 286 spaces $13,496,912 PKF Personal Property (FF &E) $30,000 per room 285 rooms $8,550,000 PKF Hard Cost Contingency 5.0% subtotal direct costs $4,104,515 HR&A Total Direct Costs $86,194,807 Indirect Costs' Architecture, Engineering and Consulting 6.0% Landmark /Parking /FF &E direct costs $2,223,580 HR&A Public Permits and Fees 4.0% Landmark/Parking/FF &E direct costs $1,482,387 HR&A Legal, Titie &Escrow 0.5% direct costs $520,000 PKF Insurance 0.3% directcosts $230,000 PKF Developer Admin &Overhead 1.5% direct costs $1,298,000 PKF Pre - Opening E)Wenses and Working Capital 1.7% directcosts $1,425,000 PKF Real Estate Taxes 0.7% directcosts $592,000 PKF Soft Cost Contingency 5.0% subtotal softcosts $386,548 HR&A Total Indirect Costs - $8,159,515 Financing /Closing Costs Construction Interest and Loan Origination' 70% financed 60% drawn $3,420,313 HR &A Permanent Financing Loan Origination' 70% financed $1,135,620 HR &A Total Financing /Closing Costs $4,555,933 Total Development Costs (2011 $) $112,710,254 Per Key 285 rooms $395,475 Per Key (w /o Land) 285 rooms $347,054 Developer Equity 30% total development costs Collateral 100% land valuation Remaining Needed Cash Equity $33,813,076 $13,800,000 $20,013,076 ' Based on HR &A interpretation of PKF Report Assumes 7.5% interest on construction loan (only applied to Landmark renovations, parking, FF &E, hard cost contingency and land costs); 18 month construction; 1.0 points for loan origination; and 1.0 %forclosing costs. 'Assumes 1.0 points for loan origination; and 0.5% for closing costs. HR&A ADVISORS, !NC. PKF Report Peer Review Number of Annual Rooms Available Occupancy Rate Number of Rooms Occupied Average Daily Rate Revenue PerAV ilable Room (RevPAR) Revenues Rooms Food & Beverage Other Operated Departments Rentals &Other Income Total Revenues Departmental Fxperees Roams Food & Beverage - Other Opemkd Departments Total Departmental Expenses Departmental Profit Undistributed Expenses Pdmin & General Marketing Property Operation & Maintenance U81ity Costs Total Undistributed Expenses Cross Operating Profit Fixed Expenses PmpeMTaxes Insurance Base Management Fee Total Fxed Expenses Net Operating Income (WI) FF &E Reserve NOI After Reserve NOI After Reserve (2011 $) Reversion' Reversion (2011 $)' Cost of Bale (2011 $) Net Reversion (2011 S)' Cumulatine 10 -Year NOI and Reversion Cum ill 10 -Year Not and Net Reversion (2011 S) Entrepremurtal Profit (2011 $)2 Development Budget Prd it Margin° Return 0n Cash Equity 104,025 104,025 104,025 104025 104,025 104,025 104,025 104,025 104,025 104,025 70% 76% 80% 80% 80% 80% 80% 80% 80% 80% 72,818 79,059 83,220 83,220 83,220 83,220 83,220 83,220 83,220 83,220 3% $321.26 $330.01 $340.01 $350.01 $360.01 $371.26 $382.51 $393.76 $405.01 5417.52 $224.88 $250.81 $272.01 $280.01 $288.01 3297.02 $306D1 $315.01 $324.01 $33402 $23,393,000 $26,090,000 $28295,000 $29,128,000 $29,960,000 $30,897,000 $31,833,000 $32,769,000 $33,705,000 $34,746,000 $8,455,181 $9,455,000 $10,250,362 $10,557,681 $10,874,204 $11200,]25 $11,536,884 $11,883,044 $12239,204 $12,607B66 $1,988,793 $2,225,000 $2,411,335 $2,483,793 $2,558,857 $2,635,171 $2,713,899 $2,795,128 $2,8]8,85] $2,955,192 $978,771 S105_2,_500 $1,113,789 _ $114_ 520 $1182949 $1,217579 $1253,819 $1,291,309 $1330,049 $1370089 $34,815,744 $38,022,500 $42,071,107 $43,316,994 $44,575,610 $45,950,174 $47,337,602 $48,738,401 $50,153,110 $51,688,347 $4,913,000 $5,244,000 $5,546,000 $5,680,000 $5,872,000 $6,056,000 $6239,000 $6,423,000 56,606,000 $6,810,000 $6,434,000" $6,949,000 $],380,000" $],602,000' $],829,000' $8,065,000` $8,307,000 $8,556,000` $8,812,000 $9,0]],000 $123000 $1,446,000 $1567000 $1614`000 $1 fifi3`000 $1713_000 $1$1764`BOO 51817`000 $181000 $1925 ,_000 $12,640,000 $13,639,000 $14,493,000 $14,096,000 $15,364,000 $15,834,000 $16,310,000 $16,796,000 $17,289,000 $17,814,000 $22,175,744 $25,103,500 $2],5]8,487 $28,420,994 $29,211,610 $30,116,474 $31,027,602 $31,942,481 $32,864,110 $33,874,347 $2,802,560 $2,867,500 $2,973,855 $3,062,553 $3,155,132 33,250,210 $3,347,684 $3,447,658 $3,551,382 $3,657,737 $2,920,062 $3,007,500 $3,097,609 $3,190,055 $3,286,387 $3,385,219 $3,486,442 $3,591,414 $3,698,887 $3,610,247 $1,362,529 $1,403,750 S1,445,051 $1,488,]]6 $1,533,814 81,580,102 $1,627,589 $1,6]6,32] 31,728,314 $1,777,615 $1167`525 2 $1$ 2500 $123;x]94 $12]62]2 $1,315,055 3135�`088 $1396`32] $143816 $1,482555 $1,527,599 $8,252,676 $8,501,250 $8,755,309 $9,017,655 $9,290,388 $9,570,620 $9,858,042 $10,154,215 $10,459,138 $10,773,198 $13,923,068 $16,682,250 $18 ,823,177 $19,103,339 $19,921,222 $20,545,855 $21,169,560 $21,788,266 $22,404,972 $23,101,149 $1,]01286 $1,841,250 51,877,566 $1,915,033 $1,953,832 $1,992.629 $2,032,612 $2,073,845 $2,115,078 $2,157,640 $195,004 6200,000 $208257 $212,504 3218,759 5225,015 $231,263 $238,761 $246,259 $253,768 $104`000 $11`5000 $1262_000 $1300_000 $133000 S137000 $142000 $1465_, 2,_000 $1,505000 $151000 $2,940,291 $3,206,250 $3,345,824 $3,427,537 $3,509,591 $3,596,644 $3,683,874 $3,774,606 $3,866,338 $3,962,406 $10,982,777 $13,476,000 $15,477.354 $15,975,802 $16,411,632 $16,949211 $17,405,686 $18,013,660 $10,538,635 $19,130,743 $696_000 $1,165,000 $1,683,000 $1733,_000 $178_, 3,_000 $1838`000 $1,894 OOD $1950_000 $2006000 $2068`000 $10,286,777 $12,311,000 $13,794,354 $14,242,802 $14,620,632 $15,111211 $15,591,686 $16,063,660 $16,532,635 $1],070,]43 11.0% $7,521,603 58109.637 $8,186276 $7,614,754 S7,046.003 $6,557,155 $6,095,176 $5,657,372 $5,245,529 $4,879,515 8.5% $203,033,067 8.5% $58,035,139 1.5% $870,527 $57,154,612 $348,666,567 $124,077,664 $11,36],410 $112,710,254 10.1% 568% ' Includes adjusted real estate saes Natvmuld saturated sale. a Cumulative 10.Year No and Reversion (2011 5)- Development Budget (2011 $) 3 Entrepreneurial Profit (2011 $) I Development Budget (2011 5) P R&.A eADV�SORS, M. PKF Report Peer Review Appendix C HR &A /W &W Financial Feasibility Model for the Smaller Hotel Alternative ADVISORS, INC. Site Costs Land Valuation Total Site Costs Direct Costs Landmark Renovations New Building Improvements Parking Personal Property(FF &E) Hard Cost Contingency Total Direct Costs Indirect Costs' Architecture, Engineering and Consulting Public Permits and Fees Legal, Tite & Escrow Insurance Developer Adm in &Overhead Pre - Opening Expenses and Working Capital Real Estate Takes Soft Cost Contingency Total Indirect Costs Financing /Closing Costs Construction Interestand Loan Origination' Permanent Financing Loan Origination Total Financing /Closing Costs Factor Sources $263 psf 52,500 sf $13,800,000 HR&A $13,800,000 $319 psf 34,178 sf $10,908,239 PKF $211 psf 113,892 sf $24,041,759 PKF $47,233 perspace 150 spaces $7,084,950 PKF $30,000 per room 132 rooms $3,960,000 PKF 5.0% subtotal directoosts $2,299,747 HR&A $48,294,695 6.0% Landmark /Parking /FF &E direct costs $1,455,176 HR&A 4.0% Landmark /Parking/FF &E direct costs $970,117 HR&A 0.8 %directcosts $520,000 PKF 0.4% direct costs $230,000 PKF 2.1% direct costs $1,298,000 PKF 1.1% direct costs $660,000 PKF 1.0% direct costs $592,000 PKF 5.0% subtotal softoosts $266,265 HR&A $6,011,558 70% financed 60% drawn $2,559,060 HR&A 70% financed $715.116 HR&A $3,274,176 Total Development Costs (2011 $) - $71,380,429 Per Key 132 rooms $540,761 Per Key(w /o Land) 132 rooms $436,215 Developer Equity 30% total development costs Collateral 100% land valuation Remaining Needed Cash Equity $21,414,129 $13,800,000 $7,614,129 ' Based on HR &A interpretation of PKF Report, Assumes 7.5% interest on construction loan (only applied to Landmark renovations, parking, FF &E, hard cost contingency and land costs); 18 month construction; 1.0 points for loan origination; and 1.0% for closing costs. 'Assumes 1.0 points for loan origination; and 0.5% for closing costs. NC. PKF Report Peer Review Number of Annual Rooms Available 48,180 48,180 46,180 48,180 48,150 48,180 48,180 48,180 48,180 48,180 Occu pancy Rate 72% 77% 52% 82% 82% 82% 62% 82% '62% 82% N um bar of Rooms Occupied 34,690 37,099 39,508 39,508 39,508 39,508 39,508 39,508 39,508 39,508 A rage Daily Rate 3% $335.47 $345.48 $355.50 $366 .76 $376.77 $388.04 $400.56 $411.82 $424.34 $436.86 Recenue Per Available Room(RaWM) $241.53 $26602 $291.51 $300]5 $308.95 $31520 $328.46 $337.69 $347.97 $358.22 Revenues $8510,799 $8,755,562 $9,032,768 $9,304,865 FF &E Resene S3601000 $593,000 $865000 $692_000 Rooms - $11,637,000 $12817,000 $14,045,000 $14,490,000 $14,885,000 $15,331,000 $15.825,000 $16,270,000 $16,765,000 $17,259,000 Food &Savant a $4,270,780 $4,703,739 $5,159,388 $5,314,836 $5,473,144 $5,638,974 $5,807,799 $5,981,562 $6,160 .768 $6,345,865 Cher Operated Departments $1,167,000 $1,307,000 $1,433,000 $1,476,000 $1,521,000 $1,566,000 $1,613,000 $1,661,000 $1.711,000 $1,762,000 Rentals &Other Income $909_000 $95000 $99000 $102000 5106000 $109,1000 $112f_000 51158`000 $1193`000 $1228`000 Total Revenues $18,003,780 $19,700,739 $21,636,308 $22,309,036 $22,939,144 $23,626,974 $24,369,799 $25,070,562 $25,829,768 $26594,065 Departmental Expenses $420,229 Rooms $2,642,000 $2,807,000 $2,978,000 $3,072,000 $3,156,000 $3.250,000 $3,355,000 $3,449,000 $3,554,000 $3,659,000 Food & Beverage $3,562,000 53,815,000 $4,076,000 $4,199,000 $4.324,000 $4,455,000 $4,588,000 $4,725,000 $4,867,000 $5,013,000 Other Operated Departments 571000 $78000 $860000 $887„_000 $913000 $94000 $968,000 $99000 $102000 $105000 Total Departmenal Expen... $6,916,000 $7,406,000 $7,914,000 $0,158,000 $0,393,000 $8,645,000 $8,911,000 $9,171,000 $9,448,000 $9,729,000 Departmental Profit $11,087,780 $12,374,739 $13,722,388 $14,151,036 $14,546,144 $14,981,974 $15,458,199 $15,099,$62 $16,381,768 $16,865,865 Undistributed Expenses. $71,380,429 Profit Margins Admin &General $1,625,000 $1,674,000 $1,724,000 $1,776,000 $1,829,000 $1,884,000 $1,940,000 $1,999,000 $2,058,000 $2,120,000 Marketing $1,174,000 $1,209,000 $1,245,000 $1,282,000 $1,320,000 $1,361,000 $1,401,000 $1,443,000 $1,487,000 $1,531,000 Property Dpeatien& Maintenance $903.000 $930,000 $956,000 $986,000 51,016,000 51,04Q000 $1,078,000 $1,110,000 $1,144,000 $1,178,000 USlit/COSts S542.000 $558,000 $576000 $592,000 S61i ,000 $62$000 $647_000 $66000 $686000 $707_000 Total Undistributed Expenses $4,244,000 $4,371,000 $4,502,000 $4,636,000 $4,775,000 $4,919,000 $5,066,000 $5,210,000 $5,375,000 $5,536,000 Gross Operating Profit 56,043,700 $0,003,739 $9.220,388 $9515,836 $9,771,144 $10,062,974 $10,392,799 $10,601,562 $11,006,768 $11,329,865 Fixed Expenses PmperNTaxes $817,000 $885,000 $902,000 $921,000 $940000 $959,000 $978,000 $995,000 $1,016,000 $1,038,000 Insurance $144.000 $149,000 $153,000 $158,000 $163,000 $168,000 $173,000 $178,000 $183,000 $189,000 Base Management Fee 554 _000 $593,000 $64; ,000 $662_000 S688,000 $709,000 $73 000 $752`000 $775000 $798_000 Total Fixed Expenses $1,501,000 $1,627,000 $1,704,000. $1,748,000 $1,791,000 $1,036,000 $1,802,000 $1,926,000 $1,974,000 $2,025,000 Net Operating IncOme(N0I) $5,342,780 $6,376,739 $7,516,308 $7,767,036 $7,980,144 $8,226,974 $8510,799 $8,755,562 $9,032,768 $9,304,865 FF &E Resene S3601000 $593,000 $865000 $692_000 S918,000 $94J_000 $975_000 51003000 51033000 $1064`000 NOI After Resent $4,982,780 $5,703,739 $6,651,388 $6,875,036 $7,062,144 $1,281,974 $7,535,799 $7,752,562 $7,999,768 $8,240,865 N0I Mar Reserve(2011$) 11.0% $3,643,366 $3,809,928 $3,947,275 $3,676,103 $3,401,541 53,159,842 $2,945,930 $2,730,332 $2,538,193 $2,355,576 Reversion' 8.5% $90,010,111 Reversion (2011 $)' 8.5% $28,015,291 Cost of Sale (2011$) LS% $420,229 Net Reversion (2011 $)' $27,595,061 Cumu nne, 1O-Year NOI and Reversion $160,176,966 Cum WON, 10 -Year NOI and Reversion (2011 $) $59,803,147 Entrepreneurial Pmt (2011 If 411,577,283 Development Budget $71,380,429 Profit Margins -16.2% Return on Cash Equity -152.0% ' Ineludes adjusted real estate fees t118t Would occurepon sale. ' Cumulative 10 -Year NOI and Recension (2011 $) - Development Budget(2011 $) s Entrepreneurial PraGt(2011 $) I Development Budget (2011 $) PKF Report Peer Review Appendix D Calculation Details for the Economic Impacts Projection for the Project HR&A ADVISORS, INC. PKF Report Peer Review Hotel Total Direct Costs' Per HR &AFinancial Feasibility. IMPLAN Industry Sector $86,194,807 34 Existing Operations Setups: 710 Wilshire Blvd - Office and Retail Spaces Occupied Net Leasable Square Footage 32,469 Square Feet per Employee' 275 Total Employees 118 Rented Spaces 40 Parking Spaces Employees /100 Spaces Total Employees IMPLAN Industry Sector 130 1_5 2 368 275 square feet per employee, per Cityof Santa Monica. Per rent roll, business name and HR&A esfim ate of corresponding industry sector. Per HR&A Hotel Total Revenues (2016 $)' $42,071,487 Per HR &AFinancial Feasibility. IMPLAN Industry Sector 411 HR&A .ADVISORS, INC. PKF Report Peer Review IMPLAN Industry Tenant Categor)Z Rented Spaces Sq. Ft. Jobs Sector Printing 1 2,400 9 113 Retail - F &B 1 250 1 324 Retail - Clothing 2 3,140 11 327 Retail - Misc 1 337 1 330 Film Production and Related 2 1,162 4 346 Mortgage Broker 1 645 2 355 Stocks 1 320 1 356 Real Estate 1 547 2 360 Rental Car 1 1,256 5 362 Legal 3 1,832 7 367 Architects /Engineering 3 1,894 7 369 Specialized Design 4 2,682 t0 370 Computer Related 1 968 4 373 Advertising 2 2,100 8 377 Photographic 2 1,700 6 378 Employment Services 1 2,033 7 382 Other Educational Services 9 6,700 24 393 Medical Offices 1 400 1 394 Fitness and Related 1 1,000 4 407 Personal Care SeMces 2 1,103 4 419 Total 40 32,469 118 Parking Spaces Employees /100 Spaces Total Employees IMPLAN Industry Sector 130 1_5 2 368 275 square feet per employee, per Cityof Santa Monica. Per rent roll, business name and HR&A esfim ate of corresponding industry sector. Per HR&A Hotel Total Revenues (2016 $)' $42,071,487 Per HR &AFinancial Feasibility. IMPLAN Industry Sector 411 HR&A .ADVISORS, INC. PKF Report Peer Review Construction Employment IMPLAN Industry Sector Direct Indirect Induced Total %Total Cum% 34 GOmslmctlM of new nonresitleMial conmemld and health can 613.6 0.0 0.0 613.6 67.9% 67.9% 389 And iteclual, engineering, and related services 0.0 33.6 0.6 34.2 3.8% 71.6% 413 Face services and oinking places 0.0 4.2 25.1 29.3 3.2% 74.9% 319 WMNesale make businesses 00 121 7.2 19.9 22% 771% 397 Plod. hospitals 0.0 0.0 15.9 15.9 1.8% 78.8% 394 Offices of physicians, dentists, and other MaRh practitioners 0.0 TO 14.8 14.8 16% 80.5% 360 Real estate establishments 0.0 33 6.8 10.1 1.1% 81.6% 398 Nursing and resldertni care facilities 0.0 0.0 9.1 9.1 1.0% 82.6% 324 Retail Stores - Food and beverage 0.0 0.7 7.8 06 0.9% 83.6% 426 Private household operations 0.0 0.0 8.2 8.2 0.9% 84.5% _ 320 Retail Stores- Motor vehicle and parts 0.0 0.6 5.2 5.8 0.6% 85.1% 392 Pdeem junior colleges, colleges, universllies, and professional 0.0 0.0 5.7 5.8 0.6% 853% 3W Legal services 0.0 2.9 2.4 5.3 0.6% 88.3% 425 Give, social, professional, and similar organizations 0.0 1.9 3.0 4.9 0.5% 86.9% 414 Automotive repair and maintenance, except carwashss 0.0 2.3 24 4.7 0.5% B7.4% 327 Retail Stores - Clothifg and clothing accessories 0.0 0.3 19 4.3 0.5% 87.9% 356 Securities, commodity contexts, Investments, and related ad of) 1.3 17 4.0 DA% 88.3% 391 private elementary and secondary schools OA 0.0 4.0 4.0 0.4% 88]% ' 358 Accounting, lax preparegon, bookkeeping, and payroll service: 0.0 2.3 1.4 3.7 0.4% 89.1% 395 Hone health care services 0.0 0.0 3.5 3.5 04% 89.551) 325 Retail Stores - Health antl personal care 0.0 0.4 3.1 3.5 0.4% 89.9% 411 Hotels and metals, including cast. fid.fs 0.0 1.3 1.9 3.1 (13% 903% 4001Mivdual and family services 0.0 0.0 3.0 3.0 0.3% 916% 330 Retail Stores - Miscellaneous 0.0 0.3 2.6 3.0 0.3% 90.9% 419 Personal care services 0.0 0.0 2.9 2.9 0.3% 81.2% 354 Monetary authorities and depository credit inleimediali m actin 0.0 1.2 1.6 2.8 0.3% 91.5% 393 Other pdwte educational seMces 0.0 0.0 2.7 2.7 0.3% 91.9% 295 Woad kitchen cabinet and cmnlertop manufacturing 0.0 2.5 0.1 28 03% 92.1% 401 Community food, hacsirg, and other relief seMces, including I 0.0 0.0 2.6 2.6 0,3% 924% 374 Management, scientific, and technical consulting senices 0.0 14 1.1 2.4 0.3% 92.7% 3871nnesti9ation and security services 0.0 12 1.2 2.4 0.3% 93.0% 3% Child day care seMces 0.0 DS 24 24 03% 93.2% 3% Medical and diagnostic labs and outpatient and other ambufatt 0.0 0.0 2.3 2.3 0.3% 93.5% 351 Telecommunications 0.0 1.4 0.8 2.2 0.2% 93.7% 432 Other state and local geneumb ut enterprises Q0 0:2 1.9 2.1 02% 94.0% 386 Business support services 00 1.4 07 21 02% 94.2% 328 Retail Sloes - Storming goods, hobby, back and music 0,0 0.3 1.8 2.1 02% 94.4% MS Noodepository credit Intermediation and related acuities 0.0 0.7 1.3 2.0 0.2% 94 .7% 424 Gummakig, gift, and social advecacy, organizations 0.0 0.0 19 1.9 02% 94.9% 407 Fitness and mcreational spoofs centers 0.0 0.4 1.3 1.7 0.2% 95.0% 321 Retail Stores- Furniture and Mme fuMshilgs 0.0 0.1 1.5 1.7 02% 95.2% 381 Management ofcornpanies and enterprises 0.0 1.0 0.7 1.6 02% 95.4% 335 Trainload by Luck 00 1.1 0,5 1.6 0.2% 95.6% 322 Retail Stores- Electronics and appliances 00 0.2 1.4 1.6 02% 95.8% 388 Sam,es to buildings and cl,afings 00 (18 08 1.6 02% 95.9% 323 Retail Stores - Bulking material and garden supply 0.0 0.1 1.4 1.5 0.2% WA% 377 Aco misimg and related services 0.0 0.7 0.8 15 02% 98.394 20 Extraction of od antl natural as OA 0.9 05 1.4 02% %14% 329 Retail Sloes- General merchandise OD 112 1.2 1.3 01% Wit% 330 Scenic and sightseeing transportation and support activities to D D 07 0,6 1.3 0.1% 96.7% 365 Commercial and Industrial machinery and equipment rental an 00 1.2 01 1.3 0.1% %.9% 331 Retail Nmsfores- Prso and electronic sales 00 0.1 12 1.3 0.1% 97.0% 3B2 Employment services 0.0 0.7 OS 1.2 0.1% 97.1% 422 Other personal seMces US 0.1 1.1 1.2 0.1% 97.3% 427 US Postal SaNe 00 0.4 08 1.2 0.1% 97.4% W Office adminislralice serves 00 0.6 0.4 1.0 0]% 9Z5% 375 Ensroom urml antl other technical consulting services OD 0.7 0.3 1D 0.1% 97.6% 372 COmpatersystems design seMces OD 07 03 1.0 0.1% 97.7% 380 All other miscellaneous professional, scientific, and technical 00 0.7 02 1.0 0.1% 97.8% 379 Veterinary senices 00 0.0 09 0.9 0.1% 97.9% 326 Retail Stores- Gasoline stations 00 0.1 0.8 0.9 0.1% 98.0% 39 Maintenance and repair construction of nonresidential stmctun 0.0 0.5 0.4 0.9 0.1% 96.1% 415 Car wasMs 0.0 0.3 0.6 D.8 01% 98.2% 336 Transit and ground passenger transportation 0.0 02 0.6 0.8 01% 98.3% 371 Custom computer programming services 0.0 0.5 0.2 0.7 0.1% 98.4% 363 General and consumer goods rental except video tapes and of 0.0 0.2 0.5 0.6 0.1% 96.5% 376 Scientific research and denefopment seMces 0.0 0.4 0.3 0.6 0.1% 96.5% 421 Drycleanin9 and laundry services 0.0 0.0 OS 0.6 0.1% 96.6% 370 Specialized tlesign seMces 0.0 GA 01 0.5 0.1% 98.7% 412 Other accommodations 0.0 0.0 0.5 0.5 0.1% 98.7% 358 Insurance emeralds, brokerages, and refused! activities 00 0.1 04 0.5 0.1% 98.8% 418 Personal and hruseMitl goods repair and maintenance 0.0 0.3 02 0.5 0.1% 98.8% 402 Perfuming ads companies 0.0 0.1 04 05 0.1% 98.9% 346 Motion picture and video industries 0.0 GA 0.3 0.4 0.0% 93.9% 430 State and local gone r menl passenger transit 0.0 (11 03 0.4 0.0% 99.0% 423 Religions organizations 0.0 0.0 04 0.4 0.0% 99.0% 40 Maintenance and repair crostmctim of residential stmcWres 00 0.0 04 0.4 0.0% %.1% All Oltarr Sectors 00' 3.1' 5.3' e.4 0.9% 100.0% Total 613.6 96.4 194.2 904.2 100.0°7. Source: IMPIAN; HRBA Advisors, Inc. :F &A ADViSORS, INC. PKF Report Peer Review Construction Employee Compensation IMPLAN Industry sector Direct Indirect Induced Total %Total Cum% 34 Construction of new nonresidential commercial and health can 29,082,352] 0.0 0.0 29,062,362.7 611.1% 68.1% 369 Afcbitectural, engineering, and related services 0.0 2,080,663.1 38,1]3.] 2,118,836.8 5.0% 711% 397 Private hospitals 0.0 1.6 1,340,526.4 1,340,528.0 11% 76.2% 319 Wholesale trade businesses 0.0 ]]9,255.4 442,716.3 1,221,972.7 29% 19.1% 394 Ofices of physicians, dentists, and other health practitioners 0.0 1.0 909,524.2 909,525.2 2.1% 81.2% 413 FOOd services and ddnking places 0.0 101,324.6 603,153.9 ]04,4]8.5 16% 82.9% 367 Legal services D.o 202,270.5 164729.1 366,999.6 0.9% 83 .7% 398 Nursing and residential care facilities 0.0 0.0 325,070.2 325,070.2 0.8% 84.5% 320 Relall Stores- MOlor vehlcle and pads 0.0 31,8746 272,8613 304,735.9 03% 85.2% 324 Retail Stores - Food and beveage 0.0 24,822.0 265,402.1 20.224.2 0 .7% 85.9% 356 Securities, commodity contacts, imestmenls, and related act 0.0 85,975.9 185,000.0 2]0,9]5.9 0.6% 86.5% 392 Pawn, junior colleges, colleges, universities, and professional 0.0 2,159.1 25],110.6 259,269.7 0.6% 87.1% 425 CH, social, professional, and similar organizations 0.0 93,140.8 148,083.6 241,224.5 0.6% W]% 432 Other state and local government enleprses 0.0 2],19].2 208,420.6 235,617.8 0.6% 86.2% 354 Monetary authorities and depository credit Intermediation acth 0.0 89,921.4 115,904.3 205,8253 0.5% 61 351 Telecommunications 0.0 113,721.8 67,988.4 181]10.2 0.4% 89.1% 381 Management ofcompanies and enterprises 0.0 106,010.0 73,234.2 179,244.2 OAS 89.6% 391 Private elementary and secondary schools 0.0 0.0 169,083.4 169,083.4 0.4% 1 368 Accounting, tax preparation, bookkeeping, and payroll seNce: 0.0 101,833.2 60,3114 162,2106 0.4% 90.3% 355 NOndepositery credit intermediation and related aclidties 0.0 54,495.8 103,496.1 157,9920 0.4% 90.7% 360 Rea[ estate establishments 0.0 45,860.7 95,052.3 140,913.0 0.3% 91.0% 325 Retail Stores- Health and personal care 0.0 15,995.7 123,0424 139,038.1 0.3% 914% 374 Management, scientific, and technical consulting seMces 0.0 72,922.4 5],0]9.8 130,002.1 0.3% 91 .7% 411 Hotels and motels, including casino hotels 0.0 49,036.5 73,097.7 122,1361 0.3% BIA% 424 Gahtmaking, diving, and social advocacy organizations 0.0 12.3 120,438.0 120,450.3 D.3% 92.2% 414 Automotive repair and maintenance, except car washes 0.0 58,0]0.6 50,]]2.2 116,842.8 03% 92.5% 3% Medical and diagnostic labs and outpatient and other ambush 0.0 12.5 115,565.1 115,518.2 0.3% 928% 295 Wood kitchen cabinet and countertop manufacturing 0.0 109,441.5 5,414.2 114,855.8 0.3% 93.0% 395 Home health care services 0.0 0.0 109,183.5 10.183.5 03% 93.3% 327 Rare] Stores - Clothing and clothing accessories 0.0 $342.1 1 108,141.9 0.3% -93.6% 427 US Postal SeNce o.0 34,317.8 66,368.5 100,6863 0.2% 93.8% 20 Extmntimn ofdl and natural gas 0.0 60,579.4 33,300.1 93,879.6 0.2% 94.0% 338 Scenic and sightseeing tanspodatlon and support acbetmefo 0.0 50,212.8 38,038.3 88,249.1 02% 94.2% 322 Retail Stores- Electronics and appliances 0.0 10,007.6 11,8331 87,8413 02% 94.4% 426 Private household operations 0.0 0.0 85,483.2 85,483.2 0.2% 94.6% 393 Other private educational services o.0 696.6 82,107.5 82,804.1 0.2% 94.8% 311 Advertising and related services 0.0 37,709.7 44,5403 82,250.3 0.2% 95.0% 384 Office administrative seMces 0.0 45,389.8 29,384.9 74,]]4.8 0.2% 95.2% 386 Business supped seMces 0.0 48,539.1 24,634.5 ]3,1]4.3 0.2% 95.4% 365 Commercial and Lrdustral machinery and equipment rental an 0.0 67,7923 3,336.9 71,129.2 02% 95.5% 40D luffladull and family seMces 0.0 0.0 64,057.2 64,067.2 0.2% 95.7% 323 Retail Stores- Building material and garden supply 0.0 5,108.7 56,471.9 61,660.6 0.1% 95.8% 321 Relall Stores- Fumllum and home furnishings 0.0 4,6246 56,3517 60,982.3 0.1% 96.0% 330 Retail Blame - Miscellaneous 0.0 6,649.8 50,434.2 51,083.9 0.1% 96.1% 328 Retail Stores - Sporting goads, hobby, book and music 0.0 7,367.4 49,353.6 66,721.0 0.1% 96.2% 387 Investigation and security services 0.0 28,359.6 218280 56,182.6 0.1% 96.4% 401 Community fool, housing, and other relief seMces, including r 0.0 00 55,750.5 55,750.5 0l1% 96.5% 419 Personal care services 0.0 0.0 55,501.3 55,501.3 0.1% 96.6% 31 Electric power generation, transmission, and distribution 00 21,474.4 33,192.4 54,666.8 0.1% 96.7% 372 Computer systems design sconces 0.0 38,750.6 13,583.6 52,339.2 0.1% 96.9% 346 Motion picture and video industries 0.0 10,145.9 36,193.1 46,339.0 0.1% 97.0% 32 Natural gas distribution 0.0 13,253.2 30,235.8 43,489.0 0.1 % 97.1% 371 Custom computer pro0ramming services 0.0 32,480.5 10,970.4 43,450.9 0.1% 97.2% 335 Transport by truck 0.0 30,0822 12,744.8 42,827,0 0.1% 97.3% 39 Maintenance and repair construction of nonresidential xlructup 00 22,596.5 19,]6].4 42,363.9 0.1% 07.4% 329 Relall Storrs- General merchandise 0.0 4,830.2 36,426.5 41,256.7 0.1% 97.5% 399 Child day care services 0.0 0.0 41,075.1 41,075.1 0.1% 97.6% 376Sdenfific research and development seMces 0.0 22,5727 18,127.3 40,700.0 0.1% 97.7% 375 Endanmentai and other technical consulting services 0.0 28,505.2 11,231.4 39,736.1 0.1% 97.8% 388 Services to buildings and dwellings 0.0 19,503.4 20,200.0 39,103.4 0.1% 97.9% 356 Insurance agencies, brokeages, and misled activities 00 9,971.9 26,671.8 366437 0.1% 97.9% 380 All other miscellaneous professional, scientific, and technical 0.0 26,814.3 7,954.0 34,769.1 0.1% 90.0% 273 Wiring device manufacturing 0.0 30,854.5 3,8w7 34,125.1 0.1% 98.1% 407 Filness and recreational sports centers 0.0 8,292.0 26,0403 34332.7 0.1% ill 326 Retail Stores- Gasoline stations 0.0 2,606.3 30,064.2 32,670.5 0.1% 98.3% 382 Employment seMces 0.0 18,785.3 12,816.3 31,6616 0.1% 98.3% 430 Stale and local gommmenl passenger named 0.0 8,763.2 21,7715 30,540.7 0.1% 98.4% 357 Insurance canters 00 3,217.3 26,624.0 29,841.3 0.1% 98.5% 333 Transport by all 0.0 17,671.3 10,556.4 28,227.7 0.1% 98.5% 422 Other personal services 0.0 1,559.4 25,429.6 26,989.0 0.1% 98.6% 345 Software publishers 0.0 17,708.5 8,573.9 26,282.4 0.1% 981% 349 Cable and othersubscription programming, 0.0 11,472.9 14,4318 25,904.7 0.1% 983% 370 Specialized design seMces .O 19,395.2 5,055.4 24,450.6 0.1% 98.8% 332 Tramped by an 0.0 7,892.9 16,334.3 24,2212 0.1% 98.8% 079 Veterinary seMces 0.0 0,2 23,592.2 23,592.4 0.11% 98.9% 331 Retail Nonsloms - Street and e1.1har is sales 0.c 1,122.4 22,200.4 23,322.9 0.1% 98.9% 4120thereccommedations 0.0 215.8 21,423.4 21,639.2 0.1% 99.0% All Other Sectors 0_0' 13381.7 2922800.1' 426891.8 1.034. 100.0% Toler 29,082,362.7 5,226,337.0 8,309,112.6 42,697,812.3 100.0% Source. IMPIAN; HRSA Advisors, Inc EIR &A Aiovisors, Wc. PKF Report Peer Review Construction Output IMPLAN Industry Sector Direct Indirect Induced ToUI %TOUT cum% 34 COnstmclion of new nonresidential commercial and health can e6 ,194,803.1 0.0 0.0 86,194,8031 68.2% 68.2% 369 AroNtecturel, engineering, and related senses 0.0 4,990,300.0 91,556.5 5,081,856.5 4.0% 12.2% 319 Wholesale trade businesses OD 2,311,636.9 1,316,711.1 3,634,348.0 2.9% 75.1% 397 Private hospitals 0.0 32 2,618,516.9 2,618.580.1 2.1% 77.1% 361 Imputed rental activity farovmer- occupied deallings OD 0.0 2,159,029.4 2159,029.4 1.7% 78.8% 360 Rest some. establishments OD 69.811.3 1,431,934.6 2,122,811.8 1.7% 80.5% 394 Mae ofphysicians, dentists, and other health prerlilioners 0.0 2.3 2,032,613.3 2,032,615.6 1.6% 811% 413 Food 3enices and drinking pt aces 00 291,171.0 1,733,251 2,024,421.4 1.6% 83.7% 367 Legal services 00 621,144.6 505,860.0 1,121,004.6 0.9% 84.6% 351 Telecommunications 0.0 632,2211 311,914.1 1,010,197.8 0.8% 85.4% 355 Nondepository credit intermediation and related activities 0.0 328,820.6 624,402.1 953,302.1 08% 86.2% 354 Monet ary authorities and depository credit inte0nediation acth 0.0 410,026.2 528,503.5 933529.1 03% 86.9% 432 other slate and local government enterprises 0.0 81,180.8 626,111.4 108,492.2 0.6% 87.5% 324 Retail Stores - Food and beverage 00 54,296.8 580,5524 634,849.2 0.5% 86.0% 20 Extraction ofoil and natural gas 0.0 394,957.1 217,105.2 61$062.3 0.5% 88.5% 398 Nursing and residential care facilities 0.0 0.0 608,168.1 608,168.1 0.5% 89.9% 32 Natures gas distribution 0.0 181,443.0 413,942.0 595,385.0 0.5% 89.4% 392 grunts junior collages, collages, universities, and professional 0.0 4,332.5 515,921.9 520,254.4 0.4% 89.8% 320 Relail Stores- Motor vehicle and pads 0.0 51,128.3 442,818.4 494,6463 04% 90.2% 365 Commamial and initiation machinery and equipment rental an 0.0 423,559.8 20,84B.5 444,408.2 0.4% 90.6% 411 Hotels and motels, including casino hotels 0.0 110,318.0 253,819.4 424,197.4 0.3% 90.9% 414 Automotive repair and maintenance, except car washes 0.0 208,971.8 211,496.4 420,468.1 0.3% 91.2% 358 Accounting, tax prepamlion, bookkeeping, and payroll somce: 0.0 262,370.5 155,560] 411,931.3 0.3% 91.6% 425 Civic, social, prefessional, and similar rganizations 0.0 146,811.8 233,424.0 380,24L E1 03% 91.9% 358 Securities, commodity contracts, muestmenls, and related act 0.0 116,797.0 251,319.9 368,116.9 0.3% 92.2% 295 Wood kitchen cabinet and counted, manufacturing 0.0 334,4460 16,545.5 35.991.6 0.3% 92.4% 381 Management of companies and enterprises 0.0 207,296.2 143,205.0 350,601.2 0.3% 92]% 396 Medical and diagnostic labs and ompalianl arM other ammut, 0.0 37.7 341,988.8 348,026.5 03% 93.0% 374 Management, scientific, and technical consulting seMOes 0.0 177,265.6 138,754.1 316,0193 0,2% 93.2% 327 Retail St ores - Clothing antl clothing assessment 0.0 24,3040 290,136.6 315,040.6 0,2% 93.5% 325 Retail Stores - Health and personal care 0.0 32,544.4 250,338.9 282,81 0.2% 93]% 31 Electric power generation, Iransmlssion,.0 distribution 0.0 106,5359 164,069.4 211,2053 0.2% 93.9% 311 AAerlising and related services OR 111,189.8 138,418.4 255,608.3 0.2% 94.1% 391 pride elementary antl secondary schools 0.0 0.0 233,834.9 233,834.9 0.2% 94.3% 335 Transport by 0ook 0.11 155,61 65,957.9 221,612.1 0.2% 945% 395 Home health care salient, 0.0 0.0 216,265.2 216,265.2 0.2% 94.1% 424 Grentreakin9, giving, and social advocacy organizations 0.0 21.8 213,5326 213,554.4 0.2% 94.8% 419 Personal care admires 0.0 0.1 202,550.7 202,550.8 0.2% 95.0% 422011herpersonal services 0.0 11,568.7 188,653.0 200,221.6 0,2% 95.1% 380 All other miscellaneous professional, scientific, and technical 00 139,134.4 41,453.8 181,188.2 0.1% 953% 393 Other pdvele educational seMCes 0.0 1,498.2 176,595.7 178,093.9 0.1% 95.4% 346 Motion picture and video Industries 0.0 3.869.5 124,3685 15.250.0 0.1% 956% 338 Scenic and sightseeing lranspodation and support activities to 0.0 90,234.1 68,332.4 158,586.6 0.1% 95 .7% 321 Scott Stores- Furniture and tome annahln9s 0.0 11,369.2 138,550.1 149,919.3 0.1% 958% 3571nsumnce tamers 0.0 15,845.8 131,129.3 146,975.2 0.1% 95.9% 306 Business support services 0.0 95,208.5 48,319.5 143,528.0 0.1% 96.0% 330 Retail Stores - Miscellaneous 0.0 16,409] 124,457.1 140,666.8 0.1% %A% 384 Ctfica administrative services 0.11 84,812.9 54,907.0 139,119.9 0.1% 96.3% 322 R.1.11 Stores- Electron.. and appliances 0.0 15,655.4 121,759.9 131,415.4 0.1% 96.4% 349 Cable and other subscription programming Ro 60,060.3 15,549.9 135,610.2 0.1% 96.5% 273 Wiring device manrfactumg 0.0 120,153.0 15,029.2 135,182.3 0.1% 96.6% 326 Relail Stores- Gasoline stations 0.0 10,279.2 118t513.2 128,6525 01% 96.1% 328 Retail Sl ores - Spend, goods, hobby, book and music 0.0 16,2615 108,941.7 125,211.1 0.1% 96.8% 427 US Postal Service 0.0 42,353.6 81,909.3 124,262.9 0.1% 96.9% 323 Retail Stares - Building material and garden supply 0.0 10,310.6 112,211.6 122,528.2 0.1% 97.0% 400 Individual and family services 0.0 0.0 121,338.9 121,335.9 0.1% 911% 401 Community good, housing, and other reliefeammes, including m .0 0.1 120,916.4 120,916.5 CIA% 97.2% 39 Maintenance and repair construction of nonresidential slmclup 0.0 62,152.6 54,370.9 116,523.5 0.1% 97.3% 388 Services to buildings and dwellings 0.0 55,808.4 51,8015 113,809.9 0.1 % 97.3% 376 Scientific research and dmalopmenl services 0.0 61,664.4 49,520.2 111,1843 0.1% 07.4% 387 Investigation and security services 0.0 51,248.8 53,238.5 107,484.3 0.1% 97,5% 418 Personal and household goods repair and maintenance 0.0 63175.0 42,2013 105,37813 0.1% 97.6% 399 Child do, care somom 0.0 0.0 103,1!7.9 103,777.9 0.1% 97 .7% 345 Separate publishers 0.0 68,086.0 32,965.0 101051.0 0.1% 978% 331 Relail Nonstoes- Birect and eteclmme saUS 0.0 4,860.3 96,134.2 100,994.5 CIA% 91.894, 371 Cos tom computer programming services 0.0 69,105.1 23,340.6 92,446.3 0.1% 97.994 375 Environmental and other technical consulting satires 0,0 65,685.3 25,080.9 91566.2 o.t% 98.0% 333 Transport by rail 0.0 51,294.6 34,226.4 91,521.0 CIA% 98.1% 332 Transport by air OR 29,651.0 61,362 8 91,013.9 0.1% 98.1% 426 Private household operations 0.0 0.0 81,5160 81,576.0 CIA% 98.2% 431 State and local government electric uliglies 0.0 34,244.8 52,535.7 86,780.4 11% 98.3% 350 Insurance agencies, bmkereges, and related activities 0.0' 2$460.1 60,015.8 82,536.5 0.1% 98.3% 372 Computer systems design serious 0.0 58,181.9 20,605.4 79,387.4 0.1% 98.4% 329 Retail Stores- General memhandise 0.0 9,275.1 69,9470 19,222.0 0.1% 98.5% 370 Specialized design services 0.0 61,895.3 1.133.0 78,028.3 0.1% 98.5% 363 Generel and consumer goods rental except idea tapes and di 0.0 21,654.2 51,009.7 12,663.9 0.1% 980% 365 Lessors ofnonfinancial intangible assets 0.0 43,433.2 26,638.9 10,012.2 (11% 98.6% All offer Sectors ' 0_Or 478,785.0' 1242604.0' 172!_389.0 1.4% 100.0% Total 06,19,803.1 15,633,790.9 24,610,093.0 126,430,687.1 100.0% Source: IMPLAN; HRBAAdim., Inc HR &PA tAws02S, €tvC. PKF Report Peer Review Existing Employment IMPIAN Industry Sector Direct Indirect Induced Total %Total Cum% 393 Other pnods aducatianal seMces 24.0 0.1 0.4 24.5 14.3% 14.3% 327 Retail Stores - Clothing and clothing accessories 11.0 0.0 0.6 11.6 6.8% 21.1% 370 Specialized design seMces 10.0 0.2 SO 10.3 6.0% 27.1% 113 Pnntin 9.0 0.1 0.0 9.1 5.3% 32.5% 377 Admdieing and related seMces 8.0 0.9 0.1 9.0 5.3% 37 .7% 361 Legal seMces 7.0 0.5 (14 7.9 4.6% 42.4% 359 Architectural, engineering, and related seMces ZO 0.8 0.1 7.7 4.59A 46.9% 382 Employment seMces 7.0 0.4 0.1 7.5 4.4% 51.3% 378 Photographic services 6.0 0.2 OD 6.2 3.6% 54.9% 413 Food seMces and ranking places 0.0 2.1 19 6.0 3.5% 58.4 350 Real estate establishments 2.0 2.1 1.1 5.2 3.0% 61.4% 362 Automatize equipment rental and leasing 6.0 00 0.0 5.1 3.0% 64.3% 346 Motion picture and Mass Industries 4.0 S7 0.1 4.8 2.6% 67.2% 419 Personal care seMces 4.0 0.1 0.5 4.5 2.6% 69.8% 407 Fitness and recreational sports centers 4.0 0.1 0.2 4.3 2.5% 72.3% 373 Other computer related seMces, including facilities managemi 4.0 0.0 00 4.0 2.4%. 74.7% 394 Offices of physicians, dentists, and other health practitioners 1.0 SO 2.3 3.3 1.9% 786% 355 NOndepoodory credit lMennediation and related actiNlies 2.0 0.4 0.2 2.6 t5% 78.1% 397 Private hospitals 0.0 0.0 2.5 2.5 1.4% 79.6% 388 Services to buildings and dmallings 2.0 0.3 0.1 25 1.4% 81.0% 324 Retail Stores - Food end bore.,¢ 1.0 0.0 1.2 2.2 1.3% 82.3% 319 Wholesate trade businesses 0.0 1.0 1.1 2.1 1.2% 83.6% 3% Securities, commodity contracts, imestmants, and related act 1.0 0.4 0.4 1.8 1.1% 84.6% 330 Retail Blaee - Miscellaneous 1.0 0.0 0.4 1.4 parts 85.4% 398 pool g and residential cum facilities 0.0 0.0 1.4 1.4 0.8% 86.3% 426 Private household operations 0.0 0.0 1.3 1.3 0 .7% 87.0% 368 Accounting, lax impression, bookkeeping, and payroll senice: Co 0.9 0.2 1.1 0.7% 87.7% 374 Management, scientific, and technical consulting seMces 0.0 0.9 82 1.1 0.6% 8813% 392 Phi junior colleges, collages, onizers8ies, and professional 0.0 0.0 0.9 0.9 0.5% 88.8% 320 Retail Stores- Motor vehicle antl pads SO 0.0 AS 0.8 0.5% 893% 425 Chic, social, prefessionai, and similar organizations 0.0 0.3 0.5 0.8 0.5% 89.8% 411 Hotels and motels, including casino hotels 0.0 0.5 0.3 0.8 0.4% 9D.2% 386 Business support seMces OD 0.6 0.1 0.7 D.4% 90.6% 414 Aulomolize repair and maintenance, except car washes D.0 0.3 0.4 0.7 04% 91.1% 3871mestigatlon and society seMces 0.0 0.5 0.2 0.6 0.4% 91.4% 381 Management of companies and enlemases 00 0.5 0.1 0.6 0.4% 91.8% 354 Monetary authorities and depository credit intermediation actin 0.0 0.4 0.2 D.6 0.4% 92.2% 391 Prizale elementary and secondary schools 0.0 0.0 0.6 D.6 0.4% 92.5% 358 Insurance agencies, brokerages, ark related actiNlies 0.0 0.5 0.1 0.5 0.3% 92.8% 395 Home health care smites 0.0 0.0 0.5 0.5 0.3% 93.2% 325 Retail Slates- Health and personal care 0.0 0.0 0.5 0.5 0.3% 914% 351 Telecommunications 0.0 03 0.1 D.5 0.3% 93.7% 4001ndidduai and family seMces OD 0.0 0.5 05 0.3% 94.0% 427 US Postal Same. 0.0 03 0.1 0.5 0.3% 94.3% 432 Other slate and local government enterprises 0.0 02 0.3 0.4 BSA 94.5% 384 Ofice ad.inisl.liva seMces 0.0 0.4 0.1 04 0.3% 94.8% 401 Community food, housing, and other rellefsenvices, including 1 0.0 0.0 DA 0.4 0.2% 95.0% 3% Medical and diagnostic labs and outpatient and other oracular, 0.0 D.0 0.4 0.4 02% 95.2% 399 Child day ca. seMces 0.0 00 DA DA 0.2% 95.4% 422 Other personal seMces 0.0 0.2 02 0.3 0.2% 95.6% 380 All other miscellaneous professional, scientific, and technical 0.0 0.3 I D 0.3 0.2% 95.8% 375 Emimamental and other technical consulting senates 0.0 03 0.0 0.3 82% 95.0% 424 Gum making, giving, and social advocacy, organizations 0.0 0.0 0.3 0.3 (1 96.2% 328 Retail Stores- Sporting goods, hobby, book and music 0.0 00 0.3 0.3 0.2% 96.3% 372 Computer systems design seMces 0.0 0.2 SO 0.3 02% 96.5% 39 Maintenance and repair construction of nonresidential struclur QO 0.2 0.1 0.3 d,2% 96 .7% 338 Scenic and sightseeing transportation and supped actiNlies to 0.0 0.2 0.1 0.3 02% 96.8% 321 Retail Blares- FrarRure and home famishing, 0.0 0.0 0.2 0.2 0.1% 97.0% 322 Retail Stores- Electronics and appliances 0.0 00 0.2 0.2 0.1% 97.1% 371 Custom computer programming seMces 0.0 0.2 0.0 0.2 0.1% 97.2% 405 Independent artists, waters, and performers 0.0 0.2 0.0 0.2 0.1% 97.4% 323 Retail Stores - Building material and gauden supply 0.0 0.0 0.2 0.2 0.1% 97.5% 331 Retail NOnsto25- Direct and electronic sales SO 0.0 0.2 0.2 0.1% 97.6% 329 Retail Stores- General merohandice 0.0 0.0 0.2 02 0.1% W]% 336 Transit and ground passenger transportation IDS 0.1 0.1 0.2 0.1% 97.11% 339 Couriers and messengers 0.0 0.1 0.0 02 0.1% 9T9% 349 Cable and other subscription pmgmmming O.D 0.1 0.0 0.2 0.1% 98.0% 421 Drycleaning and laundry seMces OD 0.1 0.1 0.2 0.1% 98.1% 335 Transport by truck 0.0 0.1 0.1 0.2 0.1% 98.2% 363 General and consumer goods rental except mass rapes and at 0.0 0.1 0.1 0.2 0.19% 98.3% 379 Veterinary services 0.0 0.0 0.1 0.1 0.1% 984% 20 Ext.cgon of oil and actual 0.0 0.1 0.1 0.1 0.1% 985% 415 Car washes 0.0 0.0 0.1 0.1 0.1% 98.5% 326 Retail Stores- Gasoline stations 0.0 0.0 0.1 0.1 oral% 986% 376 Scientific research and development services 0.0 0.1 0.0 0.1 0.1% 98 .7% 342 Periodical publishers 0.0 (11 0.0 0.1 0.1% 98.8% 369 Other supper! seMces 80 0.1 0.0 0.1 0,1% 98.8% All Other Sectors ' DBI 1.01 1.01 2.0 t2% 100.0% Total 120.D ;i .9 30.2 171.1 100.0%. Source: IMPLAN; HRBA Adzisols, Inc FiP9A ADVISORS, 114C. PKF Report Peer Review Existing Employee Compensation IMPI-AN Industry Sector Direct Indirect Induced Total %Tom] Cum % 393 Other Inmate educational card... ]38,354.1 3,4010 12,]24.9 ]54,4]9.9 10.4% 10.4% 367 Legal eamens 480,624.1 37,5915 25,702.2 543,919.8 7.5% IT13% 346 Motion picture and video Industries 418,086.9 78,304.9 5,612.0 502,003.8 6.9% 243% 377 Advertising and related services 443,638.5 50,360] 6,931.5 500,930.8 6.9% 31.6% 369 Architecture, engineering, and related services 433,875.5 35,846.3 5,947.5 475.669.3 6.5% 382% 370 Specialized design seMCes 45B,167.5 10,7615 785.7 469,716.6 6.5% 44.6% 113 Printing 444,402.3 4,503.0 457.1 449,3625 6.2% 50.8% 327 Retail Stores- Clothing and clothing accessories 278,3422 716.2 15,454.7 294,513.1 4.0% 54.8% 397 Print. hospitals - 0.0 52.1 208,905.2 208,957.3 2.9% 57.7% 394 Ofices of physicians, dentists, and other health practitioners 61,624.1 32.1 141,830.1 203,486.3 2.8% 60.5% 355 NOndeposilory cre dit lnleemedialfon and minted adlNiies 155,304.3 28,269,2 16,075.1 199,646.6 23% 633% 382 Employment sardines 183,015.1 11,678.5 2,004.4 196,698.0 2.]% 66.0% 373 Other computer rdatedseMCes, including facilities managemr 173,944.9 1,44].] 158.4 175,5516 2A% 0.4% 362 Antomolite equipment rental and leasing 162,820.9 1,599.1 701.2 165,121.1 2.3% 70.6% 413 Food seMces and dunking peaces 0.0 49,306.4 93,822.8 143,129.2 2.0% 72.6% 378 Photographic seMces 133,408.1 3,688.6 441.9 137,518.6 L9% 74.5% 319 Wholesale trade businesses 0.0 58,970.0 69,585.1 128,555.1 1.8% 76.5% 356 Securities, commodity contacts, imeslments, and related act 66,042,2 26,148.5 29,021.8 123,212.5 i]% 78.0% 450 Fitness and recreational spuds centers 81,641.6 2,863.8 4,039.3 86,544.5 L2% 742% 419 Personal car sarces 75,601.3 1,108.6 8,640.2 85,350.1 1.2% 80.3% 324 Retail Stores - Food and beverage 33,894.6 1,231.8 41,099.8 76,2262 1.0% 81.4% 360 Real estate establishments 2],7]3.2 29,312.7 14,9623 72,048.3 1.0% 82A 381 Management of companies and enterprises 0.0 58,997.4 11,409.2 70,406.6 1.0% 83.4% 388 SeNces to buildings and dealings 49,895.6 8,537.3 3,127.1 61,5600 0.8% 84.2% 374 Management, scientific, and technical consulting services 0.0 47,459.2 8,883.7 56,342.9 0.8% 85.0% 398 Nursing and residential car facili ties 0.0 (10 50,449.0 50,449.0 0.7% 85.7% 368 Accounting, tax empaation, bookkeeping, and paymll seMCes 0.0 41,029.8 9,409.9 50,439.7 0.7% 86.4% 432 Olherstate and I ... I gooemment enterprises 00 16,633.7 32,467.7 49,101.4 0.7% 87.0% 354 Monetary authorities and deposhory credit intermediation actin 0.0 26'endis 18,139.0 44,977.8 0.6% 87.6% 320 Retail Stores- Motor tahicle and pads 0.0 1,533.3 42,255.2 43,788.5 0.6% 88.3% 392 Penali junior colleges, colleges, universities, and professional 0.0 1,039.4 39,563.8 40,603.2 0.6% 88.894 351 Telecommunications 0.0 29,180.6 10,631.5 39,812.1 0.5% 89.4% 425 Civic, social, professional, and similar organizations 0.0 16,363.8 22,907.1 39,271.0 0.5% 89.9% 358 Insurance agencies, broke.,, and related aefidti.s 00 34,054.4 4,137.7 38,192.2 0.5% 90.4% 427 US Postal Borden 0.0 27,646.3 10,299.6 37,945.8 0.5% 90.9% 39,11 Office adminfstratite send.es 0.0 2],184.] 4,573.4 31,758.1 0.4% 91.4% 411 Hotels and motels, including casino hotels 00 18,756.9 11 268.1 30,025.0 0.4% 91.8% 330 Retail Stores - Miscellaneous 19,054.4 339.7 7,810.3 27,204.4 0.4% 92.2% 391 Pdame elementary and secondary ..hods 0S 00 25,667.1 25,667.1 0.4% 92.5% SB6 Business support seMCes 0.0 21,3025 3,836.0 25,143.4 0.3% 92.9% 325 Retail Stores - Health and personal car 0C 769.5 19,054.4 19,823.9 0.3% 911% 424 Gantmaking, giving, and social advocacy organizations 0.0 2.0 18,5]].1 18,579.1 0.3% 93.4% 3% Medical and diagnostic tabs and outpatient and other ambulatr 0.0 3956 17,973.7 18,369.3 0.3% 93.6% 405 independent artists, venters, and pwformars 0B 17,1206 1,044.9 18,165.5 0.2% 93.9% 414 AUlomotite repair and maintenance, except carwashes 0.0 8,6505 9,1026 17,763.1 0.2% 91 330 Scenic and sfghlseeing transportation and support aetfdfies fe 0.0 11,614.4 5,8843 1],498] 0.2% 94.4% 395 Home health car seMces 0.0 0.0 16,955.8 16,955.8 0.2% 94.6% 349 Cable and ether subsedgkin programming 0.0 13,527.5 2,245.0 15,772.5 0.2% 94.8% 372 Computer systems design seMces 0.0 13,304.1 2,113.9 15,418.0 02% 95.0% 387 investigation and security sanders 0.0 10,901.7 4,312.1 15,213.7 02% 95.2% 348 Radio and television broadcasting 0.0 12,479.5 1,808.0 14,287.5 0.2% 95.4% 371 Custom computerprogramming sentries 0.0 11,645.3 1,]073 13,353.0 0.2% 956% 39 Maintenance and repair construction ofnonresidentiai structun 0.0 10,242.9 3,081.1 13,324.0 0.2% 95.8% 426 Prate household operations 0.0 0.0 13,107.5 13,107.5 0.2% 96.0% 322 Retail Stores- Electronics and appliances 0.0 481.4 12,053.3 1$534.8 0.2% 962% 375 Environmental and other technical consulting seMces 0.0 10,371.0 1,]4].3 12,118.3 0.2% 91 380 All other miscellaneous pfessi ... 1. scientific, and technical: 0.0 10,190.7 1,238.4 11,429.1 0.2% 91 31 Electric power, oneall., transmission, and disldbulion 0.0 5,663.2 5,202.2 10,865.4 0.1% 95.5% 342 Periodical publishers 0.0 8,598.9 1,736.6 10,335.4 (11% 96.8% 40 Individual and family seMces 0.0 0.0 9,882.1 9,882.1 0.1% 96.9% 20 Extraction of oil and natural gas 0.0 3,806.0 5,208.7 9,014.7 0.1% 97.0% 323 Retail Stores - Building material and garden supply Co 249.6 8,745.2 8,994 B 0.1% 97.2% 321 Retail Stores- Furniture and home furnishings 0.0 222.5 8,727.4 8,949.9 0.1% 97.3% 401 Community food, housing, and othe, reliefserve.s, including 00 0.1 8,599.0 8,599.1 (11% 50.4% 345 Software publishers 0.0 6,976.1 1,332A 8,3082 0.1% 97.5% 328 Retail Stores - Sporting goods, hobby, book and music 0.0 354.4 7,6430 ],99].4 (11% 50.6% 422 Other Personal seMCes 0.0 3,946.7 3,917.7 7,864.4 0.1% 97.7% 32 Natural gas distribution 0.0 3,125.1 4,730.8 7,855.9 0.1% 97.e% 376 Scientific research and deteeopment services 0.0 5,023.8 2,819.2 7,843.0 0.1% 98.0% 257 Software, audio, and video media for reproduction 0.0 7,422.8 152.8 7,575.6 0.1% 98.1% 430 State and local government pastung.r transit 0.0 3,748.11 3,388.5 7,136.5 0.1% 96.2% 357 Insurance canters 0.0 2,920.2 4,117.1 ],03].3 0.1% 98.3% 399 Child day care seMces 0.0 0.0 6,317.5 6,317.5 0A 98.3% 339 Couriers and messengers 0.0 5,132.9 966.0 6,099.0 0,1% 98.4% 329 Retail Stores - General merchandise 0.0 232.4 5,641.0 5,873.4 0.1% 98.5% 332 Transport by air 0.0 2,522.0 2,518.0 5,040.0 0.1% 98.6% Wit General and consumer goods rental except video tapes and di 0.0 2,588.4 2,242.5 4,830.8 0.1% 98.6% All Otherbectom 00 42112.] 56299.8 993 12.5 1.4% 100.09% Total 4,921,511.3 1,051,133.5 1,303,932.5 ],276,5]7.3 100.0% Source: IMPIAN; HRBA Advisors, Inc Aiwiso RS, INC. PKF Report Peer Review Existing Output IMPIAN In dud, Sector 0irect highest Induced Total %Total Cum % 346 Motion picture aid titled industries 1,436,880.9 269,118.1 1,287.4 1,725,286.4 7.594, 7.5% 367 Legal services 1,475,929.8 115,444.5 ]8,92].8 1,670,302.1 7.3% 148% 393 Other pmete educational seMces 1,588,041.5 7,314.8 27,368.5 1,622,724.7 7.1% 21.8% 377 Ameresirg and related services 1,378,689.5 155,505.4 21,541.0 1,556,738.0 6.8% 28.6% 370 Specialized design seMces 1,462,1337 .3,349.1 2,5072 1,498,91 65% 35.1% 113 Printing 1,457,4726 14768.3 1,499.1 1,473,745.1 6.4% 41.5% 355 Nondepository credit Intermediation and related actiN(ies 937,0858 1]0,5]2.9 96,995.0 1,204,653.6 5.2% 46.8% 369 A¢Ntectme, engineering, and related services 1,040,614.8 85,974.4 14,264.5 1,140,853.8 5J)% 517% 362 Actomothe equipment rental and leasing 1,076,835.9 10,5757 4,637.3 1,092,048.8 4.8% 56.5% 360 Real estate establishments 418,395M 441,597.2 225403.2 1,065,365.4 47% 61.2% 327 Retail Stores- Clothing ant clothing accessories 810,870.6 2,086.5 45,022.9 857,980.0 37% 65.0% 373 other computer related services, including facilities managemn 700,4056 5,829.4 637.6 706,872.6 3.1% 68.0% 378 PMbgraplic seMces 563,1159 15485.2 1,885.3 580,468.4 2.5% 706% 3940fices of physicians, dentists, and other health practitioners 137,]22.2 71.7 316,9]2.] 454,766.6 2.0% 72.5% 413 Font seMces and ending places 0.0 141,689.0 289,613.4 411,302.4 1.8% 74.3% 397 Private hospitals 0.0 101.8 408,074.2 408,176.0 1.8% 76.1% 319 Wholesale trade businesses 00 175,386.6 206,957.6 382,344.2 1.7% ]7.8% 382 Employment seMces 315,256.1 20,116.9 3,452.8 338,8258 1.5% 792% 361 lmputed rental calmly for omeroccupied dwellings 0.0 0.0 332,941.2 332,941.2 1.4% 80.7% 419 Personal care seMces 275,875.4 4,045.5 31,528.9 311,449.8 1.4% 82.0% 351 Telecommunications 0.0 162,226.2 59,1049 221,330.9 1.0% 83.0% 354 Monetary a rthod . antl depository credit Interceding. arm 0.0 12$380.4 82,7107 205,091.1 0.9% 83.9% 388 Senecas to buldirgs add dwellings 142,7747 24,429.1 8,948.2 176,152.0 0.8% 84.7% 497 Filness and recreational sports centers 156,390.6 5485.4 7,7325 169,6136 07% MAY. 355 Securities, ca-mmodity contacts, Investments, and related act 92,434.4 35,522.4 39,425.6 187,382.4 07% 86.1% 324 Retail Stores - Food and beverage 74,142.6 2,694.6 89,903.4 166,7406 07% 86.8% 432 Other stale and local gwemmenl enterprises 0.0 50,0159 97,626.9 147,645.7 0.6% 87.5% 381 Management of companies and enterprises 0.0 115,365.9 22,310.0 137,675.9 0.6% 88.1% 374 Management, scientific, and technical consulting seMces 0.0 115367.6 21,595.2 1'8,962.6 0.6% 887% 368 Accounting, lax prepaatlon, tookkeep ng, and payrdi service: 0.0 105,712.2 24,244.4 129,956.5 0.6% 89.3% 32 Natural gas distribution 0.0 42,784.7 64,766.6 107,551.3 0.5% 9917% 411 Hotels and motels, including casino hotels 0.0 65,145.6 39,135.9 104,281.5 05% 90.2% 398 Nursing end residential care facilities 00 0.0 94,3119.2 94,384.2 0.4% 90.6% 358 Insurance agencies, brokerages, and related actiNlies 0.0 76,704.5 9,319.9 86,024.3 0.4% 91.0% 349 Cable ant other subscription programming 00 70,816.0 11752.6 82,568.6 0.4% 91.3% 392 Private juolo colleges, colleges, universities, and professional 00 2,065.6 79,389.4 81,475.0 0.4% 917% 320 Retail Stores- Motor vehicle and pads 0.0 2,488.4 68,574.7 71,063.1 0.3% 92.0% 330 Retail Stores - Miscellaneous 47,020.8 636.3 19,2735 67,132.6 0.3% 92.3% 414 Antomolive repair and maintenance, except car washes 0.0 31,165.6 32,756.2. 63,921.8 0.3% 92.6% 405 Independent artists, waters, and performers 0.0 55963.4 3,598.6 62,5610 03% 92.8% 425 Civic, social, professional, and similar organizations 0.0 25,794.3 36,106.5 61,9027 0.3% 93.1% 380 All other miscellaneous professional, scientific, ant technical: 0.0 53,1058 6,453.4 59,559.0 03% 93.4% 38401fice administrative sinuses 0.0 507959 8,545.5 59,341.4 02% 93.6% 20 Extraction of oil ant natural gas 0.0 24,813.5 33,9592 587]27 03% 93.9% 422 other personal seMces 0.0 29,2792 29,064.0 58,3412 0.3% 94.1% 396 Medical and diagnostic labs and outpatient and other ambu id, 0.0 1,191.2 54,122.1 55,313.3 0.2% 94.4% 31 Electric poser generation, transmission, and distribution 0.0 28,095.6 258032 53,903.8 0.2% 94.6% 386 Business support senices 0.0 41,7816 7,524.1 49,317.7 0.2% 94.8% 427 US Postal Smcce 0.0 34,119.9 12,711.3 45831.2 0.2% 95.0% 325 Faced Stores - Health and personal care 0.0 1,565.5 38)6].6 40,3331 0.2% 952% 348 Radio ant teletision broadcasting 0.0 35165.9 5,094.8 402616 0.2% 95.4% 342 Periodical publishers 0.0 31,195.8 6,300.1 37,4959 0.2% 95.5% 39 Maintenance and repair consWCliod ofnwasidential slmdun (10 28,1716 8,474.6 356482 0.2% 957% 391 Pmete elementary and secondary schools 0.0 0.0 35,496.4 35,496.4 02% 95.8% 357 Insurance callers 0.0 14,382.5 20,271.8 34,660.3 0.2% 96.0% 395 Hone health care seMces 00 0.0 33,585.2 33,585.2 0.1% 96.1% 424 Granidaking, gidng, and social adiecacy organizations 0.0 3.5 32,9367 32,940.2 0.1% 96.3% 345 Software 'wish.. 0.0 26,821.8 5,121.5 31,943.4 0.1% 96.4% 338 Scenic and sightseeing tansportaliou and support activities go 00 20,871.5 10,574.2 31,4453 DA% 95.6% 3871msiligatie, and secaity seMces 0.0 20,856.2 8,249.5 29,1058 0.1% 957% 371 Custom computer programming seMces 00 24,776.5 3,633.2 28,409.8 0.1% 96.8% 375 Emifmmental and other technical consulting seMces 00 23,898.2 4,028.2 27,924.4 0.1% 96.9% 365 Canmocial and industrial machinery and equipment rental an 0.0 23,025.4 3,243.4 26,268.8 0.1% 97.0% 366 Lessors elnonfinandal intangible assets 0.0 20,260.3 4,148.9 24,40].3 0.1% 97.1% 372 Computer systems design services 0.0 20,181.4 3,2067 23,381 0.1% 97.3% 257 S0ftoda, surge, and video made bar reproduction 00 22,523.5 463.5 22,9878 0.1% 924% 321 Rated Stores- FumiWre and Mme fumishimgs 0.0 546.9 21,455.6 22,0025 0.1% 97.4% 335 Transport by truck 0.0 11,402.4 10,190.4 21,5928 0.1% 975% 376 Scientific research and development aspires o.0 13,724.0 ],]015 21,425.6 0.1% 97.6% 322 Retail Stores- Electronics ant appliances 0.0 7EKIA 18,855.8 19,606.9 0.1% 97.7% 332 Transport by air 0.0 ,474.3 9,459.2 18,933.6 0.1% 87.8% 328 Retail Sim. - Gasoline stations 0.0 494.5 18,362.0 18,856.5 0.1% 97.9% 4 Individual antl family services 0.0 0.0 18,715.8 18,715.8 0.1% 98.0% 401 Community food, housing. ant other relief services, including r 0.0 0.2 18,650.2 18,650.5 0.1% 988% 347 Sound necording locusts.. 0.0 10,744.0 ],5]9.6 18,323.6 0.1% 981% 339 Corners add messengers 0.0 15146.6 2,850.6 17,997.5 0.1% 982% 323 Retail Stores - Building material and garden supply 0.0 496.0 17,WT B 17,8738 0.1% 963% All Other Sectors ' 0_0' 142,9728' 251,751.7 394_`24.5 i]% 100.0% Total 15,588,093.4 3,569,661.7 3,826,902.8 22,984,657.9 100.0% Somme: IMPLAN', HR &A Advems, Inc HR&A, ADVISORS, IfNC. PKF Report Peel Review Project Employment IMPli industry sector Direct Indirect Ind ..ad Total %Total Cum% 411 Hotels and motels, including casino hotels 267.4 0.8 0.6 268.7 68.7% 68 .7% 413 Food services and tldnking places 0.0 11.3 8.2 19.5 5,0% 73.7% 377 Adyeriising and related services 00 5.8 0.3 6.0 1.5% 75.2% 360 Real estate establishments 0.0 3.2 2.3 5.5 1.4% 76.6% 397 Pmate hospitals 0.0 0.0 5.2 5.2 1.3% 760% 39401fices of physicians, dentists, and other health practitioners 0.0 0.0 4.9 4.9 1.2% 79.2% 319 Wholesale trade businesses 0.0 1.2 2.4 3.6 0.9% 80.1%1 427 US Postal Sonars 0.0 3.1 0.3 3.4 0.9% 81.0% 374 Management, scientific, and technical consulting services 0.0 2.8 03 3.2 0.8% 81.8% 381 Management of companies and sentences 0.0 2.9 0.2 3.1 0.8% 82.6% 388 Services ft, buildings and dwellings 0.0 2.8 0.3 3.1 0.8% 814% 398 Nursing and residential cam facilities 0.0 0.0 3.0 3.0 0.8% 84.1% 368 Accounting, tax preparelion, bookkeeping, and payroll seMces 0.0 2.3 0.4 28 0.7% 840/1 426 Pu le household operations 0.0 0.0 26 2.6 0.7% 85.5% 324 Retail Slores - Food antl beverage 0.0 0.1 2.5 2.6 0.7% 86.2% 367 Lagal services 0.0 1.4 0.8 2.2 0.6% 86.7% 414 Automoliae repair and maintenance, except car washes 0.0 1.1 0.8 1.9 0.5% al 392 Pmele junior colognes, colleges, universiiles, and professional 0.0 0.0 1.8 1.9 0.5% 87.7% 320 Retail Stores- Motor vehicle and pads 0.0 0.1 1.7 1.7 0.4% 88.1% 39 Maintenance and repair construction of bermaidenlial strucWn D.0 1.6 0.1 1.7 0.4% 88.6% 432 Other slate and local gm an ment enterprises 0.0 1.0 0.6 1.6 0.4% 89.0% 356 S..mrflet, commodity contempt, investments, and related act 0.0 0.6 0.9 1.5 0.4% 89.4% 425 Civic, social, professional, and similar organizations 0.0 0.4 1.0 1.4 0.3% 89 .7% 327 Retail Stares- Clothing and clothing accessories 0.0 So 1.3 1.3 0.3% 90.0% 386 Business support services 0.0 1.1 0.2 1.3 0.3% 90.4% 391 Peal. elementary and secondary schools 0.1) 0.0 1.2 1.2 0.3% 90.7% 387 Investigation and security screams 0.0 0.8 0.4 1.2 0.3% 91.0% 395 Home health am. ..mass 0.0 0.0 1.1 1.1 0.3% 91.3% 351 Telecommunications 0.0 0.8 0.3 1.1 0.3% 91.6% 355 Norceposilory credit intermediation and related aclieties 0.0 0.6 0.4 1.1 0.3% 91.8% 421 Dry- cleaning and laundry services 0.0 0.9 0.2 1.1 0.37. 92.11/1, 325 Retail Stores - Health and personal care 0.0 0.0 1.0 1.0 03% 92.4% 4001nammal and family services 0.0 0.0 1.0 1.0 0.2% 92.6% 349 Cable and other subscription progmmming 0.0 0.9 0.1 10 0.2% 92.9% 419 Personal care services 0.0 0.0 1.0 1.0 02% 931% 382 Employment sereces RD 0.7 0.2 0.9 0.2% 93.3% 354 Monetary authorities and deposiiory credit intermediation actin 0.0 0.4 0.5 0.9 0.2% 93.6% 33D Road Stores - Miscellaneous 0.0 0.0 0.9 0.9 1 93.6/1 375 Environmental and other technical consulting seMces OR Rif 0.1 0.9 (12% 94.0% 369 Architectural, engineering, and hall servces 0.0 0.7 0.2 0.9 0.2% 94.3% 393 Other private educational services 0.0 0.0 0.9 0.9 0.2% 94.5% 401 Community tome, housing, and other after services, including n 0.0 0.0 0.8 0.8 02% 94]% 384 Office intermediate, seMces 0.0 0,6 0.1 0.8 0.2% 94.9% 396 Medical and diagnostic labs and outpatient and other ambulah 0.0 0.0 0.8 0.8 0,2% 95.1% 399 Child do, care seMces 0.0 0.0 0.8 0.8 02% 953% 348 Radio and television broadcasfin9 0.0 0.6 O.D 0.6 0.2% 954% 20 Extraction a foil and ralmal gas 0.0 0.5 0.2 0.6 02% 95.6% 424 Gantmaking, giving, and social schemey organizations D.0 0.0 0.6 0.6 02% 95.6% 328 Retail Slores - Sporting goods, hobby, book and music 0.0 0.0 0.6 0.6 0.2% 95.9% 407 Fitness and recreational sports centers 0.0 e,2 0.4 0.6 0.2% 96.1% 342 Periodical publishers 0.0 0.5 0.0 0.6 0.1% 96.2% 346 Motion picture and east, industries 0.0 0.5 0.1 0.6 0,1% 96.4% 383 Teel arrangement and reservation seMces 0.0 0.5 0.1 0.6 0r1% 96.5% 31 Electric pa.,aneation, tansmissi., and distribution 0.0 0.5 0.1 0.5 0.1% 96.6% 422 Other personal seMces 0.0 0.2 0.4 0.5 0.1% 96.6% 321 Retail Stores- Furniture and home Furnishings 0.0 0.0 0,5 0.5 (11% 96.9% 322 Retail Slores - Electronics and appliances 0.0 OR 0.5 0.5 0.1 % 97.0% 323 Retail Stores - Building material and garden supply 0.0 0.0 0.4 0.5 0.1% 97.1% 360 All Other miscellaneous professional, scientific, and technical: 0.0 0.9 0.1 t15 0.1% 97.3% 338 Scenic and sightseeing transportation and support activities be OD 0.3 D2 0.4 0.1% 97.4% 372 Computer systems design seMces 0.0 0.3 0.1 0.4 0.1% 97.5% 331 Retail Normares - Direct and electronic sales 0.0 0.0 0.4 0.4 0.1% 97.6% 329 Retail Stores - General merchandise 0.0 0.0 0.4 0.4 0.1% 973% 32 Natural gas distribution 0.0 0.3 0.1 0.4 0.1% 97.8% 376 Scientific research and dmalopmenl services 0.0 0.3 0.1 04 0.1% 97.9% 336 Transit and ground passenger Imnsperation 0.0 0.2 0.2 0.4 0.1% 98.0% 390 Waste management and remediafion services 0.0 0.3 0.0 0.4 DA 98.1% 335 Transport by truck 0.0 0.2 0,2 0.3 0.1% 98.2% 405 Independent edide, sailers, and performers 0.0 0.3 0.0 03 0.1% 98.2% 383 General and consumer goods rental except video lopes and di 0.0 0.2 0.1 0.3 0.1% 98.3% 415 Cm.shes 0.0 0.1 0.2 0.3 0.1% 98.4% 379 Veterinary sereces 0.0 0.0 03 0.3 0.1% 98.51/1 113 Printing OR 0.3 0.0 0.3 0.1% 98.6% 358 Insurance agencies, brokerages, and related activities 0.0 0.2 0.1 0.3 0.1% 98.6% 418 Personal and household goods repair antl maintenance 0.0 0.2 0.1 0.3 0.1% 98] 371 Custom computer programming services 0.0 0.2 0.1 0.3 0.1% 98.8% 389 Other support seMces 00 0.2 0.0 0.3 0.1% 98.8% All Other Sectors - r 0.01 221 2.3' 4,5 1.2% 100.0% Total 267.4 60.5 63.4 391.2 100.0% Source: IMPLAN; HRBA Advisors, Inc H1110 A ADMORS, INC. PKF Report Peer Review Project Employee Compensation IMPLAN Industry Sector Direct toughest Inducad Total %Total Cum% 411 Hotels and motels, including casino hotels 10,441,7059 29,388.4 23,559.0 10,494,653.4 64.3% 64.3% 413 Food seMCes and drinking places 0.0 270,616.7 197,512.1 468,128.7 2.9% 67.2% 397 Prate hospitals 0.0 0.7 440,3824 440,363.1 2.7% 69.9% 381 Management ofcompanies antl enterprises 0.0 313,308.5 24,045] 337,354.1 2.1% 71.9% 377 Adcedising and related seMCes 0.0 320,889.0 14,596.8 335,465.8 2.1% 74.0l, 394 Ot ofphy d.r., cemists, and other health pndilimers 0.0 04 299,129.5 299,130.0 1.8% 75.6% 427 US Postal Service 0.0 261,471.1 21,643.8 283,114.9 1.7% 77.5% 319 Wholesale trade businesses 0.0 74,285.6 147,625.5 221,911.1 1.4% 76.9% 432 Other slate and local gotemment enterprises 0.0 106,105,5 68,424.2 174,529.7 1.1% 80.0% 374 Management, scientific, and technical consulting services 0.0 150,856] 18,7091 169,5658 10% 81.0% 367 Legal seMCes 0.0 97,375.0 54,230.6 151,665A 0.9% 81.9% 368 Accounting, tax preparation, bookkeeping, and payroll sisters! 0.0 103,602.2 19,837.8 123,440.1 0.8% 62.7% 398 Nursing add residential care facilities 00 0.0 106,018.4 106,018.4 0.6% 83.4% 356 Securities, commodity contracts, Inestments, and related act 00 37,8876 51,482.1 99,369.7 0.6% 84.0% 320 Retail Stores - Motonehicle and pads 0.0 2,903.5 86,654.3 91 557.8 0.6% 845% 351 Telecommunications 0.0 68,049.5 22,469.1 90,518.6 0.6% 85.1% 349 Cable and other subscription programming 0.0 84,502.1 4,726.3 89,228.4 0.5% 85.6% 324 Retail Stores - Food and be rage 00 2,261.1 86,229.6 88,490.7 0.5% 86.2% 31 Encino powergenemtwo, Imn.mission, and distribulion 0.0 74,919.9 11,013.1 85,933.0 0.5% 86.7% 392 Private junior colleges, colleges, unimmities, and professional 00 745.4 82,606.8 83,352.2 0.5% 87.2% 355 N.rdepo.k., credit mandrdiffiion add related adhitme 0.0 49,520.7 33,602.5 83,323.2 0.5% 87.7% 348 Radio and television broadcasting 0.0 78,840.4 3,806.1 82,646.5 0.5% 88.2% 39 Maintenance and repaircons traction of nonresidential seucWn 0.0 75,359.5 6,495.9 81,855.4 0.5% 883% 388 Services to buildings and dwellings 0.0 69,718.5 6,559.3 76,277.8 0.5% 89.2% 360 Real estate establishments 0.0 44,464.6 31,Tr7.6 76,242.2 0.5% 99.7% 425 Chic, social, pmkssional, and similar organizations 0.0 19,5324 48,021.0 67,553.4 0.4% 90.1% 354 Monetary authorities and depository credit intermediation actin 0.0 28,012.8 38,359.1 66371.9 0.4% 90.5% 346 Motion picture and brad industries 0.0 47,180.5 11,785.8 58,966.3 0.4% 90.8% 384Office admintsbathe services 0.0 46,720.5 %MIS 56,352.0 0.3% 91.2% 369 Architectural, engineering, and relate! servces 0.0 42094.2 12,535.3 54,629.5 0.3% 91.5% 391 Private elementary and secondary schools 0.0 0.0 53,029.4 53,029.4 0.3% 91.8% 342 Pensegral publishers 00 48,145.0 3SM.7 51,799.7 0.3% 92.2% 32 Natural gas distribution 0.0 40,820.7 10,002.6 50,623.2 0.3% 92.5% 414 Automotive repair and maintenance, except carwashes 0.0 28,499.7 19,099.5 47,599.3 0.3% 92.8% 386 Business support services 0.0 37,415.3 8,081.6 45,496.9 0.3% 93.0% 20 Extraction doll ar annual as 0.0 31,311.8 11,010.8 42,322.5 0.3% 93.3% 325 Retail Stores- Health and personal care 00 1,457.1 39,977.5 41,434.6 0.3% 93.6% 424 Grin tasking, 91en9, and social advocacy organizations 00 5.6 38,851 38,864.4 0.2% 93.8% 3% Medical and diagnostic labs and outpatient and other ambulab 0.0 5.4 37,832.9 37,8363 0.2% 94.0% 375 Environmental and other technical consulting services 0.0 32,094.8 3,676.5 35,773.3 02% 94.2% 395 Home health cam amid... 0.0 0.0 35,650.3 35,650.3 0.2% 94.5% 327 Retail Stores - Charing and clothing accessories 0.0 759.9 32,424.8 33,184] 0.2% 94.7% 336 Scenic and sightseeing Oanspodalion and supped actieltes to 0.0 17,824.3 12,338.0 30,180.3 0.2% 94.8% 431 Stale and local goremment elecWC utilities 0.0 25,042.5 3,653.3 28,695.8 0.2% 95.0% 3871nvosdgation and security seMCes 0.0 18,981.1 9,051.2 28,032.3 0.2% 95.2% 405 Independent adi.is, writers, and pedouners 0.0 25,353.8 2,197.6 27,551.4 0.2% 95.4% 426 Pride household operations 0.0 0.0 27,293.1 27,293.1 0.2% 95.5% 393 Other prate educational services 00 243.9 26,713.1 26,957.0 0.2% 95.7% 421 Drycmaning and laundry services 0.0 22,204.9 4,640.0 26,845.0 0.2% 95.9% 322 Retail Stores - Electronics and appliances 0.0 911.6 25,288.8 26,200.4 0.2% 96.0% 390 Waste management add remedtation seMCes 00 21,943.7 2,477.8 24,421.5 0.1% 96.2% 383 Tmrel arrangement and reservation services 0.0 21,847.9 2.4412 24,291.1 0.1% 96.3% 376 Scientific research and drealopment services 0.0 9,948.2 5,934.0 23,882.1 0.1% 96.5% 382 Employment seMCes 0.0 19,584.3 4,222.0 23,786.3 0.1% 96.6% 372 Computer systems design seMces 0.0 17,890.6 4,451.6 22,342.2 0.1% 963% 4001ndiddual and family seMCes OR 0.0 20,671.0 20,6710 0.1% 96.9% 357 Insurance carders 0.0 11,752.7 8,628.7 20,381.4 0.1% 97.0% 358 Insurance agencies, bmketeges, and related actieltes 0.0 11,634.0 8,692.9 20,326.9 0.1% 97.1% 323 Retail Store.- Building minimal and 9.Won supply 00 4728 18,347.8 18,820.5 0.1% 97.2% 321 Retail Stores- Furniture and home unrea ids 00 421.3 18,310.6 18,731.8 0.1% 97.4% 419 Personal cafe services 0.0 0.0 18,198.3 18,198.3 0.1% 97.5% 401 Community food, housing, and other reltefseneces, mending d 0.0 0.0 17,986.4 17,986.4 0.1% 97.6% 330 Retail Stores - Miscellaneous 0.0 6057 16,386.5 16,9922 0.1% 97.7% 328 Retail Stores- broiling goods, hobby, book and music 0.0 671.1 16,035.6 16,706] 0.1% 97.8% 371 Custom computer programming senices 0.0 12,705.8 3,596.8 16,302.6 0.1% 97.9% 380 All other miscellaneous professional, scientific, and technical 0.0 13,676.3 2,608.6 16,284.9 0.1% 98.0% 430 State and localgmombeent passenger transit do 7,184.7 7,134.9 14,3193 0.1% 98.1% 113 Panting 00 13,336.8 961.5 14,298.3 0.1% 98.2% 399 Child day care services 0.0 0.0 13,185.6 13,1856 0.1% 98.2% 407 Fitness and recrea0onai spuds centers 0.0 3,8446 8,485.2 12,329.8 0.1% 98.3% 329 Retell Stores- General merchandise 0.0 440.0 11,835.3 12,275.3 0.1% 98.4% 422 Other personal services 0.0 3,579.4 8,187.3 11,766.7 0.1% 98.5% 365 Commemtal and induslaal machinery and equtpmenl rental an 00 9,721.1 1,092.9 10,814.0 0.1% 98.5% 62 Bread and bakery product manufacturing 0.0 5,8721 4,751.1 10,623.8 0.1% 98A% 363 General and consumer goods rental except Web tapes and di 0.0 5,590.5 4,6903 10,281.2 0.1% 98.7% 389 Other supped seMCes 0.0 8,534.2 1,599.9 10,134.1 0.1% 98.7% 333 Transport by tell 0.0 6,666.6 3,435.8 10,102.4 0.1% 98.8% All Other Sectors z 0_Oe 90163.51 108,869.2' 199,032.7 12% 100.0% Total 10,441,705.9 3,137,758.5 2,743,366.0 16,322,830.5 100.0% Soume: IMPLAN; HR&A Advisers, Inc DVISCIPS, INC. PKF Report Feet Review Project Output I MPLAN I ntluetry Sector Direct Indirect Induced Total %Total Cum% 411 Hotels and motels, including casino hotels 36,265,6112 102,0704 81,823.9 36,949,505.6 66.8% 66.8% 413 Food seMces and drinking places 0.0 7/,656.4 567,579.6 1,345,236.0 2.5% 69.2% 360 Real estate establishments 0.0 669,8454 4781720.0 1,148,565.4 21% 71.3% 37 Advertising and related seMces 0.0 997,222.6 45,382.3 1,042,584.9 1.9% 73.2% 397 Primate hospitals DD 1.4 860,240.6 650,241.9 1.6% 74.8% W1 ImpNetl rental activity for ovmenoccuped clarllings 0.0 0.0 696,299.8 696,299.6 1.3% 76.1% 32 Nalual gas distribution 0.0 558,853.7 136,939.7 695,793.4 1.3% 7.4% 394 Offices of physicians, dentists, and other health practitioners 0.0 1.0 668,5123 668,518.2 1.2% 78.6% 319 Wholesale trade businesses IDS 220,937.7 439,062.5 660,000.2 1.2% 79.8% 381 Management ofcompames antl soundness OM 612,655.8 47,019.8 659,6756 1.2% 81.0% 432 Other slate and local govemmeOf conferees 0.0 319,054.5 205,748.5 524,803.0 1.0% 82.0% 351 Telecommunications 0.0 378,313.9 124,914.4 503,228.3 0.9% 82.9% 355 Nmdepository credit intermediation and related actitilies 0.0 298,8016 203,959.6 W2,761.4 D.9% 83.87. 349 Cable and other subscription programming 0.0 442,364.8 24,742.1 A7,106.8 0.9% 84.7% 367 Legal seMces 0.0 299,025.1 168,534.6 465,559.7 0.9% 85.5% 31 Electric poner generation, transmission, and distribution 0.0 371,682.2 54,636.4 426,318.7 0.8% 66.3% 374 Management, scientific, aid technical consulting services 0.0 366,714.6 45,479.6 412,194.2 0.8% 87.0% 427 US Postal SeMce 0.0 322697.0 26,711.9 349,408.9 0.6% 87.7% 368 Accounting, tax amparagon, bookkeeping, and payroll serdce: 0.0 286,928.4 51,111.6 318,040.0 0.6% 88.3% 354 Monetary authorities and depository credit intermediation activ 0.0 127,733.5 174,910.7 302,644.2 0.6% 88.8% 2D Extraction of oil and natural gas 0.0 204,141.9 71,786.5 275,928.4 0.5% 89.3% 398 Radio and television broadcasting 0.0 222163.2 10,725.0 232,888.3 0.4% 897% 39 Maintenance and repair construction of nonresidential struclun 0.0 207,279.4 17,867.2 225,148.6 0.4% 90.2% 388 Som es to buildups and dxellings 0.0 199,497.4 18,769.3 218,266.7 0.4% 90.6% 346 Motion picture and video industries 0.0 162,150.0 40,505.4 202655.4 0.4% 909% 398 Nursing and residential care facilities 0.0 0.0 198,348.0 188,346.0 0.4% 91.3% 324 Retail Stores - Food and beverage 0.0 4,945.9 188,6226 193,%8.5 0.4% 913% 342 Periodical publishers 0.0 174,665.1 13,2590 187,924.1 0.3% 92.w 414 Automotive repair and maintenance, except carwashes 0.0 102,558.4 68,731.2 171,2893 0.3% 92.3% 392 Pr ate junior colleges, colleges, universities, and professional BD 1,495.7 165,760.1 167,255.8 0.3% 92.5% 320 Retail Stores- Motor vehicle antl pans 0.0 4,712.0 143,874.4 148,586.4 0.3% 92.9% 431 State and local government electric utilities 0.0 119,491.0 17,432.0 136,923.0 0.3% 931% 307 Securities, commodity contacts, investments, and related act 0.0 51,469.8 83,522.5 134,992.3 D12% 934% 369 Amhitecturd, angioc mnmi and related services 0.0 10,959.5 30,074.9 131,024.4 0.2% 916% 396 Medical and diagnostic labs and outpatient and other ambulab 0.0 16.1 113,921.6 113,937.7 0.2% 93.8% 425 Cut, social, professional, and similar organizations 0.0 30,788.9 75,695.4 106,484.3 0.2% 94.0% 384 Office administrative services 0.0 87,299.2 17,996.9 105,296.2 D.2% 942% 357 Insurance carriers 0.0 57,884.5 42,498.3 100,382.8 0.2% 94AT. 327 Retail Stores- Clothing and clothing accessories 0.0 2,213.9 91,480.3 96,674.2 0.2% 946% 405 Independent deists, vaiters, and mummers 0.0 87,318.4 7,568.6 94,886.9 0.2% 94.8% 386 Business support seMces 0.0 73,388.4 15,851.7 69,240.0 0.2% 94.9% 42201her personal services 0.0 28,554.5 60,738.8 87,293.3 0.2% 95.1% 366 Lessors ofoonfinancial intangible assets OA 78,243.8 8,734.9 84,978.7 0.2% 95.2% 307 All other miscellaneous professional, scientific, and technical 0.0 71,289.9 13,593.7 dd'bSge 0.2% 954% 325 Retail Stores- Health and personal care 0.0 2,984.5 81,337.3 84,301.8 0.2% 955% 375 Environmental add other technical consulting services 0.0 73,956.9 8,476.5 82,433.4 0.2% 95 .7% 390 Waste management and remodelled seMces 0.0 71,443.9 8,0622 79,511.1 0.1% 95.6% 383 Taval arrangement and reservation services 0.0 67,512.3 7,549.7 75,062.0 0.4% 96.0% 391 private elementary and secondary defaces 0.0 0.0 73,337.3 73,337.3 0.1% 96.1% $95 Home health care seMces 0.0 0.0 70,614.3 70,614.3 0.1% 96.2% 424 Gran(making, giving, antl social ad..., mganizaticgx Be 10.0 68,8913 68,905.3 0.1% 96.4% 365 Commercial and industrial machinery and equipment rental an 0.0 60,736.4 6,828.3 67,564.7 0.1% 96.5% 419 Personal care seMces 0.0 OD 66,407.2 66,407.2 0.1% 96.6% 376 Scienfim research and demlopmant seMces 0.0 49,030.9 16,210.5 65,241.5 0.1% 967% 421 Dry - cleaning antl laundry services 0.0 51,512.5 10,764.3 62,276.6 0.1% War% 418 Personal and household goods repair and maintenance 0.0 46,413.3 13,722.9 60,136.2 0.1% 97.0% 393 Other private educational seMces 0.0 524.5 5],454.1 57,9781 0.1% 97.1% 347 Sound recording industries 0.0 40,675.5 15,99D.6 07,666.1 0.1% 07.2% 338 Scenic add sightseeing transportation and support activities fa 00 320309 22168.2 54,199.1 0.1% 07.3% 3871nvesligatim a rd security services OD 3,3132 17,316.0 53,629.3 0.1% 97.4% 113 Printing 0.0 43,740.0 3,153.3 46,8912 0.1% 97.5% 335 Transport by truck 0.0 25,372.3 21,342.3 46,714] 0.1% 97.5% 321 Retail S tores- Furniture and home furnishings 0.0 1,035.6 45,014.9 46,050.5 0.1% 97.6% 358 Insurance agencies, brokerages, and related actitilies 0.0 26,204.4 19,580.0 45.784.4 0.1% 977% 330 Retail Stores - Miscellaneous 0.0 1,494.8 40,4372 41,932D 0.1% 97.8% 322 Retail Stores- Electronics and appliances 0.0 1,426.1 39,507.8 40,986.9 0.1% 97.9% 382 Employment services 0.0 33,700.8 7,277 40,9735 0.1% 97.9% 62 Bread and bakery product manufacturing 0.13 22,4611 18,171.6 40,632.8 0.1% 98.0% 326 Retail Stores- Gasoline stations 0.0 936.3 38,524.5 39,460.9 0.1% 98.1% 407 IndNEVal and family serdces 0.0 0.0 39,148.7 39,148.7 0.1% 98.1% 401 Community food, housing, and other relief services, including r 0.0 0.0 39,010.5 39,010.5 0.1% 98.2% 323 Retail Stores- Building material and garden supply 0.0 939.2 36,4591 37,396.9 0.1% 98.3% 328 Retail Stores - Spooling goods, hobby, book and music 0.0 1,481.5 35,398.4 35,879.9 0.1% 88.4% 363 G meal and consumer goods rental except video tapes and d 0.0 19,615.1 16,457.9 36,073.0 0.1% 98.4% 371 Custom camputer programming seMces 0.0 27,032.8 7,652.6 34,665.4 0.1% 98.5% 389 Other support seMces 0.0 29,198.7 5,4719 34,672.6 0.1% 986% 332 Transport by a if 0.0 14,258.3 19,777.0 34,035.3 0.1% 986% All Other Sectors ' 0_0' 301_,466.2' 455_,988.5' 757,454.7 1.4% 100.0% Total 36,265,611.2 10,284,554.8 8,054,207.8 54,604,373.8 100.066 Seems: IMPLAN; HRBA Advisers, few HF &A AovisoPs, Wc. PKF Report Peer Review Appendix E Calculation Details for Projection of Fiscal Impacts for the Existing Improvements and the Project HR &A ADVISORS, INC. Projection of Recurring Revenues to the City of Santa Monica and Other Agencies from the Existing Operation of 710 Wilshire Boulevard 2016 Annual Averages Totals 2011 -2023 in 2011 $ in Nominal $ in 2011 $ in Nominal $ in 2011 $ Annual Recurring Revenues to City Property Tax $ 13,973 $ 22,704 $ 13,479 $ 295,150 $ 175,224 MVLF in Lieu of Property Tax $ 512 $ 833 $ 494 $ 10,824 $ 6,426 Sales Tax $ 28,196 $ 29,220 $ 17,131 $ 379,858 $ 222,708 Business License Tax $ 83,339 $ 137,205 $ 80,442 $1,783,669 $1,045,751 Parking Tax $ 16,346 $ 26,911 $ 15,778 $ 349,839 $ 205,108 Utility Users' Tax $ 6,320 $ 10,406 $ 6,101 $ 135,272 $ 79,309 Fines and Forfeitures $ 1,359 $ 2,238 $ 1,312 $ 29,091 $ 17,056 Total Annual Recurring Revenues $150,045 $ 229,516 $134,737 $2,983,703 $1,751,581 2016 Annual Averages Totals 2011 -2023 in 2011 $ in Nominal $ in 2011 $ in Nominal $ in 2011 $ Redevelopment Property Tax Increment and Pass - Throughs Annual Recurring Revenues to Redevelopment Agency $ 6,910 $ 11,229 $ 6,666 $ 145,972 $ 86,660 Annual Recurring Revenues to the Affordable Housing Fund $ 3,199 $ 5,198 $ 3,086 $ 67,579 $ 40,120 Annual Recurring Revenues to SMMUSD $ 2,954 $ 4,799 $ 2,849 $ 62,392 $ 37,049 Annual Recurring Revenues to SMC $ 249 $ 405 $ 240 $ 5,260 $ 3,123 Total Annual Recurring Revenues to Other Agencies $ 13,312 $ 21,631 $ 12,842 $ 281,203 $ 166,944 Source: City of Santa Monica; HR &AAdvisors, Inc. HR&A ADVISORS, INC. PKF Report Peer Review ' Assumes taxrates elfective 1/1/2011 remain in effect throughout projection period. 3 City MVLF in Lieu of Property Taxis calculated as a percent of total Cityassessed valuation as of 2009 HaRA ADVISORS, INC. PKF Report Peer Review Property Taxes Property Tax Increment Source Total Assessed Value $ 2,346,757 HR&A; Account of Using Prop Bills 1% General Levy $ 23,458 County Admin Fee -1.92% $ (451) Countyof Los Angeles $ 23,017 Affordable Housing Set -Aside (2011 $) 20.0% $ 4,603 California Redevelopment Law Tax Increment Remainder 80.0% $ 18,414 Tier Pass - Through Total 25.0% $ 4,603 California Redevelopment Law City Tier I Share 17.22% $ 793 County of Los Angeles SMMUSD Tier 1 Share 17.04% $ 784 County of Los Angeles SMC Tier Share 4.23% $ 195 County of Los Angeles Tier Pass - Through Total - 21.0% $ 3,867 California Redevelopment Law City Tier 2 Share 0.0% $ - County of Los Angeles SMMUSD Tier 2 Share 17.04% $ 659 County of Los Angeles SMC Tier Share 4.23% $ 164 County of Los Angeles Total Annual City Sham (Ter 1 Only) (2011 $) $ 793 Voted Indebtedness - Cityof Santa Monica Share $ 187 HR&A; Account of Ebsfing Prop Bills Direct Assessments- Cityof Santa Monica Share - $ 19,125 HR &q Account of EAsting Prop Bills Total City Property Tax Revenues $ 20,105 Total Annual SMMUSD Shares (Tier 1 +2) (2011 $) $ 1,443 Direct Assessments - SMMUSD $ 2,807 HR&A Account of Ebsting Prop Bills Total SMMUSD Property Tax Revenues $ 4,250 Total Annual SMC Shares (Tier 1 +2)(2011$) $ 358 Redevelopment Agency Net (2011$) $ 9,943 Motor Vehicle License Fee In Lieu of Property Tax Source Total Assessed Value $ 2,346,757 City of Santa Monica Fiscal Yr. 2008-2009 MVLF in Lieu of Property Tax $ 7,257,878 Cityof Santa Monica Fiscal Yr. 2008-2009 Citywide Assessed Value $23,100,511,228 County of Los Angeles MVLF In Lieu Share of Assessed Valuation 0.031% HR&A Annual Motor Vehicle License In Lieu Revenue (2011 $) $737 ' Assumes taxrates elfective 1/1/2011 remain in effect throughout projection period. 3 City MVLF in Lieu of Property Taxis calculated as a percent of total Cityassessed valuation as of 2009 HaRA ADVISORS, INC. PKF Report Peer Review Year 1 2011 2 2012 3 2013 4 2014 5 2015 6 2016 7 2017 8 2018 9 2019 10 2020 it 2021 12 2022 13 2023 Ann. Avg. Ann. Inflation = Discount rate = Year 1 2011 2 2012 3 2013 4 2014 5 2015 6 2016 7 2017 8 2018 9 2019 10 2020 11 2021 12 2022 13 2023 Ann. Avg. Ann. Inflation = Discount rate = City Property Taxes Nominal$ 2011$ $ 20,105 $ 20,105 $ 20,507 $ 18,694 $ 20,917 $ 17,382 $ 21,336 $ 16,162 S 21,762 S 15,027 $ 22,198 $ 13,973 $ 22,642 $ 12,992 $ 23,094 $ 12,080 $ 23,556 $ 11,232 $ 24,027 $ 10,444 $ 24,508 $ 9,711 $ 24,998 $ 9,029 S 25,498 $ 8,395 S 295,150 S 175,224 5,394 $ 175,224 check Affordable Housing Set -Aside $ 22,704 S 13,479 $ 5,198 $ 3,086 2.00% (Prop. 13) 9.7% (RERC, 1 at Qtr 2011) MVLP In Lieu Property Tax Nominal $ 2011 $ S 737 Nominal$ 2011$ $ 4,603 $ 4,603 $ 4,695 $ 4,280 $ 4,789 $ 3,980 $ 4,885 $ 3,700 $ 4,983 $ 3,441 $ 5,083 $ 3,199 $ 5,184 $ 2,975 $ 5,288 $ 2,766 $ 5,394 $ 2,572 $ 5,501 $ 2,391 $ 5,612 $ 2,223 $ 5,724 $ 2,067 $ 5,838 $ 1,922 $ 67,579 $ 40,120 $ 40,120 check $ 22,704 S 13,479 $ 5,198 $ 3,086 2.00% (Prop. 13) 9.7% (RERC, 1 at Qtr 2011) MVLP In Lieu Property Tax Nominal $ 2011 $ S 737 S 737 $ 752 $ 686 $ 767 $ 637 $ 782 $ 593 $ 798 S 551 $ 814 S 512 S 830 $ 476 $ 847 $ 443 $ 864 $ 412 $ 881 $ 383 $ 899 $ 356 $ 917 $ 331 $ 935 $ 308 S 10,824 $ 6,426 $ 6,426 check $ 833 $ 494 2.00% (Prop. 13) 9.7% (RERC, 1st Qtr 2011) SMMUSD Nominal$ 2011$ $ 4,250 $ 4,250 $ 4,335 $ 3,952 $ 4,422 $ 3,674 $ 4,510 $ 3,416 $ 4,600 $ 3,177 $ 4,692 $ 2,954 $ 4,786 $ 2,746 $ 4,882 $ 2,554 $ 4,980 $ 2,374 $ 5,079 $ 2,208 $ 5,181 $ 2,053 $ 5,284 3 1,909 $ 5,390 $ 1,775 $ 62,392 S 37,041 8 37,041 check $ 4,799 S 2,849 SMC Nominal$ 2011$ $ 358 S 358 $ 365 $ 333 $ 373 $ 310 $ 380 $ 288 $ 388 $ 268 $ 396 $ 249 $ 403 $ 232 $ 412 $ 215 $ 420 $ 200 $ 428 $ 186 $ 437 $ 173 $ 445 $ 161 $ 454 $ 150 $ 5,260 $ 3,123 $ 3,123 check $ 405 $ 240 Redevelopment Agency Nominal$ 2011$ $ 9,943 $ 9,943 $ 10,142 $ 9,245. $ 10,345 $ 8,596 $ 10,552 $ 7,993 $ 10,763 $ 7,432 $ 10,978 $ 6,910 $ 11,198 $ 6,425 $ 11,422 $ 5,974 $ 11,650 $ 5,555 3 11,883 $ 5,165 $ - 12,121. $ 4,803 $ 12,363 $ 4,465 $ 12,611 $ 4,152 $ 145,972 $ 86,660 $ 86,660 check $ 11,229 $ 6,666 HF &A ADVISORS, M. PKF Report Peer Review Retail & Restaurant Retail Sq. FL' Retail Gross Sales Per Sq..Ft2 Annual Gross Sales (2011 $) Taxable Retail % Annual Taxable Retail Sales Restaurant 5q. Ft' Restaurant Gross Sales Per Sq. Ft 2 Annual Gross Sales (2011 $) Taxable Retail % Annual Taxable Retail Sales City's Sales Tax Rate Annual Sales Tax Revenue (2011 $) $ 222,708 check Ann. Aag. $ 29,220 $ 17,131 Ann. Inflation = Discount rate = ' Per HR &Ay Account of Emsting Rent Schedule. 2 Per U.S. Census Bureau, 2002 Economic Census, data by industry for the City of Santa Nlonica; H R&A, Advisors Inc. 3 Assumes tax rates effective 1/1/2011 remain in effect without change over the projection period. 3.00% (HR&A) 9.7% (RERC, 1st Qtr2011) }GC;£hA .ADvISQRS, INC. PKF Report Peer Review Sale Tax Year Nominal $ 2011 $ 3,477 1 2011 $ 24,322 $ 24,322 $425.00 2 2012 $ 25,052 $ 22,837 $1,477,725 3 2013 $ 25,803 $ 21,442 100% 4 2014 $ 26,577 $ 20,132 $1,477,725 5 2015 $ 27,375 $ 18,903 6 2016 $ 28,196 $ 17,748 250 7 2017 $ 29,042 $ 16,664 $575.00 8 2018 $ 29,913 $ 15,646 $143,750 9 2019 $ 30,811 $ 14,691 100% 10 2020 $ 31,735 $ 13,794 $143,750 11 2021 $ 32,687 $ 12,951 12 2022 $ 33,668 $ 12,160 1.5% 13 2023 $ 34,678 $ 11,417 $24,322 $ 379,858 $ 222,708 $ 222,708 check Ann. Aag. $ 29,220 $ 17,131 Ann. Inflation = Discount rate = ' Per HR &Ay Account of Emsting Rent Schedule. 2 Per U.S. Census Bureau, 2002 Economic Census, data by industry for the City of Santa Nlonica; H R&A, Advisors Inc. 3 Assumes tax rates effective 1/1/2011 remain in effect without change over the projection period. 3.00% (HR&A) 9.7% (RERC, 1st Qtr2011) }GC;£hA .ADvISQRS, INC. PKF Report Peer Review Tenant Gross Receipts Total Business Count Source 37 HR &A Account of Existing Rent Schedule Totai Sq.Ft. 40,638 HR&A Account of Existing Rent Schedule Efficiency Factor 87% HR&A Account of Existing Rent Schedule Leasable Sq. Ft. 35,234 HR &A Account of Existing Rent Schedule Vacancy Factor 8% HR&A; Account of Existing Rent Schedule Occupied Net Leasable Sq. Ft. 32,469 HR &A Account of Existing Rent Schedule Gross Sales Per Sq. PC $763 Annual Gross Sales (2011 $) $24,788,122 Landlord Gross Receipts Annual Gross Sales (2011 $) $1,153,525 HR&A Account of Existing Rent Schedule Gross Sales - $60,000 /Building or $60,000 /Building or Gross Sales Tenant Tenant Tax Per $1,000' Sales x Tax Rate Tenant $24,788,122 $2,220,000 $22,568,122 $5.00 $112,841 Landlord $1,153,525 $60,000 $1,093,525 $1.25 $1_,367 $114,208 1 Per U. S. Census Bureau, 2007 Economic Census, data byindusWor the Cityof Santa Whips; HR&A Addsors Inc. 0 Assumes tax rates efectiw 1/12011 remain in efectwithout change over the projecton period. Business License Year Nominal $ 2011 $ 1 2011 $ 114,208 $ 114,208 2 2012 $ 117,634 $ 107,232 3 2013 $ 121,163 $ 100.683 4 2014 $ 124,798 $ 94,534 5 2015 $ 128,542 $ 88,760 6 2016 $ 132,398 $ 83,339 7 2017 $ 136,370 $ 78,249 8 2018 $ 140,461 $ 73,470 9 2019 $ 144,675 $ 68,983 10 .2020 $ 149,015 $ 64,769 11 2021 $ 153,485 $ 60.814 12 2022 $ 158,090 $ 57,099 13 2023 $ 162,833 $ 53,612 $ 1,783,669 $ 1,045,751 $ 1,045,751 check $ 137,205 $ 80,442 Ann. Inflation = 3.00% (HR&A, Discount rate= 97%(RERC, 1 at Orr 2011) Gross Receipts Calculation Employer sales, shipments, receipts, Number of revenue, or business Number of paid employer done Annual payroll employees establishments 1$1,0001 ($1,000) for pay period Gross Receipts per tstabllsnments $1,969,41b Gross Receipts per Employee $209,946 Gross Receipts per Square Foot1 $763 1 275 square feet per employee, per City of Santa Monica Source: U.S. Census Bureau, 2007 Economic Census. Eta C. PKF Report Peer Review Annual Utility Tax Revenue (2011 $) $86,614 $8,661 Year 1 2011 $ 2 2012 $ 3 2013 $ 4 2014 $ 5 2015 $ 6 2016 $ 7 2017 $ 8 2018 $ 9 2019 $ 10 2020 $ 11 2021 $ 12 2022 $ 13 2023 $ Utility Tax Nominal $ 2011 $ 8,661 $ 8,661 8,921 $ 8,132 9,189 $ 7,636 9,465 $ 7,169 9,748 $ 6,731 10,041 $ 6,320 10,342 $ 5,934 10,652 $ 5,572 10,972 $ 5,232 11,301 $ 4,912 11,640 $ 4,612 11,989 $ 4,330 12,349 $ 4,066 135,272 $ 79,309 $ 79,309 check $ 10,406 $ 6,101 Ann. Inflation= 3.00 %(HR &A) Discountrate= 9.7 %(RERC, 1 st Qtr 2011) ' Per U. S. Department of Energy 2003 Commercial Building Energy Consum ption Surrey, inflated by 3% per year to 2011 for electricity and gas; Per City Budget 2011 -2012, actual revenues for FY 2010 -2011 water and sewer divided by total building square footage in City as per LUCE. , 3 Assumes taxrates effective 1/1/2011 remain in effectwithout change over the projection period. PKF Report Peer Review Occupied Net Cost /Sq Ft' Total Cost Total Tax Revenue Utility Type Leasable Sq. Ft (2011 $) (2011 $) City Tax? (2011 $) Electricity 32,469 $1.77 $57,444 10.00% $5,744 Natural Gas 32,469 $0.23 $7,416 10.00% $742 Telephone 32,469 $0.20 $6,494 10.00% $649 Cable Television 32,469 $0.05 $1,623 10.00% $162 Water 32,469 $0.21 $6,818 10.00% $682 Sewer 32,469 $0.21 $6,818 10.00% $682 Annual Utility Tax Revenue (2011 $) $86,614 $8,661 Year 1 2011 $ 2 2012 $ 3 2013 $ 4 2014 $ 5 2015 $ 6 2016 $ 7 2017 $ 8 2018 $ 9 2019 $ 10 2020 $ 11 2021 $ 12 2022 $ 13 2023 $ Utility Tax Nominal $ 2011 $ 8,661 $ 8,661 8,921 $ 8,132 9,189 $ 7,636 9,465 $ 7,169 9,748 $ 6,731 10,041 $ 6,320 10,342 $ 5,934 10,652 $ 5,572 10,972 $ 5,232 11,301 $ 4,912 11,640 $ 4,612 11,989 $ 4,330 12,349 $ 4,066 135,272 $ 79,309 $ 79,309 check $ 10,406 $ 6,101 Ann. Inflation= 3.00 %(HR &A) Discountrate= 9.7 %(RERC, 1 st Qtr 2011) ' Per U. S. Department of Energy 2003 Commercial Building Energy Consum ption Surrey, inflated by 3% per year to 2011 for electricity and gas; Per City Budget 2011 -2012, actual revenues for FY 2010 -2011 water and sewer divided by total building square footage in City as per LUCE. , 3 Assumes taxrates effective 1/1/2011 remain in effectwithout change over the projection period. PKF Report Peer Review Office Total Sq. Ft. Parking Spaces Average Annual Parking Charge per Space Total Parking Revenue Tax Rate' Annual Parking Tax Revenue (2011 $) Source 40,638 130 $1,723 Safety Park; HR&A $224,000 10_0% City of Santa lvbnica $22,400 Assumes tax rates effective 1/1/2011 remain in effectwithout change over the projection period. 1-BR&A'a AtaDvlsoR8, M. Year 1 2011 $ 2 2012 $ 3 2013 $ 4 2014 $ 5 2015 $ 6 2016 $ 7 2017 $ 8 2018 $ 9 2019 $ 10 2020 $ 11 2021 $ 12 2022 $ 13 2023 $ $ Parking Tax Nominal $ 2011$ 22,400 $ 22,400 23,072 $ 21,032 23,764 $ 19,747 24,477 $ 18,541 25,211 $ 17,409 25,968 $ 16,346 26,747 $ 15,347 27,549 $ 14,410 28,376 $ 13,530 29,227 $ 12,704 30,104 $ 11,928 31,007 $ 11,199 31,937 $ 10,515 349,839 $205,108 $205,108 check $ 26,911 $ 15,778 Ann. Inflation= 3.00 %(HR&A) Discount rate= 9.7% (RERC, 1 st Qtr 2011) Fines and Forfeitures Five -Year Average Citywide Revenues $15,652,277 Total City Population + Em ployment 193,904 Employee's Weighted % Hours in City' 19.2% Fines and Forfeitures Per Employee $15.52 Total Employees' 120 Annual Fines and Forfeitures Revenues (2011 $) $1,863 Source Fines and Forfeitures Year Nominal $ 2011 $ City of Santa Monica 1 2011 $ 1,863 $ 1,863 2 2012 $ 1,919 $ 1,749 DOF /SCAG 3 2013 $ 1,976 $ 1,642 HR&A 4 2014 $ 2,035 $ 1,542 HR&A 5 2015 $ 2,096 $ 1,448 6 2016 $ 2,159 $ 1,359 7 2017 $ 2,224 $ 1,276 8 2018 $ 2,291 $ 1,198 9 2019 $ 2,360 $ 1,125 - 10 2020 $ 2,430 $ 1,056 11 2021 $ 2,503 $ 992 12 2022 $ 2,578 $ 931 13 2023 $ 2,656 $ 874 $ 29,091 $ 17,056 $ 17,056 check An. Avg. $ 2,238 $ 1,312 Ann. inflation = Discount rate = ' Citypopulaton & employees, per CA Departm ent of Finance and SCAG respectively, weighted by hours per week in City. 3 Calculated from 5 -year average taxand total City population & employees, weighted byhours perweek in City. 3 Net leasable square footage divided by 275 square feet per employee, per City of Santa Monica: 3.00% (HR&A) 9.7% (RERC, 1st Qtr2011) ADVV5 Rs, Nc. PKF Report Peer Review Assumptions Number %of Day Resident - Equivalents Daytime Office Employment Population 118 33% 39 Daytime Parking Employment Population 2 33% 1 Grand Total 120 40 Information Systems 2010 -2011 Rev. Total Resident- Cost Per Resident - General Fund Categories Budget' Equivalent Population' Equivalent City Council $771,764 112,141 $6.88 City Manager $8,250,384 112,141 $73.57 Records & Election Services $2,585,616 112,141 $23.06 City Attorney $8,460,636 _ 112,141 $75.45 Finance $17,550,241 112,141 $156.50 Human Resources $3,326,910 112,141 $29.67 Information Systems $5,893,172 112,141 $52.55 Community Maintenance $0 112,141 $0.00 Planning &Comm. Development $15,197,179 112,141 $135.52 Police $67,017,821 112,141 $597.62 Fire $28,800,289 112,141 $256.82 Community& Cultural Services $36,050,765 112,141 $321.48 Library $10,950,760 112,141 $97.65 Housing & Econ Development $8,572,592 112,141 $76.44 Public Works $25,553,196 112,141 $227.87 Total Operating Budget $238,981,325 $2,131.08 Year 1 2011 $ 2 2012 $ 3 2013 $ 4 2014 $ 5 2015 $ 6 2016 $ 7 2017 $ 8 2018 $ 9 2019 $ 10 2020 $ 11 2021 $ 12 2022 $ 13 2023 $ ' FY2010 -11 Revised Budgetflgures per2011 -12 Budget. 3 Derived using the sum ofall residents, day -time employees and students factoring them fortheirtime spentwithin the Citylimits. City Services Costs Nominal $ 2011 $ 84,404 $ 84,404 86,936 $ 79,249 89,544 $ 74,409 92,231 $ 69,864 94,998 $ 65,597 97,848 $ 61,591 100,783 $ 57,829 103,806 $ 54,297 106,921 $ 50,981. 110,128 $ 47,867 113,432 $ 44,944 116,835 $ 42,199 120,340 $ 39,622 1,318,206 $ 772,854 $ 772,854 check 101,400 $ 59,450 Ann. Inflation= 3.00% (HR&A) Discount rate= 9.7 %(RERC, 1 at Qtr 2011) ^'R&A ADVESORS, M. PKF Report Projection of Recurring Revenues to the City of Santa Monica and Other Agencies from the Operation of the Hotel Project at 710 Wilshire Boulevard Source: City of Santa Monica; HR &AAdvisors, Inc. NC. PKF Report Peer Review 2016 Annual Averages Totals 2011 -2023 in 2011 $ in Nominal $ in 2011 $ in Nominal $ in 2011 $ Annual Recurring Revenues to City Property Tax $ 563,844 $ 867,900 $ 448,170 $ 11,282,694 $ 5,826,205 MVLF in Lieu of Property Tax $ 20,678 $ 31,829 $ 16,436 $ 413,773 $ 213,666 Business License Tax $ 31,305 $ 42,990 $ 20,003 $ 558,873 $ 260,035 Sales Tax $ 246,753 $ 203,631 $ 95,148 $ 2,647,205 $ 1,236,923 Visitor Spending Sales Tax - $ 1,124,711 $ 934,878 $ 438,473 $ 12,153,414 . $ 5,700,153 Transient Occupancy Tax - $ 3,961,440 $ 3,242,621 $ .1,508,658 $ 42,154,076 $ 19,612,550 Parking Tax $ 33,198 $ 45,906 $ 21,437 $ 596,773 $ 278,681 Utility Users' Tax $ 75,232 $ 104,555 $ 48,960 $ 1,359,215 $ 636,476 Fines and Forfeitures $ 2,868 $ 3,999 $ 1,876 $ 51,985 $ 24,382 Total Annual Recurring Revenues $ 6,060,031 $ 5,478,308 $ 2,599,159 $ 71,218,008 $ 33,789,071 2016 Annual Averages Totals 2011 -2023 in 2011 $ in Nominal $ in 2011 $ in Nominal $ in 2011 $ Redevelopment Property Tax Increment and Pass- Throughs Annual Recurring Revenues to Redevelopment Agency $ 278,859 $ 429,235 $ 221,650 $ 5,580,053 $ 2,881,452 Annual Recurring Revenues to the Affordable Housing Fund $ 129,101 $ 198,720 $ 102,616 $ 2,583,358 $ 1,334,005 Annual Recurring Revenues to SMMUSD $ 119,192 $ 183,467 $ 94,739 $ 2,385,065 $ 1,231,610 Annual Recurring Revenues to SMC $ 10,048 $ 15,467 $ 7,987 $ 201,068 $ 103,828 Total Annual Recurring Revenues to Other Agencies $ 537,201 $ 826,888 $ 426,992 $ 10,749,544 $ 5,550,895 Source: City of Santa Monica; HR &AAdvisors, Inc. NC. PKF Report Peer Review Property Tax Increment 21.0% $ Source Total Hard Construction + Land Value $ 99,994,807 H R&A Financial Feasibility 1% General Levy $ 999,948 County Admin Fee -1.92% $ (19,199) County of LOS Angeles County of Los Angeles $ 980,749 Affordable Housing Set-Aside (2011 $) 20.0% $ 196,150 California Redevelopment Law Tax Increment Remainder 80.0% $ 784,599 Tier 1 Pass - Through Total 25.0% $ 196,150 California Redevelopment Law City Tier1 Share 17.22% $ 33,777 County of LOS Angeles SMMUSD Tier 1 Share 17.04% $ 33,424 County of LOS Angeles SMC Tier 1 Share 4.23% $ 8,297 County of Los Angeles Tier2 Pass - Through Total 21.0% $ 164,766 California Redevelopment Law City Tier 2 Share 0.0% $ - County of LOS Angeles SMMUSD Tier 2 Share 17.04% $ 28,076 County of Los Angeles SMC Tier Share 4.23% S 6,970 County of Los Angeles Total Annual City Share (Tier1 Only) (2011 $) $ 33,777 Voted Indebtedness- City of Santa Monica Share' $ 7,989 HR&A;Accountof Existing Prop Bills Direct Assessments - Cityof Santa Monica Share $ 814,909 HRSA;Acmuntof Fisting Prop Bills Total City Property Tax Revenues $ 856,675 Total Annual SMMUSD Shares (Tier 1 +2) (2011 $) $ 61,500 Direct Assessments - SMMUSD' $ 119,594 HR&A; Account of Existing Prop Bills Total SMMUSD Property Tax Revenues $ 181,094 Total Annual SMC Shares (Tier 1 +2)(2011$) $ 15,267 Redevelopment Agency Net (2011 $) $ 423,684 Motor Vehicle License Fee In Lieu of Property Tax Source Total Assessed Value $ 99,994,807 Cityof Santa Monica Fiscal Yr. 2008-2009 MVLF in Lieu of Property Tax $ 7,257,878 Cityof Santa Monica Fiscal Yr. 2008-2009 Citywide Assessed Value $23,100,511,228 County of LOS Angeles MVLF In Lieu Share of Assessed Valuation' 0.031% HR&A Annual Motor Vehicle License In Lieu Revenue (2011 $) $31,417 Assumes tax rates effective 1/1/2011 remain in effect throughout projection period. 2 Calculated using a percent of assessed value approach based off of the existi ng propertytax bills and applied to the Project ' City MVLF in Lieu of Property Tax is calculated as a percent of total City assessed valuation as of 2009. PKF Report Peer Review MVLF In Lieu Property Tax Year Nominal$ 2011$ 1 2011 $ $ - 2 2012 $ 16,023 $ 14,448 3 2013 $ 32,686 $ 26,577 4 2014 $ 33,340 $ 24,444 5 2015 $ 34,007 $ 22,482 6 2016 $ 34,687 $ 20,678 7 2017 $ 35,381 $ 19,019 8 2018 $ 36,088 $ 17,492 9 2019 $ 36,810 $ 16,088 10 2020 $ 37,546 $ 14,797 11 2021 $ 38,297 $ 13,610 12 2022 $ 39,063 $ 12,518 13 2023 $ 39,844 $ 11,513 $ 413,773 $ 213,666 $ 213,666 check Ann. Aug. $ 31,829 $ 16,436 Ann. Inflation= 2.00% (Prop. 13) Discountrate= 10.9 %(RERC, t at Qtr 2011) SMC Nominal$ 2011$ $ 7,786 $ 7,021 $ 15,884 $ 12,915 $ 16,201 $ 11,878 $ 16,525 $ 10,925 $ 16,856 $ 10,048 $ 17,193 $ 9,242 S 17,537 $ 8,500 S 17,887 $ 7,818 $ 18,245 $ 7,191 $ 18,610 $ 6,614 $ 18,982 S '6,083 $ 19,362 $ 5,595 $ 201,068 $ 103,828 $ 103,828 check $ 15,467 $ 7,987 Redevelopment Agency Nominal$ 2011$ $ 216,079 $ 194,841 $ 440,800 $ 358,409 $ 449,616 $ 329,646 $ 458,609 $ $03,191 $ 467,781 $ 278,859 $ 477,137 $ 256,480 $ 486,679 $ 235,897 $ 496,413 $ 216,965 $ 506,341 $ 199,553 $ 516,468 $ 183,539 $ 526,797 $ 168,809 $ 537,333 $ 155,262 $ 5,580,053 $ 2,881,452 $ 2,881,452 check $ 429,235 $ 221,650 HR &A AD vVs4Ji;s, I'NC. PKF Report Peer Review City Property Taxes Affordable Housing Set -Aside SMMUSD Year Nominal $ 2011 $ Nominal $ 2011S Nominal $ 2011 $ 1 2011 $ - $ - $ - 3 - S - $ - 2 2012 $ 436,904 $ 393,962 $ 100,036 $ 90,204 $ 92,358 $ 83,280 3 2013 $ 891,285 $ 724,692 $ 204,074 $ 165,930 $ 188,410 $ 153,194 4 2014 $ 909,110 $ 666,534 $ 208,156 $ 152,614 $ 192,178 $ 140,899 5 2015 $ 927,293 $ 613,043 $ 212,319 3 140,366 $ 196,022 $ 129,592 6 2016 $ 945,838 $ 563,844 $ 216,565 $ 129,101 $ 199,942 $ 119,192 7 2017 $ 964,755 $ 518,594 $ 220,897 $ 118,741 $ 203,941 $ 109,626 8 2018 $ 984,050 $ 476,976 $ 225,314 $ 109,211 $ 208,020 $ 100,829 9 2019 $ 1,003,731 $ 438,697 $ 229,821 $ 100,447 $ 212,180 $ 92,737 10 2020 S 1,023,806 $ 403,491 $ 234,417 $ 92,386 $ 216,424 $ 85,295 11 2021 $ 1,044,282 $ 371,110 $ 239,106 $ 84,972 $ 220,752 $ 78,449 12 2022 $ 1,065,168 $ 341,327 $ 243,888 $ 78,152 $ 225,167 $ 72,154 13 2023 $ 1,086,471 $ 313,935 $ 248,765 $ 71,881 $ 229,671 $ 66,363 $11,282,694 $ 5,826,205 $ 2,583,358 $ 1,334,005 $ 2,385,065 $ 1,231,610 $ 5,826,205 check $ 1,334,005 check $ 1,231,610 check Ann. Avg. $ 867,900 $ 448,170 $ 198,720 $ 102,616 $ 183,467 $ 94,739 Ann. Inflation= 2.00% (Prop. 13) Cum. Construction Phasing Discount rate= 10.9 %(RERC, 1 at QV 2011) 2012 50% 2013 100% MVLF In Lieu Property Tax Year Nominal$ 2011$ 1 2011 $ $ - 2 2012 $ 16,023 $ 14,448 3 2013 $ 32,686 $ 26,577 4 2014 $ 33,340 $ 24,444 5 2015 $ 34,007 $ 22,482 6 2016 $ 34,687 $ 20,678 7 2017 $ 35,381 $ 19,019 8 2018 $ 36,088 $ 17,492 9 2019 $ 36,810 $ 16,088 10 2020 $ 37,546 $ 14,797 11 2021 $ 38,297 $ 13,610 12 2022 $ 39,063 $ 12,518 13 2023 $ 39,844 $ 11,513 $ 413,773 $ 213,666 $ 213,666 check Ann. Aug. $ 31,829 $ 16,436 Ann. Inflation= 2.00% (Prop. 13) Discountrate= 10.9 %(RERC, t at Qtr 2011) SMC Nominal$ 2011$ $ 7,786 $ 7,021 $ 15,884 $ 12,915 $ 16,201 $ 11,878 $ 16,525 $ 10,925 $ 16,856 $ 10,048 $ 17,193 $ 9,242 S 17,537 $ 8,500 S 17,887 $ 7,818 $ 18,245 $ 7,191 $ 18,610 $ 6,614 $ 18,982 S '6,083 $ 19,362 $ 5,595 $ 201,068 $ 103,828 $ 103,828 check $ 15,467 $ 7,987 Redevelopment Agency Nominal$ 2011$ $ 216,079 $ 194,841 $ 440,800 $ 358,409 $ 449,616 $ 329,646 $ 458,609 $ $03,191 $ 467,781 $ 278,859 $ 477,137 $ 256,480 $ 486,679 $ 235,897 $ 496,413 $ 216,965 $ 506,341 $ 199,553 $ 516,468 $ 183,539 $ 526,797 $ 168,809 $ 537,333 $ 155,262 $ 5,580,053 $ 2,881,452 $ 2,881,452 check $ 429,235 $ 221,650 HR &A AD vVs4Ji;s, I'NC. PKF Report Peer Review Annual Rooms Revenue (2014 $) Annual Rooms Revenue (2015 $) Annual Rooms Revenue (2016 $) City's Tax Rate' Annual TOT Revenue (2014 $) Annual TOT Revenue (2015 $) Annual TOT Revenue (2016 $) Source $23,393,000 HRRAFinancial Feasibility $26,090,000 HR&AFinancial Feasibility $28,296,000 HR&AFinancial Feasibility 14% $3,275,020 $3,652,600 $3,961,440 Assumes tax rates effective 1/1/2011 remain in effect without change over the projection period. Ti Year Nominal $ 1 2011 $ 2 2012 $ 3 2013 $ - 4 2014 $ 3,275,020 5 2015 $ 3,652,600 6 2016- $ 3,961,440 7 2017 $ 4,080,283 8 2018 $ 4,202,692 9 2019 $ 4,328,772 10 2020 $ 4,458,636 11 2021 $ 4,592,395 12 2022 $ 4,730,167 13 2023 $ 4,872,072 $ 42,154,076 )T 2011 $ $ 2,401,150 $ 2,414,771 $ 2,361,540 $ 2,193,315 $ 2,037,074 $ 1,891,962 $ 1,757,187 $ 1,632,013 $ 1,515,756 $ 1,407,781 $19,612,550 $19,612,550 check Ann.Avg. $ 3,242,621 $ 1,508,658. Ann. Inflation = 3.00% (HR&4) Discount rate= 10.9 %(RERC, 1st Qtr2011) PKF Report Peer Review Retail & Restaurant Retail Sq. Ft.' Retail Gross Sales Per Sq. Ft' Annual Gross Sales (2011 $) Taxable Retail % Annual Taxable Retail Sales Restaurant Sq. Ft' Restaurant Gross Sales Per Sq. Ft' Annual Gross Sales (2011 $) Taxable Retail % Annual Taxable Retail Sales Citys Sales Tax Rate' Annual Sales Tax Revenue (2011 $) Hotel F &B 2014 Hotel Food & Beverage Revenue Taxable Sales % Annual Taxable Retail Sales City's Sales Tax Rate' Annual Sales Tax Revenue (2014 $) 2015 Hotel Food & Beverage Revenue Taxable Sales % Annual Taxable Retail Sales _ City's Sales Tax Rate' Annual Sales Tax Revenue (2015 $) 2016 Hotel Food & Beverage Revenue4 Taxable Sales % Annual Taxable Retail Sales Citys Sales Tax Rate' Annual Sales Tax Revenue (2016 $) $9,455,000 75% $7,091,250 1.5% $106,369 $10,250,362 75% $7,687,772 1.5% $115,317 ' Per PKF. 3 Per U.S. Census Bureau, 2002 Economic Census, data by industry forth City of Santa Nbnica; HR&A Advisors Inc. ' Assumes tax rates effective 1/1/2011 remain in effect without change over the projection period. 4 Per HR&AFinancial Feasibility. (-(k &A ADVISORS, INC. PKF Report Peer Review Sale Tax Year Nominal $ 2011$ 7,351 1 2011 $ - $ - $425.00 2 2012 $ - $ - $3,124,175 3 2013 $ - $ - 100°/ 4 2014 $ 219,013 $ 160,574 $3,124,175 5 2015 $ 233,977 $ 154,685 6 2016 $ 246,753 $ 147,098 7,712 7 2017 $ 254,156 $ 136,619 $575.00 8 2018 $ 261,781 $ 126,887 $4,434,400 9 2019 $ 269,634 $ 117,848 100% 10 2020 $ 277,723 $ 109,453 $4,434,400 11 2021 $ 286,055 $ 101,656 12 2022 $ 294,637 $ 94,415 1.5% 13 2023 $ 303,476 $ 87,689 $113,379 $ 2,547,205 $ 71 236,923 $ 1,236,923 check Ann. Avg. $ 203,631 $ 95,148 $8,455,181 75% Ann. Inflation= 3.00 %(HR&A) $6,341,386 Discount rate= 10.9% (RERC, 1st Qtr 2011) 1.5% $95,121 $9,455,000 75% $7,091,250 1.5% $106,369 $10,250,362 75% $7,687,772 1.5% $115,317 ' Per PKF. 3 Per U.S. Census Bureau, 2002 Economic Census, data by industry forth City of Santa Nbnica; HR&A Advisors Inc. ' Assumes tax rates effective 1/1/2011 remain in effect without change over the projection period. 4 Per HR&AFinancial Feasibility. (-(k &A ADVISORS, INC. PKF Report Peer Review Hotel PDRINight(2011 $) Occupants Per Room PDR per person per room % of Total Daily Spending for Hotel Room Total SpandingRen r-May Nan - Lodging Room SpendirpRanonMay Rooms Ocmpancy Rate Room Nights per Year Total Room Nigho,Nr generated byte New Hotel Occupants Per Room Total Annual Occupants - Incremental Increase in Non -Room SpendingNe2r(2011$) %Captured by the Cilyof Santa Monica %of City Capture not captumd by new Project (e.g., retail and dining) Non - Project, City capture of Net -New Indirect Spending generated by ProjecVYear %allocation to Taxable Sales City Sales Tax Rate' $294.00 1.40 PKF Cansulting $21 0.00 42% Santa Monica CVS $500.00 Santa Monica CVS $290.00 Reflects amounts spent on Retail and Dining, Transportation, Entertainment Telecom, etc. 285 80% 365 83,220 1.40 PKFOonsulting 116,508 $405,447,840 50% PerHR&A 75% PerHR&A $152,042,940 43% $64,679,067 Santa Monica CV3 1.5% ResuRing City Revenues from Retail and Dining)Year(2011$) $970,186 ' Assumes tax rates effecti a Vi 2011 remain in effect without change oxer the projection period. Sale Tax Year Nominal S 2011$ 1 2011 $ S - 2 2012 $ $ 3 2013 $ $ 4 2014 $ 1,060,148 S 777,270 5 2015 $ 1,091,953 $ 721,901 6 2016 S 1,124,711 S 670,476 7 2017 S 1,158,453 $ 622,715 8 2018 $ 1,193,206 $ 578,355 9 2019 $ 1,229,003 $ 537,156 10 2020 $ 1,265,873 $ 498,892 11 2021 is 1,303,649 $ 463,353 12 2022 S 1,342,964 S 430,346 13 2023 $ 1,383,253 $ 399,690 T12,153,414 $ 5,700,153 $ 5,700,153 check Ann.Ag. S 934,878 $ 438,473 Ann. Inflation= 3.00 %(HR&A) Discountrete= 10.9 %(RERC, 1st Qtr2011) H6I,&✓F'4 ADV[SORS, NC. PKF Report Peer Review Landlord Gross Receipts Source Annual Gross Revenue (2014 $) $34,815,744 HR &A Financial Feasibility Annual Gross Revenue (2015 $) $38,822,500 HR &A Financial Feasibility Annual Gross Revenue (2016 $) $42,071,487 HR &AFinancial Feasibility t Assumes taxrates effective 1/1/2011 remain in effect wiN out chang a over the projection period Gross Sales $60,0001130ding or Tenant $60,000/Building or Tenant Tax Per $1,0001 Sales x Tax Rate Landlord (2014 $) $34,815,744 $60,000 $34,755,744 $1.25 $43,445 Landlord (2015 $) $38,822,500 $60,000 $38,762,500 $1.25 $48,453 Landlord (2016 $) $42,071,487 $60,000 $42,011,487 $1.25 $52,514 t Assumes taxrates effective 1/1/2011 remain in effect wiN out chang a over the projection period Ann.AVg. $ 42,990 $ 20,003 Ann. Inflation= 3.00% (HR&A) Discount rate= 10.9% (RERC,lst Qtr20ll) PKF Report Peer Review Business License Year Nominal$ 2011$ 1 2011 $ - $ 2 2012 $ - $ 3 2013 $ - $ 4 2014 $ 43,445 $ 31,852 5 2015 $ 48,453 $ 32,033 6 2016 $ 52,514 $ 31,305 7 2017 $ 54,090 $ 29,075 8 2016 $ 55,712 $ 27,004 9 2019 $ 57,384 $ 25,081 10 2020 $ 59,105 $ 23,294 11 2021 $ ' 60,879 $ 21,635 12 2022 $ 62,705 S 20,093 13 2023 $ 64,586 $ 18,662 $ 558,873 $ 260,035 $ 260,035 check Ann.AVg. $ 42,990 $ 20,003 Ann. Inflation= 3.00% (HR&A) Discount rate= 10.9% (RERC,lst Qtr20ll) PKF Report Peer Review r Assumes taxrates effective 1/12011 remain in effect without change oe rthe projection period. Year 1 2011 $ 2 2012 $ 3 2013 $ 4 2014 $ 5 2015 $ 6 2016 $ 7 2017 $ 8 2018 $ 9 2019 $ 10 2020 $ 11 2021 $ 12 2022 $ 13 2023 $ Utility Tax Nominal$ 2011$ _ g _ 116,752 $ 85,600 120,250 $ 79,498 126,200 $ 75,232 129,986 $ 69,873 133,886 $ 64,895 137,902 $ 60,272 142,039 $ 55,979 146,300 $ 51,991 150,689 $ 48,288 155,210 $ 44,848 1,359,215 $ 636,476 $ 636,476 check Ann. Avg. $ 104,555 $ 46,960 Ann. Inflation = 3.00% (HR&A) Discountrate= 10.9 %(RERC, 1 at Qtr 2011) 9 -0R,?t,.ft ADVESODRS, INC. PKF Report Peer Review Costs City Taxi Total Tax Rewnue Source Utility Costs (2014$) $1,167,525 10.00% $116,752 HR&AFinancial Feasibility Utility Costs (2015$) $1,202,500 10.00% $120,250 HR&A Financial Feasibility Utility Costs (2016$) $1,262,000 10.00% $126,200 HR&A Financial Feasibility r Assumes taxrates effective 1/12011 remain in effect without change oe rthe projection period. Year 1 2011 $ 2 2012 $ 3 2013 $ 4 2014 $ 5 2015 $ 6 2016 $ 7 2017 $ 8 2018 $ 9 2019 $ 10 2020 $ 11 2021 $ 12 2022 $ 13 2023 $ Utility Tax Nominal$ 2011$ _ g _ 116,752 $ 85,600 120,250 $ 79,498 126,200 $ 75,232 129,986 $ 69,873 133,886 $ 64,895 137,902 $ 60,272 142,039 $ 55,979 146,300 $ 51,991 150,689 $ 48,288 155,210 $ 44,848 1,359,215 $ 636,476 $ 636,476 check Ann. Avg. $ 104,555 $ 46,960 Ann. Inflation = 3.00% (HR&A) Discountrate= 10.9 %(RERC, 1 at Qtr 2011) 9 -0R,?t,.ft ADVESODRS, INC. PKF Report Peer Review Hotel Total Parking Revenue (2014 $)' Total Parking Revenue (2015 $)' Total Parking Revenue (2016 $)' Tax Rate Annual Parking Tax Revenue (2014 $) Annual Parking Tax Revenue (2015 $) Annual Parking Tax Revenue (2016 $) Source $489,385 HR&A Financial Feasibility $526,250 HR &A Financial Feasibility $556,895 HR &A Financial Feasibility 10_0% City of Santa Monica $48,939 $52,625 $55,689 Year 1 2011 $ 2 2012 $ 3 2013 $ 4 2014 $ 5 2015 $ 6 2016 $ 7 2017 $ 8 2018 $ 9 2019 $ 10 2020 $ 11 2021 $ 12 2022 $ 13 2023 $ Parking Tax Nominal $ 2011 $ 46,939 $ 35,880 52,625 $ 34,791 55,689 $ 33,198 57,360 $ 30,833 59,081 $ 28,637 60,853 $ 26,597 62,679 $ 24,702 64,559 $ 22,943 66,496 $ 21,308 68,491 $ 19,790 596,773 $ 278,681 $ 278,581 check Ann. Avg. $ 45,906 $ Ann. Inflation = Discount rate = ' Assumes 50% of the Rental and Other Income from the financial feasibility analysis provided by PKF can be attributed to parking. 3 Assumes tax rates effective 1/12011 remain in effect without change over the projection period. 21,437 3.00% (HR &A) 10.9% (RERC, 1st Qtr 2011) HF.Ijrak Arw4 soR$, 4,3C. PI(F Report Peer Review ' Citypopulation & employees, per CA Department of Finance and SCAG respectively, weighted byhours perweek in City. 2 Calculated from 5 -year average tax and total City population & employees, weighted by hours per week in City. 3 Per City Services calculation. Il"6Qk��l'ie PDVISORS, NC, PKF Report Peer Review Source Fines and Forfeitures Fines and Forfeitures Year Nominal $ 2011 $ Five- YearAerage Citywide Revenues $15,652,277 Cityof Santa Monica 1 2011 $ - $ - TotalCityPopulation +Employment 193,904 2 2012 $ - $ - Employee's Weighted % Hours in City' 19.2% DOF /SCAG 3 2013 $ - $ - Fines and Forfeitures Per Employee2 $15.52 HR&A 4 2014'$ 4,535 $ 3,325 Total Employees3 267 HR&A 5 2015 $ 4,671 $ 3,088 Annual Fines and Forfeitures Revenues (2011 $) $4,150 6 2016 $ 4,811 $ 2,868 7 2017 $ 4,955 $ 2,664 8 2018 $ 5,104 $ 2,474 9, 2019 $ 5,257 $ 2,298 10 2020 $ 5,415 $ 2,134 11 2021 $ 5,577 $ 1,982 12 2022 $ 5,744 $ 1,841 13 2023 $ 5,917 $ 1,710 $ 51,985 $ 24,382 $ 24,382 check An. Avg. $ 3,999 $ 1,876 Ann. Inflation= 3.00% (HR&A) Discount rate= 10.9 %(RERC, 1 st Qtr 2011) ' Citypopulation & employees, per CA Department of Finance and SCAG respectively, weighted byhours perweek in City. 2 Calculated from 5 -year average tax and total City population & employees, weighted by hours per week in City. 3 Per City Services calculation. Il"6Qk��l'ie PDVISORS, NC, PKF Report Peer Review Assumptions Number %of Day Resident- Equivalents Daytime Hotel Employment Population 267 67% 179 Grand Total 267 179 'FY2010 -11 Revised Budgetfigures per2011 -12 Budget. E Derived using the sum of all residents, day -time employees and students factoring them fortheir time spentwithin the City limits. $ 367,890 $ 172,547 Ann. Inflation= 3.00% (HR&A) Discountrate= 10.9 %(RERC, 1 st Qtr 2011) IHIF.ftA,`ADvIso 5, 4,Sc. PKF Report 2010 -2011 Rev. Total Resident- Cost Per Resident- General Fund Categories Budget' Equivalent Population' Equivalent City Council $771,764 112,141 $6.88 City Manager $8,250,384 112,141 $73.57 Records & Election Services $2,585,616 112,141 $23.06 CityAttomey $8,460,636 112,141 $75.45 Finance $17,550,241 112,141 $156.50 Human Resources $3,326,910 112,141 $29.67 Information Systems $5,893,172 112,141 $52.55 Community Maintenance $0 112,141 $0.00 Planning & Comm. Development $15,197,179 112,141 $135.52 Police $67,017,821 112,141 $597.62 Fire $28,800,269 112,141 $256.82 Community& Cultural Services $36,050,755 112,141 $321.48 Library $10,950,760 112,141 $97.65 Housing & Econ Development $8,572,592 112,141 $76.44 Public Works $25,553,196 112,141 $227.87 Total Operating Budget $238,981,325 $2,131.08 'FY2010 -11 Revised Budgetfigures per2011 -12 Budget. E Derived using the sum of all residents, day -time employees and students factoring them fortheir time spentwithin the City limits. $ 367,890 $ 172,547 Ann. Inflation= 3.00% (HR&A) Discountrate= 10.9 %(RERC, 1 st Qtr 2011) IHIF.ftA,`ADvIso 5, 4,Sc. PKF Report City Services Costs Year Nominal $ 2011 $- 1 2011 $ $ 2 2012 $ $ 3 2013 $ $ 4 2014 $ 417,187 $ 305,869 5 2015 $ 429,702 $ 284,080 6 2016 $ 442,593 $ 263,844 7 2017 $ 455,871 $ 245,049 8 2018 $ 469,547 $ 227,593 9 2019 $ 483,634 $ 211,380 10 2020 $ 498,143 $ 196,322 11 2021 $ 513,087 $ 182,337 12 2022 $ 528,479 $ 169,348 13 2023 $ 544,334 $ 157,285 $ 4,782,576 $ 2,243,108 $ 2,243,108 check 'FY2010 -11 Revised Budgetfigures per2011 -12 Budget. E Derived using the sum of all residents, day -time employees and students factoring them fortheir time spentwithin the City limits. $ 367,890 $ 172,547 Ann. Inflation= 3.00% (HR&A) Discountrate= 10.9 %(RERC, 1 st Qtr 2011) IHIF.ftA,`ADvIso 5, 4,Sc. PKF Report ATTACHMENT 6 a rR OViTG[e3 :Y11:lT/ 'RiI_LP1.1:YWAKi7IN 50 January 6, 2012 Mr. Alexander J. Gorby 710 Wilshire Boulevard, #409 Santa Monica, CA 90401 Dear Mr. Gorby: r: i Pursuant to your request, we have performed an update of our November 2010 analysis of labor wages relative to the proposed adaptive reuse of a landmark building at 710 Wilshire Boulevard and development of a full - service hotel in Santa Monica, California. Specifically, we have gathered data concerning existing wages for hotel workers at union and non -union hotels ranging in type between moderate and luxury. Additionally, we have reviewed the City of Los Angeles Ordinance establishing a living wage for hotel workers in the Los Angeles Airport area as well as a 2011 LA- Orange County -San Diego Benefits and Compensation Survey completed by Executive HR Consulting Inc. (2011 HR Survey). SCOPE The scope of our assignment included a review of the Santa Monica hotel supply and identification of potential comparables for this analysis. We have identified several hotel properties within the City of Santa Monica (the City), as well as within the greater Los Angeles market. Furthermore, we have reviewed the City of Los Angeles ordinance establishing a living wage for hotel workers in the Los Angeles Airport area and other data relative to existing hotel wage levels. For each property identified, we completed interviews or reviewed Union documentation and wage structure in order to establish minimum wages for hourly positions for both tipped and non - tipped employees. PKF Consulting has interviewed several hotels in the City of Santa Monica, including union and non -union hotels ranging in type from moderate to upscale. PKF Consulting has completed numerous market studies, appraisals, and economic impact studies in the Santa Monica market, and we have utilized our relationship with these properties to gather a representative sample of wage rates. COMPARABLE HOTEL WAGE RATES For each hotel, we attempted to gather specific data on hourly wage rates for various positions within a typical hotel in these locations. We have gathered this data for four union hotels and two non -union hotel, all located in Santa Monica. Colliers PKF Consulting 1 865 S. Figueroa Street, Suite 3500 1 Los Angeles, CA90017 TEL: 213- 680 -0900 1 FAX: 213 - 623 -82401 w .pkfc.com Mr. Alexander J. Gorby Page 2 For reasons of confidentiality, we have displayed the hotels as Union A, B, C, and D, and Non -union A and B. In each case, we have identified the location and quality level of the hotel. Summary of Union and Non -Union Comparables and Las Anseles -Orange County -San Diego Survey Results Comparable 1 Union -A Union -B Union -C UnimrD I Non -Union A" Non -Union B * *] Survey Survey Location ISantaMorica Santa Monica Santa Monica Santa Monica 1 Santa Monica Santa Monica I EA 0C-5D Zone i ] I Luxury i LA Beaches Positioning I Moderate Upscale Luxury Upscale Moderate Moderate Hotels 1 and LAX Contract Expiration 2009 2009 2011 N/A N/A N/A N/A 1 N/A Data as of 12/2011 1212011 10 /2010 12/2011 1012010 12/2011 Banquet Captain* $11.75 N/A $520 NA N/A $11.61 $13.50 Banquet Bartender• $8.00 N/A $1N2/A 16 $1 N/A N/A $0.52 $10.51 Banquet Housemen* $11.59 $11.85 $12.65 $12.45 N/A N/A $11.33 $11.74 Banquet Server- $8.00 N/A $8.00 $8.00 N/A N/A i $8.46 $9.61 Bellman Supervisor* $9.37 N/A N/A N/A N/A N/A ( $11.68 $10.05 Concierge $13.75 N/A N/A $14.40 N/A N/A $14.24 $14.71 Bellperson• $8.00 $8.00 $9.90 $9.65 N/A N/A ( $8.57 $8.59 Door person" N/A $10.80 $10.00 $11.15 N/A N/A I $9.05 $10.37 Valet Parking Attendant* $11.75 N/A N/A Outsourced I N/A N/A i $8.14 1 $8.17 Bartender* $12.41 $12.80 $12.66 $10.55 I $10.98 ** N/A $10.84 $10.46 Bar Back- i $11.45 $11.85 $13.45 $11.95 1 N/A N/A ( $10.58 I $9.33 Bus Person* I $10.70 $11.10 $11.40 $11.85 N/A N/A N/A $10.15 Host 1 $14.91 N/A $14.60 $15.05 I N/A N/A i $12.18 i $13.41 Cook] I N/A $16.85 $17.50 $17.95 $16.79 N/A $16.13 , $15.29 Cook 11 1 $15.45 $15.85 $16.50 $16.95 1 $14.80 N/A i $14.83 i $14.00 Cook 111 I N/A $14.85 $15.75 $16.20 $13.63 N/A i $73.51 I $13.55 Mini Bar Attendant 1 $13. 50 $13.90 $15.03 $9.15 N/A I N/A $[1.95 , $11.49 Room Service Server' I $8.00 $8.00 $8.00 $8.00 N/A N/A $8.13 i $8.31 Runner* $11.46 $11.85 $11.40 $12.70 1 N/A N/A $14.19 $15.00 Server* ' $8.00 $8.00 $8.00 $8.00 i N/A N/A 1 $8.07 1 $8.52 Steward I $13.01 $13.40 $14.10 $14.55 $10.25 N/A $11.71 $12.18 Cashier ' N/A $15.30 N/A $15.05 N/A N/A $16.88 $15.21 Front Desk Supervisor I $16.55 $16.80 N/A N/A I $16.48 N/A $76.68 $15.42 Guest Service Agent $74.90 $15.30 N/A $16.10 $71.56 $11.00 $13.91 $13.26 PBX Operator $14.16 $14.55 $15.40. $15.10 ' N/A N/A $13.61 $13.05 Houseperson I $13.00 $13.40 $14.10 $14.55 $10.51 $11.00 $11.33 $11.54 Room Attendant $13.00 $13.40 $14.10, $14.55 $10.51 $950 $11.77 { $11.41 Engineer $14.57 $17.85 N/A $17.00 I $15.56 $16.00 i $17.41 1 $16.59 Engineer N/A $14.97 N/A $18.50 I $13.98 N/A I $19.45 1, $17.95 Minimum Tipped $8.00 $8.00 $8.00 $8.00 N/A NIA i $8.07 1 $8.17 Minimum Non- Tipped $13.00 $13.40 $14.10 $9.15 $10.25 $9 .SO 1 $11.33 1 $11.41 Unfortunately, we have not been able to identify the benefit expense at these properties. However, from reviewing Los Angeles Ordinance 178432, we note that the LAX area living wage is comprised of a base living wage of $10.64 plus $1.25 for benefits. Furthermore, tipped positions are tied to the State minimum wage, as these categories receive compensation in the form of a base hourly wage plus gratuities received in the course of performing the respective position. Some tipped positions at the upscale comparables receive higher base hourly wages, while the Moderate comparables only present non - tipped positions except for one position at Non -union A for bartenders. The union hotels differentiate between tipped and non - tipped employees, and the hourly rates for tipped employees are substantially lower than for non - tipped employees. The non- union properties are limited service and present limited tipped positions. The 2011 HR Survey presented was based on 64 hotels, including both union and non- union properties. The sample set included seven Santa Monica hotels, including Casa, D1i% Alexander J Gorby Page 3 Shutters, Loews, Sheraton, Ambrose, Fairmont, and Viceroy Hotel. The survey presents several sub - tiers. We have focused on two: luxury hotels and Zone 1. The luxury hotel tier covers the Los Angeles, San Diego, and Orange County areas and includes Casa del Mar, Shutters, Fairmont, Viceroy, and Loews, as well as 35 other hotels. The Zone 1 tier covers Los Angeles beaches and the LAX area and includes the Ambrose, Casa del Mar, Shutters, Fairmont, Sheraton, Loews, and Viceroy, as well as 8 other properties. The minimum tipped position for Union Hotel A and the Luxury Tier survey group was Room Service Server, which presented a floor or minimum hourly wage of $8.00 (i.e., the State minimum wage), and an average hourly rate of $8.07 for the surveyed hotels. Zone 1, which presents Los Angeles Beaches and LAX, presented a minimum wage of $8.52. The survey results were based on 444 persons in the server position for the Luxury tier and 82 persons in the Zone 1 breakout. The minimum non - tipped position at Union Hotel A was mini bar attendant at $9.15 per hour. The minimum non - tipped positions in the survey results were house person at $11.33 for luxury hotels and room attendants at $11.41 for Zone 1. City of Los Angeles Living Wage Ordinance for Hotel Workers In 2006, the Los Angeles City Council adopted a living wage ordinance for the hotels inside the Century Corridor in the LAX area. These hotels are subject to a living wage of $10.64 plus $1.25 per hour for benefits for 2011. Benefits We have also reviewed survey results relative to benefits paid at Southern California lodging properties. The survey presented a sample of 64 hotels. The following presents an excerpt from the 2011 LA- Orange County -San Diego Benefits and Compensation Survey completed by Executive HR Consulting Inc. The respondents reported an average 2010 labor expense of 35.2 percent of revenues, including benefits. Averag Plan 1 Plan 2 Eligibility waiting period ---- 9 90 monthly premium - individual co -pay $ 66.95 10910 monthly premium coney - +1 S 21928 S 203.31 monthly premium copay - +2 or more S 316.24 $ 284.17 monthly premium - individual $ 316 -56 S 330.35 monthly premium - +1 $ 581.09 S 659 -94 monthly premium - +2ormore $ 79530 s 873.68 Number of hotels offering an HMO plan 55 Number of hotels offering a PPO plan 54 Number of hotels offering a Cafeteria plan 33 Number of hotels offering a Dental Plan 58 Number of hotels offering a Vision Plan 55 Number of hotels offerings Prescription Plan 51 Number of hotels offering a 401K Plan 56 Number f hotels offering a company 401K match 44 Average ofmatched401 1kj Percentage 436% Mr. AlexanderJ Got-by Page 4 Compensation and Hotel Operating Expenses In addition, PKF Consulting compiles an annual publication "Trends, in the Hotel Industry." The 2011 Edition, which incorporates 2010 financial statements from over 4,000 hotel properties within the United States, presents a total salaries and benefits expense of 37.4 percent of revenue, including 26.6 percent for salaries and 10.8 percent for benefits. Salaries and wages are the single largest component of expense within a hotel, having a direct impact on feasibility of operations. As the largest expense item, fluctuations in labor expense have significant impact on bottom line profitability. Furthermore, as a percentage of expense, salaries and wages comprise approximately 46.6 percent of total hotel expense, as can be seen below. With a majority of entry-level and hourly staffing levels predominant in the hospitality industry, it is reasonable to expect significant impact on feasibility from an adjustment of the minimum hourly rates at a given hotel. CONCLUSIONS The union hotel studied differentiate between tipped and non - tipped employees. In our experience, this is typical of the hotel industry in the region and nationwide. The union hotels studied had a minimum wage rate for non - tipped employees ranging from $9.15 to $14.10 per hour. The non -union hotels had a minimum wage for non - tipped employees of $9.50 to $10.25. The union hotels had a minimum wage rate for tipped employees of $8.00 at all properties. The 2011 LA- Orange County -San Diego Benefits and Compensation Survey reported a minimum tipped position hour wage of $8.07 for luxury hotels and $8.17 for Los Angeles Beaches and LAX, and a minimum non - tipped hourly wage of $11.33 and $11.41 for each area, respectively. Mr. Alexander J Gorby Page 5 We look forward to discussing our findings with you. Please contact us at your convenience to discuss. Sincerely, PKF Consulting By: Jeff Lugosi Senior Vice President Addenda STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS This report is made with the following assumptions and limiting conditions: Economic and Social Trends - The consultant assumes no responsibility for economic, physical or demographic factors which may affect or alter the opinions in this report if said economic, physical or demographic factors were not present as of the date of the letter of transmittal accompanying this report. The consultant is not obligated to predict future political, economic or social trends. Information Furnished by Others - In preparing this report, the consultant was required to rely on information furnished by other individuals or found in previously existing records and /or documents. Unless otherwise indicated, such information is presumed to be reliable. However, no warranty, either express or implied, is given by the consultant for the accuracy of such information and the consultant assumes no responsibility for information relied upon later found to have been inaccurate. The consultant reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available. - Hidden Conditions - The consultant assumes no responsibility for hidden or unapparent conditions of the property, subsoil, ground water or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions. Hazardous Materials - The consultant has not been provided any information regarding the presence of any material or substance on or in any portion of the subject property or improvements thereon, which material or substance possesses or may possess toxic, hazardous and /or other harmful and /or dangerous characteristics. Unless otherwise stated in the report, the consultant did not become aware of the presence of any such material or substance during the consultant's inspection of the subject property. However, the consultant is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the value of the subject property. The value estimated in this report is predicated on the assumption that no such material or substance is present on or in the subject property or in such proximity thereto that it would cause a loss in value. The consultant assumes no responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this report assumes the subject property is in compliance with all federal, state and local environmental laws, regulations and rules. Zoning and Land Use - Unless otherwise stated, the projections were formulated assuming the hotel to be in full compliance with all applicable zoning and land use regulations and restrictions. Licenses and Permits - Unless otherwise stated, the property is assumed to have all required licenses, permits, certificates, consents or other legislative and /or administrative authority from any local, state or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. Engineering Survey - No engineering survey has been made by the consultant. Except as specifically stated, data relative to size and area of the subject property was taken from sources considered reliable and no encroachment of the subject property is considered to exist. Subsurface Rights - No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated. Maps, Plats and Exhibits - Maps, plats and exhibits included in this report are for illustration only to serve as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, . nor should they be removed from, reproduced or used apart from the report. Legal Matters - No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate consultants. STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS (continued) Right of Publication - Possession of this report, or a copy of it, does not carry with it the right of publication. Without the written consent of the consultant, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with proper written qualification and only in its entirety for its stated purpose. Testimony in Court - Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance of said hearing. Further, unless otherwise indicated, separate arrangements shall be made concerning compensation for the consultant's time to prepare for and attend any such hearing. Archeological Significance - No investigation has been made by the consultant and no information has been provided to the consultant regarding potential archeological significance of the subject property or any portion thereof. This report assumes no portion of the subject property has archeological significance. Compliance With the American Disabilities Act - The Americans with Disabilities Act ( "ADA ") became effective January 26, 1992. We assumed that the property will be in direct compliance with the various detailed requirements of the ADA. Definitions and Assumptions - The definitions and assumptions upon which our analyses, opinions and conclusions are based are set forth in appropriate sections of this report and are to be part of these general assumptions as if included here in their entirety. Dissemination of Material - Neither all nor any part of the contents of this report shall be disseminated to the general public through advertising or sales media, public relations media, news media or other public means of communication without the prior written consent and approval of the consultant(s). Distribution and Liability to Third Parties - The party for whom this report was prepared may distribute copies of this appraisal report only in its entirety to such third parties as may be selected by the party for whom this report was prepared; however, portions of this report shall not be given to third parties without our written consent. Liability to third parties will not be accepted. Use in Offering Materials - This report, including all cash flow forecasts, market surveys and related data, conclusions, exhibits and supporting documentation, may not be reproduced or references made to the report or to PKF Consulting in any sale offering, prospectus, public or private placement memorandum, proxy statement or other document ( "Offering Material ") in connection with a merger, liquidation or other corporate transaction unless PKF Consulting has approved in writing the text of any such reference or reproduction prior to the distribution and filing thereof. Limits to Liability - PKF Consulting cannot be held liable in any cause of action resulting in litigation for any dollar amount which exceeds the total fees collected from this individual engagement. Legal Expenses - Any legal expenses incurred in defending or representing ourselves concerning this assignment will be the responsibility of the client. - ATTACHMENT LEGAL MEMORANDUM SUBMITTED BY APPLICANT REGARDING LIVING WAGE AND NATIONAL LABOR RELATIONS ACT, FEBRUARY 27, 2012 51 MEMORANDUM TO: File FROM: Tom Larmore Paula Mayeda HARDING LARMORE KUTCHER & KOZAL, LLP DATE: February 27, 2012 RE: Alexander Gorby - 710 Wilshire Hotel Project Our File No. 20954.001 SUBJECT: Living Wage and the National Labor Relations Act Alexander Gorby is negotiating with the City of Santa Monica for a development agreement ( "DA ") to permit construction and operation of a hotel to be located at 710 Wilshire Boulevard, There has been public discussion about the potential for a 'living" wage to be imposed by the City on the project since early in the land use review process. While Mr. Gorby objects to any such requirement, he has agreed to accept the provision recommended by City Staff (which is attached as Exhibit "A" to this Memorandum). Unite Here, Local 11 ( "Unite Here "), however, is advocating that the City use its legislative and regulatory power to mandate a much higher minimum wage rate which would exceed wages paid by comparable hotels. Such a governmental requirement would put the proposed hotel at a severe competitive disadvantage potentially rendering it economically infeasible.' As a result of such governmental action, Mr. Gorby would effectively be forced to seek a collective bargaining agreement permitting lower wages, thereby providing the union with tremendous leverage. Governmental action mandating onerous terms, such as those proposed by Unite Here, would impermissibly interfere ' According to PKF Consulting's January 6, 2012 Wage Report, salaries, wages and benefits are 46.6% of a hotel's expenses (the single largest component of a hotel's expenses) and 37.4% of a hotel's revenue. (p. 4) A significant increase in the wages for the 710 Wilshire Project would be especially problematic given that its economic feasibility is questionable absent the extraordinary living wage being proposed by Unite Here. See PKF's Feasibility Analysis of Two Development Scenarios for a Proposed Hotel at 710 Wilshire Boulevard in Santa Monica, California dated March 2011 and PKF's 710 Wilshire Report dated March 2010; See also HR&A's Financial Feasibility Peer Review of the 710 Wilshire Hotel Project and the Smaller Hotel Alternative dated September 9, 2011. with the free play of economic forces traditionally utilized by employers and unions in direct violation of the fundamental policies underlying the National Labor Relations Act ("NLRA"). This conclusion is supported by the decision in Fortuna v. City of Los Angeles, 673 F.Supp.2d 1000 (C.D. Cal. 2008) which upheld a "living wage" ordinance imposing a modest wage rate on a group of hotels near Los Angeles International Airport against an argument that the ordinance was preempted by the NLRA. The court in Fortuna recognized, however, that ordinances imposing onerous terms which virtually force a business owner to enter into a collective bargaining agreement in order to pay lower wages can, in an extreme case, frustrate the purposes of the NLRA. Unlike the modest wage rates imposed by the Los Angeles ordinance, Unite Here is attempting to convince the City to mandate exactly the type of onerous and extreme terms that the court warned against and which call for NLRA preemption. Unite Here's purpose for doing so is obvious — rather than rely on traditional organizing strategies, Unite Here's clear intent is to ask the Council to impose these mandates in order to gain a legislatively imposed advantage in collective bargaining negotiations. Such an attempt would be in clear violation of the NLRA. I. FACTS A. 710 Wilshire Hotel Project Mr. Gorby is proposing a moderate - priced, full - service hotel. PKF Consulting prepared a feasibility analysis of the proposed hotel and projected an average daily room rate ( "ADR ") of $235. (PKF Feasibility Analysis, March 2011, p. 2.) PKF defines moderate - priced, full- service hotels in Santa Monica as those with ADRs of $173 -250. Santa Monica hotels with an ADR of $250 -375 are termed upscale hotels and those With ADRs above $375 are termed luxury hotels. (PKF Feasibility Analysis, March 2011, p. 4 -5.) In peer- reviewing the PKF Feasibility Analysis, HR &A concluded that the projected ADR of $235 was overly conservative and that in order to obtain a 10% return the hotel would need an AD R near the lower end of the range for full- service, upscale hotels (ADR of $294). (HR &A Report, p. 2.) However, HR &A did not determine whether it would be feasible to achieve the $294 ADR (which would require a premium 2 of $59/night over Santa Monica's other full- service, moderate hotels). (HR &A Report, p. 4.) Regardless, Mr. Gorby's hotel is clearly in a different market segment than Santa Monica's more upscale union hotels: Fairmont Miramar, Viceroy and Loew's. B. Unite Here, Local 11 Strategy Unite Here has been monitoring and participating in the DA review process for the 710 Wilshire project since very early in the process. Throughout the process, Unite Here has attempted to secure a Card Check Neutrality Agreement ( "Neutrality Agreement") with Mr. Gorby and has advocated for a living wage well above market wage rates. In particular: 1. At the May 25, 2010 City Council float -up hearing, both Rachel Torres (research analyst) and Derek Smith (political director) of Unite Here testified. a. Rachel Torres testified that the project is "inconsistent with our community standards of development." b. Unite Here's Political Director Derek Smith stated: "We think a more appropriate living wage would be one that is commensurate with other Santa Monica union workers. For example, Loew's housekeepers make $14.55 per hour, Viceroy housekeepers make $13.40 per hour, Miramar workers make $14.10 an hour, Delfina workers make $13 an hour." c. Councilmember Davis asked Mr. Smith if Unite Here was looking for a provision that would commit to wages that are comparable to the other unionized hotels or if they were looking for a specific wage rate. Smith responded that they are "looking for a number that is not going to undermine those union workers." 2. On May 26, 2010, Ms. Torres emailed Ken Kutcher to request a meeting with the project team. Ms. Torres's email is attached as Exhibit "B ". 3. On July 12, 2010, Ms. Torres emailed Mr. Kutcher again to request a meeting with the project team. Ms. Torres's email is attached as Exhibit "C ". 3 4. On January 25, 2011, the project team and Unite Here met at Unite Here's request. Mr. Gorby did not attend this meeting. At this meeting, representatives of Unite Here requested that Mr. Gorby enter into a Neutrality Agreement with Unite Here. 5. On February 4, 2011, Ms. Torres sent the draft Neutrality Agreement to Chris Harding and requested that the project team review the agreement. Ms. Torres also requested a meeting with Mr. Gorby. Ms. Torres's email and the draft Neutrality Agreement are attached as Exhibit "D ". The Neutrality Agreement would: a. Require Mr. Gorby to take a positive approach to unionization; b. Prohibit Mr. Gorby from directly or indirectly stating or implying any opposition to employees selecting a collective bargaining agent or any preference for or opposition to any particular union as a bargaining agent; and c. Allow the union to engage in organizing efforts in non - public areas of the hotel during employees' non - working times (before work, after work, and during meals and breaks). Further, the Neutrality Agreement proposed by Unite Here indicates that if Mr. Gorby recognizes any union besides Unite Here as the exclusive collective bargaining representative, then Unite Here's obligation under the Neutrality Agreement not to picket the hotel would no longer be in effect. 6. On February 9, 2011, Ms. Torres sent a revised draft of the Neutrality Agreement to Mr. Harding for review by the project team. Ms. Torres's email and the revised draft Neutrality Agreement are attached as Exhibit "E ". 7. On May 2, 2011, Ms. Torres sent an email to Mr. Harding asking if the project team had had an opportunity to review the Neutrality Agreement and requesting a follow -up meeting. Ms. Torres's email is attached as Exhibit "F ". 2 B. On June 28, 2011, Ms. Torres sent an email to Mr. Harding expressing Unite Here's desire to meet Mr. Gorby and discuss the Neutrality Agreement in further detail. Ms. Torres's email is attached as Exhibit "G ". 9. On September 1, 2011, Unite Here filed an EIR Comment Letter. Unite Here indicated that the proposed project is "inconsistent with our community standards of development." Unite Here cited the lack of a living wage provision as a reason for their opposition to the project. Unite Here's EIR Comment Letter is attached as Exhibit "H ". 10. On September 19, 2011, Ms. Torres sent an email to Mr. Harding again requesting an in person meeting with Mr. Gorby and an opportunity to discuss the details of the Neutrality Agreement. Ms. Torres's email is attached as Exhibit „1„ 11. On November 9, 2011, the project team and Unite Here met at Unite Here's request. Mr. Gorby was present, and Unite Here again attempted to secure a Neutrality Agreement with Mr. Gorby, Mr. Gorby did not agree to the Neutrality Agreement. In the meeting, Ms. Torres also discussed a wage rate of $14.97 for employees without health benefits and $10.42 for those with benefits. 12. On November 14, 2011, Ms. Torres sent an email to Mr. Kutcher informing him that the wage she was referring to in the November 9th meeting was the wage for LAX food service workers who work at the airport and are also members of Unite Here, Local 11. She indicated that this wage is $14.97 for employees without health benefits and $10.42 for those with health benefits. Ms. Torres's email is attached as Exhibit "J ". 13. On November 16, 2011, Ms. Torres sent a second draft of the Neutrality Agreement, this time to Mr. Kutcher. Ms. Torres also stated that "other cities such as Los Angeles and West Hollywood are currently going through the process of raising the city living wage to reflect the LAX standard," and that in "this sense, it is becoming the 'new norm. "' Ms. Torres's email is attached as 61 Exhibit "K ". The LAX standard Ms. Torres was referring to was the wage for LAX food service workers who work at the airport and are also members of Unite Here ($14.97 for employees without health benefits and $10.42 for those with health benefits), not the living wage for workers in hotels near LAX airport. See Exhibit "L ", Los Angeles Ordinance No. 181199. 14. On January 25, 2012, Staff released a Supplemental Staff Report which recommended a living wage provision with a wage rate based upon (a) the PKF Report and (b) LAX's living wage ordinance for hotel workers near LAX. The rate is $10.64 per hour with health benefits of at least $1.25 per hour or $11.89 per hour without such health benefits. This rate is at the high end of the minimum wages paid at Santa Monica's comparable hotels. The living wage provision proposed by Staff also includes the following: a. Exclusion of certain tipped employees; b. An annual CPI adjustment, which occurs each July 1st; c. An opt -out provision whereby the living wage provision can be waived as part of a collective bargaining agreement; d. Limited authority for the City Manager to reduce the wage rate by up to 10 %, if justified by a wage study, every three years; e. That the living wage provision is no longer in effect if either (a) the City adopts a living wage ordinance of general application to Santa Monica hotels or (b) the City approves a development agreement without a comparable living wage provision for a new hotel that as of January 23, 2012 had a development agreement application orfloat -up request pending; and f. Expiration with the term of the DA. 15. At the January 25, 2012 Planning Commission hearing on the project, Ms. Torres testified that a living wage rate of around $15 per hour is a closer number to what the living wage rate should be. In response to a question by Commissioner Newbold about the union wage rates in Santa Monica, Ms. Torres indicated that they are closer to $14 to $16. Ms. Torres also stated: C. "There is a difference, 1 have to admit because what happens is if a hotel decided in other cities for example - the Century Boulevard was the example - those hotels opted out of the living wage through a collective bargaining agreement to distinguish between tipped and non - tipped so that there's different wage rates. But the hotels that do not opt out, they have to pay a single rate." 16. In advance of the February 15, 2012 Planning Commission hearing, Unite Here submitted a memorandum about the project and the living wage provision proposed by Staff. Unite Here's memorandum is attached as Exhibit "M ". Unite Here requested that the Commission oppose approval of the DA. Unite Here's memorandum states: • That "the community benefits offered are too minimal and do not justify such dramatic changes to the current zoning." (p.1) • That the project will result in professional middle class jobs being replaced with poverty jobs both in the construction and permanent employment of the hotel. (p. 2) • That the proposed wage rate of $10.64 per hour with health benefits or $11.89 per hour without health benefits is too low. The memorandum cites to the Economic Policy Institute's estimate that a family of four must earn a combined salary of about $71,095 to cover food, housing, transportation, healthcare and other necessities in Santa Monica. (p. 2) (The memorandum ignores that other Santa Monica hotels, including union hotels, pay lower wages than the living wage rate proposed by City Staff.) • That the exclusion of tipped employees from the proposed living wage is legally questionable. (pp. 2 -3) (The memorandum ignores that at Santa Monica's union hotels the minimum wage for tipped employees is set at $8.00 per hour, the State's minimum wage.) 7 • That the City Manager should not have the ability to reduce the living wage rate. (p. 3) (Unite Here failed to mention that Staff's proposed living wage provision limits the reduction to a maximum of 10 %. Unite Here also ignored that the provision requires the City Manager to base its decision on a wage study that he or she would commission to document wages paid to hotel workers in Santa Monica and nearby communities, which the hotel owner must pay for.) • That the living wage provision proposed by Staff is contingent on other hotels processed through the DA process including a similar provision. (p. 3) (Unite Here's memorandum ignores that this is the first project in the City that would include a living wage rate in its DA.) 17. At the February 15, 2012 Planning Commission meeting, Ms. Torres testified that the living wage provision proposed by Staff is a detriment to the City because the rate is too low and that the distinction between tipped and non - tipped employees is illegal. 18. Certain provisions of Staff's proposed living wage provision have been modified since the February 15, 2012 Planning Commission hearing; however, Staffs recommendation with respect to the wage rate has not changed. 19. Mr. Gorby has not agreed to enter into a Neutrality Agreement with Unite Here. 20. We are informed and believe that Unite Here is actively lobbying Councilmembers and others in support of a $15 per hour living wage in the DA for the 710 Wilshire project. C. Results of the PKF Wage Rate Report PKF Consulting prepared a report dated January 6, 2012 on wage rates in Santa Monica hotels. The report is attached as Exhibit "N ". The report found that in union hotels the minimum wage rate for non - tipped employees varies from $9.15 - $14.10 and that the minimum wage rate for tipped employees is $8.00. (PKF Report p. 4) The report found that for Santa Monica's non -union hotels the minimum wage rates for non- N tipped employees range from $9.50 to $10.25. (ld.) The report also pointed out that the hotels inside the Century City corridor near LAX are subject to a living wage of $10.64 plus $1.25 per hour for benefits for 2011. (Id. at p. 2) LA Established case law holds that State and local regulation of employer or employee conduct in private labor relations will be preempted by the NLRA to the extent that conduct was impliedly intended to be left unregulated under the NLRA's fundamental policy of leaving the parties free to use economic leverage in the bargaining process. (Lodge 76 Int. Asso. of Machinists v. Wisconsin Employment Relations Comm'n., 427 U.S. 132 (1976)) This doctrine does not apply to regulations establishing generally applicable minimum substantive requirements forming the background against which collective bargaining takes place; it does operate, however, to invalidate regulation that goes too far to impermissibly interfere in that collective bargaining process. (Metropolitan Life ins. v. Massachusetts, 471 U.S. 724 (1985); Chamber of Commerce v. Bragdon, 64 F.3d 497 (91" Cir. 1995); Fortuna Enterprises v. City of Los Angeles, 673 F.Supp.2d 1000 (C.D. Cal. 2008)) In the context of wage regulation, customary minimum wage laws are not subject to NLRA preemption even though they can affect the bargaining process; however, onerous and extreme wage regulations are subject to preemption because they virtually force the employer to engage in collective bargaining in order to pay lower wages, thereby frustrating the purposes of the NLRA . (Chamber of Commerce v. Bragdon, 64 F:3d 497 (9 "' Cir. 1995); Fortuna Enterprises v. City of Los Angeles, 673 F.Supp.2d 1000 (C.D. Cal. 2008)) Unite Here's proposal constitutes an attempt to have the City adopt just such a regulation for exactly that purpose. 9 rs1 1. Lodge 76 Int. Asso. of Machinists v. Wisconsin Employment Relations Comm'n., 427 U.S. 132 (1976): State or local actions which prevent employees or employers of availing themselves of private actions which apply economic pressure against the other in the course of collective bargaining negotiations are preempted by the National Labor Relations Act. Lodge 76 Int. Asso. of Machinists v. Wisconsin Employment Relations Comm'n., 427 U.S. 132 (1976) ( "Machinists ") held that a state cease and desist order was preempted by the NLRA because it interfered with employerlemployee actions in a way that Congress intended to be left unregulated. Machinists involved a labor dispute arising from negotiations for renewal of an expired collective bargaining agreement. During the negotiations, the union instructed the employees to refuse to work overtime in an effort to put economic pressure on the employer. The employer filed unfair. labor charges with the NLRB and the Wisconsin labor board. Although the NLRB Regional Director found that the ban on overtime did not violate the NLRA, the State board held that it was not protected by the NLRA and constituted an unfair labor practice under State law. It then issued a cease and desist order which was upheld by the Wisconsin courts. In reversing the lower court rulings, the Court held that in order to avoid frustrating the comprehensive federal law of labor relations, the peaceful conduct engaged in by the union must be left free of State regulation. Even though the NLRA contains no preemption provision, previous decisions have made it clear that actions which are specifically permitted or prohibited by the NLRA cannot be the subject of contrary State regulation. (This is the so- called Garmon preemption after the Court's decision in San Diego Unions v. Garmon, 346 U.S. 485 (1953).) The opinion in Machinists extends this doctrine to actions which are neither specifically permitted nor prohibited by the NLRA but which must be left unregulated by the States in order to allow both employers. and employees to avail themselves of 10 actions which apply economic pressure against the other in the course of collective bargaining negotiations. The Congressional intent underlying the NLRA was to give employers and employees the opportunity to reach their own agreement regarding working conditions ratherthan dictate what those conditions should be. The Machinists court stated: "There is simply no question that the Act's processes would be frustrated in the instant case were the State's ruling permitted to stand. The employer in this case invoked the Wisconsin law because it was unable to overcome the union tactic with its own economic self -help means. Although it did employ. economic weapons putting pressure on the union when it terminated the previous agreement, it apparently lacked sufficient economic strength to secure its bargaining demands under "the balance of power between labor and management expressed in our national labor policy," [cite omitted]. But the economic weakness of the affected party cannot justify state aid contrary to federal law for, as we have developed, "the use of economic pressure.by the parties to a labor dispute is not a grudging exception [under] ... the [federal] Act; it is part and parcel of the process of collective bargaining." [cite omitted] The state action in this case is not filling "a regulatory void which Congress plainly assumed would not exist' [cite omitted]. Rather, it is clear beyond question that Wisconsin "[entered] into the substantive aspects of the bargaining process to an extent Congress has not countenanced." [cite omitted] Our decisions hold that Congress meant that these activities, whether of employer or employees, were not to be regulable by States any more than by the NLRB, for neither the States nor the Board is 'afforded flexibility in picking and choosing which economic devices of labor and management shall be branded as unlawful.' [reference omitted] Rather, both are without authority to attempt to "introduce some standard of properly 'balanced' bargaining power,' [reference omitted], or to define'what economic sanctions might be permitted negotiating parties in an ideal or balanced state of collective bargaining.' [cite omitted] To sanction state regulation of such economic pressure deemed by the federal Act 'desirabl[y] ... left for the free play of contending economic forces.... is not merely [to fill] a gap [by] outlawing] what federal law fails to outlaw; it is denying one party to an economic contest a weapon that Congress meant him to have available.' [cite omitted] Accordingly, such regulation by the State is impermissible because it'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. "' [cite omitted] (427 U.S. at 148 -51) 11 While Machinists involved preemption. of a State regulation on activities of employees, the court was clear that regulations undermining employer flexibility are also subject to NLRA preemption: "Although many of our past decisions concerning conduct left unregulated by Congress to the free play of economic forces address the question in the context of union and employee activities, self-help is of course also the . prerogative of the employer because he, too, may properly employ economic weapons Congress meant to be unregulable." (427 U.S. at 147) 2. Generally applicable employer /employee regulations which impose minimum employment standards are not preempted by the NLRA to the extent they merely constitute the backdrop against which collective bargaining negotiations take place. Unite Here is asking for something far. different. a. Metropolitan Life Ins. v. Massachusetts, 471 U.S. 724 (1985). The doctrine formulated in Machinists is subject to a caveat in the context of generally applicable employer /employee regulations which, while they may have some impact on the collective bargaining negotiations, are deemed by the courts to merely constitute the "backdrop" against which such negotiations take place. The case most often cited for this caveat is Metropolitan Life Ins, v. Massachusetts, 471 U.S. 724 (1985) ( "Metropolitan "), Metropolitan addressed a Massachusetts statute which required that all health -care plans cover mental health. The insurance company contended, among other things, that this statute was preempted by the NLRA because it dealt with an issue that would be the subject of collective bargaining. Relying on Machinists, the plaintiff argued that Congress intended to preclude states from establishing minimum employment standards that would otherwise need to be negotiated and, possibly, set at lower levels. The Court rejected the plaintiffs position based on its interpretation of Congressional intent. It concluded that Congress' goal was to establish a system that provided for equal bargaining power between labor and management and that this goal would not be impaired by State laws establishing minimum employment standards. In a frequently quoted sentence, the Court stated: 12 "No incompatibility exists, therefore, between federal rules designed to restore the equality of bargaining power, and state or federal legislation that imposes minimal substantive requirements on contract terms negotiated between parties to labor agreements, at least so long as the purpose of the state legislation is not incompatible with these general goals of the NLRA." (471 U.S. at 754 -55). In essence, the Court held that the Massachusetts statute was not preempted by the NLRA because it constituted a minimum labor standard covering union and. non- union employees alike and neither promoted nor hindered the collective bargaining process. There is a long history of state regulation of working conditions through exercise of the police power, and Congress did not intend to limit this type of legislation except to the extent it is "incompatible" with the goals of the NLRA. The mandated benefits of the Massachusetts law were determined not to have that impact. While the Court in Metropolitan did not define the parameters of "minimum labor standards" that are not subject to preemption, it did make it clear that they were those that "neither encourage nor discourage the collective- bargaining processes that are the subject of the NLRA." (471 U.S. at 755) b. Unite Here's proposal. Unlike the Massachusetts statute in Metropolitan which required all health plans to. cover mental health, the wage mandate proposed by Unite Here is not a minimum substantive requirement. The court in Metropolitan stated that minimum labor standards are those that neither encourage nor discourage the collective- bargaining processes that are subject of the NLRA. Unite Here's proposed living wage provision, with its substantially above market wage rate, would do just that. Unite Here is seeking that the City impose a wage rate of approximately $15 per hour even though the minimum wage rate for non - tipped employees at Santa Monica's union hotels (which are predominantly more upscale hotels) varies from $9.15 per hour to $14.10 per hour, the minimum wage rates for comparable non -union hotels ranges from $9.50 to $10.25 per hour and the minimum wage rate for tipped employees at Santa Monica's union hotels is $8.00 per hour. (PKF Report, p. 4) The extreme wage 13 rate requested by Unite Here would not form a mere backdrop against which the collective bargaining process would proceed. Instead, it would virtually mandate that Mr. Gorby enter into the collective bargaining process and would provide the union with substantial leverage in negotiating the collective bargaining agreement. 3. A city or state imposed living wage requirement on a particular employer where the city or state's only role is as a regulatory body is untested. No California case has addressed the applicability of Machinists preemption to a situation in which the measure impacted only one business. By way of contrast, the Seventh Circuit in 520 South Michigan Avenue Asso. v. Shannon, 549 F.3d 1119 (7tn Cir. 2008) invalidated a State law which specifically limited its application to hotel room attendants in Cook County hotels. In doing so, it distinguished the measure from those ,.minimal substantive requirements' approved in Metropolitan: "The more stringent a state labor substantive standard, the more likely it is that the state law interferes with the bargaining process. And as a standard becomes more stringent, the state, at a certain point, effectively substitutes itself as the bargaining representative." (549 F.3d at 1136) It is questionable whether the City has the constitutional power to apply a minimum wage provision limited to a single specific business.2 If it can, however, an attempt do so by establishing a wage rate at substantially above - market rates would be held to be preempted by the NLRA as an impermissible interference with the collective bargaining process. L- Subject to Preemption under Machinists. Living wage laws are a relatively new phenomenon. The ones that have been adopted have typically been limited to companies entering into service contracts with local municipalities rather than being applicable to businesses in their private x See 520 South Michigan Avenue Asso. v. Shannon, 549 F.3d 1119,(71h Cir. 2008) [discussed above]; Village of Willowbrook v. O/ech, 528 U.S. 562 (2000) .(holding that an individual stated a valid "equal protection" claim with respect to a local development condition that applied only to her]; Nolan v. California Coastal Comm'n., 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994). 14 operations? As a result, we have found only two reported decisions dealing with the legality of living wage ordinances which mandate the wage level that must be paid by businesses outside of the context of public works. The only opinion that addresses the preemption argument is Fortuna Enterprises v. City of Los Angeles, 673 F.Supp.2d 1000 (C.D. Cal. 2008).4 Fortuna upheld the validity of the Los Angeles living wage ordinance which applied to certain hotels near LAX but did so in an opinion that highlights the legal problem with any attempt to establish the applicable wage level at a rate substantially higher than that paid by comparable hotels. The hotels' argument in Fortuna was based on the Ninth Circuit opinion in Chamber of Commerce v. Bragdon, 64 F.3d 497 (91h Cir. 1995). Bragdon, invalidated a prevailing wage ordinance which it characterized as, in effect, requiring non -union employers to pay wages based on union wages in the area. .Fortuna relied heavily on the analysis in Bragdon in analyzing the Los Angeles living wage ordinance. While Fortuna held that Bragdon was not controlling, the court reiterated the holding in Bragdon that an ordinance could be so restrictive as to impermissibly interfere with the collective bargaining process. 1. Chamber of Commerce v. Bragdon, 64 F.3d 497 (9th Cir. 1995) and Fortuna Enterprises v. City of Las Angeles, 673 F.Supp.2d 1000 (C.D. Cal. 2008). a. Bragdon. Bragdon addressed the validity of a County ordinance which required employers to pay prevailing wages in certain types of private industrial construction projects. The court concluded that the effect of this ordinance was to require non -union companies to pay wages established under local collective bargaining contracts. 3 Preemption isn't an issue in the public context because the government is acting as a "proprietor" rather than as a 'regulator." See, for example, Building and Construction Trades Council v. Associated Builders, 507 U.S. 218 (1993). 4 The other case is RUI One Corporation v. City of Berkeley, 371 F.2d 1137 (91h Cir. 2004) which upheld the ordinance against contract clause and equal protection arguments. 15 After discussing Machinists and Metropolitan, and quoting the sentence from Metropolitan quoted above,5 the court stated that the question was whether the ordinance was incompatible with the goals of the NLRA. In addressing this question, the court acknowledged that state laws imposing substantive requirements on labor conditions, such as wages, are generally not preempted even though they do affect the bargaining process. However, it also pointed out that substantive requirements can be so restrictive that they, rather than the "free play of economic forces ", control the results of that process. (64 F.3d at 501) The court concluded that the ordinance was preempted by the NLRA because it was significantly more invasive into the bargaining process than measures of general applicability such as minimum wage laws or the mandated benefits at issue in Metropolitan. In support of this conclusion, the court stated: "Furthermore, this.type of minimum labor standard enactment, which is not of general application, but targets particular workers in a particular industry and is developed and revised from the bargaining of others, affects the bargaining process in a way that is incompatible with the general goals of the [NLRA]." (64 F3d at 504) The opinion in Bragdon contains some fairly broad language, such as that quoted above, and, therefore, has been relied upon by those contending that various types of labor regulations should be preempted in situations with facts significantly different from those in Bragdon itself. As a result, the opinion has been criticized and narroweda but the core holding — that substantive requirements can be so restrictive that they 5 "No incompatibility exists, therefore, between federal rules designed to restore the equality of bargaining power, and state or federal legislation that imposes minimal substantive requirements on contract terms negotiated between parties to labor agreements, at least so long as the purpose of the state legislation is not incompatible with these general goals of the NLRA." (471 U.S. at 754 -55) 6 See, for example, Associated Builders v. Nunn, 356 F.3d 979 (91h Cir. 2004) (refusing to preempt a State regulation mandating certain minimum wages for apprentices registered in a State program and distinguishing Bragdon based on the general application of the county ordinance compared to the fact that employers could avoid payment of the minimum apprentice wage by hiring apprentices not registered in the State program); Southern Cal. Edison v. Public Util. Comm'n., 140 Cal.App.0 1085 (2006) (declining to follow Bragdon in the context of a PUC order requiring utilities to pay prevailing wages in utility construction projects); and California Grocers Asso. v. City of Los Angeles, 52 Ca1.4'" 177 (2011) (rejecting a contention that Bragdon provides a basis for preempting a local ordinance regulating worker retention following the acquisition of large grocery stores.) ' 16 impermissibly interfere with the bargaining process — has never been questioned. To the contrary, it was addressed and acknowledged to be a viable concern in Fortuna. b. Fortuna. Fortuna involved the Los Angeles ordinance imposing a living wage requirement on hotels located near LAX in an area along Century Boulevard designated the "Airport . Hospitality Enhancement Zone." In support of its Machinists preemption argument, the plaintiff contended that the Los Angeles ordinance, like that invalidated in Bragdon, affected the bargaining process in a much more invasive and detailed fashion than the isolated statutory provisions of general application approved in Metropolitan. The court concluded that the Los Angeles ordinance presented both parallels and differences when compared to the ordinance at issue in Bragdon. The major distinction identified by the court was that the living wage levels set forth in the ordinance were not based on collective bargaining agreements entered into with other employers: "First, and most importantly, the Ordinance at issue in this case is distinguishable from the ordinance in Bragdon because it is not a prevailing wage statute; that is to say, it is not tied to collective bargaining agreements entered into by third parties. In Bragdon, the prevailing wage rate was determined by averaging the rates in collective bargaining agreements in the specific locality. As a result, employers were completely deprived of the ability to pay anything other than the rate that the few major unions had established in that locality. The employer either had to enter into a collective bargaining agreement and pay the collective bargaining rate, or it could pay the prevailing wage, which was determined with reference to collective bargaining agreements established between third parties. Thus, the employers were faced with two options without a distinction, and the end result was to completely eviscerate the purpose of collective bargaining negotiations. By contrast, in the Ordinance at issue here, the living wage is a fixed number that is not tied in any way to collective bargaining agreements between third parties. As a result, an employer can choose to pay the living wage, or it can enter into a collective bargaining agreement. The rates between the two options could be different, or they could be the same.. Even if the negotiated rate turns out to be the same as the living wage, however, there is still an important distinction because the parties had the opportunity to negotiate freely. The important point is that the rate 17 in the Ordinance is not tied directly to the rates established in collective bargaining agreements between third parties." (673 F.Supp.2d at 1009 -10) At the same time, the court noted a significant parallel between the concerns raised by the court in Bragdon and the Los Angeles ordinance: "On the other hand, a significant parallel to be drawn with the ordinance at issue in Bragdon, is that the Ordinance here is not a statewide minimum wage law, but a City ordinance that targets a narrow class of employers. Legitimate concerns exist that employees and unions might focus their efforts to petition the local government for more localized ordinances in order to target individual businesses. This could lead to the result where cities and counties are passing ordinances with such onerous terms that business owners are virtual ly. forced to enter into a collective bargaining agreement in order to pay lower wages. In extreme cases, this could potentially frustrate the purpose of the [NLRA], by substituting the "'free - play of political forces for the free -play of economic forces. "' (See Bragdon, 64 F.3d at 504) In addressing this concern in the case of the Los Angeles ordinance, the court in Fortuna concluded that it did not constitute an "extreme" case because it increased wages only "moderately ": "Although this [the Bragdon issue] is a legitimate concern that could affect whether an ordinance is so restrictive as to interfere with the collective bargaining process in certain cases, the Court finds nb reason to believe that the Ordinance here would have such an effect. The Ordinance increases wages only moderately to approximately $10 per hour, which is most likely not more than most union rates." (673 F.Supp.2d at 1010) The court seemed comfortable with the idea that if the minimum wage rate established through the ordinance was "most likely not more than most union rates," it would not present an "extreme" case. In contrast, the Unite Here proposal would require an increase in minimum wages far in excess of those paid at comparable hotels and even in excess of those paid by union hotels, many of which are able to charge room rates far in excess of those which will be available to the 710 Wilshire hotel. Finally, the Fortuna court also noted that the Ninth Circuit has narrowed the scope of the holding in Bragdon as discussed earlier in this Memorandum. However, as pointed out above, no court has suggested that Bragdon's concern about substituting 10 political forces for economic forces through the imposition of "extreme" substantive measures - is no longer valid. Where Bragdon has been narrowed is its suggestion that a state or local measure which applies only to particular workers or industries may be suspect. In contrast, the court in 520 South Michigan struck down a stringent, narrowly targeted labor regulation citing with approval the analysis in Bragdon. 2. Unite Here's proposal. a. The court's concern in Fortuna is precisely what Unite Here is requesting in the context of the 710 Wilshire DA. Unite Here is targeting an individual business by attempting to use political forces to impose onerous terms, thereby unfairly tilting the playing field against the employer ratherthan relying on standard economic forces to seek a collective bargaining agreement. The Fortuna court was concerned that the Los Angeles ordinance, which applied to hotels near LAX and included a wage rate that was only a moderate increase above the State's minimum wage level, could lead to cities and counties passing ordinances with such onerous terms that business owners would be virtually forced to enter into a collective bargaining agreement in order to pay lower wages and that such a result could frustrate the purpose of the NLRA. The wage rate proposed by Unite Here substantially exceeds rates being paid by comparable Santa Monica hotels and does not distinguish between tipped and non - tipped employees. If the City Council imposes such a mandate, the purpose of collective bargaining negotiations would be eviscerated. Mr. Gorby's (or a future owner's) only practical choice would be to enter into a collective bargaining agreement in order to negotiate more feasible wage rates with the union. Further, there would be no meaningful opportunity for the parties to negotiate the collective bargaining agreement freely because the union would have substantial advantage in negotiations. Unite Here's proposal with its substantially above market wage rate and its failure to distinguish between tipped and non - tipped employees, presents the extreme case discussed in Fortuna. 19 Q The difference between the Los Angeles ordinance upheld in Fortuna and the position taken by Unite Here could not be clearer. In upholding the Los Angeles ordinance, the Fortuna court relied on the fact that the wage in issue (approximately $10 per hour) was only a moderate increase above the State's minimum wage rate. (673 F.Supp.2d at 1010) The Fortuna court indicated that there is a legitimate concern that an ordinance could be so restrictive as to. interfere with the collective bargaining process. Id. The wage proposed by Unite Here at the January 25, 2012 Planning Commission meeting was approximately $15 per hour -- substantially above the wages at comparable Santa Monica hotels .7 Such a wage would impermissibly interfere with the collective bargaining process. This is particularly true for tipped employees, who under Unite Here's proposal, would be entitled to nearly double the typical wage for such employees in Santa Monica's union hotels. Unite Here could contend that basing the DA rate on union rates should shield it from the preemption attack. The problem with this position in the context of the 710 Wilshire project is that the prevailing union rates in Santa Monica hotels are generally established in the context of more upscale hotels such as the Fairmont Miramar, Loew's Santa Monica Beach Hotel and the Viceroy which are able to charge much higher room rates than the proposed hotel is projecting. More comparable hotels such as the Santa Monica Doubletree and the Shore Hotel, which charge much lower room rates than the more upscale hotels, do not pay wages similar to those hotels. in order to fairly measure the "extreme" nature of the proposed wage level, it is necessary to compare it to hotels that will operate in a similar niche. The minimum wage rate for non - tipped employees at Santa Monica's union hotels (which are predominantly luxury hotels) varies from $9.15 per hour to $14.10 per hour, the minimum wage rates for comparable non -union hotels ranges from $9.50 to $10.25 per hour and the minimum wage rate for tipped employees at Santa Monica's union hotels is $8.00 per hour. (PKF Report, p. 4) 20 The context here makes the point. Unite Here has been attempting for many years to expand its base in Santa Monica, occasionally with success (Fairmont Miramar and Loew's), occasionally with assistance from the City (Viceroy) and occasionally without success (Doubletree). In 2001, it supported a living wage ordinance (which was rejected by the voters in a referendum election) which would have applied to selected businesses and included an "opt -out" provision such as is suggested for the DA. Unite Here has been involved with the 710 Wilshire project since the beginning of the public review process. It has persistently attempted to secure a Neutrality Agreement with Mr. Gorby which would effectively lead to the hotel becoming a union hotel because the hotel's owner would be prohibited from directly or indirectly opposing unionization and would be required to allow the union to organize on the hotel premises. (See Section LA above and Exhibits "D % "G" and "I ") Mr. Gorby has declined to sign the Neutrality Agreement. In an effort to pressure Mr. Gorby to sign a Neutrality Agreement and /or convince the City to impose an infeasible living wage provision with an "opt -out" if the hotel unionizes, Unite Here has criticized the project at public hearings and through letters to both the City Council and the Planning Commission. (See Section LA above and Exhibits "H" and "M ") Unite Here has consistently advocated for a DA- imposed living wage rate that is well above market rates for comparable hotels. At the January 25, 2012 Planning Commission hearing, Unite Here advocated for a rate of around $15 per hour. And, at the May 25, 2010 City Council float -up hearing, Unite Here claimed that it was looking for a wage rate that was not going to undermine union workers. However, PKF has documented the minimum wage rates at Santa Monica's union hotels as $8 per hour for tipped employees and between $9.15 and $14.10 for non - tipped employees. (PKF 21 Report, p. 4) Thus, Unite Here's requested $15 per hour is above even the highest minimum wage rate paid to employees at Santa Monica's more upscale union hotels. In addition to advocating for an extremely high wage rate, Unite Here is attempting to gain tremendous leverage in the collective bargaining negotiations by requesting that the City apply the rate uniformly to both tipped and non - tipped employees. Unite Here opposes City Staff's recommendation to exclude certain tipped employees from the living wage provision. (See Unite Here's Memorandum to the Planning Commission and February 15, 2012 public comments made by Ms. Torres) However, even Santa Monica's union hotels, which are predominantly upscale hotels, set the minimum wage rate for tipped employees at the State's minimum of $8.00. (PKF Report, p. 4) At the January 25, 2012 Planning Commission hearing, Rachel Torres of Unite Here pointed out that hotels in other cities opt out of city- imposed living wage provisions by entering into collective bargaining agreements in part to gain the ability to distinguish between tipped and non - tipped employees. Following their game plan, Unite Here is attempting to convince the City to impose an extreme living wage provision in order to eliminate one of Mr. Gorby's economic tools (i.e. to offer above market, but feasible wages) and force Mr. Gorby's hand to negotiate a collective bargaining agreement. If the City Council includes the living.wage provision proposed by Unite Here in the 710 Wilshire DA, the provision would be preempted by the NLRA. Unite Here's strategy with respect to the 710 Wilshire hotel project is clear. Rather than rely on traditional organizing and negotiating strategies, it wants the City Council to.mandate onerous and extreme wage levels which, with the collective bargaining opt -out provision, will leave the hotel owner with no practical choice but to unionize and will provide Unite Here with substantial leverage in the collective bargaining negotiations. Such a strategy asks the City to use its governmental power in exactly the manner warned against by the courts in Bragdon and Fortuna to undermine fundamental policies of the NLRA. 22 I I It Hotel Living Wage. (i) The purpose of this Section 2.8 is to ensure that Hotel worker, receive fair and reasonable compensation comparable to similar hotels in Santa Monica and nearby communities without putting the Hotel at a competitive disadvantage in its hourly labor rates in comparison to such other hotels. (H) To the extent they are working at the Property, all workers performing Hotel Use services (exclusive ofworkers for any on -site vehicle rental agency), whether as employees ofthe Hotel or as employees of contractor providing Hotel Use services within the Hotel, shall be covered by this Section 2.8: except that managers, supervisors, tipped employem (e-g, concierge, bell staff room service delivery stag bartenders, and food or beverage wait stalfand bus sarvers� confidential employees, and any employee required to possess sn occupational license shall be excluded from this Section 2.8. The Parties agree that as used in this Section, the term "tipped employee" does not include housekeepers, regardless of whether they may occasionally receive tips. (iii) Workers covered by this Section 2.8 shall be paid at least the minimum hourly wage rate specified herein as a Hotel Living Wage. The amount of the Hotel Living Wage required by this Section is $10.64 per hour with health benefits (ifthese benefits consist ofthe payment ofat least $1.25 per hour towards the provision ofhealth cane benefits) or $11.89 per hour without health benefits as ofthe Effective Date. (iv) The Hotel Laving Wage minimum hourly rate required by this Section shall be adjusted annually each July 1st, beginning with July 2013. The minimum Hotel Living Wage rate shall continue to be adjusted annually by an amount corresponding to theprevious year's change (January to January) in the United States Department of Labor, Bureau ofLabor Statistics ConsumerPrice Index forUrbau Wage Eamers and Clerical Workers 1967 =100 forthe Los Angeles - Riverside range County Region of California (the "CPP') (h9pJ/wwwbls.sov/ro9 /news.hk A ruing an initial homiy rate of$10.64 per hour with health benefits of at least $1.25 per hour or $11.89 per hour without health benefits agofthe month and year in which the Et%ctive Date falls. In the event the compilation and/or publication ofthe CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then an index most nearly the same as the CPI shall be used to make such calculation, as reasonably determined by Developer. (v) The provisions of this Section 2.8 may be waived, in or in part, in a bona fide collective bargaining agreement, but only ifand to the extent the waiver is explicitly set forth in such agreement in clear and unambiguous terms Unilateral implementation o£terms and conditions of employment by eid=party to a collective bargaining relationship shall not constitute, or be permitted as, awaiver ofail of any part ofthe provisions of this Section 2.8. (vi) Periodic Review of Hotel Living Wage: Each three years, beginning on July 1, 2015, and on each three year anniversary date thereafter (July 1, 2018, etc.), Developer.may request in writing that the City Manager orhisiber designee review and reduce the Hotel Living Wage then in effect Developer shall file any such request within 120 days prior to July 1st ofthe year in question. Following receipt ofsuch request, the City Manager shall commission the preparation ofa wage study documenting the wages paid to hotel workers in Santa Monica and nearby communities and any other analysis that the City Manager determines is reasonably necessary to assess Developes request The cost of said study shall be borne by Developer. _ The City Manager shalt reader a final decision on Developer's request for a reduced Hotel Living Wage within 90 days ofthe receipt of the final wage study. The City Manager's decision shall be guided by the statement of purpose contained in Section 2.8(1) above. The City Manager's decision shall set forth its reasoning and be based upon the data obtained concerning hotel workers' wages in Santa Monica and nearby communities Any reduction to the Hotel Living Wage then in effect which the City Manager deten nes is warranted and which does not exceed ten percent (10%) shall be considered a MinctrModification to the Project Any reduction to the Hotel Living Wage which the City Manager dewnnh = is warranted and which exceeds ten pmeat (l o%) shall be considered a Major Modification and would therefore require an amendment to this Agreement unless the Developer elects to limit the decrease to no more than ten percent. In no event shall the City Manager use Developer's request as an opportunity to increase the Hotel Living Wage above the initial Hotel Living Wage as adjusted by the CPI formula specified in Section 2.8(iv). (vii) In the event the City adopts aLiving Wage Ordinance of general application to hotels located within the City, then The provisions ofthis Section 2.8 shall, automatically be of no further force and effect Alternatively, Developer shall have the right to elect to terminate this Section 2.8, effective 60 days after providing the City with written notice in accordance with this Agreement, in the event: (x) the City approves a development agreement for the construction of a new hote) or replacement hotel in the Downtown District (as defined in the LUCE) that, as of January 23, 2012, had a development agreement application or a float-up request pending, and (y) any such development agreement does not include a comparable living wage obligation, and (z) the hotel covered by such development agreement is not otherwise party to either an existing and on -going bona fide collective bargaining agreement or a labor union neutrality agreement for hotel workers. ( viii) if not terminated any earlier, this Section 2.8 shall automatically expire pad be of no further force or effect upon expiration of the term of this Agreement. 11MIM" Susie Kim Subject: FW: RE: 710 Wilsire Hotel Project - - - -- Original Message---- - From: rtorresnunitehereII.orE [mailto:rtorres( uniteherell.orEl Sent: Wednesday, May 26, 201012:00 PM To: Ken Kutcher Cc: dsmith@uniteherell.org Subject: 710 Wilsire Hotel Project Hi Kenneth, It was a pleasure meeting you last night. We look forward to discussing the project further and seeing how we can collaborate on this development. If possible, could you send us a few dates in mid -June that work well for you, and your colleagues? We would happy to come to your office in Santa Monica. Thanks, Rachel Rachel Torres Research Analyst UNITEHEREI Local 11 464 S. Lucas Avenue, Suite 201 Los Angeles, CA 90017 Phone:(213) 481 -8530, Ext, 275 Fax: (213) 481 -0352 --- -- End forwarded message - - -- Rachel Torres Research Analyst UNITEHEREI Local 11 464 S. Lucas Avenue, Suite 201 Los Angeles, CA 90017 Phone:(213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext, 275 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local I I 464 S. Lucas Ave., Suite 201 Los Angeles, CA 9001.7 Phone: (213) 481 -8530, Ext. 275 Fax: (213)481 -0352 Ken Kutcher From: Rachel Torres [rtorres @uniteherel l.orgj Sent: Monday, July 12, 201011:44 AM To: Ken Kutcher Subject: Re: RE: 710 Wilslre Hotel Project Hi Ken, I wanted to check in and see where we are in meeting. I know that we have many folks on vacation in the next fews weeks and throughout August. Perhaps we could set a tentative time in late August or early September. If this should work for you and your team, please let me know. Thanks! Rachel, Thank you for the overture. I hope to meet with our project team later this week or early next week. Unfortunately, two persons are currently out of town. I will re- connect with you after that internal meeting to talk about next steps, including timing for meetings as appropriate, Thank you for offering to come to Santa Monica. I look forward to a productive dialogue and exchange of ideas. Ken Kenneth L. Kutcher Harding Larmore Kutcher & Kozal, LLP 1250 6th Street, Suite 200 Santa Monica, CA 90401 t: (310) 451 -3669 f: (310) 392 -3537 - - - -- Original Message--- - From: rtorresOunitehereI lore [mailto:rtotresftnitehereI Lorg] Sent: Wednesday, May 26, 2010 12:00 PM To: Ken Kutcher Cc: dsmith(&uniteherel Lorg Subject: 710 Wilsire Hotel Project Hi Kenneth, It was a pleasure meeting you last night. We look forward to discussing the project further and seeing how we can collaborate on this development. if possible, could you send us a few dates in mid -June that work well for you and your colleagues? We would happy to come to your office in Santa Monica. Thanks, Rachel Rachel Torres Research Analyst UNiTEHERE! Local 11 464 S. Lucas Avenue, Suite 201 Los Angeles, CA 90017 Phone:(213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 - - - -- End forwarded message - - - -- Rachel Torres Research Analyst UNITEHERE! Local 11 464 S. Lucas Avenue, Suite 201 Los Angeles, CA 90017 Phone:(213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 .�I�i�Ir�� ►�� Page 1 of 1 You forwarded this message on 2/22/2012 3:18 PM. Attachments can contain viruses that may harms your computer. Attachments may not display correctly. From: Rachel Torres [rtorres @uniteherell.org] Sent: Frl 214/20114:00 PM Tor Chris Harding Cc: Subject: 710 Wilshire Hotel Project Follow Up Attachments: , Card Check Neutrality Aereement.dod56KB) Hl Chris, It was a pleasure meeting you and your team to discuss the project. Attached please find the card check neutrality agreement for the hotel component of the project. Please review the agreement. As we discussed at the meeting, we took forward to meeting the developer directly and discussing the agreement further. Would anytime Monday, February 28th or Thursday, March Id work for you and your client? If you should have any questions or concerns, please de not hesitate to call me. Thank you for your attention in this matter. Best regards, Rachel Torres Research Analyst Unite Here Local 11 - 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext, 275 Fax: (213)4B1 -0352 https: // mail. hlml aw. com /exchangelharding/Inbox(Gorby /710 %20 Wilshire %20Hotel %20Pr....2 /22/2012 MEMORANDUM OF AGREEMENT THIS AGREEMENT is made and entered into by and between Maxser and Company, LLC (hereinafter the "Employer "), and UNITE HERE! Local I I (the "Union "). 1. This Agreement shall cover all,employees employed in classifications listed in Exhibit A, or in classifications called by different names when performing similar duties, (referred to hereinafter as "Employees ") at a hotel to be located at or near 710 Wilshire Boulevard in Santa Monica, CA (hereinafter referred to as the "Hotel ") which during the term of this Agreement is owned by, operated by or substantially under the control of the Employer. The term "Employer" shall be deemed to include any person, firm, partnership, corporation, joint venture or other legal entity substantially under the control of. (a) the Employer covered by this Agreement; (b) one or more principal(s) of the Employer covered by this Agreement; (c) a subsidiary of the Employer covered by this Agreement; or (d) any person, firm, partnership, corporation, joint venture or other legal entity which substantially controls the Employer covered by this Agreement. 2. The parties hereby establish the following procedure for the purpose of ensuring an orderly environment for the exercise by the Employees of their rights under Section 7 of the National Labor Relations Act and to avoid picketing and/or other economic action directed at the Employer in the event the Union decides to conduct an organizing campaign among Employees. 3. The parties mutually recognize that national labor law guarantees employees the right to form or select any labor organization to act as their exclusive representative for the purpose.of collective bargaining with their employer, or to refrain from such activity. 4. The Employer will take a positive approach to unionization of Employees. The Employer will not do any action nor make any statement that will directly or indirectly state or imply any opposition by the Employer to the selection by such Employees of a collective bargaining agent, or preference for or opposition to any particular union as a bargaining agent. S. The Union and its representatives will not coerce or threaten any Employee in, an effort to obtain authorization cards. 6. Whenever the Employer finds it necessary to hire new Employees for vacancies in job classifications covered by this Agreement at the Hotel, the Employer shall notify the Union to request applicants for such vacancies. When requesting applicants, the Employer shall state the qualifications applicants are expected to possess, The Union may furnish applicants for the job vacancies specified by the Employer. The Union's selection of applicants for referral shall be on a non - discriminatory basis and shall not be based upon or in any way affected by membership in the Union or the Union's bylaws, rules, regulations, constitutional provisions, or any other aspects or obligation of Union membership policies or requirements, or upon personal characteristics of an applicant where discrimination based upon such characteristics is prohibited bylaw. The Employer agrees that any interest demonstrated by an applicant in joining the Union shall not constitute grounds for discriminatory or disparate treatment nor adversely impact the applicant's ability to be hired by the Employer. The Employer shall be the sole judge of an applicant's suitability, competence and qualifications to perform the work of any job to be filled. 7. If the Union provides written notice to the Employer of its intent to organize Employees covered by this Agreement, the Employer shall provide access to its premises and to such Employees by the Union. The Union may engage in organizing efforts in non - public areas of the Hotel during Employees' non - working times (before work, after work, and during meals and breaks) and/or during such other periods as the parties may mutually agree upon. "Organizing" includes communicating with Employees before and after recognition of the Union as provided in Paragraph 9. 8. Within ten (10) days following receipt of written notice of intent to organize Employees, the Employer will furnish the Union with a complete list of Employees, including both full and part-time Employees, showing their job classifications, departments and addresses. Thereafter, the Employer will provide updated complete lists monthly. 9. The Union is not presently recognized as the exclusive collective bargainina representative of the Employees. The Union may request recognition as the exclusive collective bargaining agent for such Employees. The Arbitrator identified in Paragraph 14, or another person mutually agreed to by Employer and Union, will conduct a review of Employees' authorization cards and membership information submitted by the Union in support of its claim to represent a majority of such Employees.. if that review establishes that a majority of such Employees has designated the Union as their exclusive collective bargaining representative or joined the Union, the Employer will recognize the Union as such representative of such Employees. The Employer will not file a petition with the National Labor Relations Board for any election in connection with any demands for recognition provided for in this agreement or file a notice of voluntary recognition with the NLRB, so that the decision of when and whether to provide such notice is within the sole discretion of the Union. If the Union notifies the NLRB of recognition pursuant to this Agreement, the Employer shall post the NLRB notice of recognition in accordance with the instructions from the NLRB immediately upon receipt of the notice. The Union and the Employer agree that if any other person or entity petitions the National Labor Relations Board for any election as a result of or despite recognition of the Union pursuant to this Paragraph, (a) if the NLRB notice has been posted for 45 days before the petition is filed (a condition that applies only to this subparagraph (a)), the Employer and the Union will each request that the NLRB .dismiss the petition on grounds of recognition bar or, if they have agreed to a collective bargaining agreement covering Employees at the time the petition is filed, on grounds of contract bar, (b) if the petition is not dismissed, the Employer and the Union shall agree to a full consent election agreement under Section 102.62(c) of the NLRB's Rules and Regulations, and (c) the Employer and the Union shall at all times abide by the provisions of this Agreement except that the Union may file unfair labor practice charges.. Except as provided above, the Union and the Employer will not file any charges with the National Labor Relations Board in connection with any act or omission occurring within the context of this agreement; arbitration under Paragraph 14 shall be the exclusive remedy. 10. If the Union is recognized as the exclusive collective bargaining representative as provided in paragraph 9, negotiations for a collective bargaining agreement shall be commenced immediately_and conducted diligently and in good faith to the end of reaching agreement expeditiously. If the parties are unable to reach agreement on a collective bargaining agreement within 90 days after recognition pursuant to Paragraph 9, all unresolved issues shall be submitted for resolution to final and binding arbitration pursuant to Paragraph 14. The arbitrator identified in paragraph 14 below shall be the arbitrator, unless another arbitrator is mutually agreed to by the. parties. The arbitrator shall be guided by the following considerations: a) Employer's financial ability; b) size and type of the Employer's operations; c) cost of living as it affects the Employer's employees; d) ability of the employees, through the combination of wages, hours and benefits, to earn a living wage to sustain themselves and their families; and e) employees' productivity. The collective bargaining agreement shall include the terms and conditions complete collective bargaining afeement. 11. During the term of this Agreement, the Union will not engage in picketing or other economic activity at the Hotel, and the Employer will not engage in a lockout of the Employees. Notwithstanding the termination provision above, if the Employer recognizes any union besides Union as the exclusive collective bargaining representative of Employees, or any of them, this paragraph shall terminate immediately and without notice. 11. In the event that the Employer sells, transfers, or assigns all or any part of its right, title, or interest in the Hotel or substantially all of the assets used in the operation of the Hotel, or in the event there is a change in the form of ownership of the Employer, the Employer shall give the Union reasonable advance notice thereof in writing, and the Employer further agrees that as a condition to any such sale, assignment, or transfer, the Employer will obtain from its successor or successors in interest a written assumption of this Agreement and furnish a. copy thereof to the Union, in which event the assignor shall be relieved of its obligations hereunder to the extent that the assignor has fully transferred its right, title, or interest. 13. The Employer shall incorporate the entirety of paragraphs 4,6, 7, 8, 9, and 10 of this of Agreemeril in any contract, subcontract, lease, sublease, operating agreement, franchise .agreement or any other agreement or instrument giving a right to any person to operate any enterprise in the Hotel employing employees in classifications listed in Exhibit A, or in classifications called by different names when performing similar duties, and shall obligate any person taking such interest, and any and all successors and assigns of such person, to in turn incorporate said paragraphs in any further agreementor instrument giving a right as described above. The Employer shall enforce such provisions, or at its option, assign its rights to do so to the Union. The Employer shall give the Union written notice of the execution of such agreement or instrument and identify the other party(ies) to the transaction within 15 days after the agreement or instrument is signed. The terms "Employer" and "Hotel" shall be modified in such agreement or instrument to conform to the terminology in such agreement or instrument but retain the same meaning as in this Agreement, and the terms "Employer" and `Employees" as used herein shall be modified to refer, respectively, to the person or persons receiving a right to operate an enterprise in the Hotel and the employees of such person or persons. 14. The parties agree that any disputes over the interpretation or application of this Agreement shall be submitted to expedited and binding arbitration, with serving as the arbitrator. If he.is unavailable to serve within thirty (30) calendar days of notification then , or another mutually acceptable person, shall be the arbitrator. The arbitrator shall have the authority to determine the arbitration procedures to be followed. The arbitrator shall also have the authority to order the non - compliant party to comply with this Agreement. The parties hereto agree to comply with any order of the arbitrator, which shall be final and binding. The United States District Court for the • District of shall have exclusive jurisdiction in any action concerning arbitration under this Agreement. The parties consent to the entry of any order of the arbitrator as the order or judgment of the Court, without entry of findings of fact and conclusions of law. 15. This Agreement shall be in full force and effect from the date it is fully executed on behalf of the Employer and the Union until four years from the full public opening of the hotel, or if sooner upon execution of a collective bargaining agreement or issuance of an interest arbitration award which concludes the collective bargaining agreement negotiations, either of which explicitly supersedes this document. IN WITNESS WHEREOF, the parties hereto by their duly designated representatives have hereunto set their hands. FOR THE EMPLOYER: Maxser and Company, LLC in Its: FOR THE UNION: UNITE HERE! Local l l . Its: Date: Date: EXHIBIT A All regular full -time and regular part-time hotel service, housekeeping, food and beverage, and laundry employees (including room cleaners, housepersons, bell persons, telephone operators, kitchen employees, servers, bussers, bartenders, cashiers, hosts, concierges, and laundry workers, and front desk, recreational, and parking employees) employed by the Employer at the Hotel, but excluding all secretarial, office clerical, sales, and maintenance employees and all managers, supervisors, and guards as defined in the National Labor Relations Act. Page 1 of 2 you forwarded this message on 2/90114:46 PM. Attachments can contain viruses that may ham your comouter. Attachments may not display correctly, From; Rachel Torres frtorres @uniteherell,org) Sent; Wed 2/9120113:24 PM' To; Chris Harding Cc: Subject: Re: 710 Wilshire Hotel Project follow Up Attachments: -1 Card Check Neutrality Aoreement.docf56K8S Thanks, Chris. I realized that 1 sent the agreement without Indicating the arbitrators and court in which any legal issue would he heard. This agreement comes from our athmey in Washington, DC, and so we were asked to Indicate who we use locally in LA. The two arbitrators who have handled the majority of these agreements are Fred Horowitz and Gerald McKay. The court, of course, Is the Central District of California. Attached is the revised copy with these changes only. We look forward to meeting you and your team soon. On Wed, Feb 9, 2011 at 8:56 AM, ChrisHardfng 0ardina0hlkklaw.com> wrote: Dear Rachel, .Thank you for your email. I have forwarded your email and the attachments to Mr. Gorby and his project team, and we will be discussing it. I will then contact you. Sincerely, Chris Christopher M. Harding HARDING LARMORE KUTCHER & KOZAL. LLP 1250 Gib Street, Suite 200 Santa Monica. CA 90401 T: (310) 451 -2968 F: (310) 392 -3537 NOTICE OF DISTRIBUTION: This e-mail message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any information contained in it) to anyone. If you have received this message in error., please advise the sender by reply e -mail and delete this message. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. From: Rachel Torres [mailto :rtorresOuniteherell.orol Sent: Fri 2/4/20114 :00 PM To: Chris Harding Subject: 710 Wilshire Hotel Project Follow Up HI Chris, It was a pleasure meeting you and your team to discuss the project. Attached please find the card check neutrality agreement for the hotel component of the project. Please review the agreement. As we dscussed at the meeting, we look forward to meeting the developer directly and discussing the agreement further. Would anytime Monday, February 28th or Thursday, March 3rd work for you and your client? If you should have any questions or concerns, please do not hesitate to call me, Thank you for your attention In this matter. Best regards. https : /lmail.hlmlaw.com/ exchange /harding/Inboxt Gorby/ Re:%20710%20Wilshireolo20Hot... 2/22/2012 Page 2 of 2 Rachel Torres Research Analyst Unite Here Local 11 - 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481.8530, Ext. 275 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 https : / /mail.hlmlaw.coml exchange lhardingllnboxIGorby /Re: %20710 %2OWilshirelo2OHot... 2/22/2012 MEMORANDUM OF AGREEMENT THIS AGREEMENT is made and entered into by and between Maxser and Company, LLC (hereinafter the "Employer "), and UNITE HERE! Local 11 (the "Union "). 1. This Agreement shall cover all employees employed in classifications listed in Exhibit A, or in classifications called by different names when performing similar duties, (referred to hereinafter as "Employees ") at a hotel to be located at or near 710 Wilshire Boulevard in Santa Monica, CA (hereinafter referred to as the "Hotel ") which during the term of this Agreement is owned by, operated by or substantially under the control of the Employer. The term "Employer" shall be deemed to include any person, firm, partnership, corporation, joint venture or other legal entity substantially, under the control of: (a) the Employer covered by this Agreement; (b) one or more principal(s) of the Employer covered by -this Agreement; (c) a subsidiary of the Employer covered by this Agreement; or (d) any person, firm, partnership, corporation, joint venture or other legal entity which substantially controls the Employer covered by this Agreement. 2. The parties hereby establish the following procedure for the purpose of ensuring an orderly environment for the exercise by the Employees of their rights under Section 7 of the National Labor Relations Act and to avoid picketing and/or other economic action directed at the Employer in the event the Union decides to conduct an organizing campaign among Employees. 3. The parties mutually recognize that national labor law guarantees employees the right to form or select any labor organization to act as their exclusive representative for the purpose of collective bargaining with their employer, or to refrain from such activity. 4. The Employer will take a positive approach to unionization of Employees. The Employer will not do any action nor make any statement that will directly or indirectly state or imply any opposition by the Employer to the selection by such Employees of a collective bargaining agent, or preference for or opposition to any particular union as a bargaining agent. 5. The Union and its representatives will not coerce or threaten any Employee in an effort to obtain authorization cards. d. Whenever the Employer finds it necessary to hire new Employees for vacancies in job classifications covered by this Agreement at the Hotel, the Employer shall notify the Union to request applicants for such vacancies. When requesting applicants, the Employer shall state the qualifications applicants are expected to possess. The Union may furnish applicants for the job vacancies specified by the Employer. The Union's selection of applicants for referral shall be on a non - discriminatory basis and shall not be based upon or in any way affected by membership in the Union or the Union's bylaws, rules, regulations, constitutional provisions, or any other aspects or obligation of Union membership policies or requirements, or upon personal characteristics of an applicant where discrimination based upon such characteristics is prohibited by law. The Employer agrees that any interest demonstrated by an applicant in joining the Union shall not constitute grounds for discriminatory or disparate treatment nor adversely impact the applicant's ability to be hired by the Employer. The Employer shall be the sole judge of an applicant's suitability, competence and qualifications to perform the work of any job to be filled. 7. If the Union provides written notice to the Employer of its intent to organize Employees covered by this Agreement, the Employer shall provide access to its premises and to such Employees by the Union. The Union may engage in organizing efforts in non - public areas of the Hotel during Employees' non - working times (before work, after work, and during meals and breaks) and/or during such other periods as the parties may mutually agree upon. "Organizing" includes communicating with Employees before and after recognition of the Union as provided in Paragraph 9. 8. . Within ten (10) days following receipt of written notice of intent to organize Employees, the Employer will furnish the Union with a complete list of Employees,. including both fall and part -time Employees, showing their job classifications, departments and addresses. Thereafter, the Employer will provide updated complete lists monthly. 9. The Union is not presently recognized as tile exclusive collective baz ammg representative of the Employees. The Union may request recognition as the exclusive collective bargaining agent for such Employees. The Arbitrator identified in Paragraph 14, or another person mutually agreed to by Employer and Union, will conduct a review of Employees' authorization cards and membership information submitted by the Union in support of its claim to represent a majority of such Employees. If that review establishes that a majority of such Employees has designated the Union as their exclusive collective bargaining representative or joined the Union, the Employer will recognize the Union as such representative of such Employees, The Employer will not file a petition with the National Labor Relations Board for any election in connection with any demands for recognition provided for in this agreement or. file a notice of voluntary recognition with the NLRB, so that the decision of when and whether to provide such notice is within the sole discretion of the Union. If the Union notifies the NLRB of recognition pursuant to this Agreement, the Employer shall post the NLRB notice of recognition in accordance with the instructions from the NLRB immediately upon receipt of the notice. The Union and the Employer agree that if any other person or entity petitions the National Labor Relations Board for any election as a result of or despite recognition of the Union pursuant to this Paragraph, (a) if the NLRB notice has been posted for 45 days before the petition is filed (a condition that applies only to this subparagraph (a)), the Employer and the Union will each request that the NLRB dismiss the petition on grounds of recognition bar or, if they have agreed to a collective bargaining agreement covering Employees at the time the petition is filed, on grounds of contract bar, (b) if the petition is not dismissed, the Employer and the Union shall agree to a full consent election agreement under Section 102.62(c) of the NLRB's Rules and Regulations, and (c) the Employer and the Union shall at all times abide by the provisions of this Agreement except that the Union may file unfair labor practice charges.. Except as provided above,Jhe Union and the Employer will not file any charges with the National Labor Relations Board in connection with any act or omission occurring within the context of this agreement; arbitration under Paragraph 14 shall be the exclusive remedy. 10. If the Union is recognized as the exclusive collective bargaining representative as provided in paragraph 9, negotiations for a collective bargaining agreement shall be commenced immediately_and conducted diligently and in good faith to the end of-reaching agreement expeditiously. If the parties are unable to reach agreement on a collective bargaining agreement within 90 days after recognition pursuant to Paragraph 9, all unresolved issues shall be submitted for resolution to final and binding arbitration pursuant to Paragraph 14. The arbitrator identified in paragraph 14 below shall be the arbitrator, unless another arbitrator is mutually agreed to by the parties. The arbitrator shall be guided by the following considerations: a) Employer's financial ability; b) size and type of the Employer's operations; c) cost of living as it affects the Employer's employees; d) ability of the employees, through the combination of wages, hours and benefits, to cam a living wage to sustain themselves and their families; and e) employees' productivity. The collective bargaining agreement shall include the terms and conditions contained in Exhibit B, which shall not be effective until the parties reach agreement on a complete collective bargaining agreement. 11. During the term of this Agreement, the Union will not engage in picketing or other economic activity at the Hotel, and the Employer will not engage in a lockout of the Employees. Notwithstanding the termination provision above, if the Employer recognizes any union besides Union as the exclusive collective bargaining representative of Employees, or any of them, this paragraph shall terminate immediately and without notice, 12. In the event that the Employer sells, transfers, or assigns all or any part of its right, title, or interest in the Hotel or substantially all of the assets used in the operation of the Hotel, or in the event there is a change in the form of ownership of the Employer, the Employer shall give the Union reasonable advance notice thereof in writing, and the Employer further agrees that as a condition to any such sale, assignment, or transfer, the Employer will obtain from its successor or successors in interest a written assumption of this Agreement and furnish a copy thereof to the Union, in which event the assignor shall be relieved of its obligations hereunder to the extent that the assignor has fully transferred its right, title, or interest. 13. The Employer shall incorporate the entirety of paragraphs 4,6, 7, 8, 9, and 10 of this of Agreement in any contract, subcontract, lease, sublease, operating agreement, franchise agreement or any other agreement or instrument giving a right to any person to operate any enterprise in the Hotel employing employees in classifications listed in Exhibit A, or in classifications called by different names when performing similar duties, and shall obligate any person taking such interest, and any and all successors and assigns of such person, to in turn incorporate said paragraphs in any further agreement or instrument giving a right as described above. The Employer shall enforce such provisions, or at its option, assign its rights to do so to the Union. The Employer shall give the Union written notice of the execution of such agreement or instrument and identify the other party(ies) to the transaction within 15 days after the agreement or instrument is signed. The terms "Employer" and "Hotel" shall be modified in such agreement or instrument to conform to the terminology in such agreement or instrument but retain the same meaning as in this Agreement, and the terns "Employer" and "Employees" as used herein shall be modified to refer, respectively, to the person or persons receiving a right to operate an enterprise in the Hotel and the employees of such person or persons. 14. The parties agree that any disputes over the interpretation or application of this Agreement shall be submitted to expedited and binding, arbitration, with Fred Horowitz serving as the arbitrator. If he is unavailable to serve within thirty (30) calendar days of notification then Gerald McKay, or another mutually acceptable person, shall be the arbitrator. The arbitrator shall have the authority to determine the arbitration procedures to be followed. The arbitrator shall also have the authority to order the non - compliant party to comply with this Agreement. The parties hereto agree to comply with any order of the arbitrator, which shall be final and binding. The United States District Court for the Central District of shall have exclusive jurisdiction in any action concerning arbitration under this Agreement. The parties consent to the entry of any order of the arbitrator as the order or judgment of the Court, without entry of findings of fact and conclusions of law. 15. This Agreement shall be in full force and effect from the date it is fully executed on behalf of the Employer and the Union until four years from the full public opening of the hotel, or if sooner upon execution of a collective bargaining agreement or issuance of an interest arbitration award which concludes the collective bargaining agreement negotiations, either of which explicitly supersedes this document. IN WITNESS WHEREOF, the parties hereto by their duly designated representatives have hereunto set their hands. FOR THE EMPLOYER: Maxser and Company, LLC LN Its: FOR THE UNION: UNITE HERE! Local 11 By: Its: Date: Date: Is};fifi4tlj All regular full -time and regular part -time hotel service, housekeeping, food and beverage, and laundry employees (including room cleaners, housepersons, bell persons, telephone operators, kitchen employees, servers, bussers, bartenders, cashiers, hosts, concierges, and laundry workers, and front desk, recreational, and parking employees) employed by the Employer at the Hotel, but excluding all secretarial, office clerical, sales, and maintenance employees and all managers, supervisors, and guards as defined in the National Labor Relations Act. Page I of 2 on 5/512011 12:01 PM. From: Rachel Torres frtorres @uniteherell.org] Sant: Mon 5/2/20114:44 PM To: Chris Harding Cc: Subject: Re: 710 Wilshire Hotel Project Follow Up Attachments: HI Chris, I wanted to check In with you on scheduiingour follow up meeting. Have you and your team been able to discuss the agreement? We would be happy to answer any questions you may have as well as meet Mr. Gorby In person, If possible, please let me know or two or three dates that work In next few weeks, and I will coordinate on our end. Thanks again, Rachel On Wed, Feb 9, 2011 at 3,24 PM, Rachel Torres <rtorres0uniteherelIx > wrote; Thanks, Chris. I realized that I sent the agreement without Indicating the arbitrators and court In which any legal Issue would he heard. This agreement comes from our athmey In Washington, DC, and so we were asked to Indicate who we use locally In IA. The two arbitrators who have handled the majority or these agreements are Fred Horowitt and Gerald McKay. The court, of course, is the Central District of Califomia. Attached Is the revised copy with these changes only. We look forward to meeting you and your team soon. On Wed, Feb 9, 2011 at 8:56 AM, Chris Harding <hardinaftIkkiaw.cam> wrote: Dear Rachel, Thank you for your email. I have forwarded your email and the attachments to Mr. Gorby and his project team, and we will be discussing it. I will then contact you, Sincerely, Chris Christopher M. Harding HARDING LARN40RE KUTCHER & KOZAL, LLP 1250 6th Street, Suite 200 Santa Monica. CA 90401 T: (310) 451 -2988 F: (310) 392 -3537 NOTICE OF DISTRIBUTION This e-mail message contains information that may be confidentia( and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any information contained in it) to anyone. If you have received this message in error, please advise the sender by reply e-mail and delete this message. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. From: Rachel Torres [mailto:rtorres@uniteherelLoral Sent: Fri 2/4/20114:00 PM To: Chris Harding subject: 710 Wilshire Hotel Project Follow Up Hi Chris, It was a pleasure meeting you and your team to discuss the project. Attached please and the card check neutrality agreement https:// mait.himlaw .cotnlexchangelhardifigllnboxI Gorby /Re: %20710 %2O Wilshirelo2OHot... 2/22/2012 Page 2 of 2 for the hotel component of the project. Please review the agreement. As we discussed at the meeing, we look forward to meeting the developer directly and discussing the agreement further. Would anytime Monday, February 28th or Thursday, March 3rd work for you andyour dient? If you should have any questions of concerns, please do not hesitate to call me. Thank you for your attention in this matter. Best regards. Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (2131481 -8530. Ext. 275 Fax: (2133) 481-0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530. Ext. 275 Fax: (213) 481-0352 iachel Torres 2esearch Analyst Jnite Here Local 11 964 S. Lucas Ave., Suite 201 As Angeles, CA 90017 Shone: (213) 481 -8530, Ext, 275 =ax: (213) 481-0352 https: / /mail.hlmlaw.coni/ exchange / harding /Inbox/Gorby/ Reza /x20710 %20Wilshire %20Hot... 2/22/2012 Page I of 3 on 8/16/201111:34 AM, From: Rachel Torres [rtorres @uniteherell.org] Sent: Tue 6/28/201110:51 AM To: Chris Harding Cc: Subject: Re: 710 Wilshire Hotel Project Follow Up Attachments: Chris, As the release of the draft HR approaches, we are eager to meet with Mr. Gorby and discuss the agreement in further detall. Are there 2 -3 dates and times that work for your team in the next few weeks? Thanks and we look forward to meeting again soon, On Thu, May 5, 2011 at 11:54 AM, Chris Harding <har4Ing0hlkkftw.com> wrote: Rachel, thanks for your email. Mr. Gorby is out of the country until next week, I will forward your message to him and others on his project team, and then follow up with Mr. Gorby when he returns. Chris Christopher M. Harding Harding Larmore Kutcher & Kozal, LLP 1250 6th Street, Suite 200 Santa Monica, CA 90401 t: ,(310) 451 -2968 f; (310) 392 -3537 NOTICE OF DISTRIBUTION: This e-mail message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any information contained in it) to anyone. If you have received this message in error, please advise the sender by reply e-mail and delete this message. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. From: Rachel Torres [maiito:rtorres(1a uniteherelLortrl Sent: Monday, May 02, 20114:44 PM To: Chris Harding Subject: Re: 710 Wilshire Hotel Project Follow Up https: / /mail.hlmlaw.com/ exchange /harding /Inbox/GorbylRe: %20710 %20Wilshire %2OHot... 2/22/2012 Page 2 of 3 Hi Chris, I wanted to check in with you on schedulingour follow up meeting. Have you and your team been able to discuss the agreement? We would be happy to answer any questions you may have as well as meet Mr, Gorey in person. If possible, please let me know of two or three dates that work in ne# few weeks, and I will coordinate on our end. Thanks again, Rachel On Wed, Feb 9, 2011 at 3:24 PM, Rachel Torres vtorres6uniteherell.ore> wrote: Thanks, Chris. I realized that I sent the agreement without Indicating the arbitrators and court In which any leghl issue would he heard. This agreement comes from our atbmey in Washington, DC, and so we were asked to indicate who we use locally In LA. The two arbitrators who have handled the majority of these agreements are Fred Horowitz and Gerald McKay. The murk of course, Is the Central District of California. Attached Is the revised copy with these changes only. We look forward to meeting you and your team soon. On Wed, Feb 9, 2011 at 8:56 AM, Chris Harding <hardino @hlkklaw.com> wrote: Dear Rachel, Thank you for your email. I have forwarded your small and the attachments to Mr. Gorey and his project team, and we will be discussing it. I will then contact you. Sincerely, Chris Christopher M. Harding HARDING LARMORE KUTCHER & KOZAL, LLP 12506th Street, Suite 200 Santa Monica, CA 90401 T: (310) 451 -2968 F: ( 0) 392 -3537 NOTICE OF DISTRIBUTION: This email message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any Information contained in it) to anyone. If you have received this message in error, please advise the sender by reply e-mail and delete this message. Nothing In this message . should be Interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. https: / /mail.hlmlaw.com/ exchange /harding/inbox/Gorby/Re: %20710 %20Witshire %20Hot... 2/22/2012 Page 3 of 3 From; Rachel Torres [ maiito:rtorresOunitehereli.oral Sent: Fri 214/20114:00 PM To: Chris Harding Subject: 710 Wilshire Hotel Project Fallow Up Hi Chris, It was a pleasure . meeting you and your team to discuss the project. Attached please find the card check neutrality agreement for the hotel component of the project Please review the agreement. As we discussed at the meeting, we look forward to meatting the developer directly and discussing the agreement further, Would anytime Monday, February 2Bth or Thursday, March 3rd work for you and your client? If you should have any questions or concerns, please do not hesitate to call me. Thank you for your attention in this matter. Best regards. Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530. Ext. 275 Fax: (2131481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S, Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext, 275 Fax: (213) 481.0352 Rachel Torres Research Analyst Unite Here Loral 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530. Ext. 275 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext, 275 Fax: (213) 481-0352 https: /Imail.hlmlaw.com/ exchange /harding /Inbox/Gorby /Re: %20710 %2OWilsliire %2OHot.,. 2/22/2012 $pit, fill mim UNITEHERE! September 1, 2011 City of Santa Monica Planning and Community Development Department Attention: Tmg Yeo 1685 Main Street Santa Monica, Califiomia 90401 RE: 710 Wilshire Boulevard Hotel and Mixed- Useprojeek, Draft Emiromnental Impact Report: SCH # 2010061044 Dear Ms. Yeo, On behalf of the 20,000 members of Unite Here, local 11, we wish to Comment on the Drab Environmental Impact Report (DER) for the proposed 710 WdsWm Boulevard Hotel and M med Use Project. Our members five, work, and recreate is the city of Santa Monica, and it wilt likely be our members who will be adversely affected by the constroodon and operation ofthis project. The project deMoperspropow to build a mixed -use hotel developmentthat is inconsistent with our community standards of development. By profoundly increasing the height and floor area ratio, the developers are asking for more apace, and effectively, more money in business while not sufficiently serving a public purpose for this increase. This project will Create significant and unavoidable impacts that will result in "increased regional air pollutant emissions, which would incrementally contribute to the degradation of air quality.", Because ofthese proposed changes, the developer is Currently in negotiations on a Development Agreement, Development Agreements (DA) are inherently Controversial as they bypass zoning restrictions and are often unenforced', and should be entered into on the rare occasion that the developer provides a profound community benefits package. The DER references the DA in mu ' le sections as to explain how certain issues such as parking and housing will be mitigated , yet it is unavailable for public review. Therefore, : it is problematic to review the DEIR For example, it states the project's objectives including "new jobs and tax revenue ", but only amounts to 62 net jobs.4 The report does not state the expected pay scales for these permanent jobs nor the actual tax revenue generated. If the hotel; retail, and restaurants pay poverty wages with little added talc revenue, this is not a benefit to the community. Ile community, the Landmarks and Planning Commissions, and City Council have responded clearly that the developer needs to provide a more meaningful public benefits package.' When publicly asked by the 710 MUM Benl0v4rd Fb1d wdMhxed -Usa Project=E prepared byRinm Coa diauts, km,. ht 2011 2 Grot'es, MWh% `7n Sants Moniar, a @wadable- housWicntalsgroaneals are lea not enforced," Los Angd?*Tiws, Apd15, 2010 'Fur example,&eDffitstmwdW "as pmto fMe Development Apcaraent ,WaapplicaniiyraVmtbsga 50% th% muatiathermd =udf(ooramofawpmjed." ftFS -3) 4 DB[R iS 5 -2 Santall6111ca City C=W M%twg rogardmg 710 VrMdre Hotel gmjed Development Ap..,nt, May 25,1010, MAIN OFFICE QARDFN GROVE OFFICE AmFOar OFFICE 464 S. Lucas Ave;, Su6a 201 13252 Garden Grove Blvd., auae 200 4534 W. Impsdalf{wy. Los Macias. GA 66017 (hudon Grove, CA92843 Inalewc rd, CA 00304 (213) 461.6630 • Fax (213) 461 -0352 (714) 760-0373 - Fax (714) 750.2863 (310) 6710720 • Fax (310) 6715021 Page 2 September 1, 2011 Planning Commission, the developer could not cam mit to paying a living wage. They argued that it was "too early on° to do was these fimdamenW issues.6 yet, this is exactly the time to be very clear about what is at stake and how it impacts the community. The DEIR is incomplete and requires a full disclosure of the Draft Development Agreement. In addition, the DEM states that in Development Scenario 1, there will be 24 residential units, but does not indicate ifthey will be affordable, workforce, market, or homey housing. This may be addressed in the Development Agreement, but should also be addressed in the DEQf as it directly impacts the environmental and social beam of the community. If workers live on site, this will significantly decrease the daily trip count in the area. This is a benefit to the community as a whole. Furthermore, the DEIII does not include any analysis ofthe substiWtion effect and business transference, or the process by which consumers substitute one farm of purchase for another and transfer they business to a different location. This is a fimdamentai flaw of the study. If consumers choose this proposed hotel, retail, and restaurant for their . business, it is assumed that they are not spending money elsewhere. Therefore, the annual revenue that is generated by the project must be weighed against the loss of revenue the consumer would have spent elsewhere in the city. Tbere is a net loss that needs to be calculated to understand the impact ofthe project on the city. For these and other reasons, we respectfully request that these issues be addressed as soon as possible. Thank you for your ooentesy in this matter. If you should have any questions or concerns, please do not hesitate to cell. Sincerely, i Thomas Walsh President 6 Santa Monica Planning Com®ssioareganllng 710 WHsUireHWd Pmject� Agreement. 7nae 107009. Page I of 5 Hi Chris, Sorry for the delay in respondng. We understand that Mr. Gorby Wil not operate the hotel which is fairly typical for hotel developers and/or landowners. However, just as lie Development Agreement is signed by the developer, so Is the agreement that we are proposing. We, therefore, encourage Mr. Gorby to meet with us in person as soon as possible, The details of the agreement may be complicated, and so it Is best to start early in discussions. Also, you mentioned areport by PKF Consulting (File # 51669). If possible, could you forward us a copy for our review? Thanks and we took forward to meeting with you and Mr. Gorby soon. Best, Rachel On Tue, Aug 16, 2011 at 11:39 AM, Chds Harding <hardina(dhlkklaw; cwm> wrote: Dear Rachel, I apologize for my delay In responding. Mr. Gorby has considered UNITE HERE Local 11's request. He believes it is premature to consider operational issues since he does not yet have entitlements and he does not plan to operate the hotel himself. He believes UNITE HERE's request should be directed to the hotel's operator in the event this project obtains the necessary City approvals and moves forward. This hotel, if approved and built, will create substantial new employment opportunities. Per a report by the Southern California Association of Governments ( "SCAG "), the City of Santa Monica estimates that the hotel will have approximately 130 FTE employees, plus another 39 jobs in the restaurant and retail businesses also proposed within the project. (Vol. I, Draft EIR, SCH # 2010061044, Table 5 -1.) And according to a report prepared by PKF Consulting (File # 51669), by the third year of operation (by which time the project is anticipated to achieve stabilized operation) the project is expected to generate annualized tax revenues to the City /Redevelopment Agency of about $4,500,000. This revenue will be available for public education, affordable housing and social services in addition to core municipal services, I suggest that UNITE HERE Local 11 should consider joining the Wllmont neighborhood organization and many others in supporting this project. Those of us who are working on this project are available to meet with you to discuss this project - further and answer any questions you may have. Sincerely, Chris https: / /mail,himlaw.coml exchange lhardingtlnboxIGorbylRc: %20710 %2OWilshire %2OHot... 2122/2012 Page 2 of 5 Christopher M. Harding HARDING LARMORE KUTCHER & KOZAL, LLP 1250 6th Street, Suite 200 Santa Monica, CA 90401 T: (310) 451 -2968 F: (310) 392 -3537 NOTICE OF DISTRIBUTION: This e-mail message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any information contained in it) to anyone. If you have received this message in error, please advise the sender by reply e-mail and delete this message. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. From: Rachel Torres [ ma(Ito:rtorres(o)uniteherell.org] Sent: Tue 6/28/201110:51 AM To: Chris Harding Subject: Re: 710 Wilshire Hotel Project Follow Up Chris, As the release of the draft ER approaches, we are eager to meet with Mr. Gorby and discuss the agreement In further detail. Are there 2.3 dates and times that work for your team Ih the next few weeks? Thanks and we took forward to meeting again soon. On Thu, May 5, 2011 at 11:54 AM, Chris Harding <hardingtthlkkiaw,com> wrote: Rachel, thanks for your email. Mr. Gorby is out of the country until next week. I will forward your message to him and others on his project team, and then follow up with Mr. Gorby when he returns. Chris Christopher M. Harding Harding Larmore Kutcher & Kozal, LLP 1250 6th Street, Suite 200 Santa Monica, CA 90401 t: (310) 451 -2968 f: (310) 392 -3537 NOTICE OF DISTRIBUTION: This e-mail message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any information contained in it) to anyone. If you have received this message in error, please advise the sender by reply e- mail and delete this message. Nothing in this message should be interpreted as a digital or https: / /mail.himlaw.conV exchange /hardin&gnbox/Gorby/Re: %20710 %20Wi1shire %20Hot... 2/22/2012 Page 3 of 5 electronic signature that can be used to authenticate a contract or other legal document. From: Rachel Torres [maiito;rtorres@uniteherell.ornl Sent: Monday, May 02, 20114:44 PM To: Chris Harding Subject: Re: 710 Wilshire Hotel Project Follow Up HI Chris, I wanted to check In with you on schedulingour follow up meeting. Have you and your team been able to discuss the agreement? We would be happy to answer any questions you may have as well as meet Mr. Gorby in person. If possible, please let me know of two or three dates that work In next few weeks, and I will coordinate on our end Thanks again, Rachel On Wed, Feb 9, 2011 at 3:24 PM. Rachel Torres <rjorres @uniteherelLam> Wrote: Thanks, Chris. I realized that I sent the agreement without indicating the arbitrators and court In which any legal Issue would he heard. This agreement comes from our attorney in Washington, DC, and so we were asked to Indicate who weuse locally in LA. The two arbitrators who have handled the majority of these agreements are Fred Horowitz and Gerald McKay. The court, of course, is the Central District of California, Attached is the revised copy with these changes only. We look forward to meeting you and your team soon. On Wed, Feb 9, 2011 at 8:56 AM, Chris Harding <hardlno(mhlkkIgw com> wrote: Dear Rachel, Thank you for your email. I have forwarded your emall and the attachments to Mr. Gorby and his project team, and we will be discussing It, I will then contact you. Sincerely, Chris Christopher M. Harding HARDING LARMORE KUTCHER & KOZAL, LLP 1250 6th Street, Suite 200 Santa Monica, CA 90401 T: (310) 451.2968 https: / /mail,hlmlaw.com/ exchange /harding/Inbox/Gorby /Re: %20710 %20Wi1shire%20Hot... 2/22/2012 Page 4 of 5 F: (310) 342 -3537 NOTICE OF DISTRIBUTION: This e-mail message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any information contained in it) to anyone. If you have received this message in error, please advise the sender by reply e-mail and delete this message. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. From: Rachel Torres [mailto:rtorres(duniteherell.orgI Sent: Fri 2/4/20114:00 PM To: Chris Harding Subject: 710 Wilshire Hotel Project Follow Up H1 Chris, It was a pleasure meeting you and your team to discuss the project. Attached please find the card check neutrality agreement for the hotel component of the project. Please review the agreement, As we dscussed at the meeting, we look forward to meeting the developer directly and discussing the agreement further, Would anytime Monday, February 280 or Thursday, March 3rd work for you andyour client? If you should hate any questions or concerns, please do not hesitate to call me Thank you for your attention in this matter. Best regards. Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481.8530, Ext. 275 Fax: (213) 481-0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, EA. 275 Fax: (213)481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext. 275 https:l lmail. hlml aw. coni/ exchangelhardingllnboxIGorbylRe: %20710 %2OWilshireVo2OHot.., 2/22/2012 Page 5 of 5 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: • (213) 481 -8530 Ext. 275 Fax: (213) 481 -0352 tachel Torres tesearch Analyst Jnite Here Local 11 464 S. Lucas Ave., Suite 201 -os Angeles, CA 90017 Shone: (213) 481 -8530, Ext. 275 -ax: (213) 481 -0352 httpsat mail. hlmlaw. comlexchange /harding/]nbox/Gorby /Ro: %20710 %20 W ilsHre %20Hot... 2/22/2012 I �,I��I���i Ken Kutcher From: Rachel Torres Irtorres @uniteherel l.org] Sent: Monday, November 14, 2011 2:46 PM To: Ken Kutcher Cc: Chris Harding Subject: Re: Living Wage for LAX Hotel Workers Ken, Thank you for following up. Yes, the information you provided applies to hotels along Century Boulevard near LAX, I was referring to LAX food service workers who work at the airport and are also members of Local 11. The correct number is $14.97 for those employees without health benefits and $10.42 for those with benefits. Here is the information: hgp• / /www.lawa.oralwelcome LAWA.asa ?id =596 Administrative Requirements - Living Wage and Service Worker Retention Ordinance Living Wage Ordinance or Living Wage and Service Contractor Worker Retention Ordinances - RFB or RFP will specify whether the Living Wage Ordinance or the Living Wage and Service Contractor Worker Retention Ordinances is /are required. Living Wage Ordinance (LWO) Pursuant to Los Angeles Administrative Code, Division 10, Chapter 1, Article 11, Section 10.37 et seq., it is the policy of the City of Los Angeles that contractors/subcontractors who have agreements with the City must comply with all applicable provisions of the Living Wage Ordinance, including paying their employees a minimum "living wage" with health benefits and providing compensated days off. The Bureau of Contract Administration (BCA) has determined that there is a proprietary interest in applying LWO to all airport employees who provide industry - specific services to or for LAWA, In effect, this determination broadens coverage to include airport employee classifications whose work occurs in non - public and/or secure areas since their work 1) impacts the public's perceptions of services at LAWA or 2) maintains airport security. The effective date to implement this coverage was May 1, 2010. Living Wage Ordinance Compliance Requirements: Contractor agrees to pay employees a living wage — updated July 1st of every year. On September 9, 2009, the Los Angeles City Council unanimously approved an amending ordinance to Living Wage that requires airport employers at all airports in the LAWA system to increase the hourly rate for health benefits of airport employees covered by LWO to $4.50 per hour from $1.25. The new Ordinance became effective on January 17, 2010. Office of Contract Compliance (OCC) of the Department of Public Works, which is the designated administrative agency for the LWO, sent written notice to LAWA contractors and tenants. As of July 1, 2011, if health benefits are not provided by an airport employer, then $4.55 must be added to the base hourly wage rate. Thus, the new hourly rate becomes $10.42 for employees with benefits and $14.97 for those without. Further, if an airport employer provides benefits for less than $4.55 per hour, the differential must be added to the hourly wage rate. Contractor must provide at least 12 compensated days off per year for each employee's sick leave, vacation or personal necessity, and at least 10 days off uncompensated. Contractor agrees to inform employees making less than $12.00 per hour of the Earned Income Tax Credit and make forms available. Contractor agrees to permit access to work sites for authorized City representatives to review operations, payroll and related documents. Contractor agrees not to retaliate against any employee claiming non - compliance or union organizing. Living Wage and Service Contractor Worker Retention Ordinances (LWO /SCWRO) Pursuant to LAAC, Division 10, Chapter 1, Article 11, Sections 10.36 et seq. and 10.37 et seq., it is the policy of the City of Los Angeles that successor contractors /subcontractors who have agreements with the City must . comply with all applicable provisions of the Living Wage Ordinance (LWO) and Service Contract Worker Retention Ordinance ( SCWRO). Contracts subject to Service Contractor Worker Retention Ordinances, are required to comply with the following requirements in addition to the above: Contractor agrees to offer to employ and retain for a 90 -day period the employees who worked for at least 12 months for the terminated contractor /subcontractors earning less than $15.00 per hour. Contractor agrees to not discharge without cause the employees retained during the 90- day period. Contractor agrees to perform a written performance evaluation of each employee retained at the end of the 90 -day period. Documents: Bidders/Proposers subject to LWO or LWO /SCWRO are not required to submit forms with the bid/proposal. The language pertaining to LWO and SCWRO compliance will be part of your contract with LAWA: LWO and SCWRO Draft Contract Language • . LWO Applicability for LAWA's Contractors and Tenants (BCA's Determination as of February 26, 2010) . Once the contract is executed, the prime contractor is required to complete the following forms within 30 days of contract execution and submit them to the Office of Contract Compliance: • Em llooyee Information Form • Subcontractor Information Form The subcontractors are required to submit the Subcontractor's Declaration of Comuliance to the prime within 90 days of subcontract execution. Please follow the instructions on the forms for completion and submittal. Exemptions: There are exemptions from this ordinance. If bidder /proposer qualifies for any of them, he /she is required to complete and submit one of the following exemption forms (click on the link to download the form) at the bid/proposal due date: Collective bargaining agreement with supersession language or Occupational license • 501(c)(3) Non -Profit Organizations or One- Person Contractors . • Small Business (for lessees and licensees only) • City Financial Assistance Recipient ( SCWRO Exemption Form) Please visit Public Works' website or contact the Bureau of Contract Administration, Office of Contract Compliance, 1149 S. Broadway St., Suite 300, Los Angeles, CA 90015, phone: (213) 847 -1922, and fax: (213) 847 -2777; for the most current LWO and SCWRO rates, language, and regulations. For information on business opportunities at LAWA, access the Los Angeles Business Assistance Virtual etwork. We took forward to doing business with youl Copyright © 2010 Los Angeles World Airports. All rights reserved. Terms of Use Please let us know if you have additional questions, comments, or concerns. Thanks again. On Mon, Nov 14, 2011 at 2:29 PM, Ken Kutcher <kutchen[Rl klaw.com> wrote: Rachel,. I would like to follow up on something you mentioned during our meeting last week. I believe you indicated that the LAX hotel worker living wage rate is currently $14.80/hour. We received a different rate from the person we contacted at the City of Los Angeles for this information. As stated in the email below, we were told that the current Living Wage rate for Airport Hotel Workers is $11.67 per hour without health benefits, and if the employer provides health benefits at a rate of $1.25 /hr, the Living Wage rate to be paid is $10.421hr. So I wanted to ask you if you can help clarify this? Thanks. Ken Kenneth L. Kutcher Harding Larmore Kutcher & Kozal, LLP 1250 6th Street, Suite 200 Santa Monica, CA 90401 t: (310) 45I -3669 f: (310) 392 -3537 NOTICE OF DISTRIBUTION: This e-mail message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you may not use, copy or disclose this message (or any information contained in it) to anyone. If you have received this message in error, please advise the sender by reply e-mail and delete this message. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. From: Mario Interiano [ mailto :mario.interianoOIacity.orel Sent: Tuesday, November 08, 20118:52 AM To: Paula Mayeda Cc: Hannah Choi Subject: Living Wage for Hotel Workers Ordinance No. 178432 Ms. Mayeda, I am responding to your inquiry regarding the above subject liner The current Living Wage rate £oxmotel Workers is $1.1.67 per hour without health benefits. If the employerprovides health benefits at a rate' of $L25/hr;'tlty Living. Wage rate to be paid is $1.4.42/hr. These rates are adjusted annually on July 1 st in accordance with Ordinance No. 181199 amending the previous ordinance referenced in the subject line. Mario Interiano Contract Compliance Analyst Office of Contract Compliance Bureau of Contract Administration P: 213 847 -2631 F: 213 847 -2777 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 OF44 Ken Kutcher From: Rachel Torras Irtorres @uniteherel 1.org] Sent: Wednesday, November 16,20115:39 PM To: Ken Kutcher Cc: Chris Harding Subject: Re: Living Wage for LAX Hotel Workers Attachments: Card Check Neutrality Agreement.doc Ken, Here are a couple other points to mention that we didn't discuss at our recent meeting: Other cities such as Los Angeles and West Hollywood are currently going through the process of raising the city living wage to reflect the LAX standard. In this sense, it is becoming the "new norm ". So to go back to your team's question around living wage policies, the 710 Wilshire Hotel project is only the latest development to incorporate this standard. As we also discussed at our previous meeting, a "living wage" requirement is only the most minimal standard for a good job. We discussed the card check neutrality agreement in general, but did not discuss any of the specifics. The agreement can be rather dense at first glance, and so I wanted to see if you and your team have discussed it and what are some of the initial questions, comments, and concerns you may have. Attached is a fresh copy of the agreement. Thank you and I look forward to hearing from you soon. Best regards, Rachel On Mon, Nov 14, 2011 at 2:45 PM, Rachel Torres <rtorres@uniteherel I.org> wrote: Ken, Thank you for following up. Yes, the information you provided applies to hotels along Century Boulevard near LAX. I was referring to LAX food service workers who work at the airport and are also members of Local 11. The correct number is $14.97 for those employees without health benefits and $10.42 for those with benefits. Here is the information: bttp://www.lawa.orgLwelcome LAWA.aspx ?id =596 Administrative Requirements - Living Wage and Service Worker Retention Ordinance Living Wage Ordinance or Living Wage and Service Contractor Worker Retention Ordinances - RFB or RFP will specify whether the Living Wage Ordinance or the Living Wage and Service Contractor Worker Retention Ordinances is /are required. Living Wage Ordinance (LWO) Pursuant to Los Angeles Administrative Code, Division 10, Chapter 1, Article 11, Section 10.37 et seq., it is the policy of the City of Los Angeles that contractors /subcontractors who have agreements with the City must comply with all applicable provisions of the Living Wage Ordinance, including paying their employees a minimum "living wage" with health benefits and providing compensated days off. The Bureau of Contract Administration (BCA) has determined that there is a proprietary interest in applying LWO to all airport employees who provide industry- specific services to or for LAWA. In effect, this determination broadens coverage to include airport employee classifications whose work occurs in non - public and/or secure areas since their work 1) impacts the public's perceptions of services at LAWA or 2) maintains airport security. The effective date to implement this coverage was May 1, 2010. Living Wage Ordinance Compliance Requirements: Contractor agrees to pay employees a living wage — updated July 1st of every year. On September 9, 2009, the Los Angeles City Council unanimously approved an amending ordinance to Living Wage that requires airport employers at all airports in the LAWA system to increase the hourly rate for health benefits of airport employees covered by LWO to $4.50 per hour from $1.25. The new Ordinance became effective on January 17,2010. Office of Contract Compliance (OCC) of the Department of Public Works, which is the designated administrative agency for the LWO, sent written notice to LAWA contractors and tenants. As of July 1, 2011, if health benefits are not provided by an airport employer, then $4.55 must be added to the base hourly wage rate. Thus, the new hourly rate becomes $10.42 for employees with benefits and $14.97 for those without. Further, if an airport employer provides benefits for less than $4.55 per hour, the differential must be added to the hourly wage rate. Contractor must provide at least 12 compensated days off per year for each employee's sick leave, vacation or personal necessity, and at least 10 days off uncompensated. Contractor agrees to inform employees making less than $12.00 per hour of the Earned Income Tax Credit and make forms available. Contractor agrees to permit access to work sites for authorized City representatives to review operations, payroll and related documents. Contractor agrees not to retaliate against any employee claiming non- compliance or union organizing. Living Wage and Service Contractor Worker Retention Ordinances (LWO /SCWRO) Pursuant to LAAC, Division 10, Chapter 1, Article 11, Sections 10.36 et seq. and 10.37 et seq., it is the policy of the City of Los Angeles that successor contractors /subcontractors who have agreements with the City must comply with all applicable provisions of the Living Wage Ordinance (LWO) and Service Contract Worker Retention Ordinance (SCWRO). Contracts.subject to Service Contractor Worker Retention Ordinances, are required to comply with the following requirements in addition to the above: Contractor agrees to offer to employ and retain for a 90 -day period the employees who worked for at least 12 months for the terminated contractor /subcontractors earning less than $15.00 per hour. Contractor agrees to not discharge without cause the employees retained during the 90- day period. Contractor agrees to perform a written performance evaluation of each employee retained at the end of the 90 -day period. Documents: Bidders/Proposers subject to LWO or LWO /SCWRO are not required to submit forms with the bid /proposal. The language pertaining to LWO and SCWRO compliance will be part of your contract with LAWA: • LWO and SCWRO Draft Contract Language • LWO Applicability for LAWA's Contractors and Tenants (BCA's Determination as of February 26, 2010) Once the contract is executed, the prime contractor is required to complete the following forms within 30 days of contract execution and submit them to the Office of Contract Compliance: • Employee Information Form • Subcontractor Information Form The subcontractors are required to submit the Subcontractor's Declaration of Compliance to the prime within 90 days of subcontract execution. Please follow the instructions on the forms for completion and submittal. Exemptions: There are exemptions from this ordinance. If bidder /proposer qualifies for any of them, he/she is required to complete and submit one of the following exemption forms (click_ on the link to download the form) at the bid/proposal due date: • Collective bargaining agreement with supersession language or Occupational license • 501(c)(3) Non -Profit Organizations or One- Person Contractors • Small Business (for lessees and licensees only) City Financial Assistance Recipient ( SCWRQ Exemption Form) Please visit Public Works' website or contact the Bureau of Contract Administration, Office of Contract Compliance, 1149 S. Broadway St., Suite 300, Los Angeles, CA 90015, phone: (213) 847 -1922, and fax: 2!� 847 -2777; for the most current LWO and SCWRO rates, language, and regulations. For information on business opportunities at LAWA, access the Los Angeles Business Assistance Virtual Network. We look forward to doing business with you! Copyright © 2010 Los Angeles World Airports. All rights reserved. Terms of Use Please let us know if you have additional questions, comments, or concerns. Thanks again. On Mon, Nov 14, 2011 at 2:29 PM, Ken Kutcher <kutcher(@hlkklaw.com> wrote: Rachel, I would like to follow up on something you mentioned during our meeting last week. I believe you indicated that the LAIC hotel worker living wage rate is currently $14.80/hour. We received a different rate from the person we contacted at the City of Los Angeles for this information. As stated in the email below, we were told that the current Living Wage rate for Airport Hotel Workers is $11.67 per hour without health benefits, and if the employer provides health benefits at a rate of $1.25/hr, the Living Wage rate to be paid is $10.42/hr. So I wanted to ask you if you can help clarify this? Thanks. Ken Kenneth L. Kutcher. . Harding Larmore Kutcher & Kozal, LLP 1250 6th Street, Suite 200 Santa Monica, CA 90401 t: (310) 451 -3669 f:(310)392 -3537 NOTICE OF DISTRIBUTION: This e-mail message contains information that may be confidential and privileged. Unless you are the addressee (or authorized to receive messages for the addressee), you, may not use, copy or disclose this message (or any information contained in it) to anyone, If you have received this message in error, please advise the sender by reply e-mail and delete this message. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or other legal document. From: Mario Interiano [ mailto :mario.intcrianoQlacitv.orel Sent: Tuesday, November 08, 20118:52 AM To: Paula Mayeda Cc: Hannah Choi Subject: Living Wage for Hotel Workers Ordinance No. 178432 Ms. Mayeda, I am responding to your inquiry regarding the above subject line. The current Living Wage rate for Hotel WJorkers is. $11.67 per hour without health benefits. If the employer provides health benefits. at a rate of $1.25/hr, the Living Wage rate to.be paid is $10.42/hr: These rates are adjusted annually on July 1st in accordance with Ordinance No. 181199 amending the previous ordinance referenced in the subject line. Mario Interiano Contract Compliance Analyst Office of Contract Compliance Bureau of Contract Administration P: 213 847 -2631 F: 213 847 -2777 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 Rachel Torres Research Analyst Unite Here Local 11 464 S. Lucas Ave., Suite 201 Los Angeles, CA 90017 Phone: (213) 481 -8530, Ext. 275 Fax: (213) 481 -0352 MEMORANDUM OFAGREEMENT THIS AGREEMENT is made and entered into by and between Maxser and Company, LLC (hereinafter the "Employer "), and UNITE HEREI Local 11 (the "Union "). 1. This Agreement shall cover all employees employed in classifications listed in Exhibit A, or in classifications called by different names when performing similar duties, (referred to hereinafter as "Employees ") at a hotel to be located at or near 710 Wilshire Boulevard in Santa Monica, CA (hereinafter referred to as the "Hotel ") which during the term of this Agreement is owned by, operated by or substantially under the control of the Employer, The term "Employer" shall be deemed to include any person, firm, partnership, corporation, joint venture or other legal entity substantially under the control of: (a) the Employer covered by this Agreement; (b) one or more principal(s) of the Employer covered by this Agreement; (c) a subsidiary of the Employer covered by this Agreement; or (d) any person, firm, partnership, corporation, joint venture or other legal entity which substantially controls the Employer covered by this Agreement. 2. The parties hereby establish the following procedure for the purpose of ensuring an orderly environment for the exercise by the Employees of their rights under Section 7 of the National Labor Relations Act and to avoid picketing and/or other economic action directed at the Employer in the event the Union decides to conduct an organizing campaign among Employees. 3. The parties mutually recognize that national labor law guarantees employees the right to form or select any labor organization to act as their exclusive representative for the purpose of collective bargaining with their employer, or to refrain from such activity. 4. The Employer will take a positive approach to unionization of Employees. The Employer will not do any action nor make any statement that will directly or indirectly state or imply any opposition by the Employer to the. selection by such Employees of a collective bargaining agent, or preference for or opposition to any particular union as.a bargaining agent. 5. The Union and its representatives will not coerce or threaten any Employee in an effort to obtain authorization cards. 6. Whenever the Employer finds it necessary to hire new Employees for vacancies in job classifications covered by this Agreement at the Hotel, the Employer shall notify the Union to request applicants for such vacancies. When requesting applicants, the Employer shall state the qualifications applicants are expected to possess. The Union may famish applicants for the job vacancies specified by the Employer. The Union's selection of applicants for referral shall be on a non - discriminatory basis and shall not be based upon or in any way affected by membership in the Union or the Union's bylaws, rules, regulations, constitutional provisions, or any other aspects or obligation of Union membership policies or requirements, or upon personal characteristics of an applicant where discrimination based upon such characteristics is prohibited by law. The Employer agrees that any interest demonstrated by an applicant in joining'the Union shall not constitute grounds for discriminatory or disparate treatment nor adversely impact the applicant's ability to be hired by the Employer. The Employer shall be the sole judge of an applicant's suitability, competence and qualifications to perform the work of any job to be filled. 7. If the Union provides written notice to the Employer of its intent to organize Employees covered by this Agreement, the Employer shall provide access to its premises and to such Employees by the Union. The Union may engage in organizing efforts in non - public areas of the Hotel during Employees' non - working times (before work, after work, and during meals and breaks) and/or during such other periods as the parties may mutually agree upon. "Organizing" includes communicating with Employees before and after recognition of the Union as provided in Paragraph 9. S. Within ten (10) days following receipt of written notice of intent to organize Employees, the Employer will fumish the Union with a complete list of Employees, including both full and part -time Employees, showing their job classifications, departments and addresses. Thereafter, the Employer will provide updated complete lists monthly. 9. The Union is not presently recognized as the exclusive collective bargaining representative of the Employees. The Union may request recognition as the exclusive collective bargaining agent for such Employees. The Arbitrator identified in Paragraph 14, or another person mutually agreed to by Employer and Union, will conduct a review of Employees' authorization cards and membership information submitted by the Union in support of its claim to represent a majority of such Employees. If that review establishes that a majority of such Employees has designated the Union as their exclusive collective bargaining representative or joined the Union, the Employer will recognize the Union as such representative of such Employees. The Employer will not file a petition with the National Labor Relations Board for any election in connection with any demands for recognition provided for in this agreement or file a notice of voluntary recognition with the NLRB, so that the decision of when and whether to provide such notice is within the sole discretion of the Union. If the Union notifies the NLRB of recognition pursuant to this Agreement, the Employer shall post the NLRB notice of recognition in accordance with the instructions from the NLRB immediately upon receipt of the notice. The Union and the Employer agree that if any other person or entity petitions the National Labor Relations Board for any election as a result of or despite recognition of the Union pursuant to, this Paragraph, (a) if the NLRB notice has been posted for 45 days before the petition is filed (a condition that applies only to this subparagraph (a)), the Employer and the Union will each request that the NLRB dismiss the petition on grounds of recognition bar or, if they have agreed to a collective bargaining agreement covering Employees at the time the petition is filed, on grounds of contract bar, (b) if the petition is not dismissed, the Employer and the Union shall agree to a full consent election agreement under Section 102.62(c) of the NLRB's Rules and Regulations, and (c) the Employer and the Union shall at all times abide by the provisions of this Agreement except that the Union may file unfair labor practice charges.. Except as provided above, the Union and the Employer will not file any charges with the National Labor Relations Board in connection with any act or omission occurring within the context of this agreement; arbitration under Paragraph 14 shall be the exclusive remedy. 10. If the Union is recognized as the exclusive collective bargaining representative as provided in paragraph 9, negotiations for a collective bargaining agreement shall be commenced immediately_and conducted diligently and in good faith to the end of reaching agreement expeditiously. If the parties are unable to reach agreement on a collective bargaining agreement within 90 days after recognition pursuant to Paragraph 9, all unresolved issues shall be submitted for resolution to final and binding arbitration pursuant to Paragraph 14. The arbitrator identified in paragraph 14 below shall be the arbitrator, unless another arbitrator is mutually agreed to by the parties. The arbitrator shall be guided by the following considerations: a) Employer's financial ability; b) size and type of the Employer's operations; c) cost of living as it affects the Employer's employees; d) ability of the employees, through the combination of wages, hours and benefits, to earn a living wage to sustain themselves and their families; and c) employees' productivity. The collective bargaining agreement shall include the terms and conditions contained in Exhibit B. which shall not be effective until the parties reach agreement on a complete collective bargaining agreement 11. During the tern of this Agreement, the Union will not engage in picketing or other economic activity at the Hotel, and the Employer will not engage in a lockout of the Employees. Notwithstanding the termination provision above, if the Employer recognizes any union besides Union as the exclusive collective bargaining representative of Employees, or any of them, this paragraph shall terminate immediately and without notice. 12. In the event that the Employer sells, transfers, or assigns all or any part of its right, title, or interest in the Hotel or substantially all of the assets used in the operation of the Hotel, or in the event there is a change in the form of ownership of the Employer, the Employer shall give the Union reasonable advance notice thereof in writing, and the Employer further agrees that as a condition to any such sale, assignment, or transfer, the Employer will obtain from its successor or successors in interest a written assumption of this Agreement and furnish a copy thereof to the Union, in which event the assignor shall be relieved of its obligations hereunder to the extent that the assignor has fully transferred its right, title, or interest. 13. The Employer shall incorporate the entirety of paragraphs 4,6, 7, 8, 9, and 10 of this of Agreement in any contract, subcontract, lease, sublease, operating agreement, franchise agreement or any other agreement or instrument giving a right to any person to operate any enterprise in the Hotel employing employees in classifications listed in Exhibit A, or in classifications called by different names when performing similar duties, and shall obligate any person taking such interest, and any and all successors and assigns of such person, to in turn incorporate said paragraphs in any further agreement or instrument giving a right as described above. The Employer shall enforce such provisions, or at its option, assign its rights to do so to the Union. The Employer shall give the Union written notice of the execution of such agreement or instrument and identify the other party(ies) to the transaction within 15 days after the agreement or instrument is signed. The terms "Employer" and "Hotel" shall be modified in such agreement or instrument to conform to the terminology in such agreement or instrument but retain the same meaning as in this Agreement, and the terns "Employer" and "Employees" as used herein shall be modified to refer, respectively, to the person or persons receiving a right to operate an enterprise in the Hotel and the employees of such person or persons. 14. The parties agree that any disputes over the interpretation or application of this Agreement shall be submitted to expedited and binding arbitration, with Fred Horowitz serving as the arbitrator. If he is unavailable to serve within thirty (30) calendar days of notification then John Kagle, or another mutually acceptable person, shall be the arbitrator. The arbitrator shall have the authority to determine the arbitration procedures to be followed. The arbitrator shall also have the authority to order the non - compliant party to comply with this Agreement. The parties hereto agree to comply with any order of the arbitrator, which shall be final and binding. The United States District Court for the Central District of California shall have exclusive jurisdiction in any action concerning arbitration under this Agreement. The parties consent to the entry of any order of the arbitrator as the order or judgment of the Court, without entry of findings of fact and conclusions of law. 15. This Agreement shall be in full force and effect from the date it is fully executed on behalf of the Employer and the Union until four years from the full public opening of the hotel, or if sooner upon execution of a collective bargaining agreement or issuance of an interest arbitration award which concludes the collective bargaining agreement negotiations, either of which explicitly supersedes this document. IN WITNESS WHEREOF, the parties hereto by their duly designated representatives have hereunto set their hands. FOR THE EMPLOYER: Maxser and Company, LLC Its: FOR THE UNION: UNITE HERE! Local 11 By: Its: Date: _ Date: EXHIBIT A All regular full -time and regular part-time hotel service, housekeeping, food and beverage, and laundry employees (including room cleaners, housepersons, bell persons, telephone operators, kitchen employees, servers, bussers, bartenders, cashiers, hosts, concierges, and laundry workers, and front desk, recreational, and parking employees) employed by the Employer at the Hotel, but excluding all secretarial, office clerical, sales, and maintenance employees. and all managers, supervisors, and guards as defined in the National Labor Relations Act. ORDINANdE NO.89,9 An ordinance amending Sections 104.102,104.103,104.104, 104.105 and adding a new Section 104.116 of the Los Angeles Municipal Code relating to the Airport Hospitality Enhancement Zone and adding a new Section 184.09 of ttie Los Angeles Municipal Code relating to the Hotel Service Charge Reform Ordinance. THE PEOPLE OF THE CiTY OF LOS ANGELES DO ORDAIN AS FOLLOWS: Section 1. Section 104.102 of the Los Angeles Municipal Code is amended by adding ttrB definition of "Adoption Date" in proper alphabetical order to read as follows: A.• "Adoption Date" means February 26, 2007, Sao, Z Subsection A of Section 104.103 of the Los Angeles Municipal Code is amended to read as follows: A. Establishment of Zone. There is hereby established an Airport Hospitality Enhancement Zone. The Airport Hospitality Enhancement Zone shall be the area designated by the boundaries of the Gateway to LA Property Business improvement District (Gateway to LA PSID), established by Ordinance Number 177211: Sec. 3. Paragraph a of Subdivision 2 of Subsection B of Section 104.103 of the Los Angeles Municipal Code is amended to read as follows: a. CDD shall Implement within 180 days of the effective date of the ordinance a workforce training program, which shall include one or more of customer service training, hospitality training, management training, and/or culinary arts training, for Hotel Workers. Training will occur at a location within the Airport Hospitality Enhancement Zone or within five miles to the Airport Hospitality Enhancement Zone. Program(s) shall make this training available to 120 Hotel Workers per year for five years beginning in FY 2008-09. The City shall determine appropriate funding from among federal, state, and City funds. Sec. 4. Paragraph b of Subdivision 3 of Subsection B of Section 104.103 of the Los Angeles Municipal Code is amended to read as follows: b. The City shall grant $50;000 to the Gateway to LA PBiD to prepare a market analysis and to develop materials and data from the analysis to use in attracting new business to the Airport Hospitality Enhancement Zone. Sec. 5. Subdivision 5 of Subsection B of Section 104.103 of the Los Angeles Municipal Code is amended to read as follows: 6. Street Improvements. a. Department of Transportation shall develop within ,two years and implement within three years a program of directional /navigational signage . to'direct drivers to. Hotels, rental car agencies, and other airport related services In the Airport Hospitality Enhancement Zone. b. _ Foilowing adoption of this ordinance, Bureau of Street Services commenced construction of a $1 million set of street improvements, Including new median islands, landscaping, refurbishment, and signage, for the portion of Century Boulevard tietweeb Aviation Boulevard and La Cienega Boulevard. c. Bureau of Street Services shall develop within 180 days of the effective date of this ordinance e-a plan to identify and expedite needed street and alley resurfacing and sidewalk repair In the Airport Hospitality Enhancement Zone, and shall commence this plan within 180 days of the effective date of this ordinance. d. CAO and Bureau of Street Services shall report within 180 days of the effective date of this ordinance on options to finance and commence - within one year construction of new sidewalks in the Airport Hospitality Enhancement Zone to facilitate pedestrian access from Hotels to public transit Sec. 6. Subdivision 6 of Subsection B of Section 104.103 of the Los Angeles Municipal Code is amended to read as follows: 6. Remote Check-in. IAWA shall facilitate the establishment of remote check -In facilities at each Interested Hotel in Zone, including providing assistance as necessary to expedite or prioritize the establishment of these facilities as the network of region wide check -in location's grows. Sea 7. Subdivision 6 of Subsection B of Section 104.103 of the Los Angeles Municipal Code is amended to read as follows, '8. Integrated'Waste Management. In order to assist in realizing cost savings on hauling fees, Bureau of Sanitation shall work with Interested businesses in the Airport Hospitality Enhancement Zone and Gateway to LA PBID to develop and implement within one year of the effective date of this ordinance a -joint recycling and waste diversion program. Bureau of Sanitation's offered technical assistance shall include assistance in preparation of necessary bid documents, assistance in review of proposals and contract negotiations, preparation of outreach materials for. staff, and training. of staff. 2 r i Sec. 8. Subsection A of Section 104.904 of the Los Angeles Municipal Code is amended to read asfollow's: i A. Wages, in accordance with Section 104106 of this Article, Hotel Employers shag pay Hotel Workers a wage of no less than the hourly rates set under. the authority of this article. The minimum compensation for each Hotel Worker•shaii be at least $9.39 per hour with health benefits, not including gratuities, Service Charge distributions, or bonuses, or $10.64 per hour without health benefits, not ificluding I gratuities, Service Charge distrbutions, or bonuses. Starting July 1, 2009, and continuing thereafter, these rates shall continue to be adjusted as of July 1 of each year . 'to. be the same dollar amounts as the wage rates at such dates adjusted pursuant to Section 10.37.2(a) of the Los Angeles Administrative Code. Sec. 9. Subsection C of Section 104:104 of the Los Angeles Municipal Code Is amended to read as follows: C. Mandatory Study. After two years from the effective date of this ordinance, the CAO shall conduct a study and evaluation of the effect of this article on Hotels, Hotel customers, and Hotel Workers In the Airport Hospitality Enhancement Zone. Sec.10. Subdivision 2 of Subsection C of Section 104.104 of the Los Angeles Municipal Code is amended to read as follows: 2. If the study Is not completed within thirty months from the date of the effective date of this ordinance, the living wage provisions of this ordinance shall. be suspended until the report is completed, Sec. 11. Subsection 8 of Section 104,105 of the Los Angeles Municipal Code Is amended to read as follows: j B. Mandatory Study, Within eight months of the effective date of this ordinance, the CAO shall complete a study of health benefits availability for Hotel Workers. Sec. 12. A new Section 104.116 of the Los Angeles Municipal Code is added to read as follows: SEC. 104.116. ADMINISTRATION. The City Council shall by resolution designate the Bureau of Contract Administration to promulgate rules for implementation of this article and otherwise coordinate administration of the requirements of this article. Sao. 13. A new-Section 184A.9 of the Los Angeles Municipal Code is added to read as follows: SVC.184.09.; AbMINISTRATION. The City Council shall by resolution designate the Bureau of Contract Administration Uapromulgate rules for implerimentagon of this article and otherwise coordinate administration of the requirements of this article. 4 Sec. 14, The City Clerk shall certify to the passage of this ordinance and have it published in accordance with Council policy, either in a daily newspapar circulated - in the City.of Los Angeles or by posting for ten days in three public places in the City of Los Angeles: one copy on the bulletin board located at the Main Street entrance to the Los Angeles City Hall; one copy on the bulletin board located at the Main Street. entrance to the Los Angeles City Hall East; and one copy on the bulletin board located at the Temple Street entrance to the Los Angeles County Hall of Records. 1 hereby certify that this ordinance was passed by the Council of the City of Los Angeles, at its meeting of _ a�l1N QgA'ro" JUNE IAGMAY, City Clark By. Deputy Approved JUN 18 2010 Mayor Approved as to Form and Legality: CARMEN A. TRUTANICH, City Attorney By >WA7A r l�rW i SIA J KOWSKI -Deputy City Attorney Date 6--7-/0 File No. aid- ftMamml Counsel iGCjTASIA JANKOWSKIIORDINANCESUVZORD. ANEiAMENOMENr t.doe 6 R i o 464 South Lucas Avenue* Los Angeles (:alltbrnfa 90017 • (213) 481 -8530• FAX (213) 481.0352 To: Santa Monica Planning Commission From: UNITE HERE Local 11 1. RE; 710 Wilshire Hotel Development Agreement No. 07 -006 This memo is submitted on behalf of the 20,000 members of Unite Here, Local I I in response to the draft Development Agreement for the proposed 710 Wilshire Hotel project. As demonstrated . at the January 25* hearing, our members live, work, and play in the city of Santa Monica, and it will be they who will be adversely affected by the project's social, environmental, and economic impacts. After careful analysis ofthe Development Agreement, we strongly believe that the community benefits offered are too minimal and do not jus* sucb'dramatic changes to the current zoning. In fact, the projedand the community benefits offered may be less beneficial than what is already at the site. The building currently houses many small businesses including law and real estate firms, chiropractors, and educational specialists. These professional middle class jobs will be replaced with poverty jobs both in the construction and permanent employment of the hotel. The developer opposes the Commission's recommendation for further public art, and argues that the renovation of building itself is art. The developer also asks for a long term Development Agreement against staff's and the Commission's recommendations. Therefore, we respectfully request the Commission to oppose approval ofthe proposed Development Agreement. The following are the reasons to oppose. 1. Construction of Project While the construction of the project is construed as a community benefit because of the jobs created and local hiring provision, there is no Community Workforce Agreement (CWA) and thus no authentic plan of enforcement: CWA's are used throughout Los Angeles County to create quality construction jobs with a path to the middle class -- requiring that highly - skilled workers earn prevailing wages with health benefits. They increase local residents' access to construction apprenticeship programs, which have a growing track record of preparing people of color and women for jobs in the construction trades. They also allow a skilled workforce to complete construction projects safely and on time --a win -win for workers and taxpayers. Without a CWA, these jobs will pay poverty wages and the local hiring provision will be effectively unenforceable. (See Attachment A.) 11. Living Wage At the May 2010 Float -Up hearing for the proposed project, the City Council stated that a living wage for hotel employees was its top community benefit priority. This is in keeping with many cities throughout the United States that recognize families working in low wage jobs make insti icient income to live locally given the local cost of living. Each living wage is specific to the locality and cannot be distinguished through averages, especially in Los Angeles County in which the cost of living varies greatly throughout the region. A living wage rate requirement is only one part of a provision, and does not address other fundamental issues for a just work environment. The purpose of the developer's proposal is to "ensure that Hotel workers receive fair and reasonable compensation comparable to similar hotels in Santa Monica and nearby communities," but does not accomplish this goal. The.following sections address the various problems with the developer's proposal. A. Proposed F_age is Too Low The Economic Policy Institute estimates that a family of four must earn a combined salary of '16Dut $71,095 to cover food, housing, transportation, healthcare, and other' necessities in Santa Monica. Santa Monica benefits from a thriving $1 billion tourism industry, but has not always produced good jobs for the workers who maintain this business. "During 2011 Santa Monica continued to be one of the strongest hotel markets in Los Angeles County. For the first 10 months of the year, Santa Monica had the highest hotel occupancy rate among submarkets in the county tracked by PKF. Santa Monica's occupancy rate through October was 86.1 percent, up 3.2 percent from a year earlier. The.;,: average room rate jumped 8.7 percent to,$27.5:81 »l Given the high cost df living and the thriving hotel market, it is incumbent that hotel workers receive a Santa Monica living wage. However, the developer proposes a very low wage even.for the greater region and makes several distinctions of enforcement that are unnecessary and/or illegal. The developer proposes a wage scale of $10.64 per hour with health benefits or $11.89 per hour without health benefits, This calculates to about $21,000 per year. This is extremely low by any stretch of the imagination. The Federal Govemmeres poverty line is $22,113 for a family of four with two children.z The City of Santa Monica Municipal Code Chapter 4.65, Living Wage Ordinance (LWO), for example, establishes a minimum wage of $13.54 for employees of certain contracts with the city. This amounts to about $26,000 which is still very low and far below the $71,095 standard. It is also much lower then other nearby Los Angeles Airport Living Wage hourly rate of $10.42 for employees with benefits and $14.97 for those without. (See Attachment B.) B. Certain Job Exemptions Are Legally Questionable The developer purports that this proposal is modeled after the Century Boulevard Living Wage Ordinance. However, Section (ii) of the proposal significantly deviates from the Ordinance. First, the Ordinance covers all workers of the hotel including tipped employees. The developer's proposal exempts tipped employees (e.g. concierge, bell staff, room service delivery staff, bartenders, and food or beverage wait staff and bus servers) from coverage of the living wage rate. This exemption is legally questionable, and puts the city of Santa Monica at legal risk For example, a different minimum wage for tipped workers was rejected as unlawful and contrary to the policy of the California Labor Code to treat tip as not wages? When this issue was raised by 'Henning v. IWC (06 46 CaDd 1262 _ •• 2 the hotel industry during the Century Boulevard campaign in 2007, our attorney drafted the attached memo to address these concerns. (See Attacbment C.) Second, Section (ii) excludes supervisors from the provision. Supervisors lead other employees, but do not have the power to high and fire. They are not management, and deserve the rights and privileges of other employees. Third, Section (ii) also excludes "any employee required to possess an occupational license:' There is no reason for this provision, as it does not add anything new. It has been interpreted to include people lice shuttle bus drivers required to get a commercial driver's license. Therefore, the city of Los Angeles is removing it. In order for the city to eliminate this risk, the Commission should remove these exemptions. C. Periodic Review of Hotel Living Wage Should Be Determined by City Council and Not Reduced _ Section (vi) of the developer's proposal is completely new precedent and does not model the Century Boulevard Living Wage Ordinance at all. First, the developer seeks to reduce the living . wage every 3 years if so desired. If the reduction is 10% or less, it is considered a „"Minor Modification to the Ptoject ". In no tt&bt *, shall the City Manager use Developee- inquest as an opportunity to increase the Hotel Living Wage above.the initial Hotel Living'"Wage::'. After a lottig.recession, the cost of living is:projected to increase; and the living wage should follow these projections. There should be no reduction in the wages. Second, the developer proposes that the City Manager or his/her designee authorize this final decision. This effectively allows an appointed official to overturn the policy decisions of elected officials. If there are any modifications to this ordinance, it should be subject to the City Council rather than the City Manager. D. Right of Private Action is Missing The developer's proposal does not include the private right of action. This is a standard right of living wage provisions. Workers do not have any means of enforcing the requirement. If any person believes the hotel has violated any portion of the provision, they may bring an action in court and for injunctive relief and seek damages. Please see enforcement language in the attachment. E. Development Agreement is Not Contingent on Other Development Agreements or Policies This Development Agreement has been drafted specifically for the 710 Wilshire Hotel project, and not for any other project. The community benefits offered cannot be modified based on whether other projects subscribe to the same benefits. Final approvals should stand and not be undermined by other approvals in the fixture. The law functions through precedent; and not retroactivity. F. The Living Wage Provision Cannot Expire When Development Agreement Exrres Section (viii) states, "If not terminated any earlier, this Section 2.8 shall automatically expire and be of no finther force or effect upon expiration of the term of this Agreement." This means that the fixing wage is not a long -term feature of the hotel's operations. Hotels can operate for 50 years or more. Living wages should continue despite any development agreement expiration as it applies beyond any development process. 111. Public Art Requirement Development Agreements are used to produce more community benefits than what is already there at the project The renovation of the building is needed to change the use ofthe site from an office to a hotel. While the developer follows the letter of the law by proposing to spend $11 million in renovations and therefore fulfill the loophole in the public art requirement, he misses "the spirit ofthe law which is to produce more public art for the city, This community benefit took 25 years of community activism to create, said it should not be undermined in this way. 1V. Long Term Development Agreement. The City of Santa Monica is seeing more and more Development Agreements." Each Development Agreement serves as a precedent for future agreements. When a developer proposes a long term agreement, the benefits proposed now may be insufficient 10 years later and the project may be out of step with new zoning requirements. This area is currently seeldug anew Specific Plan, and this project may be out of line with it This sets a negative precedent for the city. http: Avww .orfssntamonicaoomissm_sitetbe lookoutkaws /News- 20121Fcbntaty- 2012102 07 2011_Development Agre=ents_Continue to Rise in_Santa Monica,html 4 All I DwIftess - laving Wage 4- / /www.18wa.OW/welwM�. IAWA.Mp:Rid -596 ' Current weather TEMPLRATURE580Fi44q 11 E.ATF®i:Pa$romalf ltl W btmFd.Hi04131N PsT -cs�r jg�811Ati)yAeu«. News Finandal Reports Abrpmt .Engineering "Plea Maeagareant Environment Real Estate TentiMs 411 ,. Tenant Pmjocts Eldsopponu,dnes led Webrlte Airport Info tors with ' � ;pxkl Needs ' " Text are: 1+1 L -1 sh® LA aracwa � A Ntmu.wv kaemu Administrative Reauiremerds - Liyintl Wage and Service Worker Retention Ordinance Living Wage Ordinance or Living Wage and Service Contractor Worker Retention Ordinances - RFD or RFP will mmdfV whethar.the LJvimg Wago ora7muynd ar the LlvhW Wegw cad Service Caftbartof Worker /letentlan nnnaesis /are repaired. . Living Wage Ordinance (LWO) i Pu Slam i;j,0s Amleles Administrative Code, ONIslon 10,.Chapter 1, Article 11, Section 10.37 at seq, It Is , t the Polliy of Nre illy of Los Angeles that mnaactors1wbmntracmrs who have agreements with the Oty r' must comply ;Mill all applicable Provislors of the Living Wage Ordinance, including Paying their employees- - a minlmurn'Bving wage° with health benefits ad providing compensated days off. The Bureau of contract AdmUYstration (BCA) has determined that there is a proprietary interest In applying LWO to an airport employees wfio provide industryspeditc services to or for LAW& In effect, this determination broadens coverage to Include airport employee dassNtcattons whose wank occurs in 00n-pubec and/or sease areas since their work 1) Impacts the PubDCW perceptions of services at LAWA or 2) matntairs avportsecority. The effective data to ImPlemectthis coverage was May 2, 2010. Living Wage Ordinance Compliance Requirements; • contractor agrees to pay employees a living wage — updated July 1st of every year. On September 9, 2009 the Los Angeles City round[ unanimously appeared an amending Ordinance to thl" Wage ghat requires atrpat employers at all airports in the LAWA system to Increase the hourly rate for health benefits of airport employees covered by LWO to $150 per hour from 0195. The new Ordinance became effective on January 17, 2010. Office of Contract Compliance (OOL) of the Oepaltnent of Pubk- Works, wNch Is the deslgnabed adntnlsbatNe agency for the LWO, sent written notice to LAWA contractors and tenants. . . • As of July 1, 2011, If health benefits are not provided by an airport eriploye, then $455 must be added to the base hourly wage rate. Thus, the new treaty rate becomes $20.42 for employees with benefits and $14.97 for those wftuk Rrraw, if snalrport employer provides benefits for less than $4.55 per flour, the differential most be added to the hourly wage rata. Contractor must Provide at least 12 compensated days off per year (dr each employea s sick team, vacation or Personal nernsity, and at least 10 days off uncompensated. • Contractor agrees to Inform employees maldng less than $12.00 per hour of the Famed . Income Tax Credo and make ferns; avafiabte. ... . • Contractor agrees to permit awess to work sites for aWwrtzed City replasentatives to review operations, payroll and related documecds. • Contractor agrees not to retaliate against any employee claiming narcompllarca or - union Organizing. Living Wage and Service Contractor Worker Retention Ordinances (LWO /SC;WRO) Pursuant W LAAC, Division 10, Chapter 1, Article 11, Sections 1036 et seq. and 10.37 et seq, it Is the po0a/ of the City of Los Angeles that successor eonbactoWsubcontractors who have agreements with the . ..�� Ory must comply with all appiicable provisions of the Uving Wage Ordinance (LWO) and Service Contract :•�e..•'.� l Oft 2/14/2012 3:15 PM r...r• t.. m.t!;�1 The Construction Careers Project A partnership between LAANE, the LA County Federation of Labor, the Building Trades, faith -based leaders, and other community organizations, the Construction Careers Project represents an effort to link public investment to the creation of good jobs for local residents through the establishment of Community Workforce Agreements (CWA). The Construction Careers Project has two key components: e A CWA, which Is a collective bargaining agreement between the building trades and developers that set out wages and . benefits for workers, and ensures labor peace on the job, and 2 A targeted hire program aimed at increasing access to careers . in the construction industry for local residents and low income communities How Can the Construction Careers Project Help Los Angeles Families? It will create quality construction jobs with a path to the middle class — requiring that highly - skilled workers earn prevailing wages with health beneflts. It will increase local residents' access to construction apprenticeship programs, which have a growing track record of preparing people of color and women for jobs in the construction trades. y It will allow a skilled workforce to complete construction projects safely and on time —a win -win for workers and taxpayers. Good Jobs Build Thriving Communities Workers' increased spending power creates a demand for goods and services in the region and generates new jobs. Workers who receive family- supporting wages and health care reduce the burden on the public safety net. Business - Livlgg Pfdge •W16 2 oft htlPdfwww.lawa.Org/welcome,J 4WA.aspx?id =596 Worker Retention Ordinance (SCWAO). Contracts svb)ect to Service Conbzcbor Worker Retention Ordhmneas, are required to comply With the folloydn9 requirementsln addition to the above: • Contractor agrees to otter W employ and retain for a 90-day period the employees Who wodred for at least 12 rrlontiW for the hairninated cantacb:r1SAMn radars earning leis than $15.00 per hour. • Contractor agrees to not discharge without muse the employees retained during the 90-day pedad. • Contactor agrees to perform a written performance evaluation of each employee retained at the end of the 90-day pedod. . uearmeelts: BlddeWPropOsers sutrjett to LWO or LWO{SLWRO are no required to submit farms with the bid/proposal. The language pertaining to LWO and SCWRO ccmptlante.wlli be part of your mntractwith LAWA: • IWO and SCWRO Draft Contract Language • LWO Applicability for tAWNs CAnbad urs and Tenants (SMs Determination as of February 26, 2010) Once the contract Is mtecuted, the prime OonbaWr Is required to complete the following forms within 30 days of wnbact exact don and submit them to the Office of Conbad Compliance: • Employee Information FOrm • Subcontractor Information Form . .,.,,11le subcontractors are required to submit the Subt6nbaCbDes Declaration of Compliance to Pe -prime wltNn 90 days of subconbadeh(egdion. . Pease follow the Irs1ru Clans on Orr: f9ims for affwTeBon and, "Ital. .. • ,;:5:. There are exerrIPOOns born Ods mdmnce. If bidder /pmposar quON$ for any of them, he (she Is Mulmd to complete and submit one of the following exemption Forms (dkk on the link to download the fort) at the bld /proposaf due date: • Collective bargaining agreement with supersession language or Omrpabonal license • 601(c)(3) Non -Profit Organizations or One- Person Contactors • Small Business (for lessees and licensees only) • City Financial Assistance keciplent (SCWRO Exemption Form) Please visit Public Works' WeWbe or contact the Bureau of Contract Adminlsbatiory Office of Contract CompllarrcG 1149 S. Broadway St, Sub 30g, Los Angeles, CA'90g15, phone: (213) 847 -1921, and fax: (213) 847. 2777; fur the must current LWO and SLWRO rates, language, and regulations. For tnitbrmaidon on business Opportunities at LAWA, access the Los Angedes lluslness Assistance virtual Retwork. We took forward to doing husinenw nth youl Copyrlghto 201010 Angeles World Atrpoft All rights reserved. Terms of Use .... CLy orL& f DstlEmr I A ®toy I Wavy I aoaxt I Sjs pl Comm /Mime rro Mnm12n 147c (ctdcm) I eaa t�rmi4 i apnlbt 1 a3a{ (ku•npsa)) rasamv 1 wktremm• ® 101]10[ruq�WONINwR.LOiaRh esmwa. 2114/2012 3:15 PM ATTACHMENT. C. t'. � � o s DAV , COWELL & BOW , LLP rnA 4 Counselors and Attornays at taw acntyta January26,2007 x SM FnnefRm MtUft St W.Ua lino Sal HarV�tR, Cdimrrit Wla3 • RU'.597.Tmp Gy iIS597.Tmi _ A l \L VlTl 1TAJC�MOR DUM try Ni suns JH,M(U} 5•ami.$rmmnn!IA,hV� .`eda+o 4 XdixaR CCh RV w u&m ,w.ryCCA W) To: Whom It May Concern P.&. J.a Af0. Wni JaolOnu.r,t j Prom: Richard CJ. McCracken a;+raeE.kpfC•leHl wE,Nrkm �trnhxxxet H'oaLHVlin (ry�hY Re: Two -Tier Minimum Wage e g ErcaynsiG Mh. Date: January 26, 2007 Pall. 2Gn.iUW) PJrnGR SootGlaG •been F404eroMMIM -190; A question has raised whether the City of Los Angeles might enact a amnca Minimum. wage ordinance that provided different wage utter depending on whether mp%Wau(u) or not employees received tips from customers. Putting aside the considerable conceptual and drafting problems with this idea, including what types of jobs Wcehingron, OG receive tips, how to measure how much they receive, whether to have multiple tiers of wages depending on how much they receive, we believe this distinction is �015e) " "o prohibited by California law, CalWmia is one of six States that ban completely the mr.rZlirY* taking of a credit for tips against wages. Fa ZW.7i.5551 fm90014GM +orl California Labor Code Section 351 provides: ✓4441 bdnan (Ir. rA la, W) . alaGr.Sl�Gtocrteoµ rr) 351. No employer or a , e, y gent shall collect tak or receive an )a: i wrm g,(A, nu) gratuity or a part thereof that is paid, given to, or left for an aomuq unn employee by a patron, or deduct any amount from wages due an employee sew- ,.I$rea iin as l on account of a gratulty, or require an employee to credit the ra aauoxmanau amount, or any part thereof, of a gratuity against and as a part of 6t7.]L'.57m W a173T7.9Tb7 the wages due the em ployee f rom the employer. Eve ry gratuity is hereby declared to be the sole property of the employee or employees 'G;RIe ;A+d"w to.MOCHA) to whom it was paid, given, or left for. An employer thatpermits patrons to pay gratuities by credit card shall pay the employees the 0nro«x ") full amount of the gratuity that the patron indicated on the credit IGe &W st,� card slip, without any deductions for twat lamer 970113160W any credit card payment processing eessin fees or costs that may be charged to the employer by the Fa 9Z.9I&M credit card company. Payment of gratuities made by patrons using SWkKww (rx.4E W i credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit EteGRGNen,SferRR , m9n card payment. r�° 'R PY !bu;iCRlmvm{SonLSiineA•i k;�''a t+atEyaG.xRame9mT .. NL3@5.51G - ' fu mJAl49 &b . El Janumy26, 2007 Page 2 C The California Supreme Court has held that Section 351 prohibits the Industrial Welfare Commission from establishing a'Ywo -tie>" minimum wage system based on whether or not employees receive tips, Henning v Industrial Welfare Commission (1988) 46 Ca1.3d 1262, 1279. The Court reasoned: [Tihe Legislature has broadly declared that the Commission may not permit an employer to obtain the benefit ofhis employee's tips by paying the employee a wage lower than he would be obligated to pay if the employee did not receive tips. But in establishing the system under review, the Commission has attempted to do the very thing the Legislature has prohibited: under this system, the Commission clearly purports to allow an employer to pay a tipped employee a wage lower than he would be obligated to pay if the employee did not receive tips. rd. . No agency may establish a two -tier minimum wage based on tips. The only question remaining is whether cities can do so despite § 351's prohibition. Section 351's prohibition against tip credit is not confined to the state minimum wage. If a municipality were to establish•a minimum wage rate for all or some classes of employment but then reduce it for some employees because they cam tip income, the municipality would thereby purport to give employers covered by the law the power to do something that they are prohibited from doing under Section 351. It would amount to a city- ordained tip credit. One of the basic rules of the allocation of power between the State and its political subdivisions is that in the absence of a grant of power from1he State, municipalities may not adopt laws that stand in direct conflict with State law. Sherwin- izlkams Co. a City of Los Angeles (1993) 4 Cal.4th 893, 897 -898; California Federal Savings and Loan Association v. City of Los Angeles (1991) 54 Cal.3d 1, 17 -18. Another way to put this is that a city may not adopt a law prohibiting a person to do what state law allows, or allowing a person to do what state law - forbids. Such a two -tier minimum wage law would allow an employer to do what it is forbidden to do under state law. A charier city such as Los Angeles may nevertheless enact a law that contradicts state law if the subject matter is of municipal and not statewide concern. Amwest Surety Ins. Co. v. Wilson (1995) 11 Cal.4th 1243,1254; California Federal Savings, 54 Ca1.3d at 18 (the question is whether there is "a convincing basis for legislative action originating in extramunicipal concerns, one justifying legislative supersession based on sensible, pragmatic considerations.') The subject of what is the appropriate level for the minimum wage is one the leading topics statewid"ndeed nationwide —as everyone !mows. Any argument that this is a primarily municipal concern would defy common sease. 0 January 26, 2007 Page 3 0 Moreover, the state policy against tip credit is a strong and broad one, in addition to the nde in Section 351, the Legislature has in Section 356 stated explicitly that this is a policy that may not be circumvented by the action of any branch of government or by private contract. The Legislature expressly declares that the purpose of this article is to prevent fraud upon the public in connection with the practice of tipping and declares that this article is passed for a public reason and can not be contravened by a private agreement. As a part of the social public policy of this State, this article is binding upon all departments of the State. Section 356 announces that this is fundamental public policy and that it is intended not so much to help workers but to protect the public generally. A oity may not be technically a department of the State, but the last sentence of Section 356 makes it quite plain that the legislature intended that all parts of govertment were to be bound by the policy against reducing wage rates because of tips. We conclude, therefore, that a two -tier minimum wage law based on whether employees •earn tips would be preempted by state law and invalid. , MSIDCMRd ftWI -6MW Wµeirgwdn,.wp� In QMJJa Sal 4w �Ii�l���� `. January 6, 2012 Mr. Alexander J. Corby 710 Wilshire Boulevard, #409 Santa Monica, CA 90401 Dear Mr. Gorby: CONSULTING USA Pursuant to your request, we have performed an update of our November 2010 analysis of labor wages relative to the proposed adaptive reuse of a landmark building at 710 Wilshire Boulevard and development of a full- service hotel in Santa Monica; California. Specifically, we have gathered data concerning existing wages for hotel workers at union and non -union hotels ranging in type between moderate and luxury. Additionally, we have reviewed the City of Los Angeles Ordinance establishing a living wage for hotel workers in the Los Angeles Airport area as well as a 2011 LA- Orange County -San Diego Benefits and Compensation Survey completed by Executive HR Consulting Inc. (2011 HK Survey). SCOPE The scope of our assignment included a review of the Santa Monica hotel supply and identification of potential comparables for this analysis. We have identified several hotel properties within the City of Santa Monica (the City),, as well as within the greater Los Angeles market. Furthermore, we have reviewed the City of Los Angeles ordinance establishing a living wage for hotel workers in the Los Angeles Airport area and other data relative to existing hotel wage levels. For each property identified, we completed interviews or reviewed Union documentation and wage structure in order to establish minimum wages for hourly positions for both tipped and non - tipped employees. PKF Consulting has interviewed several hotels in the City of Santa Monica, including union and non -union hotels ranging in type from moderate to upscale. PKF Consulting has completed numerous market studies, appraisals, and economic impact "studies in the Santa Monica market, and we have utilized our relationship with these properties to gather a representative sample of wage rates. COMPARABLE HOTEL WAGE RATES For each hotel, we attempted to gather specific data on hourly wage positions within a typical hotel in these locations. We have gathered union hotels and two non -union hotel, all located in Santa Monica. CciOem PKF Consulting 1805 S. Mguaan Strom, SuHe 35x01 LonAngnlea, CA90017 TEL 213-000-0000 I FAX: 213-023- 02401w .pVc.am rates for various this data for four Mr. Alexander J. Corby Pagel For reasons of confidentiality, we have displayed the hotels as Union A, 8, C, and D; and Non -union A and B. in each case, we have identified the location and quality. level of the hotel. Surnanary, of Union and NomUnion CornparaWWes and Los Anarl es-0range CwntvSan Diego Su"q Rerult, Comparable Union - A Union -8 Union -C Union Non -Union A'• NwUnion8'• Surver, Sway Location Santa Monica Santa Monica Sanama"Ita Santa Manua Santa Monica Sanla Monica LA-01751) ZoneI Luxury LA Beaches Positioning Moderate Upscale Luxury Upscale Moderate Moderate Hotels and LAX Contact Expiration 2009 2009 2011 WA WA N/A N/A NIA Data as of. 1212011 12 /2011 1012010 1212011 1012010 1212011 Banquet Capdin' $11.75 NA NIA $15.20 WA WA $11.61 31150 Banquet Bartender- $8.00 N/A $1116 $12.91 WA NIA $10.52 310.51 Banquet Housemen' $1159 $11.85 $12.65 $12.45 N/A MIA $11.33 $11.14 amcluelsewer• $8.00 WA Sam 18.00 WA NIA $8.46 $9.61 Winer Supervisor* $9.37 NIA N/A NIA WA WA $11.60 310.05 Concierge $13.75 WA NIA $14.40 WA NIA $14.24 $14.71 Beliperson' $8.00 stamo $9.90 $9.65 NIA N/A $8.57 $8.59 Dorrpeason• N/A $10.00 910AD $11.15 NA N/A $9.05 $10.37 Valet Parking Attendant' $11.7s NIA NIA Ouisourced NA WA $8.14 $8.17 Bartender- $12.41 $12.00 312.66 S1D.55 310.98'• NIA $10.04 110.46 Bar Bark' $11AS $11.85 $13.45 $11.95 NIA NA $10.58 $9.33 Bus Person. $10.70 $11.10 $11.40 $11.85 N/A N/A NM WAS Host $14.91 NIA $14.60 $15.05 NIA NA $12.18 $13.41 Cook WA $16.05 $17.50 $17.95 MS.79 NIA $16.13 $15.29 Cook 11 $15AS $15.85 $16.50 $16.95 S14.60 NA $14.83 $14.00 Cook 111 NIA WAS $15.75 $16.I0 $13.63 N/A $13.51 $13.55 Mini Bar Attendant $13.50 $13.90 $15.01 $9.15 WA N/A $11.95 $11.49 Roo.Sorvice5erver• $0.00 Sue Sam $0.00 N/A NIA $8.13 $8.31 Room- - $11.46 571.85 $11.40 512.70 WA. N/A $14.19 $15.00 Server- $8.00 $0.00 SBAD Sam WA N/A $8.07 $8.53 Steward $13.01 $13.40 $14.10 $14.55 510.25 N/A $11.71 $12.10 Cashler N/A $15.30 NIA $15.05 NA N/A $16.88 515.21 Front Desk Supervisor $16.55 $16.80 NIA WA $16.48 N/A $16.68 $15.42 Guest Sewlen Agem $14.90 $15.30 N/A $16.10 $11.56 $11.00 51331 $13.26 PBX Operator $14.16 $14.55 $15.40 $15.10 WA WA $13.61 113.05 Huu"Person $13.00 313.411 514AD $14.55 $10.51 $11.00 $11.33 511.54 Room Almndant $13.00- $13AD $14.10 $14.55 $10.51 $9.50 $11.77 $11.41 Englneerl $14.57 $17.05 N/A $17.00 $15.56 $16.00 $17.41 $16.59 toodneer 2 NA $14.97 N/A 318,50 $13.98 NIA $19.45 $17.95 Minimum Tipped 8.00 $8.00 $8.00 SS% NIA NA $8.07 $8.17 Minimum Non -Ti $13.00 $13.40 514.10 59.15 510.25 $9.50 11.33 SIIA1 • ripped position •'Non U ' A is limited service widr minimal food and hesasmge Only lipped posillor, is bar tender and k hfplserdian non - tipped position PKP Consult nR ExeculNe HE ConsulpnR Omup, and Individual Properties Unfortunately, we have not been able to identify the benefit expense at these properties. However, from reviewing Los Angeles Ordinance 178432, we note that the PAX area living wage is comprised of a base living wage of $10.64 plus $1.25 for benefits. Furthermore, tipped positions are tied to the State minimum .wage, as these categories receive compensation in the form of a base hourly wage plus gratuities received in the course of performing the respective position. Some tipped positions at the upscale comparables receive higher base hourly wages, while the Moderate comparables only present non - tipped positions except for one position at Non -union A for bartenders. The union hotels differentiate between tipped and non - tipped employees, and the hourly rates for tipped employees are substantially lower than for non - tipped employees. The non- union properties are limited service and present limited tipped positions. The 2011 HR Survey presented was based on 64 hotels, including both union and non- union properties. The sample set included seven Santa Monica hotels, including Casa, Mr. Alexander J. GorbY Page 3 Shutters, Loews, Sheraton, Ambrose, Fairmont, and Viceroy Hotel. The survey presents several sub - tiers. We have focused on two: luxury hotels and Zone 1. The luxury hotel tier covers the Los Angeles, San Diego, and Orange County areas and includes Casa del Mar, Shutters, Fairmont, Viceroy, and Loews, as well as 35 other hotels. The Zone 1 tier covers Los Angeles beaches and the LAX area and includes the Ambrose, Casa del Mar, Shutters, Fairmont, Sheraton, Loews, and Viceroy, as well as 8 other properties. The minimum tipped position for Union Hotel A and the Luxury Tier survey group was Room Service Server, which presented a floor or minimum hourly wage of $8.00 (i.e., the State minimum wage), and an average hourly rate of $8.07 for the surveyed hotels. Zone 1, which presents Los Angeles Beaches and LAX, presented -a minimum wage of $8.52. The survey results were based on 444 persons in the server position for the Luxury tier and 82 persons in the Zone 1 breakout. The minimum non - tipped position at Union Hotel A was mini bar attendant at .$9.15 per hour. The minimum non - tipped positions in the survey results were house person at $11.33 for luxury hotels and room attendants at $11.41 for Zone 1. City of Los Angeles Living Wage Ordinance for Hotel Workers In 2006, the Los Angeles City Council adopted a living wage ordinance for the hotels inside the Century Corridor in the LAX area. These hotels are subject to a living wage of $10.64 plus $1.25 per hour for benefits for-2011. Benefits We have also reviewed survey results relative to benefits paid at Southern California lodging properties. The survey presented a sample of 64 hotels. The following presents an excerpt from the 2011 LA- Orange County -San Diego Benefits and Compensation Survey completed by Executive HR Consulting Inc. The respondents' reported an average 2010 labor expense of 35.2 percent of revenues, including benefits. Ateragra Eligibglty, waiting period monthly premium - Individual eo.pay monthly premium repay - +1 monthly premium repay - +I or more monthly premium - Individual monthly Premium - +1 monthly premlm - +2 or more Number of hotels offering an HMO plan - Number of hotels offering a PPO plan Number of hotels offering a Gfewrla plan Number of hotels offering a dental Pin Nuenberof howls offering Vision Plan Number of howitoffering a Prescription Plan Number of hotels offering a 4019 Plan Numb*( of hotels offering a company 401K match Awroge of wished 401lkj percentage Plant Wing 91 90- S 88.95 S 109.78 S 219.28 S 203.31. S 31824 ifI 316.56 S 284.17 S 330.36 s 591.69 s fifa.94 S 796.30 S 873.68 55 59 33 58 55 SI 56 94 4.36% Mr. Alexander J. Gorby Page 4 Compensation and Hotel Operating Expenses In addition, PKF Consulting compiles an annual publication "Trends in the Hotel Industry." The 2011 Edition, which incorporates 2010 financial statements from over 4,000 hotel properties within the United States, presents a total-salaries and benefits expense of 37.4 percent of revenue, including 26.6 percent for salaries and 10.8 percent for benefits. Salaries and wages are the single largest component of expense within a hotel, having a direct impact on feasibility of operations. As the largest expense item, fluctuations in labor expense have significant impact on bottom line, profitability. Furthermore, as a percentage of expense, salaries and wages comprise approximately 46.6 percent of total hotel expense, as can be seen below, 1 Il " � ixi: r_:is: nx �. t;•• rsa a r ecm.R —wavma � s r� 'i1 � �I i Z, I 1y11, it t�rM1,�G l)I 1h r' �. 6 �5\ (( h } I\ 1 (\` A LC.., {)�!+tta'�b��1'l�trd.�'.1�ari With a majority of entry-level and hourly staffing levels predominant in the hospitality industry, it is reasonable to expect significant impact on feasibility from an adjustment of the minimum hourly rates at a given hotel. CONCLUSIONS The union hotel studied differentiate between tipped and non - tipped employees, In our experience, this is typical of the hotel industry in the region and nationwide. The union hotels studied had a minimum wage rate for non-tipped employees ranging from $9.15 to $14.10 per hour. The non -union hotels had a minimum wage for non - tipped employees of $9.50 to $10.25. The union hotels had a minimum wage rate for tipped employees of $8.00 at all properties. The 2011 LA- Orange County-San Diego Benefits and Compensation Survey reported a minimum tipped position hour wage of $8.07 for luxury hotels and $8.17 for Los Angeles Beaches and LAX, and a minimum non - tipped hourly wage of $11.33 and $11.41 for each area, respectively. Mr. Alexander✓ Gorby Page S We look forward to discussing our findings with you. Please contact us at your convenience to discuss. Sincerely, PK*jeffLuso og By: si Senior Vice President { { O T STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS This report is made with the following assumptions and limiting conditions: Economic and Social Trends - The consultant assumes no responsibility for economic, physical or demographic factors which may affect or alter the opinions in this report If said economic, physical or demographic factors were not present as of the date of the letter of transmittal accompanying this report. The consultant is not obligated to predict future political, economic or social trends. Information Furnished by Others, - in preparing this report, the consultant was required to rely on Information - furnished by other individuals or found in previously existing records and/or documents. Unless otherwise Indicated, such Information is presumed to be reliable. However, no warranty, either express or Implied, is given by the consultant for the accuracy of such information and the consultant assumes no responsibility for information relied upon later found to have been inaccurate. The consultant reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available. Hidden Conditions -The consultant assumes no responsibility for hidden or unapparent conditions of the property, subsoil, ground water or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions. Hazardous Materials - The consultant has not been provided any information regarding the presence of any material or substance on or in any portion of the subject property or improvements thereon, which material or substance possesses or may possess toxic, hazardous and /or other harmful and/or dangerous characteristics. Unless otherwise stated in the report, the consultant did not become aware of the presence of any such material or substance during the consultant's inspection of the subject property. However, the consultant is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the value of the subject property. The value estimated in this report is predicated on the assumption that no such material or substance Is present on or in the subject property or in such proximity thereto that it would cause a loss in value. The consultant assumes no responsibility for the presence of any such substance or material on or in the subject property, not for any expertise or engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this report assumes the subject property is in compliance with all federal, state and local environmental laws, regulations and rules. Zoning and Land Use - Unless otherwise stated, the projections were formulated assuming the hotel to be in full compliance with all applicable zoning and land use regulations and restrictions. Licenses and Permits - Unless otherwise stated, the property is assumed to have all required licenses, permits, certificates, consents or other legislative and /or administrative authority from any local, state or national government or - private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained In this report is based. Engineering Survey - No engineering survey has been made by the consultant. Except as specifically stated, data relative to size and area of the subject properly was taken from sources considered reliable and no encroachment of the subject property is considered to exist. Subsurface Rights - No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is "expressly stated. Maps,, Plats and Exhibits - Maps, plats and exhibits included in this report are for illustration only to serve as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced or used apart from the report. Legal Matters - No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate consultants. STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS (continued) Right of Publication - possession of this report, or a copy of it, does not carry with it the right of publication, Without the written consent of the consultant, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with proper written qualification and only in its entirely for its stated purpose. Testimony in Court - Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance of said hearing. Further, unless otherwise indicated, separate arrangements shall be made concerning compensation for the consultant's time to prepare for and attend any such hearing, Archeological Significance - No investigation has been made by the consultant and no Information has been provided to the consultant regarding potential archeological significance of the subject property or any portion thereof_ This report assumes no portion of the subject property has archeological significance. - Compliance With the American Disabilities Act - The Americans with Disabilities Act ( "ADA') became effective January 26, 1992. We assumed that the property will be in direct compliance with the various detailed requirements of the ADA., Definitions and Assumptions - The definitions and assumptions upon which our analyses, opinions and conclusions are based are set forth In appropriate sections of this report and are to be part of these general assumptions as if included here in their entirety. Dissemination of Material - Neither all nor any part of the contents of this report shall be disseminated to the general public through- advertising or sales media, public relations media, news media or other public means of communication without the prior written consent and approval of the consultant's). Distribution and Liability to Third Parties - The party for whom this report was prepared may distribute copies of this appraisal report only in Its entirety to such third parties as may be selected by the party for whom this report was prepared; however, portions of this report shall not be given to third parties without our written consent. Liability to third parties will not be accepted. . Use In Offering Materials - This report, including all cash flow forecasts, market surveys and related data, conclusions, exhibits and supporting documentation, may not be reproduced or references made to the report or to PKF Consulting.in any sale offering, prospectus, public or private placement memorandum, proxy statement or other document ( "Offering Material ") in connection with a merger, liquidation or other corporate transaction unless PKF Consulting has approved in writing the text of any such reference or reproduction prior to the distribution and filing thereof. Limits to Liability - PKF Consulting cannot be held liable in any cause of action resulting in litigation for any dollar amount which exceeds the total fees collected from this individual engagement. Legal E3penSeS -Any legal expenses incurred in defending or representing ourselves concerning this assignment will be the responsibility of the client. ATTACHMENT DECLARATION OF BRUCE BALTIN, PKF CONSULTING, SIGNED MARCH 1, 2012 52 DECLARATION OF BRUCE BALTIN I, BRUCE BALTIN, declare: 1. This declaration is prepared in connection with the City of Santa Monica's processing of a Development Agreement Application (DR No. 07 -006) for a proposed hotel and other improvements at 710 Wilshire Boulevard and related addresses. Professional Background 2. 1 am a senior vice president in the Los Angeles office of PKF Consulting USA ( "PKF "), where I have worked for more than 40 years. PKF is an international firm of management consultants, industry specialists, and appraisers. We provide a full range of services to the hospitality, real estate and tourism industries. Headquartered in San Francisco, PKF also has offices in Atlanta, Boston, Chicago, Dallas, Houston, Indianapolis, Los Angeles, New York, Philadelphia, and Washington, D.C. 3. 1 am a member of the following professional organizations: the International Society of Hospitality Consultants, the American Institute of Certified Public Accountants, the American Hotel -Motel Association, the Urban Land Institute, the California Travel Association and the Orange County Tourism Council. I am on the Board of Directors of the Orange County Tourism Council. 4. 1 am an Adjunct Associate Professor for the University of Southern California, Sol Price School of Public Policy, where I teach a course in hotel development for the Masters of Real Estate Development Program. I am also a member of the Chancellor's Hospitality Industry Advisory Board for the California State University system. I formerly taught at the University of Nevada and the Collins School fl of Hospitality Management at California Polytechnic Institute. I was awarded a Bachelor of Science in Hotel Administration from Cornell University. 5. 1 have gained a wide diversity of experience in the hospitality and tourism industries, including market demand studies, valuations, economic and operational consulting, and matters dealing with leases, franchises and management contracts. My industry experience includes hotels, resorts, clubs, restaurants, theme parks, and national and state parks. I have worked extensively with various governmental entities in tourism and hospitality real estate issues. I have frequently been quoted in the national and local media and have previously testified as an expert witness on various industry issues. 6. The statements made in this declaration are true and correct and based upon my own personal knowledge except as otherwise indicated. Familiarity With 710 Wilshire Hotel Proiect 7. 1 am familiar with the hotel and commercial project proposed by Maxser and Company, LLC, and Alex Gorby at 710 Wilshire Boulevard. I have reviewed the project plans prepared by project architect Howard Laks. 8. This project would consist of a full - service hotel and retail shops and restaurants, including 285 hotel guest rooms, almost 7,500 sf of banquet/meeting rooms, about 7,750 sf of restaurant space, almost 8,000 sf of ground floor retail and 290 parking spaces. 9. The proposed hotel and amenities would constitute a full - service hotel. The typical amenities that exist at full - service hotels include gift shop, a three -meal coffee ICA shop /restaurant, a bar and lounge, meeting and conference rooms (including a main ballroom), exercise room, spa, pool, business center, and concierge. 10. As I understand it, Mr. Gorby is negotiating a proposed Development Agreement with the City of Santa Monica for this project. Hotel Feasibility 11. My firm has been retained to work on a series of reports and studies for the project. On March 26, 2010, we prepared a feasibility analysis including market demand, an estimation of potential average daily room rates ( "ADR ") for this hotel, an estimation of hotel occupancy, a projection of cash flows and derivation of value, and a cost and financial feasibility analysis. On April 5, 2011, we updated our estimation of potential ADRs, our estimation of hotel occupancy, our projection of cash flows and derivation of value, and the cost and financial feasibility components of the March 2010 report. 12. We concluded that the projected ADR would be $235, that the occupancy rate would be 80 %, that the development costs would total approximately $92,250,000, and that the entrepreneurial profit would be 10.2% -- which is at the lower end of the range of profitability for a hotel developer. To account for development risk, profit for a typical hotel developer normally ranges between 10% to 20 %. 13. The anticipated $235 ADR would place this hotel in a moderate - priced hotel category (i.e., $173 -250 ADR) for Santa Monica. 14. Our feasibility analysis does not take into account the cost of providing any project- specific community benefits, including paying a living wage that compels minimum wages for this hotel above the State minimum wage law. The imposition of 3 such community benefits will further erode the profitability (and therefore feasibility) of this hotel. 15. 1 am also familiar with a financial feasibility peer review jointly performed by Paul Silvern and David Berneman of HR &A Advisors, Inc. and William Whitney of Whitney & Whitney, Inc. 16. They estimated that the hotel would need an ADR of $294 to achieve at least a 10% return on cost, which is higher than our projected ADR of $235. They further indicate that while they believe the property location is significantly better than the comparables we used in our analysis, they declined to express an opinion as to whether an ADR of $294 is achievable. We continue to believe that there is a lack of data to support a projected ADR as high as $294 for this hotel and that $235 is a more accurate projection of ADR for this hotel in this location. Hotel Labor Wage Survey 17. On November 8, 2010, we prepared a hotel labor wage survey for comparable hotels in the City of Santa Monica, as well as within the Greater Los Angeles market. For purposes of that study, we examined the wages of four union hotels (three in Santa Monica and one near Los Angeles International Airport) and two non -union moderate - priced hotels in Santa Monica. For reasons of confidentiality, we have not disclosed the identities of the specific hotels surveyed. 18. On January 6, 2012, we updated our hotel labor wage survey. A copy of our updated survey is attached hereto as Exhibit "A ". 19. Salaries and wages are the single largest component of expense within a hotel. They have a direct impact on the feasibility of hotel operations. Fluctuations in V. labor expense have a significant impact on the bottom line profitability of a hotel. As a percentage of expense, salaries and wages comprise approximately 46.6% of total hotel expense. With a majority of entry-level and hourly staffing levels predominant in the hospitality industry, any adjustment of the minimum hourly rates can have a significant impact on feasibility. 20. We found that in the four union hotels we studied, the minimum wage rates for non - tipped employees range from $9.15 to $14.10 per hour. We included housekeepers as non - tipped employees, although housekeepers can and do receive tipped income in the course of their work. We found that for Santa Monica's non -union hotels, the minimum wage rates for non - tipped employees range from $9.50 to $10.25 per hour. We found that at both union and non -union hotels, the minimum wage rate for tipped employees such as bartenders, servers, bell persons, and room service servers is consistently the State minimum wage of $8.00 per hour. 21. Per our wage survey, both the union and non -union hotels differentiate between tipped and non - tipped employees. This distinction is typical of the hospitality industry in the region and nationwide. For the hotels surveyed, the typical minimum wages of tipped employees is $8.00 per hour, which is the minimum wage in California. Tipped employees retain their tips in addition to being paid the wages from the hotel employers. The income of tipped employees significantly augments their hour wage. Living Wage Discussion 22. It is my understanding that during the course of development agreement negotiations with the City of Santa Monica, discussions have arisen regarding whether 5 to impose a living wage requirement for this particular hotel, which is generally understood as a minimum wage that is higher than the State minimum wage. 23. It is my understanding that representatives for Unite Here Local 11 are advocating for a living wage of $15.00 per hour for all hotel employees, regardless of their position. Moreover, it is my understanding that the union representatives oppose an exemption for tipped employees. 24. 1 am not aware of any hotel in Santa Monica or the surrounding area that pays a minimum wage of $15.00 per hour, including any union hotel, to all of its employees. To the best of my knowledge, no example has been provided where such a high minimum wage is provided to all employees of a hotel with which Mr. Gorby's hotel would compete for business. 25. As would be true in any industry, hotel workers who gain seniority will expect to be paid wages above entry level position. Thus, establishing a $15 per hour minimum wage will be sure to raise labor costs throughout the job categories for this hotel. 26. As proposed, the living wage provision for the 710 Wilshire Development Agreement contains an exemption in the event a collective bargaining agreement is reached. 27. 1 have no philosophical objection to organizing efforts of the hotel workers, provided they are conducted fairly and responsibly. Professional Opinion 28. In my professional opinion, disregarding the possibility of a living wage obligation that might be imposed on this particular hotel, the proposed hotel at 710 R1 Wilshire Boulevard might generate enough profit to consider developing at 10% above the cost of development, but will not generate sufficiently large profits to attract many potential developers, investors or lenders. The project is a marginally profitable opportunity, given the risk of development. 29. In my professional opinion, a minimum wage of $15.00 per hour for hotel workers in Santa Monica is artificially high -- well above market for comparable Santa Monica hotels -- and would place the proposed hotel at a significant competitive disadvantage as compared with its competitors. This would be true even if the living wage requirement contains an exemption for tipped employees. If there is no such exemption, there is simply no precedent in this region for paying tipped employees such as bell persons, bartenders or wait staff much above the State minimum wage of $8.00 per hour. 30. A $15 per hour minimum wage rate is well above the minimum wages paid in union and non -union hotels in Santa Monica or surrounding areas. Such a high minimum wage rate that is out of scale with minimum wages paid at other Santa Monica hotels (both union and nonunion hotels), when combined with a.legislative exemption from the minimum living wage requirement provided that a collective bargaining agreement is reached, creates a severe inequity of bargaining power in favor of the hotel workers union. The hotel operator would have significant economic pressure to enter into a collective bargaining agreement with more competitive wages rather than pay wages to its employees that are out of scale with the wages paid by other union or nonunion hotels. Because of the high cost of developing this hotel and the narrow profit margin presented by this development opportunity, a minimum wage rate of $15 per 7 hour targeted to this hotel and out of scale with other hotels in the area virtually compels the hotel operator or hotel developer to enter into a collective bargaining agreement that would provide a more competitive wage rate in line with the wages paid by other Santa Monica union hotels.. 31. Even without a living wage obligation, the proposed hotel is on the lower end of the spectrum for economic feasibility with a projected return of 10.2% according to our analysis. The City's peer review of our work reaches a similar conclusion, although they project higher development costs, leading to the need for higher room rates. 32. Furthermore, given my experience with hotel financing, investment and operations, I question whether this project can secure construction and permanent financing if such a high minimum wage rate is imposed. The project will already be difficult to finance given the low profit margin and high cost of construction. 33. In my opinion, a minimum wage rate of $11.89 per hour without benefits (or $10.65 per hour plus at least $1.25 for health care) is more comparable to the minimum rates paid by other union and non -union hotels located in the study area, excluding tipped employee positions. By contrast, a minimum wage rate of $15 per hour would be an extreme minimum wage requirement far above the minimum wages paid by comparable hotels in Santa Monica. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed this day of f4�L K , 2012, at Los Angeles, California. Bruce'Baltin 20954 / Docs /Declaration. Baltin.1001 a. KLK January 6, 2012 Mr. Alexander J. Corby 710 Wilshire Boulevard, #409 Santa Monica, CA 90401 Dear Mr. Gorby: Pursuant to your request, we have performed an update of our November 2010 analysis of labor wages relative to the proposed adaptive reuse of a landmark building at 710 Wilshire Boulevard and development of a full - service hotel in Santa Monica, California. Specifically; we have gathered data concerning existing wages for hotel workers at union and non -union hotels ranging in type between moderate and luxury. Additionally, we have reviewed the City of Los Angeles Ordinance establishing a living wage for hotel workers in the Los Angeles Airport area as well as a 2011 LA- Orange County -San Diego Benefits and Compensation Survey completed by Executive HR Consulting Inc. (2011 HR Survey). SCOPE The scope of our assignment included a review of the Santa Monica hotel supply and identification of potential comparables for this analysis. We have identified several hotel properties within the City of Santa Monica (the City), as well as within the greater Los Angeles market. Furthermore, we have reviewed the City of Los Angeles ordinance establishing a living wage for hotel workers in the Los Angeles Airport area and other data relative to existing hotel wage levels. For each property identified, we completed interviews or reviewed Union documentation and wage structure in order to establish minimum wages for hourly positions for both tipped and non - tipped employees. PKF Consulting has interviewed several hotels in the City of Santa Monica, including union and non -union hotels ranging in type from moderate to upscale. PKF Consulting has completed numerous market studies, appraisals, and economic impact studies in the Santa Monica market, and we have utilized our relationship with these properties to gather a representative sample of wage rates. COMPARABLE HOTEL WAGE RATES For each hotel, we attempted to gather specific data on hourly wage rates for various positions within a typical hotel in these locations. We have gathered this data for four union hotels and two non -union hotel, all located in Santa Monica. Colliers PKF Consulting 1 865 S. Figueroa Street, Suite 3500 1 Los Angeles, CA90017 TEL: 213- 680 -0900 1 FAX: 213 - 623 -8240 w .pkfc.com Don Alexander J Got-by Page 2 For reasons of confidentiality, we have displayed the hotels as Union A, B, C, and D, and Non -union A and B. In each case, we have identified the location and quality level of the hotel. Summary of Union and Non -Union Comparables and Los Angeles -Orange County -San Diego Survey Results Comprable Union - A Union - B Union - C Union 1 Non -Union A" Non -Union B "I Survey 1 Survey Locatioan Santa Monica Santa Monica Santa Monica Santa Monica 1 Santa Monica Santa Monica ILA -OC -SD ( 'One t Luxu�Beaches Positioning Moderate Upscale Luxury Upscale Moderate Moderate I Hotels ( and LAX Contract Expiration 2009 2009 2011 N/A 1 N/A N/A 1 N/A N/A Data as of 12/2011 12/2011 1012010 1212011 ' 10/2010 12/2011 I I i Banquet Captain' $11.75 N/A N/A $75.20 1 N/A N/A i $17.61 ' $13.50 Banquet Bartender" $8.00 N/A $12.16 $72.91 N/A N/A ' $10.52 $10.51 Banquet Housemen' $11.59 $11.85 $12.65 $12.45 i N/A N/A ' $11.33 $11.74 Banquet Server' $8.00 N/A $8.00 $8.00 1 N/A N/A I $8.46 ' $9.61 Bellman Supervisor' $9.37 N/A N/A N/A N/A N/A I $11.68 $10.05 Concierge $13.75 N/A N/A $74.40 i N/A N/A $14.24 ' $14.71 Bellpersan' $8.00 $8.00 $9.90 $9.65 I N/A N/A I $8.57 $8.59 Door person* N/A $10.80 $10.00 $11.15 N/A N/A $9.05 I $10.37 Valet Parking Attendant' $11.75 N/A N/A Outsourced N/A N/A $8.14 $8.17 Bartender' $12.41 $12.80 $12.66 $10.55 $10.98" N/A $10.84 $10.46 Bar Back' $17.45 $11.85 $13.45 $11.95 N/A N/A $10.58 1 $9.33 Bus Person' I $10.70 $11.10 $11.40 $11.85 N/A N/A N/A $10.15 Host $14.91 N/A $14.60 $15.05 ' N/A N/A $12.18 $13.41 Cook i N/A $16.85 $17.50 $17.95 $16.79 N/A $16.13 $15.29 Cook 11 i $15.45 $15.85 $16.50 $16.95 I $74.80 N/A j $14.83 $14.00 Cook 111 i N/A $14.85 $15.75 $16.20 $13.63 N/A $13.51 $13.55 Mini Bar Attendant 1 $13.50 $13.90 $15.03 $9.15 N/A N/A I $11.95 I $11.49 Room Service Server' $8.00 $8.00 $8.00 $8.00 N/A N/A $8.13 1 $8.31 Runner' ( $17.46 $11.85 $17.40 $12.70 1 N/A N/A $14.19 $15.00 Server' $8.00 Won $8.00 $8.00 ' N/A N/A i $8.07 I $8.52 Steward $7301 $13.40 $14.10 $14. $11. $12.18 Cashier N/A $15.30 N/A $505 N/A N/A $688 $15.21 Front Desk Supervisor $16.55 $16.80 N/A N/A $16.48 N/A I $16.68 I $15.42 Guest Service Agent 1 $14.90 $15.30 N/A $16.10 $11.56 $11.00 1 $13.91 I $13.26 PBX Operator i $74.16 $14.55 $75.40 $15.70 1 N/A N/A $13.67 1 $13.05 Houseperson 1 $13.00 $13.40 $14.10 $14.55 $10.51 $11.00 i $11.33 1 $11.54 Room Attendant 1 $13.00 $13.40 $14.10 $14.55 $10.51 $9.50 $11.77 $71.41 Engineer 1 $14.57 $17.85 N/A $17.00 1 $15.56 $16.00 I $77.47 i $16.59 Engineer I N/A $14.97 N/A $18.50 ; $13.98 N/A ; $19.45 1 $17.95 Mini mum Tipped $8.00 $8.00 $8.00 $8.00 1 N/A N/A i $8.07 1 $8.17 Minimum Non- Tipped $13.00 $13.40 $14.10 $9.15 1 $10.25 $9.50 1 $11.33 1 $11.41 ' Tipped position *`Non Union A is limited service with minimal food and beverage. Only tipped position is bar tender and is higher than non - tipped position PKF Consulting, Executive HR Consulting Group, and Individual Properties Unfortunately, we have not been able to identify the benefit expense at these properties. However, from reviewing Los Angeles Ordinance 178432, we note that the LAX area living wage is comprised of a base living wage of $10.64 plus $1.25 for benefits. Furthermore, tipped positions are tied to the State minimum wage, as these categories receive compensation in the form of a base hourly wage plus gratuities received in the course of performing the respective position. Some tipped positions at the upscale comparables receive higher base hourly wages, while the Moderate comparables only present non - tipped positions except for one position at Non -union A for bartenders. The union hotels differentiate between tipped and non - tipped employees, and the hourly rates for tipped employees are substantially lower than for non - tipped employees. The non- union properties are limited service and present limited tipped positions. The 2011 HR Survey presented was based on 64 hotels, including both union and non- union properties. The sample set included seven Santa Monica hotels, including Casa, Mr. Alexander) Gorby Page 3 Shutters, Loews, Sheraton, Ambrose, Fairmont, and Viceroy Hotel. The survey presents several sub - tiers. We have focused on two: luxury hotels and Zone 1. The luxury hotel tier covers the Los Angeles, San Diego, and Orange County areas and includes Casa del Mar, Shutters, Fairmont, Viceroy, and Loews, as well as 35 other hotels. The Zone 1 tier covers Los Angeles beaches and the LAX area and includes the Ambrose, Casa del Mar, Shutters, Fairmont, Sheraton, Loews, and Viceroy, as well as 8 other properties. The minimum tipped position for Union Hotel A and the Luxury Tier survey group was Room Service Server, which presented a floor or minimum hourly wage of $8.00 (i.e., the State minimum wage), and an average hourly rate of $8.07 for the surveyed hotels. Zone 1, which presents Los Angeles Beaches and LAX, presented a minimum wage of $8.52. The survey results were based on 444 persons in the server position for the Luxury tier and 82 persons in the Zone 1 breakout. The minimum non- tipped position at Union Hotel A was mini bar attendant at $9.15 per hour. The minimum non - tipped positions in the survey results were house person at $11.33 for luxury hotels and room attendants at $11.41 for Zone 1. City of Los Angeles Living Wage Ordinance for Hotel Workers In 2006, the Los Angeles City Council adopted a living wage ordinance for the hotels inside the Century Corridor in the LAX area. These hotels are subject to a living wage of $10.64 plus $1.25 per hour for benefits for 2011. Benefits We have also reviewed survey results relative to benefits paid at Southern California lodging properties. The survey presented a sample of 64 hotels. The following presents an excerpt from the 2011 LA- Orange County -San Diego Benefits and Compensation Survey completed by Executive HR Consulting Inc. The respondents reported an average 2010 labor expense of 35.2 percent of revenues, including benefits. A,a,nges Plana [ Plan2 Eligibility waiting period 911 90 monthly premium - Individual co -pay 88.95pS 109.10 monthly premium copay - +1 219.28 S Liss- 203.37 monthly premium copay - +2 or more 3162415 28417 monthly premium - individual S 31656 S 33035j monthly premium - +1 $ 58109 I S 65994 monthly premium - +2 or more 5 795.30 1 S 873.68_1 Number of hotels offering an HMO plan 55 Number of hotels offering a PPO plan - 54 Number of hotels offering a Cafeteria plan 33 Number of hotels offering a Dental Plan __ _ 58 Number of hotels offering a Vision Plan 55 Number of hotels offering a Prescription Plan 51 Number of hotels offering a 401K Plan 56 Number of hotels offering company -0OlK match 44 Average of matched 401[k) percentage Mr. Alexander J Gorby Page 4 Compensation and Hotel Operating Expenses In addition, PKF Consulting compiles an annual publication "Trends in the Hotel Industry." The 2011 Edition, which incorporates 2010 financial statements from over 4,000 hotel properties within the United States, presents a total salaries and benefits expense of 37.4 percent of revenue, including 26.6 percent for salaries and 10.8 percent for benefits. Salaries and wages are the single largest component of expense within a hotel, having a direct impact on feasibility of operations. As the largest expense item, fluctuations in labor expense have significant impact on bottom line profitability. Furthermore, as a percentage of expense, salaries and wages comprise approximately. 46.6 percent of total hotel expense, as can be seen below. Costs and g°IP n4 ,�Ga EQS (:Xpe115e8 Naa °e�si�'At 4rt' c,a�e�0 c� °tip re`' cep Salk "�,u�e� Q4e}a��� Uosi °E� �su�f With a majority of entry -level and hourly staffing levels predominant in the hospitality industry, it is reasonable to expect significant impact on feasibility from an adjustment of the minimum hourly rates at a given hotel. CONCLUSIONS The union hotel studied differentiate between tipped and non - tipped employees. In our experience, this is typical of the hotel industry in the region and nationwide. The union hotels studied had a minimum wage rate for non - tipped employees ranging from $9.15 to $14.10 per hour. The non -union hotels had a minimum wage for non - tipped employees of $9.50 to $10.25. The union hotels had a minimum wage rate for tipped employees of $8.00 at all properties. The 2011 LA- Orange County -San Diego Benefits and Compensation Survey reported a minimum tipped position hour wage of $8.07 for luxury hotels and $8.17 for Los Angeles Beaches and LAX, and a minimum non - tipped hourly wage of $11.33 and $11.41 for each area, respectively. Mr. Alexander J Gorby Page 5 We look forward to discussing our findings with you. Please contact us at your convenience to discuss. Sincerely, PKF Consultinzr idt By: Jeff Lugosi Senior Vice President Addenda STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS This report is made with the following assumptions and limiting conditions: Economic and Social Trends - The consultant assumes no responsibility for economic, physical or demographic factors which may affect or alter the opinions in this report if said economic, physical or demographic factors were not present as of the date of the letter of transmittal accompanying this report. The consultant is not obligated to predict future political, economic or social trends. Information Furnished by Others - In preparing this report, the consultant was required to rely on information furnished by other individuals or found in previously existing records and /or documents. Unless otherwise indicated, such information is presumed to be reliable. However, no warranty, either express or implied, is given by the consultant for the accuracy of such information and the consultant assumes no responsibility for information relied upon later found to have been inaccurate. The consultant reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available. Hidden Conditions - The consultant assumes no responsibility for hidden or unapparent conditions of the property, subsoil, ground water or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions. Hazardous Materials - The consultant has not been provided any information regarding the presence of any material or substance on or in any portion of the subject property or improvements thereon, which material or substance possesses or may possess toxic, hazardous and /or other harmful and /or dangerous characteristics. Unless otherwise stated in the report, the consultant did not become aware of the presence of any such material or substance during the consultant's inspection of the subject property. However, the consultant is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the value of the subject property. The value estimated in this report is predicated on the assumption that no such material or substance is present on or in the subject property or in such proximity thereto that it would cause a loss in value. The consultant assumes no responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this report assumes the subject property is in compliance with all federal, state and local environmental laws, regulations and rules. Zoning and Land Use - Unless otherwise stated, the projections were formulated assuming the hotel to be in full compliance with all applicable zoning and land use regulations and restrictions. Licenses and Permits - Unless otherwise stated, the property is assumed to have all required licenses, permits, certificates, consents or other legislative and /or administrative authority from any local, state or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. - Engineering Survey - No engineering survey has been made by the consultant. Except as specifically stated, data relative to size and area of the subject property was taken from sources considered reliable and no encroachment of the subject property is considered to exist. Subsurface Rights - No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated. Maps, Plats and Exhibits - Maps, plats and exhibits included in this report are for illustration only to serve as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced or used apart from the report. Legal Matters - No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate consultants. STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS (continued) Right of Publication - Possession of this report, or a copy of it, does not carry with it the right of publication. Without the written consent of the consultant, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with proper written qualification and only in its entirety for its stated purpose. Testimony in Court - Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance of said hearing. Further, unless otherwise indicated, separate arrangements shall be made concerning compensation for the consultant's time to prepare for and attend any such hearing. Archeological Significance - No investigation has been made by the consultant and no information has been provided to the consultant regarding potential archeological significance of the subject property or any portion thereof. This report assumes no portion of the subject property has archeological significance. Compliance with the American Disabilities Act - The Americans with Disabilities Act ( "ADA ") became effective January 26, 1992. We assumed that the property will be in direct compliance with the various detailed requirements of the ADA. Definitions and Assumptions - The definitions and assumptions upon which our analyses, opinions and conclusions are based are set forth in appropriate sections of this report and are to be part of these general assumptions as if included here in their entirety. Dissemination of Material - Neither all nor any part of the contents of this report shall be disseminated to the general public through advertising or sales media, public relations media, news media or other public means of communication without the prior written consent and approval of the consultant(s). Distribution and Liability to Third Parties - The party for whom this report was prepared may distribute copies of this appraisal report only in its entirety to such third parties as may be selected by the party for whom this report was prepared; however, portions of this report shall not be given to third parties without our written consent. Liability to third parties will not be accepted. Use in Offering Materials - This report, including all cash flow forecasts, market surveys and related data, conclusions, exhibits and supporting documentation, may not be reproduced or references made to the report or to PKF Consulting in any sale offering, prospectus, public or private placement memorandum, proxy statement or other document ( "Offering Material ") in connection with a merger, liquidation or other corporate transaction unless PKF Consulting has approved in writing the text of any such reference or reproduction prior to the distribution and filing thereof. Limits to Liability - PKF Consulting cannot be held liable in any cause of action resulting in litigation for any dollar amount which exceeds the total fees collected from this individual engagement. Legal Expenses - Any legal expenses incurred in defending or representing ourselves concerning this assignment will be the responsibility of the client. ATTACHMENT DRAFT ORDINANCE 53 CA:f\atty \muni \laws \barry \710 Wilshire Development Agreement Ord. 3 -20 -12 City Council Meeting 03 -20 -12 Santa Monica, California ORDINANCE NUMBER (CCS) (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA APPROVING THE DEVELOPMENT AGREEMENT BETWEEN THE CITY OF SANTA MONICA, A MUNICIPAL CORPORATION AND MAXSER & COMPANY, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY WHEREAS, on July 24, 2007, Maxser & Company, LLC, a California Limited Liability Company, submitted an application for a development agreement for a mixed -use project that will include a full - service hotel, restaurant space and retail space and which involves the rehabilitation of an existing landmark building and new construction on an existing surface parking lot and adjacent property; and WHEREAS, a Draft Environmental Impact Report dated July 2011 and a Final Environmental Impact Report dated December 2011 have been prepared analyzing the environmental effects of the development agreement; and WHEREAS, on March 20, 2012, the City Council adopted resolutions certifying the Final Environmental Report and adopting a statement of overriding considerations and mitigation monitoring plan; and WHEREAS, the development agreement is consistent with the objectives, policies, general land uses and programs specified in the General Plan, as described 1 below, and as detailed in the accompanying City Council staff report prepared for this proposed project and the exhibits thereto in that: (a) Consistent with LUCE Policy D1.5, the project focuses new investment on a site that is transit - accessible, can accommodate mixed -use development, contributes to a pedestrian- oriented environment, and can support substantial community benefits and the Policy further identifies the subject property stating that new investment should include the preservation of the Landmark building. ` (b) Policies D7.5 and D7.6 specifically reference the need for new buildings to respect the context and character - defining features of historic resources and provide that the Secretary of the Interior's Standards shall be used as a tool for preserving character - defining features of historic resources and the project is both consistent with this policy as it includes the rehabilitation and adaptive re -use of the Landmark building, ensuring the long -term viability of a historic resource and it will also be required to obtain a Certificate of Appropriateness for alterations to the Landmark building and Architectural Approval for the new building, which will require findings consistent with the Secretary of Interior's Standards. (c) Policy D1.6 establishes, among others, Wilshire Boulevard as a new perimeter of the Downtown with the intent of providing transitions between the higher intensities of the Downtown and lower intensity residential areas to the north and the proposed project is consistent with this policy with a reduced scale on Wilshire and 7th Street placing more of the mass towards the southern end of the project site, away from the adjacent residential neighborhood to the north. (d) The Downtown District also includes Policy D7.2 that encourages local - serving uses as part of an overall trip reduction strategy and the ground floor 2 retail /restaurant uses are intended not only to serve hotel guests but also provide convenient services within walking distance of the adjacent residential communities in Downtown and north of Wilshire. (e) Consistent with Policy D9.1 which seeks to design and manage streets to be an integral part of the urban open space in the Downtown, the project would widen sidewalks on 7th Street and provide the opportunity for outdoor dining that would help to activate the street. (f) The implementation of a Transportation Demand Management (TDM) plan in efforts to reduce vehicle trips in the area and reduce associated parking demand is consistent with LUCE Circulation Policy T19.2 which seeks appropriate TDM requirements for new development. (g) The project is consistent with LUCE's overall land use policies by providing community benefits for the area, including but not limited to, preservation and adaptive re -use of a Landmark building; a transportation infrastructure contribution that would support capital improvements for transit infrastructure including bicycle facilities, pedestrian network completion, vehicle network improvements, and transit improvements; a local hiring program for construction and employment; internships for local high school and college students; ground floor open space; shared parking; and a TDM plan that provides bicycle facilities for a variety of on -site users and transit subsidies for employees. 3 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. The Development Agreement attached hereto as Exhibit 1 and incorporated herein by reference between the City of Santa Monica, a municipal corporation, and Maxser & Company, LLC, a California limited liability company, is hereby approved. SECTION 2. Each and every term and condition of the Development Agreement approved in Section 1 of this Ordinance shall be and is made a part of the Santa Monica Municipal Code and any appendices thereto. The City Council of the City of Santa Monica finds that public necessity, public convenience, and general welfare require that any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Development Agreement, to the extent of such inconsistencies and no further, be repealed or modified to that extent necessary to make fully effective the provisions of this Development Agreement. SECTION 3. Any provision of the Santa Monica Municipal Code or appendices thereto, inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, are hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. SECTION 4. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any n court of any competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance, and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the Ordinance would be subsequently declared invalid or unconstitutional. SECTION 5. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. This Ordinance shall be effective 30 days from its adoption. APPROVED AS TO FORM: !'i / MAr&SH JoNES MOUTRIE C )h e 61 EXHIBIT 1 DEVELOPMENT AGREEMENT ATTACHMENT 10 DEVELOPMENT AGREEMENT AND EXHIBITS 54 Recording Requested By: City of Santa Monica When Recorded Mail To: City of Santa Monica Santa Monica City Attorney's Office 1685 Main Street, Third Floor Santa Monica, CA 90401 Attention: Senior Land Use Attorney Space Above Line For Recorders Use No Recording Fee Required Government Code Section 27383 DRAFT DEVELOPMENT AGREEMENT BETWEEN CITY OF SANTA MONICA AND MAXSER & COMPANY, LLC 2012 TABLE OF CONTENTS Recitals........................................................ ............................... Article 1 Definitions .......................... ............................... Article 2 Description of the Project .. ............................... 2.1 General Description ........... ............................... 2.2 Principal Components of the Project ................ 2.3 No Obligation to Devel op .. ............................... 2.4 Vested Rights ..................... ............................... 2.5 Permitted Uses ................... ............................... 2.6 Alcoholic Beverage Permits ............................. 2.7 Project and Community Benefits ...................... 2.8 Living Wage ....................... ............................... 2.9 Prohibited Activities in the Public Use Area.... 2.10 Parking ............................... ............................... 2.11 Design ................................ ............................... Article 3 Construction ....................... ............................... 3.1 Construction Mitigation Plan ............................ 3.2 Construction Hours ............ ............................... 3.3 Outside Building Permit Issuance Date............ 3.4 Construction Period ........... ............................... 3.5 Tiebacks ............................. ............................... 3.6 Construction Staging .......... ............................... 3.7 Damage or Destruction ............................ :....... .................1 .................3 ................. 5 ................. 5 ................. 5 ................. 6 ................. 6 ................. 8 ................10 ................10 ................23 ................ 26 ................26 ................26 ................27 ................ 27 ................27 ................27 ................28 ................28 ................28 ................ 28 Article 4 4.1 4.2 4.3 Article 5 5.1 5.2 5.3 5.4 5.5 Article 6 6.1 Article 7 7.1 7.2 7.3 7.4 7.5 Article 8 8.1 Completed and Final Landmarks Commission Review of 718 Wilshire Building................................................................................. ............................... 28 Project Fees, Exactions, Mitigation Measures and Conditions ............................28 Fees, Exactions, Mitigation Measures and Conditions ........... .............................28 Conditions on Modifications ................................................... .............................29 Implementation of Mitigation Measures ................................. .............................29 Effect of Agreement on City Laws and Regulations ............ ............................... 29 Development Standards for the Property; Existing Regulations .........................29 Permitted Subsequent Code Changes ................................... ............................... 30 Common Set of Existing Regulations ..................................... .............................32 ConflictingEnactments ........................................................... .............................32 Timing of Development ........................................................ ............................... 32 DesignReview ........................................................................ .............................32 Joint Landmarks Commission /Architectural Review Board Body ......................32 CityTechnical Permits ............................................................ .............................34 Definitions............................................................................. ............................... 34 Diligent Action by City ........................................................... .............................34 Conditions for Diligent Action by the City ............................. .............................34 New Technical Requirements ................................................. .............................35 Duration of Technical City Permits ...................................... ............................... 35 Amendment and Modification ............... ............................... Amendment and Modification of Development Agreement Article 9 Term ........................ 9.1 Effective Date ......... 9.2 Term ....... ............................... Article 10 Periodic Review of Compliance. .... 36 .....36 ..... 36 .....36 .....36 .....36 10.1 City Review ............................................................................ .............................36 10.2 Evidence of Good Faith Compliance ...................................... .............................36 10.3 Information to be Provided to Developer ............................. ............................... 37 10.4 Notice of Breach; Cure Rights ................................................ .............................37 10.5 Failure of Periodic Review ................................................... ............................... 37 10.6 Termination of Development Agreement ............................. ............................... 37 10.7 City Cost Recovery ................................................................. .............................37 Article11 Default ..................................................................................... .............................38 11.1 Notice and Cure .................................................................... ............................... 38 11.2 Remedies for Monetary Default ............................................ ............................... 38 11.3 Remedies for Non-Monetary Default ..................................... .............................39 11.4 Modification or Termination Agreement by City ................... .............................40 11.5 Cessation of Rights and Obligations ....................................... .............................41 11.6 Completion of Improvements ............................................... ............................... 42 Article12 Mortgagees .............................................................................. .............................42 12.1 Encumbrances on the Property ............................................. ............................... 42 Article 13 Transfers and Assignments ..................................................... .............................44 13.1 Transfers and Assignments ..................................................... .............................44 13.2 Release Upon Transfer ............................................................ .............................44 Article14 Indemnity to City .................................................................... .............................44 14.1 Indemnity .............................................................................. ............................... 44 14.2 City's Right to Def ense ........................................................... .............................45 Article 15 General Provisions .................................................................. .............................45 15.1 Notices .................................................................................... .............................45 15.2 Entire Agreement; Conflicts ................................................... .............................46 15.3 Binding Effect ......................................................................... .............................46 15.4 Agreement Not for Benefit of Third Parties ........................... .............................47 15.5 No Partnership or Joint Venture ............................................. .............................47 15.6 Estoppel Certificates ............................................................... .............................47 15.7 Time ........................................................................................ .............................47 15.8 Excusable Delays .................................................................... .............................47 15.9 Governing Law ....................................................................... .............................48 15.10 Cooperation in Event of Legal Challenge to Agreement ........ .............................48 15.11 Attorneys' Fees ....................................................................... .............................49 15.12 Recordation ............................................................................. .............................49 15.13 No Waiver ............................................................................... .............................49 15.14 Construction of this Agreement .............................................. .............................49 15.15 Other Governmental Approvals .............................................. .............................49 15.16 Venue ..................................................................................... .............................50 15.17 Exhibits ................................................................................... .............................50 15.18 Counterpart Signatures ............................................................ .............................51 15.19 Certificate of Performance .................................................... ............................... 51 15.20 Interest of Developer ............................................................. ............................... 51 15.21 Operating Memoranda ............................................................ .............................51 15.22 Acknowledgments, Agreements and Assurance on the Part of Developer ......... 52 15.23 Not a Public Dedication .......................................................... .............................52 15.24 Other Agreements ................................................................. ............................... 52 15.25 Severability and Termination .................................................. .............................52 Exhibit "A" Legal Description of the Property Exhibit "B" Project Plans Exhibit "C" Permitted Fees and Exactions Exhibit "D" Mitigation Measures and Conditions Exhibit "E" SMMC Article 9 (Planning and Zoning) Exhibit "F" Hotel Conditions of Approval to Dispense Alcohol Exhibit "G" Restaurant "A" Conditions of Approval to Dispense Alcohol Exhibit "H" Restaurant "El" Conditions of Approval to Dispense Alcohol Exhibit "I" Standard Restaurant Conditions to Dispense Alcohol Exhibit "J -1" Local Hiring Program for Construction Exhibit "J -2" Local Hiring Program for Permanent Jobs Exhibit "K" Construction Mitigation Plan Exhibit "L" Assignment and Assumption Agreement DEVELOPMENT AGREEMENT This Development Agreement ( "Agreement "), dated for reference purposes , 2012, is entered into by and between MAXSER & COMPANY, LLC, a California limited liability company ( "Developer "), and the CITY OF SANTA MONICA, a municipal corporation organized and existing pursuant to the laws of the State of California and the Charter of the City of Santa Monica (the "City "), with reference to the following facts: RECITALS A. Pursuant to California Government Code Sections 65864, et seq., Chapter 9.48 of the Santa Monica Municipal Code, and Santa Monica Interim Ordinance No. 2356 (collectively, the "Development Agreement Statutes "), the City is authorized to enter into binding development agreements with persons or entities having a legal or equitable interest in real property for the development of such real property. B. Developer is the owner of approximately 52,500 square feet of land located in the City of Santa Monica, State of California commonly known as 710 Wilshire Boulevard, 718 Wilshire Boulevard, and 1213 -1227 Seventh Street, more particularly described in Exhibit "A" attached hereto and incorporated herein by this reference (the "Property "). The Property is currently developed with the following improvements: (1) 710 Wilshire Boulevard (also sometimes referred to as 702 Wilshire Boulevard) is improved with the landmark, seven -story retail /office building ( "Landmark Building "). (2) 718 Wilshire Boulevard is improved with a red -brick building, two- stories in height. (3) South of the 702 -718 Wilshire Boulevard parcels, there is a large asphalt parking lot fronting on Seventh Street commonly known as 1213 -1227 Seventh Street ( "Seventh Street Lots "). C. The City has included the Property within the Downtown Core land use designation under the City's Land Use and Circulation Element of its General Plan, adopted on July 6, 2010 (the "LUCE "). The Property is located within the C3 Downtown Commercial District and C3 -C Downtown Overlay District under the City's Zoning Ordinance. To aid in the redevelopment of the Property, the City and Developer desire to allow Developer to (1) construct a new building, subterranean parking, and related facilities for hotel and other uses and (2) rehabilitate and adaptively reuse the Landmark Building for hotel use above the ground floor. D. On July 24, 2007, Developer filed an application for a Development Agreement, (the "Development Application ") pursuant to Santa Monica Municipal Code ( "SMMC ") Section 9.48.020. The Development Application was designated by the City as Application No. DEV 07 -006. After a series of changes reducing its size and scope, the Development Application is for a mixed -use project that will include a full- service hotel, restaurant space and retail space more fully described in this Agreement. The Development Application includes the rehabilitation of the existing Landmark Building and new construction on the existing surface parking lot and at 718 Wilshire Boulevard, all of which together total approximately 165,000 square feet of Floor Area. E. On April 26, 2011 the City Council adopted Interim Ordinance No. 2356 ( "IZO "). The IZO prohibits the issuance of permits for development projects which would exceed 32 feet in height in the Downtown Core as delineated in the LUCE and its Land Use Designation Map unless developed pursuant to a development agreement adopted in accordance with SMMC Chapter 9.48. Adoption of this Agreement will allow for the issuance of permits for the Project. F. Developer has paid all necessary costs and fees associated with the City's processing of the Development Application and this Agreement. G. The primary purpose of the Project is to create a new full - service hotel project, with restaurant and retail uses, that is pedestrian- friendly and includes the rehabilitation and adaptive reuse of the Landmark Building in the City's Downtown consistent with the LUCE. The Parties desire to enter into this Agreement in conformance with the Development Agreement Statutes in order to achieve the development of the Project on the Property. H. The Developer has assembled a team of experts and professionals to assist with this Project. They include a preservation architect, the project architect, a specialist in the masonry of historic buildings, a structural engineer, a multi- disciplinary building engineering firm, a LEED© consultant, a general contractor, and legal counsel familiar with historic preservation law and practice, as well as others. Upon completion, rehabilitation and adaptive reuse of the Landmark Building as a hotel will benefit the community in terms of both utilization and architectural preservation. This rehabilitation and adaptive reuse will greatly enhance the Landmark Building's public use and visibility and increase appreciation of its historic features. L The City Council has determined that a development agreement is appropriate for the proposed development of the Property. This Agreement will (1) eliminate uncertainty in planning for the Project and result in the orderly development of the Project, (2) assure installation of necessary improvements on the Property, (3) provide for public infrastructure and services appropriate to development of the Project, (4) preserve substantial City discretion in reviewing subsequent development of the Property, (5) secure for the City improvements that benefit the public, and (6) otherwise achieve the goals and purposes for which the Development Agreement Statutes were enacted. J. This Agreement is consistent with the public health, safety, and welfare needs of the residents of the City and the surrounding region. The City has specifically considered and approved the impact and benefits of the development of the Project on the Property in accordance with this Agreement upon the welfare of the region. Consistent with the LUCE, the Project will provide a number of public benefits, including without limitation the following: rehabilitation and adaptive reuse of a City landmark, a comprehensive TDM Plan, LEED Silver equivalent, unbundled parking, shared parking, project design including publicly - accessible open space, and a local hiring provision for hotel and restaurant employees. K. The City Council has found that the provisions of this Development Agreement are consistent with the relevant provisions of City's General Plan, including the LUCE. L. On January 25, 2012, the City's Planning Commission held a duly noticed public hearing on the Development Agreement. The Commission continued the item to February 15, 2012. On February 15, 2012, the City's Planning Commission held a second public hearing on the Development Agreement. The Commission recommended that the City Council certify the Environmental Impact Report and approve the Project. M. On March 30, 2012, the City Council held a duly noticed public hearing on the Development Application and at such hearing the City certified the EIR, adopted a Statement of Overriding Considerations, and introduced Ordinance No. for first reading, approving this Agreement. N. On , 2012, the City Council adopted Ordinance No. NOW THEREFORE, in consideration for the covenants and conditions hereinafter set forth, the Parties hereto do hereby agree as follows: ARTICLE 1 DEFINITIONS The terms defined below have the meanings in this Agreement as set forth below. 1.1 "Agreement" means this Development Agreement entered into between the City and Developer as of the Effective Date. 1.2 "ARB" means the City's Architectural Review Board. 1.3 "Average Natural Grade" means 95.38 feet above sea level for the New Construction. 1.4 "California Historical Building Code" means California Health and Safety Code Sections 18950, et seq., and Part 8 of Title 24 of the California Code of Regulations as of the Effective Date or, in Developer's sole and absolute discretion, a subsequent version of the California Historical Building Code then in effect. 1.5 "City Council" shall mean the City Council of the City of Santa Monica, or its designee. 1.6 "Discretionary Approvals" are actions which require the exercise of judgment or a discretionary decision, and which contemplate and authorize the imposition of revisions or additional conditions, by the City, including any board, commission, or department of the City and any officer or employee of the City. Discretionary Approvals do not include Ministerial Approvals. 1.7 "Effective Date" has the meaning set forth in Section 9.1 below. 1.8 "Floor Area" has the meaning given that term in Section 9.04.02.030.315 of the Santa Monica Municipal Code ( "SMMC "), provided however, that in accordance with the IZO, Subterranean Space (regardless of its use) shall not be included in the calculation of Floor Area for the purposes of determining Floor Area Ratio (FAR). The Parties acknowledge that the City is in the process of updating the Zoning Ordinance, and the Parties agree that, upon the City's adoption of the new zoning ordinance, the Developer may make a one -time election whether to have Floor Area have the meaning as contained in Existing Regulations or as contained in the City's new zoning ordinance. T_ he maximum allowable Floor Area for the Project is 165,000 square feet. 1.9 "Floor Area Ratio" and "FAR" mean the Floor Area of the Project, as calculated in accordance with Section 1.8 of this Agreement, divided by the area of the Property. 1.10 "General Plan" or "City General Plan" means the General Plan of the City of Santa Monica, and all elements thereof including the LUCE, as of the Effective Date unless otherwise indicated in this Agreement. 1.11 "Incidental Food Service" has the meaning given that term in Section 9.04.02.030.420 of the SMMC. 1.12 "Including" means "including, but not limited to." 1.13 "Landmarks Commission" means the Landmarks Commission of the City of Santa Monica. 1.14 "LEED® Rating System" means the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System For New Construction & Major Renovations adopted by the U.S. Green Building Council. 1.15 "Legal Action" shall mean any action in law or equity. 1.16 "Ministerial Approvals" mean any action which merely requires the City (including any board, commission, or department of the City and any officer or employee of the City), in the process of approving or disapproving a permit or other entitlement, to determine whether there has been compliance with applicable statutes, ordinances, regulations, or conditions of approval. 1.17 "Parties" mean both the City and Developer and "Party" means either the City or Developer, as applicable. 1.18 "Planning Director" means the Planning Director of the City of Santa Monica, or his or her designee. 1.19 "Project Plans" mean the plans for the Project that are attached to this Agreement as Exhibit `B." 1.20 "Secretary of Interior Standards" means the Secretary of the Interior Standards for Treatment of Historic Properties published by the U.S. Department of the Interior found at 36 C.F.R. § 68.3 as it may be amended from time to time. 1.21 "Subterranean Space" means all space in the Project below the ground floor as shown on the Project Plans attached as Exhibit `B ". 1.22 "Zoning Ordinance" means the City of Santa Monica Comprehensive Land Use and Zoning Ordinance (Chapter 9.04 of the SMMC) and any applicable Interim Zoning Ordinance, as the same is in effect on the Effective Date, is set forth in its entirety in Exhibit "E" (Planning and Zoning). ARTICLE 2 DESCRIPTION OF THE PROJECT 2.1 General Description. The Project includes all aspects of the proposed development of the Property as more particularly described in this Agreement and on the Project Plans. If there is a conflict or inconsistency between the text of this Agreement and the Project Plans, the Project Plans will prevail provided, however, that (a) the ground floor areas identified as Retail and Restaurant on the Project Plans may be used for either Restaurant Use or retail use in the Developer's sole and absolute discretion as long as Restaurant Uses do not exceed 9,730 square feet and (b) omissions from the Project Plans shall not constitute a conflict or inconsistency with the text of this Agreement. 2.2 Principal Components of the Project, The Project consists of the following components, as well as the other components delineated in the Project Plans, all of which are hereby approved by the City subject to the other provisions of this Agreement: (a) Demolition of the existing two -story building at 718 Wilshire Boulevard containing approximately 7,000 square feet of floor area. (b) Adaptive re -use and rehabilitation of the Landmark Building located at 710 Wilshire Boulevard into a Hotel with 55 guest rooms above the ground floor and 6,949 square feet of ground floor uses including retail uses and Restaurant Uses. (c) Construction of a new building on the Seventh Street Lots and 718 Wilshire Boulevard ( "New Construction "). The New Construction will consist of a structure varying in heights between one and six stories (approximately 19 feet at the top of the podium level to 70 feet at the top of the sixth floor), with a partial seventh floor (81 feet at the top). The New Construction will include 230 guest rooms, approximately 8,724 square feet of retail uses and Restaurant Uses, and approximately 7,451 square feet of meeting /banquet room space. The New Construction will also contain other amenities such as a spa, gym and rooftop swimming pool. The partial seventh floor will contain approximately 3,356 square feet of Floor Area of amenities to be used in conjunction with the rooftop pool. These amenities include food service, a fitness center and bathrooms. (d) A new subterranean parking garage will be constructed beneath the New Construction with 285 -325 parking spaces, subject to modification in accordance with Section 2_4 herein. All of the parking spaces shall be operated for the uses to be located in the New Construction and Landmark Building or for Shared Parking in accordance with Section 2.7.2(8 herein. 2.3 No Obligation to Develop. 2.3.1 Except as specifically provided herein: (a) Nothing in this Agreement shall be construed to require Developer to proceed with the construction of the Project or any portion thereof. (b) The decision to proceed or to forbear or delay in proceeding with construction of the Project or any portion thereof shall be in Developer's sole discretion. (c) Failure by Developer to proceed with construction of the Project or any portion thereof shall not give rise to any liability, claim for damages or cause of action against Developer, except as may arise pursuant to a nuisance abatement proceeding under SMMC Chapter 8.96, or any successor legislation. 2.3.2 Failure by Developer to proceed with construction of the Projector any portion thereof shall not result in any loss or diminution of development rights, except upon expiration of Developer's vested rights pursuant to this Agreement, or the termination of this Agreement. 2.3.3 Notwithstanding any provision of this Section 2.3 to the contrary, Developer shall be required to implement all mitigation measures and conditions required under this Agreement in accordance with Exhibit "D ". 2.4 Vested Rights. 2.4.1 Approval of Project Plans. The City hereby approves the Project Plans. The City shall maintain a complete copy of the Project Plans, stamped "Approved" by the City, in the Office of the City Clerk, and Developer shall maintain a complete copy of the Project Plans, stamped "Approved" by the City, in its offices at the Project site. The Project Plans to be maintained by the City and Developer shall be a half -size set. Further detailed plans for the construction of the Buildings and improvements, including, without limitation, structural plans and working drawings shall be developed by Developer subsequent to the Effective Date based upon the Project Plans. 2.4.2 Minor Modifications to Project. Developer, with the approval of the Planning Director, may make minor changes to the Project or Project Plans ( "Minor Modifications ") without amending this Agreement; provided that the Planning Director makes the following specific findings that the Minor Modifications: (i) are consistent with the Project's approvals as approved by the City Council; (ii) are consistent with the provisions, purposes and goals of this Agreement; (iii) are not detrimental to the public health, safety, convenience or 0 general welfare; and (iv) will not significantly and adversely affect the public benefits associated with the Project. 2.4.3 Modifications Requiring Amendment to this Agreement. Developer shall not make any "Major Modifications" (defined below) to the Project without first amending this Agreement to permit such Major Modifications. A "Major Modification" means the following: (a) Reduction of any setback of the Project, as depicted on the Project Plans, if by such reduction the applicable setback would be less than is permitted in the applicable zoning district under the Zoning Ordinance in effect on the date such modification is applied for. (b) Any change in use not consistent with the permitted uses defined in Section 2.5 below. (c) Any decrease in the minimum number of parking spaces provided for in Section 2.10 (i.e., 285 spaces). Additionally, any decrease in the minimum number of parking spaces provided for in Section 2.10 shall be supported by a parking demand study prepared by the Developer and reasonably approved by the Planning Director. (d) An increase in the maximum number of parking spaces, as provided for in Section 2.10 (i.e., 325 spaces) by more than 10 spaces. (e) Any variation in the design, massing, and building configuration, including but not limited to FAR and building height, that renders such aspects out of substantial compliance with the Project Plans. (f) Any change that would materially reduce the Community Benefits. If a proposed modification does not exceed the Major Modification thresholds established above, then the proposed modification may be reviewed in accordance with Section 2.4.2. 2.4.4 City Consent to Modifications. If the City's consent is required for a Minor Modification, the Planning Director shall not unreasonably withhold, condition, or delay its approval of a request for such Minor Modification. The City may impose fees, exactions, conditions, and mitigation measures in connection with its approval of a Minor or Major Modification, subject to any applicable law. Notwithstanding anything to the contrary herein or in the Existing Regulations, if the Planning Director approves a Minor Modification or if the City approves a Major Modification (and the corresponding amendment to this Agreement for such Major Modification), as the case may be, Developer shall not be required to obtain any other Discretionary Approvals for such modification, except for Joint Design Review Body approval, in the case of certain Major Modifications. 2.4.5 Right to Develop. Subject to the provisions of Section 3.3 below, during the Term (as defined in Section 9.2.1 below) of this Development Agreement, Developer shall have the vested rights (the "Vested Rights ") to (a) develop and construct the Project in accordance with the following: (i) the Project Plans (as the same may be modified from time to time in accordance with this Agreement); (ii) any Minor Modifications approved in accordance with Section 2.4.2; (iii) any Major Modifications which are approved pursuant to Section 2.4.3; and (iv) the requirements and obligations of Developer related to the improvements which are specifically set forth in this Agreement, and (b) use and occupy the Project for the permitted uses set forth in Section 2.5. Except for any required approvals from the Joint Design Review Body pursuant to Section 6.1 of this Agreement, the City shall have no further discretion over the elements of the Project which have been delineated in the Project Plans (as the same may be modified from time to time in accordance with this Agreement). 2.5 Permitted Uses. The City approves the following permitted uses for the Project: 2.5.1 Uses Defined. (a) "Restaurant Uses" shall have the meaning given the term "Restaurant" as defined in Section 9.04.02.030.730 of Existing Regulations. Restaurant uses shall not include "Incidental Food Service ", as defined in Section 9.04.02.040.420 of Existing Regulations, or "Fast food, take -out, or drive - through," as defined in Section 9.04.02.040.735 of Existing Regulations. The Parties acknowledge that the City is in the process of updating the Zoning Ordinance, and the Parties agree that, upon the City's adoption of the new zoning ordinance, the Developer may make a one -time election whether to have Restaurant Uses have the meaning as contained in Existing Regulations or as contained in the City's new zoning ordinance. (b) "Hotel" and "Hotel Use" shall mean a building, group of buildings or a portion of a building which is designed for or occupied as the temporary lodging place of individuals for generally less than thirty consecutive days including, but not limited to, an establishment held out to the public as an apartment hotel, hostel, inn, timeshare project, tourist court or other similar use. "Hotel" and "Hotel Use" include those activities and services customarily associated with a full- service hotel including, without limitation, meeting and banquet rooms, health club /gymnasium for hotel guests only, business center, retail uses, Restaurant Uses including restaurant/bar /food service, swimming pool /spa, rooftop gardens, and all other building area and open space in the Landmark Building above the ground floor and in the New Construction. The normal and customary use of the meeting and banquet space located on the Property shall be considered a Hotel Use and not a nightclub. 2.5.2 Prior to Development of the Project. Until the Developer exercises the building permit for the adaptive reuse and rehabilitation of the Landmark Building and construction of the New Construction to such an extent that the uses are no longer possible, the uses of the Property and the buildings located thereon shall be governed by the SMMC, subject to the following: (a) The ground floor space in the Landmark Building and in the building located at 718 Wilshire Boulevard may be used for any uses identified as either retail uses or Restaurant Uses as defined in this Agreement. (b) The existing Floor Area located in floors two through seven of the Landmark Building may continue to be used for general office purposes; and (c) The Seventh Street Lots currently in use as a surface parking lot may continue as a surface parking lot without further approvals. 2.5.3 Permitted Uses. Pursuant to this Agreement, Permitted Uses in the Project shall be as specified below: (a) In the Landmark Building at the ground floor, the following are Permitted Uses: Restaurant Uses, Incidental Food Service, retail uses, rental car agencies, photocopy shops, martial arts studios, and any other uses that are designated as permitted uses for ground floor space in the Landmark Building by the SMMC in effect at the time the use is established. Banks and similar financial institutions may be located on the ground floor facing the Public Use Area frontage provided that the frontage of such uses does not exceed twenty continuous linear feet. (b) In the New Construction at the ground floor, the following are Permitted Uses: Hotel Use, Restaurant Uses, Incidental Food Service, retail uses, rental car agencies, photocopy shops, martial arts studios, and any other uses that are designated as Permitted Uses for ground floor space in the New Construction by the SMMC in effect at the time the use is established. Banks and similar financial institutions may be located on the ground floor facing the Public Use Area frontage provided that the frontage of such uses does not exceed twenty continuous linear feet. (c) In the Landmark Building and New Construction above the ground floor, the following is a Permitted Use: Hotel Use. (d) In the Subterranean Space, the following are Permitted Uses: Parking, including Shared Parking in accordance with Section 2.7.2(f) below, automobile vehicle storage for on -site rental car agencies as shown on the Project Plans (or, if there is no rental car agency, they may be used for Parking), Hotel Uses including laundry facilities for the hotel, Wine Storage and Tasting Room, and any other uses that are designated as Permitted Uses in the Zoning Ordinance in effect at the time the use is established. Except as specifically provided herein, Developer will not be required to obtain any additional Discretionary Approvals for any of the Permitted Uses. Permitted Uses may commence in the Project upon issuance of a City business license and without any discretionary planning approvals for such uses. 2.5.4 Conditionally Permitted Uses. "Conditionally Permitted Uses" include (a) all uses that are identified as Conditionally Permitted Uses in the SMMC in effect at the time the use is sought to be established, with the exception of any uses that are defined as Permitted Uses herein, and (b) any uses requiring a Conditional Use Permit in Section 2.6.3. A Conditional Use Permit shall also be required for: (a) banks and similar financial institutions located on the ground floor project frontage facing Wilshire Boulevard or 7`h Street or (b) banks and similar financial institutions located on the ground floor project frontage facing the Public Use Area with a frontage exceeding twenty continuous linear feet. Conditionally Permitted Uses may commence operating at the Project upon issuance of a Conditional Use Permit ( "CUP ") in accordance with the procedures established in the SMMC and the issuance of a business license. 7 2.5.5 Other Uses Subject to Discretionary City Planning Approvals. In addition to Permitted Uses and Conditionally Permitted Uses, Developer may seek City discretionary planning approval for uses that are allowed by any other City discretionary process as provided in the SMMC in effect when the use is sought to be established. Such use may not commence until the requisite City discretionary planning approval and a business license are obtained. 2.6 Alcoholic Beverage Permits. 2.6.1 Hotel. Developer or a Hotel operator may sell or furnish alcoholic beverages within the hotel's mini -bars, hotel rooms, common areas, meeting and banquet spaces, the Second Floor Bar, the Wine Storage /Tasting Room, and the Rooftop dining areas as shown on the Project Plans without obtaining a conditional use permit pursuant to SMMC Section 9.04.10.18 if Developer or hotel /business operator agrees in writing to comply with the terms and conditions in Exhibit "F ". Notwithstanding the foregoing, Developer or a hotel business operator may apply for a conditional use permit pursuant to SMMC Section 9.04.10.18 in order to sell or furnish alcoholic beverages for consumption on terms other those in Exhibit "F" for the hotel common areas, meeting and banquet space, Second Floor Bar, Rooftop dining areas or Wine Storage and Tasting Room. 2.6.2 Restaurants. Developer or a hotel /restaurant operator may dispense for sale or other consideration, alcoholic beverages, including beer, wine, malt beverages, and distilled spirits for on -site consumption in Restaurant "A" (as shown on the Project Plans), Restaurant "El" (as shown on the Project Plans) or any other area on the Project Plans designated for Restaurant or Retail - -as long as there are not more than 9,730 square feet of Restaurant Uses in the Project -- if Developer agrees in writing to comply with the terms and conditions in either Exhibit "G" for Restaurant "A ", Exhibit "H" for Restaurant "El" or Exhibit "I" for any Restaurant or Retail space, including Restaurant "A" and Restaurant "El ". Developer shall cause all hotel /restaurant operator leases or transfer of ownership to contain a clause that requires the tenant to comply with the terms and conditions in either of the applicable Exhibits G, H, or I. Notwithstanding the foregoing, Developer or a Hotel /Restaurant operator may apply for a conditional use permit pursuant to SMMC Section 9.04.10.18 in order to sell or furnish alcoholic beverages for consumption on -site on terms other than those in Exhibits "G ", "H" or "I" for any area on the Project Plans designated for Restaurant or Retail. 2.6.3 Conditional Use Permit. A conditional use permit pursuant to SMMC Section 9.04.10.18 shall be required for any proposed use in the hotel that (a) includes the service or sale of alcoholic beverages and (b) does not comply with the conditions set forth in Sections 2.6.1 or 2.6.2. Notwithstanding the foregoing, no conditional use permit shall be required for catered events for which the necessary permits then required for such events have been obtained. 2.7 Project and Community Benefits. This Agreement provides assurances that the project and community benefits identified below in this Section 2.7 will be achieved and developed in accordance with the terms of this Agreement. 10 2.7.1 Project Benefits. Set forth in this Section 2.7.1 are the project benefits that will be provided to the City, including without limitation: (a) increasing tax revenues, including transient occupancy tax, sales tax, property tax, business license tax, parking tax, and utility user's tax; (b) providing substantial new employment opportunities in both the Hotel and retail space; (c) a desirable mix of uses, including retail, restaurants /cafes and 24 -hour hotel, within a new building to be constructed in the Downtown in close proximity to transit; (d) providing the City with fee revenue for child care facilities; and (e) trip reduction measures as required by SMMC Chapter 9.16. 2.7.2 LUCE Community Benefits. Set forth below in this Section 2.7.2 are the additional community benefits that will be provided by the Project. (a) Historic Preservation. (i) The Project includes the rehabilitation and adaptive reuse of the existing Landmark Building at 710 Wilshire Boulevard. This Spanish Colonial Revival building was designated as a City landmark by the Santa Monica Landmarks Commission on August 8, 2005. (LC -05 -LM -003.) The 34,178 square foot Landmark Building, known as the Santa Monica Professional Building, was constructed in 1928. The Landmark Building was built for, and currently remains in use as, commercial offices above retail at the ground floor. Evolutions in style, changes in tenants, and various retrofits have altered significant elements of the Landmark Building's exterior and interior. Exterior alterations include infill of the original porte- cochere, alterations of storefront windows and doors, added inoperable awnings, missing light fixtures, missing art stone features, removal of a rooftop garden above the first floor podium, replacement of terra cotta roofing tiles with asphalt composition shingles, removal of masonry grills, termination of flood up- lighting, changes to the first floor lobby including removal of decorative molding, ceilings, elevator doors, lighting, display case, and mail chute, and changes to upper floor corridors including wainscoting, ceilings, lighting, and doors. Pursuant to Article 6 of this Agreement, a Certificate of Appropriateness will be obtained from the Joint Design Review Body, or the City Council on appeal, to review and approve these alterations and to the extent possible, restore the Landmark Building's publicly accessible spaces to their original appearance based on physical evidence and other documentation. Original architectural drawings of both the interior and exterior provide extensive information on the Landmark Building's original appearance, and will be utilized along with historic photographs of the exterior to guide rehabilitation. Rehabilitation will conform to Secretary oflnterior Standards for Treatment of Historic Properties ( Secretary's Standards). Rehabilitation and adaptive reuse of the Landmark Building in accordance with the Certificate of Appropriateness will: (1) make the building safer in light of today's codes, (2) rehabilitate and restore its character - defining features, and (3) ensure that the Landmark Building endures for future generations. At the time of rehabilitation, various structural aspects of the existing Landmark Building will be upgraded. In addition, to improve the existing life safety protections, existing fire and life safety conditions will be updated per current codes while achieving a balanced application of the Secretary's Standards and California Historical Building 11 Code. Furthermore, handicap accessibility will be upgraded as part of rehabilitation of the Landmark Building. (ii) Performance Bond for Landmark Building. (A) Timing. Prior to issuance of a building permit, Developer shall provide evidence satisfactory to the City Attorney of a performance bond issued by a corporate surety authorized to do business in the State of California ( "Performance Bond "). At Developer's option and if commercially available, the Performance Bond may be structured in a such manner so as to take effect upon commencement of the Project's construction. (B) Purpose. The purpose of the Performance Bond shall be to ensure that if after rehabilitation work on the Landmark Building has commenced, the building permit for the Project expires or the Developer notifies the City in writing that the Project has been abandoned, then, to safeguard the Landmark Building, the City will have the ability to pay for its cost of completing the Landmark Building's exterior rehabilitation as authorized by the Certificate of Appropriateness, subject to the scope of work specified in 2.7.2(1)(ii)(C) and the process specified in 2.7.2(1)(ii)(H). (C) Scope. The exterior rehabilitation work covered by the Performance Bond shall include, without limitation, the roofs (i.e., the second floor podium, the sixth floor rooftop and the roofs of the unoccupied rooms on the partial seventh floor), the windows (including the ground floor storefront doors and windows, as well as the upper floor windows), the surface finishes of the exterior (including the cast -in -place board - formed concrete and the painted cement stucco skin), and, to the extent they are being retained, rehabilitated or replaced, the decorative cast -stone trim details and elements on the exterior of the Landmark Building. The work may also include other building elements which are required as part of the Certificate of Appropriateness. The exterior rehabilitation work shall not include additional elements that may be included in the Certificate of the Appropriateness such as the landscaping, irrigation, lighting, mechanical, electrical or plumbing systems, or interior rehabilitation work. Notwithstanding the foregoing, the exterior rehabilitation work covered by the Performance Bond shall also include any interior construction activity that directly impacts the exterior appearance or overall structural integrity of the Landmark Building, but only to the extent such work directly and materially impacts the exterior appearance or overall structural integrity of the Landmark Building. (D) Amount. The initial amount of the Performance Bond shall be mutually agreed upon by the Developer and the Planning Director, and may be reduced over time as the rehabilitation work to the Landmark Building progresses. The initial amount of the Performance Bond shall be based on the anticipated cost of performing the rehabilitation work to the exterior of the Landmark Building as approved by the Certificate of Appropriateness. To aid in this valuation, Developer shall provide the Planning Director with an estimate from a general contractor of the approximate cost of performing such work. If, when the Performance Bond comes up for periodic renewal, the rehabilitation work to the exterior of the Landmark Building has been accomplished in part, then at that time the amount of the 12 Performance Bond can be reduced accordingly by the mutual agreement of Developer and the Planning Director. (E) Contents. The Performance Bond shall provide that if the Developer allows the building permit to expire, fails to satisfactorily obtain a Certificate of Occupancy within the timeframe allowed under SMMC (including any extensions that may be granted) or otherwise abandons the Project, and consequently the City acts to ensure that the Landmark Building's exterior rehabilitation work is completed, as authorized by the Certificate of Appropriateness, after providing the requisite notice, there shall be recoverable by the City, any and all damages, loss, or costs incurred by the City. (F) Term. The Performance Bond shall only be cancelled -- or allowed to expire without renewal -- upon the mutual agreement of Developer apd the Planning Director that the Landmark Building's exterior rehabilitation work as approved by the Certificate of Appropriateness has been completed or substantially completed. In all circumstances, the obligation to provide the Performance Bond shall automatically terminate once a Certificate of Occupancy has been issued for-either the Landmark Building or the Project as a whole. (G) Reservation. The rights reserved to the City with respect to the Performance Bond are in addition to all other rights of the City, whether reserved by this Agreement or authorized by law, and no action, proceeding, or exercise of a right with respect to such Performance Bond shall affect any other rights which may be held by the City. (H) Process. In the event that (i) the building permit lapses after rehabilitation work on the Landmark Building has been commenced, or (ii) the Developer notifies the City in writing that the Project has been abandoned after the rehabilitation work on the Landmark Building has been commenced, then the City shall give Developer thirty (30) days written notice thereof and an additional sixty (60) days to initiate active steps to cure the abandonment or building permit expiration. If, after providing this notice and opportunity to cure, the concerns are not then being adequately addressed by Developer, the City shall become empowered thereafter to enter the Property to complete any exterior rehabilitation work that had been initiated by Developer, to the extent (and no more than) necessary to ensure that as to such work that has been initiated the Landmark Building's exterior rehabilitation work is completed The City may perform any such exterior rehabilitation itself or lified and insured entity or person to complete the work to safeguard for such purposes, shall be authorized to use Developer's equipment n site, provided that the entire expense of the exterior rehabilitation park Building, whether done by City itself or by the employment of 'ged to Developer and provided further, that the doing of such work :)yment of other persons shall in no way relieve Developer from any ment, nor limit the rights and remedies of City hereunder in any manner whatsoever. (b) Transportation Demand Management Plan. Developer shall adopt and implement the following Transportation Demand Management Plan ( "TIM Plan "): 13 (i) AVR Target. For employees of the Project, Developer shall achieve an average vehicle ridership ( "AVR ") of 1.75 by the third year after the City's issuance of a certificate of occupancy for the Project and the 1.75 AVR shall continue to be achieved and maintained thereafter. SMMC Chapter 9.16 shall govern how the AVR is calculated. Failure to achieve the AVR standard as provided in this Section will not constitute a Default within the meaning of the Agreement so long as Developer is working cooperatively with the City and taking all feasible steps to achieve compliance. The term "feasible" shall have the meaning given that term in Section 21061.1 of the California Public Resources Code, or any successor legislation thereto. Developer will determine its AVR through employee surveys for one consecutive week each calendar year beginning the first year the commercial component is at least 50% occupied. For purposes of determining AVR, the survey must be conducted and AVR calculated in accordance with SMMC 9.16.070(d)(2)(1) except to the extent modified by this Agreement below: The survey must be taken over five consecutive days during which the majority of employees are scheduled to arrive at or leave the worksite. The days chosen cannot contain a holiday and cannot occur during `Rideshare Week' or other `event' weeks (i.e., Bicycle Week, Walk to Work Week, Transit Week, etc.). This survey must have a minimum response rate of seventy -five percent of employees who report to or leave work between six a.m. and ten a.m., inclusive, and seventy -five percent of employees who report to or leave work between three p.m. and seven p.m., inclusive. Employers that achieve a ninety percent or better survey response rate for the a.m. or p.m. window may count the `no- survey responses' as `other' when calculating their AVR ... The procedure for calculating AVR at a worksite shall be as follows: (A) The AVR calculation shall be based on data obtained from an employee survey as defined in [SMMC Section 9.16.070(d)(2)]. (B) AVR shall be calculated by dividing the number of employees who report to or leave the worksite by the number of vehicles arriving at or leaving the worksite during the peak periods. All employees who report to or leave the worksite that are not accounted for by the employee survey shall be calculated as one employee per vehicle arriving at or leaving the worksite. Employees walking, bicycling, telecommuting, using public transit, or on their day off under a recognized compressed work week schedule shall be counted as employees arriving at or leaving 14 the worksite without vehicles. Motorcycles shall be counted as vehicles. (C) A child or student may be calculated in the AVR as an additional passenger in the carpool /vanpool if the child or student travels in the car /van to a worksite or school /childcare facility for the majority (at least fifty -one percent) of the total commute. (D) If two or more employees from different employers commute in the same vehicle, each employer must account for a proportional share of the vehicle consistent with the number of employees that employer has in the vehicle. (E) Any employee dropped off at a worksite shall count as arriving in a carpool only if the driver of the carpool is continuing on to his /her worksite. (F) Any employee telecommuting at home, off-site, or at a telecommuting center for a full work day, eliminating the trip to work or reducing the total travel distance by at least fifty -one percent shall be calculated as if the employee arrived at the worksite in no vehicle. Furthermore, the definition of AVR contained in SMMC Section 9.16.030, as written on the Effective Date, shall govern how AVR is calculated. That definition reads as follows: "The total number of employees who report to or leave the worksite or another job-related activity during the peak periods divided by the number of vehicles driven by these employees over that five -day period. The AVR calculation requires that the five - day period must represent the five days during which the majority of employees are scheduled to arrive at the worksite. The hours and days chosen must be consecutive. The averaging period cannot contain a holiday and shall represent a normal situation so that a projection of the average vehicle ridership during the year is obtained." (ii) TDM Plan Program Elements. The specific program elements of the TDM program for the Project are as follows: 2.7.2.1 Transportation Demand Management Association. Developer and building tenants shall be required to participate in the establishment of a geographic -based Transportation Demand Management Association (TMA) that may be defined by the City. TMAs provide employees, businesses and visitors of an area with resources to increase the amount of trips taken by transit, walking, bicycling, and ridesharing. If the City adopts a requirement that a TMA be formed for this geographic area, Developer shall attend 15 organizational meetings and provide traffic demand data to the TMA. Developer shall require in all leases it executes as landlord for space within the Project that building tenants be required to participate in the TMA and that all subleases contain this same provision. Developer may elect to provide some or all of the services required by this Section 2.7.2(b) through the TMA. 2.7.2.2 Employee Transportation Coordinator. An Employee Transportation Coordinator (ETC) shall be designated for this Project by Developer. The ETC shall manage all aspects of this TDM program and participate in the local TMA that may be established by the City, City- sponsored workshops and information roundtables. The ETC shall be responsible for actively encouraging and making available information materials on options for alternative transportation modes and opportunities. The ETC shall contact each employee at the point of hire and at least once per year thereafter with an offer of personalized commute assistance, including, but not limited to: (a) one month's free transit pass (at commencement of employment only) and an on -going 50% or greater subsidy described in subsection 2.7.2.13 below, (b) guidance on routes to use, (c) information about carpool and vanpool formation, (d) a month's free vanpool fare (one time only), and (e) a discussion of other benefits available. The ETC shall also promote non - drive -alone options to employees by providing onsite information, including a newsletter, at least two events per year (e.g., Rideshare Week and Bike Week) and marketing activities such as contests and raffles. The ETC shall coordinate with nearby employers to facilitate more effective carpool /vanpool matching, events and promotions. In addition, transit fare media will be made available for purchase through the ETC to employees and visitors during typical business hours. Employee Transportation Coordinator services may be provided through the TMA contemplated in Section 2.7.2(b)(ii)(2.7.2.1) above. 2.7.2.3 Transportation Information Center. Developer shall provide on -site information for hotel employees, hotel guests, and employees of the Project's other commercial tenants about local public transit services (including bus lines, light rail lines, bus fare programs, ride share programs and shuttles) and bicycle facilities (including routes, rental and sales locations, on -site bicycle racks and showers. Developer shall provide (e.g., at check -in) each hotel guest with a map, schedule and fare information for utilizing the transit system in Santa Monica and the surrounding area. Developer shall also provide hotel guests with information about rideshare, shopping locally, and bike and walking routes through the hotel's website, reservation confirmations and materials provided upon registration (i.e., wherever parking or location information is provided. Developer shall also provide walking and biking maps for employees and visitors, which shall include but not be limited to information about convenient public transit stops, local services, and restaurants within walking distance of the Project. Developer shall provide information to employees and commercial tenants and employees of the hotel operator regarding local rental housing agencies. Such transportation information shall be provided on -site, regardless of whether also provided on a website. 2.7.2.4 Secure Bicycle Parking for Employees /Hotel Guests. Developer shall provide secure long -term bicycle storage for employees and for hotel guests in a secure convenient location approved by the Planning Director. This shall have a capacity for a minimum of 64 bicycles. For the purpose of this requirement, secure bicycle parking shall mean bicycle lockers, an attended cage, or a secure parking area. NA 2.7.2.5 Visitor Bicycle Parking. Developer shall provide short -term bicycle parking for 16 bikes for guests of the Project. This guest bike parking shall be located on the ground floor of the Project and may be relocated from time to time as long as the parking remains on the ground floor. 2.7.2.6 Hotel Guest Bicycle Check. Developer shall provide "bike check" service to hotel guests. Information on this service shall be included on the hotel's website, reservation confirmations, and hotel information provided in guest rooms. 2.7.2.7 Bicycles for Shared Use by Hotel Guest. Developer shall make available a minimum of 20 on -site bicycles for rent by Hotel guests at a nominal charge or free. The bicycles shall be maintained in good working order and helmets shall be provided to guests if required by law. The Planning Director may require that more bicycles shall be made available as demand warrants. The Developer, in consultation and mutual agreement with the Planning Director, may allow these additional bicycles to be made available to Hotel guests through the provision of vouchers for an off -site bicycle rental store /service located in the Downtown area or for a bicycle sharing program if one is instituted by the City or another operator. Information on the availability of shared bicycles shall be included on the hotel's website, reservation confirmations, and hotel information provided in guest rooms. 2.7.2.8 Preferred Drop- off /Pick -up Loading Zone. As depicted on the Project Plans, the Project includes an on -site drop -off /pick -up loading zone to discourage on- street double parking. Parking time limits in this designated zone shall be enforced by Developer to facilitate adequate availability of the loading area. 2.7.2.9 Carpool Program. Developer shall provide preferential parking within the parking garage for project employees who commute to work in ernployer- registered carpools. An employee who drives to work with at least one other employee in the Project or adjacent facilities may register as a carpool entitled to preferential parking within the meaning of this provision. Developer shall require in all Hotel and Restaurant leases (for Restaurants greater than 1,500 gross square feet) or operating agreements that employees be provided with financial incentives for carpooling /vanpooling. 2.7.2.10 Rideshare Matching Service. Developer shall provide a rideshare matching service to all employees at least once per year to assist employees in finding carpool /vanpool opportunities (i.e., through a service such as RideMatch (www.ridematch.info)) and /or require tenants to participate in Metro's CommuteSmart.info website. Rideshare matching services may be provided through the TMA contemplated in Section 2.7.2(b)(ii)(2.7.2.1) above. 2.7.2.11 Parking Pricing. Hourly parking pricing shall be market -based and adjusted periodically in an effort to ensure parking availability for Hotel guests, commercial tenants and their employees and visitors during peak parking hours. Whenever Developer makes any unused on -site commercial parking available for daily, weekly, or monthly lease to third parties in the surrounding area in need of parking in accordance with Section 2.7.2(8, Developer shall charge market rates. 17 2.7.2.12 Carshare Service. Developer shall, in the subterranean parking garage, make a car sharing service available within the project with a minimum of two cars, if such a service is available from a third party provider on commercially reasonable terms including the rental rate to be paid to Developer for use of the parking space(s). Required parking spaces may be used for carshare vehicles. Developer shall propose a signage system to notify people of the location and availability of the carshare vehicles; the City Transportation Manager shall consider such request and may authorize the posting of signs within the public right -of -way to guide pedestrian and vehicular traffic to the carshare parking location. Location of carshare vehicles shall be determined by the Planning Director in consultation with the Developer, at such time as the carshare service provider has been selected. 2.7.2.13 Rental Car Availability. If a rental car agency is not operating within the project, Developer shall provide information to Hotel guests on rental car agency locations within the city and shall make arrangements for rental cars to be delivered to and picked up from the Hotel or for hotel guests to be picked up by the rental car agency. Information on rental car availability shall be included on the hotel's website, reservation confirmations, and hotel information provided in guest rooms. 2.7.2.14 Unbundled Parking. Developer shall lease its parking to commercial tenants separately from the commercial space. If commercial tenants desire to lease parking, parking shall either be leased pursuant to a separate agreement or shown as a separate line item in the lease. Such parking shall typically be leased on a month -to -month basis at market rates established by Developer from time -to -time. Developer may, subject to the Planning Director's approval, reconfigure the parking spaces and operations from time -to -time in order to facilitate unbundling of parking. Developer shall require in all tenant leases it executes as landlord that tenants not pay for or reimburse their employees for parking. 2.7.2.15 Public Transit Subsidy. Developer shall require in the lease it executes as landlord (or management, operating or similar agreement) that the Hotel and Restaurant operators (for Restaurants greater than 1,500 gross square feet) must (a) provide all newly hired employees that will work within the Project a free public transit pass valid every day for at least the first three months of their employment and (b) offer all employees a Metro EZ pass (or equivalent multi- agency monthly transit pass) at a 50% or greater subsidy on an ongoing basis. Developer shall require in the lease it executes as landlord (or management, operating or similar agreement) that the Hotel and Restaurant operators must provide for their employees that work within the Project a financial incentive to use public transit (e.g., Santa Monica Big Blue Bus, or Metro Bus Service or future Metro Light Rail Service) in lieu of driving a vehicle to the site. Such a financial incentive shall include, among other things, that the Hotel and Restaurant operators shall not reimburse their employees for parking, unless precluded by a bona fide collective bargaining agreement. 2.7.2.16 On -Site Shower and Locker Facilities. A minimum of two showers and locker facilities (one for each gender) shall be provided for employees of commercial uses on site who bicycle or use another active means, powered by human propulsion, of getting to work or who exercise during the work day. 18 2.7.2.17 Guaranteed Return Trip. Developer shall require in all leases it executes as landlord for space within the Project that tenants provide employees who vanpool or carpool with a return trip to the point of commute origin at no additional cost to the employee, when a Personal Emergency Situation requires it. The employee guaranteed return trip may be provided through the TMA contemplated in Section 2.7.2(ii)(2.7.2.1) above. The ETC may register with Metro's Guaranteed Ride Home program for such commuters. (iii) Changes to TDM Program. Subject to approval by the City's Planning Director, the Developer may modify this TDM program provided the TDM program, as modified, can be demonstrated as equal or superior in its effectiveness at mitigating the traffic- generating effects of this Project. Any of the modifications to the TDM program proposed by Developer (or proposed by the Planning Director and agreed to by the Developer) to help the Project achieve the applicable AVR standard shall be subject to the reasonable approval by the City's Planning Director as a Minor Modification. (iv) Tenant Leases. Developer shall require in all tenant leases that tenants cooperate with Developer in meeting the objectives and complying with the terms and conditions of the TDM Program in effect or any future program instituted by any governmental authority and applicable to the property, including the annual survey described in Section 2.7.2(b)(i) above and the requirement to participate in the TMA in Section 2.7.2(b)(ii, )(2 above. (v) Annual Report. As part of the annual compliance review described in Article 10 below, Developer shall report to the City on the status of the TDM program implementation, usage and results. (vi) New TDM Ordinance. If the City adopts a new ordinance of general application that updates or replaces Chapter 9.16 of the SMMC and that applies to the geographic area in which the Property is located ( "New TDM Ordinance "), then, subject to the Planning Director's approval in his or her sole and absolute discretion, Developer may elect to comply with the New TDM Ordinance in lieu of complying with the TDM Plan outlined in this Agreement. (c) Sustainable Design Features. Developer shall retain the services of an accredited professional to consult with Developer regarding inclusion of sustainable design features for the Project. Developer shall design the Project so that, at a minimum, the Project shall have the number of points that would be commensurate with achieving LEEDO credits equivalent to a "Silver" certification under the LEEDO Rating System (the "Sustainable Design Status "). If Developer has received design approval pursuant to Section 6.1 within 4 years after the Effective Date, Developer may utilize LEEDO Rating System version 3.0 dated 2009 ( LEEDO NC v3 -2009) unless Developer chooses, in its sole and absolute discretion, to use a subsequent version of the LEEDO Rating System. If Developer has not received design approval from the Landmarks Commission pursuant to Section 6.1 within 4 years of the Effective Date, then Developer shall utilize the version of the LEEDO Rating System then in effect unless the City agrees that Developer may utilize an earlier version of the LEEDO Rating System. For purposes of clarity, Developer shall design the Project in a manner that achieves the 19 Sustainable Design Status; provided, however, that Developer shall not be required to pay to the Green Building Certification Institute the fees required to obtain a LEED® certificate. (1) Developer shall confirm to the City that the design for the Project has achieved the Sustainable Design Status in accordance with the following requirements of this Section 2.7.2(c). (2) Prior to the submission of plans for the Joint Design Review Body's review consistent with Article 6 of this Agreement, Developer shall submit a preliminary checklist of anticipated LEED® credits (that shall be prepared by the LEED® accredited professional) for review by the City of Santa Monica Green Building Program Advisor ( "Advisor "), along with a narrative to demonstrate that the Project is likely to achieve the Sustainable Design Status. (3) As part of Developer's set of plans and documents submitted to the City with Developer's plan check application for the Project's building permit, Developer shall also submit the LEED® credits identified in clause (2) above (prepared by the LEED® accredited professional) for review by the Advisor to demonstrate that the Project is likely to achieve the Sustainable Design Status. (4) Prior to issuance of a final Certificate of Occupancy for the Project, the City's Green Building Program Advisor shall verify and approve (which approval shall not be unreasonably withheld, conditioned or delayed) that the LEED© credits identified in clause (2) above (prepared by the LEED® accredited professional) demonstrate that the Project is likely to achieve the Sustainable Design Status. Developer shall meet with the Advisor at least 30 days prior to submitting the final LEED© credits for the Advisor's approval, and during such meeting Developer shall review the LEED® progress with the Advisor. (5) Notwithstanding the foregoing, if the Advisor has not yet approved the LEED® credits that demonstrate that the constructed Project has achieved the Sustainable Design Status, the City shall nonetheless issue a temporary Certificate of Occupancy for the Project (assuming that the Project is otherwise entitled to receive a temporary Certificate of Occupancy). The temporary Certificate of Occupancy shall be converted to a final Certificate of Occupancy once the Advisor determines that the LEED® credits for the Project demonstrate that the constructed Project has achieved the Sustainable Design Status. (d) Photovoltaic Panels. Photovoltaic panels shall be installed on the roof deck in accordance with the Project Plans. (e) EV Conduit. Developer shall in the subterranean parking garage, including on the P.1 level, provide either: (a) a minimum number of 208/240 V 40 amp, grounded AC outlets equal to 30 parking spaces or (b) panel capacity and conduit for future installation of electrical outlets designed to allow the simultaneous charging of a minimum number of 208/240 V 40amp, grounded AC outlets equal to at least 30 parking spaces. Until the Planning Director makes a determination, based on demonstrated demand by drivers of such vehicles, that some or all of the 30 parking spaces be restricted for electric or other alternative 20 fueled vehicle use, the spaces may be utilized without regard to vehicle type at the Developer's sole and absolute discretion. (f) Shared Parking. In furtherance of the LUCE's shared parking policies and consistent with providing sufficient on -site parking for the Project's users, Developer may make any unused on -site parking available for monthly lease at market rates to third parties in the surrounding area in need of parking, including area residents, businesses, and employees, ( "Shared Parking ") if (i) Developer obtains a written report by a traffic and parking engineering firm that demonstrates that the proposed additional parking spaces to be leased to third parties are not needed to meet the Project's peak parking demand, (ii) Developer submits such report to the City for review and approval, and (iii) the Planning Director approves the additional parking spaces for Shared Parking. Alternatively, Developer may make parking spaces available for Shared Parking in accordance with any SMMC procedure authorizing shared parking then in effect. In order to facilitate annual compliance monitoring of shared parking and trip reduction targets, Developer shall install ticketing equipment for on -site parking that is able to discern between on -site and off -site users. (g) Local Hiring. A local hiring program shall be provided in accordance with Exhibits "J -1" and "J -2 ". (h) Internship Program. On an ongoing basis, the Developer shall provide at least two paid (unless taken for school credit) internships per school session to students who attend a high school in Santa Monica or Santa Monica College. Developer will inform the schools that internships shall be targeted towards students whose household income is no greater than 80% of the Median Income, as defined in Exhibit "J -2" of the this Agreement. Subject to the requirements specified in this subsection (h), Developer retains full discretion to select the students for the internships. (i) Community Meeting Space. Subject to availability, Developer shall make banquet or meeting rooms available to non - profits or other community organizations on a reduced cost basis at least twelve (12) times per year for up to five hours per meeting. The reduced cost shall be based on fees that are required for similar City -owned facilities. Notwithstanding the foregoing, standard set up fees and standard food and beverage rates will apply. Prior to the Hotel's Certificate of Occupancy, written rental facility guidelines as to community availability of the meeting /banquet rooms shall be prepared by the Hotel operator and submitted to the Planning Director for review and approval. Such rental facility guidelines regarding community availability may be amended from time to time thereafter, subject to the Planning Director's review and approval. The following hourly fees shall be stated in the written rental facility guidelines and adjusted annually for CPI: 21 SM Based Non -SM SM Based Non -SM SM Based Non -SM Non -Profit Non -Profit Community Community Business Business Meeting $17.75 $35.53 $29.60 $62.17 $71.04 $95.88 Room A Meeting $14.32 $28.60 $25.04 $49.79 $57.21 $77.26 Room B 21 0) Transportation Infrastructure Fee. On or before issuance of a building permit for the Project, Developer shall make a $244,000 contribution to the City to be used within five years thereafter for the purposes of helping fund capital improvements to transportation infrastructure that may include but not be limited to pedestrian network completion, bicycle facilities as guided by the Bicycle Action Plan, transit improvements, and automobile network improvements. (k ) Bicycle Sharing Area. Developer shall provide a reasonable amount of space in the Public Use Area, not to exceed six (6) feet in depth and twelve (12) feet . in width, at a visible and accessible location on site which is compatible with the operation of the Project, for a bicycle sharing program station in conjunction with any bicycle sharing program instituted by the City or another operator. The bicycle sharing area may replace no more than 5 visitor bicycle parking spaces, as required by Section 2.7.2.5. Developer shall have the right to relocate the area made available for such bicycle sharing station from time to time so long as the new location continues to be of a similar size and reasonably located given the requirements of the bicycle sharing program. Developer shall have no obligation to fund or operate any such program or to keep any space available if no bicycle sharing system is implemented by the City or other operator. (1) Project Design. As a result of this Agreement, there are enhanced elements of the Project design, including enhanced walkway and courtyard areas as shown on the Project Plans and other pedestrian- oriented design elements of the Project. The public use of that certain area designated on the Project Plans as "Public Use Area" shall be: (i) consistent with the terms and conditions of this Agreement; (ii) solely for pedestrian access to and passive use of the Public Use Area by the public; and (iii) compatible with Developer's development, use and enjoyment of the Project. No use other than pedestrian access to and passive use of the Public Use Area by the public shall be permitted on the Public Use Area. Between the hours of 10:00 p.m. and 8 :00 a.m., Developer may limit public access to the Public Use Area. (m) Non - Potable Water System. Prior to the issuance of the Project's building permit, the Developer shall provide proof to the Planning Director of submission of a written request for a determination from the City's Water Resources Department as to: (i) the status of the approval and construction schedule for non - potable water delivery to the Property for non - potable use; (ii) the availability of a dedicated or identifiable source for financing the City's construction of the necessary infrastructure for accomplishing non - potable water delivery to the Property; (iii) sufficient capacity of non - potable water to meet anticipated demand; (iv) in the event that the City does not plan to deliver non - potable water to the Property from its own City water supply, an agreement between the City and a third party non - potable water wholesaler to sell its non - potable water to City; and (v) an approved utility rate schedule for the usage of non - potable water. 22 SM Based Non -SM SM Based Non -SM SM Based Non -SM Non - Profit Non - Profit Community Community Business Business Meeting $14.32 $28.60 $25.04 $49.79 $57.21 $77.26 Room C Meeting $14.32 $28.60 $25.04 $49.79 $57.21 $77.26 Room D 0) Transportation Infrastructure Fee. On or before issuance of a building permit for the Project, Developer shall make a $244,000 contribution to the City to be used within five years thereafter for the purposes of helping fund capital improvements to transportation infrastructure that may include but not be limited to pedestrian network completion, bicycle facilities as guided by the Bicycle Action Plan, transit improvements, and automobile network improvements. (k ) Bicycle Sharing Area. Developer shall provide a reasonable amount of space in the Public Use Area, not to exceed six (6) feet in depth and twelve (12) feet . in width, at a visible and accessible location on site which is compatible with the operation of the Project, for a bicycle sharing program station in conjunction with any bicycle sharing program instituted by the City or another operator. The bicycle sharing area may replace no more than 5 visitor bicycle parking spaces, as required by Section 2.7.2.5. Developer shall have the right to relocate the area made available for such bicycle sharing station from time to time so long as the new location continues to be of a similar size and reasonably located given the requirements of the bicycle sharing program. Developer shall have no obligation to fund or operate any such program or to keep any space available if no bicycle sharing system is implemented by the City or other operator. (1) Project Design. As a result of this Agreement, there are enhanced elements of the Project design, including enhanced walkway and courtyard areas as shown on the Project Plans and other pedestrian- oriented design elements of the Project. The public use of that certain area designated on the Project Plans as "Public Use Area" shall be: (i) consistent with the terms and conditions of this Agreement; (ii) solely for pedestrian access to and passive use of the Public Use Area by the public; and (iii) compatible with Developer's development, use and enjoyment of the Project. No use other than pedestrian access to and passive use of the Public Use Area by the public shall be permitted on the Public Use Area. Between the hours of 10:00 p.m. and 8 :00 a.m., Developer may limit public access to the Public Use Area. (m) Non - Potable Water System. Prior to the issuance of the Project's building permit, the Developer shall provide proof to the Planning Director of submission of a written request for a determination from the City's Water Resources Department as to: (i) the status of the approval and construction schedule for non - potable water delivery to the Property for non - potable use; (ii) the availability of a dedicated or identifiable source for financing the City's construction of the necessary infrastructure for accomplishing non - potable water delivery to the Property; (iii) sufficient capacity of non - potable water to meet anticipated demand; (iv) in the event that the City does not plan to deliver non - potable water to the Property from its own City water supply, an agreement between the City and a third party non - potable water wholesaler to sell its non - potable water to City; and (v) an approved utility rate schedule for the usage of non - potable water. 22 If prior to the City's issuance of the Project's building permit, City has confirmed in writing: (i) a construction schedule for non - potable water delivery to the Property within 18 months after issuance of the Project's building permit, (ii) the availability of a dedicated or identifiable source or mechanism for financing the construction of the non - potable water delivery to the Property, (iii) sufficient capacity of non - potable water to meet anticipated demand, whether through the City's own supply or from a third party; and (iv) an approved utility rate schedule for non - potable water, then the Project's plumbing system shall include non - potable water plumbing lines (which may include dual plumbed construction, dual meters and backflow protection assemblies) to the satisfaction of the City Engineer and County Health Department. If feasible, the dual plumbing shall be designed and constructed to accommodate all Project irrigation and cooling tower demands, if cooling towers are used in the project. No other purple pipe installation or usage shall be mandated by this Agreement. In the event the City fails to respond within 90 days after Applicant's written request for determination with a final written response regarding its approval and construction schedule and source of financing and rate schedule, then the Project's construction will not be required to include a non - potable water delivery system. 2.8 Living Wage. a) Purpose. The purpose of this Section 2.8 is to ensure that Hotel workers receive fair and reasonable compensation comparable to similar hotels in Santa Monica and nearby communities without putting the Hotel at a competitive disadvantage in its hourly labor rates in comparison to such other hotels. b) Hotel Workers Covered. To the extent they are working at the Property, the following workers, or similarly described job classifications, performing Hotel Use services (exclusive of workers for any on -site vehicle rental agency), whether as employees of the Hotel or as employees of a contractor providing Hotel Use services within the Hotel, shall be covered by this Section 2.8: I. File Clerk 2. Receptionist 3. Storeroom Clerk 4. Room Service Cashier 5. Restaurant Cashier 6. Pantry Staff 7. Prep Cook 8. Kitchen Apprentice 9. Buffet Runner 10. Kitchen Utility Person 11. Restaurant Night Cleaner 12. Pot Washer 13. Ware Washer 14. Room Service Order Taker 15. Bus Person 16. Bar Back 23 17. _ Banquet Housemen 18. Mini Bar Attendant 19. Lifeguard 20. Hotel Common Area Cleaner 21. Housekeeper 22. Room Attendant 23. Turndown Attendant 24. Housekeeping Clerk 25. Pool Attendant 26. Laundry Attendant 27. Laundry Washer 28. Laundry Presser 29. Uniform Room Attendant 30. Laundry Sorter 31. Security Officer 32. Parking Lot Attendant 33. Front Desk Clerk /Guest Service Agent 34. Telephone Operator 35. Health Club Attendant 36. Cleaning /Janitorial Staff 37. Child Activities Leader 38. Groundskeeper /Gardener 39. Driver 40. Door Person 41. Bellman Supervisor 42.. Page 43. Parking Garage Cashier C) Living Wage Amount. Workers covered by this Section 2.8 shall be paid at least the minimum hourly wage rate specified herein as a Hotel Living Wage. The amount of the Hotel Living Wage required by this Section is $10.64 per hour with health benefits (if these benefits consist of the payment of at least $1.25 per hour towards the provision of health care benefits) or $11.89 per hour without health benefits as of the Effective Date, without any deduction on account of any gratuity or any part thereof given to or left for a Hotel worker by a Hotel patron. Any tips received by Hotel workers covered by this Section 2.8 shall be the sole property of the worker or workers to whom it was paid, given or left for. d) CPI Adjustment. The Hotel Living Wage minimum hourly rate required by this Section shall be adjusted annually each July 1 st, beginning with July 2013. The minimum Hotel Living Wage rate shall continue to be adjusted annually by an amount corresponding to the previous year's change (January to January) in the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index for Urban Wage Earners and Clerical Workers 1967 =100 for the Los Angeles- Riverside- Orange County Region of California (the "CPI ") ( http : / /www.bls.gov /ro9 /news.htin), using an initial hourly rate of $10.64 per hour with health benefits of at least $1.25 per hour or $11.89 per hour without health benefits as of the month and year in which the Effective Date falls. In the event the compilation and /or publication of the CPI shall be transferred 24 to any other governmental department or bureau or agency or shall be discontinued, then an index most nearly the same as the CPI shall be used to make such calculation, as reasonably determined by Developer. e) Collective Bargaining Exception. The provisions of this Section 2.8 may be waived, in full or in part, in a bona fide collective bargaining agreement, but only if and to the extent the waiver is explicitly set forth in such agreement in clear and unambiguous terms. Unilateral implementation of terms and conditions of employment by either party to a collective bargaining relationship shall not constitute, or be permitted as, a waiver of all of any part of the provisions of this Section 2.8. f) Periodic Review of Hotel Living Wage. Once construction of the Project's subterranean parking structure has been completed and construction of the above grade floors has been commenced, or at some time thereafter, Developer may request in writing that the City Manager or his /her designee review and reduce the Hotel Living Wage then in effect. Following receipt of such request, the City Manager shall commission the preparation of a wage study documenting the wages paid to hotel workers in Santa Monica and nearby communities and any other analysis that the City Manager determines is reasonably necessary to assess Developer's request. The cost of said study shall be home by Developer. The City Manager shall render a final decision on Developer's request for a reduced Hotel Living Wage within 90 days of the receipt of the final wage study. The City Manager's decision shall be guided by the statement of purpose contained in Section 2.8(a) above. The City Manager's decision shall set forth its reasoning and be based upon the data obtained concerning hotel workers' wages in Santa Monica and nearby communities Any reduction to the Hotel Living Wage then in effect which the City Manager determines is warranted and which does not exceed ten percent (10 %) shall be considered a Minor Modification to the Project. Any reduction to the Hotel Living Wage which the City Manager determines is warranted and which exceeds ten percent (10 %) shall be considered a Major Modification and would therefore require an amendment to this Agreement unless the Developer elects to limit the decrease to no more than ten percent. In no event shall the City Manager use Developer's request as an opportunity to increase the Hotel Living Wage above the initial Hotel Living Wage as adjusted by the CPI formula specified in Section 2.8(d). Each time the City Manager's decision has been made or a Major Modification having to do with the potential reduction of the Hotel Living Wage has been acted on, Developer may not renew such a request to reduce the Hotel Living Wage any sooner than three years after making the most recent prior such request. g) Termination Rights. In the event the City adopts a Living Wage Ordinance of general application to hotels located within the City, then the provisions of this Section 2.8 shall automatically be of no further force and effect. Alternatively, Developer shall have the right to elect to terminate this Section 2.8, effective 60 days after providing the City with written notice in accordance with this Agreement, in the event: (i) the City approves a development agreement for the construction of a new hotel or replacement hotel in the Downtown District (as defined in the LUCE) that, as of January 23, 2012, had a development agreement application or a float -up request pending, and (ii) any such development agreement does not include a comparable living wage obligation, and (iii) the hotel covered by such development agreement is not otherwise party to either an existing and on -going bona fide collective bargaining agreement or a labor union neutrality agreement for hotel workers. 25 h) Expiration. If not terminated any earlier, this Section 2.8 shall automatically expire and be of no further force or effect 15 years after the City's issuance of the Certificate of Occupancy for the Project. 2.9 Prohibited Activities in the Public Use Area. Nothing in this Agreement shall give members of the public the right, without the prior written consent of Developer, which consent may be conditioned or withheld by Developer in Developer's sole discretion, to engage in any other activity on the Public Use Area, including, without limitation any of the following: (i) cooking, dispensing or preparing food; (ii) selling any item or engaging in the solicitation of money, signatures, or other goods or services; (iii) sleeping or staying overnight; (iv) engaging in political or other demonstrations; (v) using sound amplifying equipment; or (vi) engaging in any illegal, dangerous or other activity that Developer reasonably deems to be inconsistent with other uses in the Project or with the use of the Public. Use Area by other members of the public for the permitted purposes, such as excessive noise or boisterous activity, bicycle or skateboard riding skating or similar activity, being intoxicated, having offensive bodily hygiene, having shopping carts or other wheeled conveyances (except for wheelchairs and baby strollers /carriages), and Developer shall retain the right to cause persons engaging in such conduct to be removed from the Project. If any such persons refuse to leave the Project, they shall be deemed to be trespassing and be subject to arrest in accordance with applicable law. Developer shall be entitled to establish and post rules and regulations for use of the Public Use Area consistent with the foregoing. Nothing in this Agreement or in the Project Plans shall be deemed to mean that the Public Use Area is a public park or is subject to legal requirements applicable to a public park or other public space. The Public Use Area shall remain the private property of Developer with members of the public having only a license to occupy and use the Public Use Area in a manner consistent with this Article 2. 2.10 Parking. The number of parking spaces provided in the Project shall be between 285 -325, including up to forty percent (40 %) compact parking spaces. This Agreement and the Project Plans set forth the exclusive off -street parking requirements for the Project and supersede all other minimum space parking requirements under the Existing Regulations, including without limitation Part 9.04.10.08 of the Zoning Ordinance. Those portions of the subterranean garage marked on the Project Plans as "rental vehicle storage" shall not count as parking spaces for purposes of this Section 2.10, Section 2.2(d), and Sections 2.4.3(c) and (d). In the event it is not used for rental vehicle storage, use of the rental vehicle storage area for off -site parking may be authorized by the Planning Director as Minor Modification pursuant to Section 2.4.2 of this Agreement. Should additional floor area be added to the Project, such additional floor area shall be subject to Developer's obligation to demonstrate sufficient availability of parking. 26 2.11 Design. 2.11.1 Setbacks. Developer shall maintain the setbacks for the Project as set forth on the Project Plans. In the event that any inconsistencies exist between the Zoning Ordinance and the setbacks required by this Agreement, then the setbacks established by this Agreement shall prevail. 2.11.2 Buildine Height. The heights of the buildings shall be as shown on the Project Plans. In the event that any inconsistencies exist between the Zoning Ordinance and the Building Height established by this Agreement, then the Building Height allowed by this Agreement shall prevail. 2.11.3 Stepbacks. Developer shall maintain the stepbacks for the Project as set forth on the Project Plans. In the event that any inconsistencies exist between the Zoning Ordinance and the stepbacks established by this Agreement, then the stepbacks required by this Agreement shall prevail. 2.11.4 Permitted Projections. Projections shall be permitted as reflected on the Project Plans. In the event that any inconsistency exists between the projections permitted by the Zoning Ordinance and the projections permitted by this Agreement, then the projections permitted by this Agreement shall prevail. 2.11.5 Signage. The location, size, materials and color of any signage on the Property shall be reviewed and approved by the Joint Design Review Body or approved pursuant to a sign program approved by the Joint Design Review Body as part of the process for obtaining a Certificate of Appropriateness and Architectural Approval in accordance with the procedures set forth in Section 6.1 herein. Directional signs for vehicles shall be located at approaches to driveways as required by the City's Strategic Transportation Planning Division. ARTICLE 3 CONSTRUCTION 3.1 Construction Mitigation Plan. During the construction phase of the Project, Developer shall comply with the Construction Mitigation Plan attached as Exhibit "K" hereto. 3.2 Construction Hours. 3.2.1 Developer shall be permitted to perform construction between the hours of 8:00 a.m. to 6:00 p.m. Monday through Friday, and 9:00 a.m. to 5:00 p.m. Saturday; provided that interior construction work which does not generate noise of more than thirty (30) decibels beyond the Property line may also be performed between the hours of 7:00 a.m. to 8:00 a.m. and 6:00 p.m. to 7:00 p.m. Monday through Friday, and 8:00 a.m. to 9:00 a.m. and 5:00 p.m. to 6:00 p.m. Saturday. Notwithstanding the foregoing, pursuant to SMMC Section 4.12.110(e) Developer has the right to seek a permit from the City authorizing construction activity during the times otherwise prohibited by this Section. The Parties acknowledge and agree that, among other things, afterhours construction permits can be granted for concrete pours. 27 3.3. ' Outside Building Permit Issuance Date. If Developer has not been issued a building permit for the Project by the "Outside Building Permit Issuance Date" (defined below), then on the day after the Outside Building Permit Issuance Date, without any further action by either Party, this Agreement shall automatically terminate and be of no further force or effect. For put-poses of clarity, if Developer has not been issued a building permit for the Project by the Outside Building Permit Issuance Date, the City shall not be required to pursue its remedies under Section 11.4 of this Agreement, and this Agreement shall, instead, automatically terminate. "Outside Buildine Permit Issuance Date" means the date that is the last day of the seventy- second (72 ") full calendar month after the Effective Date; provided that the Outside Building Permit Issuance Date may be extended in accordance with the remainder of this paragraph. If the approval by the Joint Design Review Body of the Project design does not occur within six (6) months of the submittal by Developer to the Joint Design Review Body of the Project design, then the Outside Building Permit Issuance Date shall be extended one month for each additional month greater than six that the final Joint Design Review Body approval is delayed. At any time before the last day of the seventy- second (72 "a) full calendar month after the Effective Date, Developer may deliver written notice to the Planning Director, requesting an extension of the Outside Building Permit Issuance Date for an additional twelve (12) months. The Outside Building Permit Issuance Date may be administratively extended not more than one (1) time by the Planning Director for an additional twelve (12) months per extension. The Planning Director may grant such extension if Developer can demonstrate that substantial progress has been made towards obtaining a building permit and show reasonable cause why Developer will not be able to obtain the building permit for the Project by the initial Outside Building Permit Issuance Date (including because of Developer's inability to obtain project financing) and can demonstrate that: (a) the condition of the Property will not adversely affect public health or safety and (b) the continued delay will not create any unreasonable visual or physical detriment to the neighborhood. 3.4 Construction Period. Construction of the Project shall be subject to the provisions of SMMC Section 8.08.070. 3.5 Tiebacks. Excepting any utility conflicts, Developer shall be allowed to install tiebacks, subject to standard terms and conditions as determined by the City's Director of Public Works or designee, for Seventh Street, Wilshire Boulevard and Seventh Court. Developer shall compensate the City for such tiebacks in accordance with the City's tieback fees then in effect. All tiebacks on City property shall be de- tensioned and cut down five feet below grade prior to issuance of Certificate of Occupancy. 3.6 Construction Staging. Developer may use the Seventh Street frontage for construction staging at City's customary costs and procedures or permits then in effect. Developer may also use 1218 Lincoln Boulevard for construction staging. 3.7 Damage or Destruction. If the Project, or any part thereof, is damaged or destroyed during the term of this Agreement, Developer shall be entitled to reconstruct the Project in accordance with this Agreement if: (a) Developer obtains a building permit for this reconstruction prior to expiration of this Agreement, and (b) the Project is found to be consistent with the City's General Plan in effect at the time of obtaining the building permit for such work. we 3.8 Completed and Final Landmarks Commission Review of 718 Wilshire Building. Demolition of the existing building located at 718 Wilshire Boulevard shall be exempt from any further Landmarks Commission review up through the Outside Building Permit Issuance Date. ARTICLE 4 PROJECT FEES, EXACTIONS, MITIGATION MEASURES AND CONDITIONS 4.1 Fees, Exactions, Mitigation Measures and Conditions. Except as expressly set forth in Section 4.2 (relating to modifications), Section 2.7 (relating to Community Benefits), and Section 5.2 (relating to Subsequent Code Changes) below, the City shall charge and impose only those fees, exactions, mitigation measures, conditions, and standards of construction set forth in this Agreement, including Exhibits "C ", "D" and "K" attached hereto; and no others. If any of the mitigation measures or conditions set forth on Exhibit "D" is satisfied by others, Developer shall be deemed to have satisfied such measures or conditions. 4.2 Conditions on Modifications. The City may impose fees, exactions, mitigation measures and conditions in connection with its approval of Minor or Major Modifications, provided that all fees, exactions, mitigation measures and conditions shall be in accordance with any applicable law. 4.3 Implementation of Mitigation Measures. 4.3.1 Compliance with Mitigation Measures and Conditions. Developer shall be responsible for implementing the mitigation measures set forth in Section A of Exhibit "D" attached hereto, and Developer shall be responsible to adhere to the conditions of approval set forth in Section B of Exhibit "D" in accordance with the timelines established in Exhibit "D ". 4.3.2 Survival of Mitigation Measures and Conditions If Developer proceeds with the construction of the Project, except as otherwise expressly limited in this Agreement, the obligations and requirements imposed by the mitigation measures and conditions of approval set forth in the attached Exhibit "D" shall survive the expiration of the Term of this Agreement and shall remain binding on Developer, its successors and assigns, and shall continue in effect for the life of the project. 4.3.3 Fee Waivers and Reductions. Notwithstanding the foregoing, the Project shall be entitled to all fee waivers and fee reductions available for projects involving landmark buildings, under the SMMC. ARTICLE 5 EFFECT OF AGREEMENT ON CITY LAWS AND REGULATIONS 5.1 Development Standards for the Property: Existing Regulations. The following development standards and restrictions set forth in this Section 5.1 govern the use and development of the Project and shall constitute the Existing Regulations, except as otherwise expressly required by this Agreement. 29 5.1.1 Defined Terms. The following terms shall have the meanings set forth below: (a) "Existing Regulations" collectively means all of the following which are in force and effect as of the Effective Date: (i) the General Plan (including, without limitation, the LUCE); (ii) the Zoning Ordinance except as modified herein; (iii) the IZO; (iv) any and all ordinances, rules, regulations, standards, specifications and official policies of the City governing, regulating or affecting the demolition, grading, design, development, building, construction, occupancy or use of buildings and improvements or any exactions therefore, except as amended by this Agreement; and (v) the development standards and procedures in Section 2 of this Agreement. (b) "Subsequent Code Changes" collectively means all of the following which are adopted or approved subsequent to the Effective Date, whether such adoption or approval is by the City Council, any department, division, office, board, commission or other agency of the City, by the people of the City through charter amendment, referendum, initiative or other ballot measure, or by any other method or procedure: (i) any amendments, revisions, additions or deletions to the Existing Regulations, or (ii) new codes, ordinances, rules, regulations, standards, specifications and official policies of the City governing or affecting the grading, design, development, construction, occupancy or use of buildings or improvements or any exactions therefor or regulating wages or benefits. "Subsequent Code Changes" includes, without limitation, any amendments, revisions or additions to the Existing Regulations imposing or requiring the payment of any fee, special assessment or tax. 5.1.2 Existing Regulations Govern the Project. Except as provided in Section 5_21 development of the Buildings and improvements that will comprise the Project, including without limitation, the development standards for the demolition, grading, design, development, construction, occupancy or use of such Buildings and improvements, and any exactions therefor, shall be governed by the Existing Regulations. The City agrees that this Agreement is consistent with the General Plan, including the LUCE, as more fully described in the Recitals. Any provisions of the Existing Regulations inconsistent with the provisions of this Agreement, to the extent of such inconsistencies and not further, are hereby deemed modified to that extent necessary to effectuate the provisions of this Agreement. The Project shall be exempt from: (a) all Discretionary Approvals or review by the City or any agency or body thereof, other than the matters of design review by the Landmarks Commission as specified in Section 6.1 and review of modifications to the Project as expressly set forth in Sections 2.4.2 and 2.4.3; (b) the application of any subsequent local development or building moratoria, development or building rationing systems or other restrictions on development which would adversely affect the rate, timing, or phasing of construction of the Project, and (c) Subsequent Code Changes which are inconsistent with this Agreement. 5.2 Permitted Subsequent Code Changes. 5.2.1 Applicable Subsequent Code Changes. Notwithstanding the terms of Section 5.1, this Agreement shall not prevent the City from applying to the Project the following Subsequent Code Changes set forth below in this Section 5.2.1. 30 (a) Processing fees and charges imposed by the City to cover the estimated actual costs to City of processing applications for development approvals including: (i) all application, permit, and processing fees incurred for the processing of this Agreement, any administrative approval of a Minor Modification, or any amendment of this Agreement in connection with a Major Modification; (ii) all building plan check and building inspection fees for work on the Property in effect at the time an application for a grading permit or building permit is applied for; and (iii) the public works plan check fee and public works inspection fee for public improvements constructed and installed by Developer and (iv) fees for monitoring compliance with any development approvals, or any environmental impact mitigation measures; provided that such fees and charges are uniformly imposed by the City at similar stages of project development on all similar applications and for all similar monitoring. Notwithstanding the foregoing, the Project shall be entitled to all fee waivers and fee reductions available for projects involving landmark buildings under the SMMC then in effect. (b) General or special taxes, including, but not limited to, property taxes, sales taxes, parcel taxes, transient occupancy taxes, business taxes, which may be applied to the Property or to businesses occupying the Property; provided that (i) the tax is of general applicability City -wide and does not burden the Property disproportionately to other similar developments within the City; and (ii) the tax is not a levy, assessment, fee or tax imposed for the purpose of funding public or private improvements on other property located within the Downtown Core (as defined in the City's General Plan as of the Effective Date). (c) Procedural regulations relating to hearing bodies, petitions, applications, notices, documentation of findings, records, manner in which hearings are conducted, reports, recommendations, initiation of appeals, and any other matters of procedure; provided such regulations are uniformly imposed by the City on all matters, do not result in any unreasonable decision - making delays and do not affect the substantive findings by the City in approving this Agreement or as otherwise established in this Agreement. (d) Regulations governing construction standards and specifications which are of general application that establish standards for the construction and installation of structures and associated improvements, including, without limitation, the City's Building Code, Plumbing Code, Mechanical Code, Electrical Code and Fire Code; provided that such construction standards and specifications are applied on a City -wide basis and do not otherwise limit or impair the Project approvals granted in this Agreement unless adopted to meet health and safety concerns. (e) Any City regulations to which Developer has consented in writing. (f) Collection of such fees or exactions as are imposed and set by governmental entities not controlled by City but which are required to be collected by City. (g) Regulations which do not impair the rights and approvals granted to Developer under this Agreement. For the purposes of this Section 5.2.1(g), regulations which impair Developer's rights or approvals include, but are not limited to, regulations which (i) materially increase the cost of the Project (except as provided in Section 5.2.1(a), (1), and 31 above), or (ii) which would materially delay development of the Project, or that would cause a material change in the uses of the Project as provided in this Agreement. 5.2.2 New Rules and Regulations. This Agreement shall not be construed to prevent the City from applying new rules, regulations and policies in those circumstances specified in Government Code Section 65866. 5.2.3 State or Federal Laws. In the event that state or federal laws or regulations, enacted after the Effective Date, prevent or preclude compliance with one or more of the provisions of this Agreement, such provisions of this Agreement shall be modified or suspended as may be necessary to comply with such state or federal laws or regulations; provided that this Agreement shall remain in full force and effect to the extent it is not inconsistent with such laws or regulations and to the extent such laws or regulations do not render such remaining provisions impractical to enforce. 5.3 Common Set of Existing Regulations. Prior to the Effective Date, the City and Developer shall use reasonable efforts to identify, assemble and copy three identical sets of the Existing Regulations, to be retained by the City and Developer, so that if it becomes necessary in the future to refer to any of the Existing Regulations, there will be a common set of the Existing Regulations available to all Parties. 5.4 Conflicting Enactments. Except as provided in Section 5.2 above, any Subsequent Code Change which would conflict in any way with or be more restrictive than the Existing Regulations shall not be applied by the City to any part of the Property. Developer may, in its sole discretion, give the City written notice of its election to have any Subsequent Code Change applied to such portion of the Property as it may have an interest in, in which case such Subsequent Code Change shall be deemed to be an Existing Regulation insofar as that portion of the Property is concerned. If there is any conflict or inconsistency between the terms and conditions of this Agreement and the Existing Regulations, the terms and conditions of this Agreement shall control. 5.5 Timing of Development. The California Supreme Court held in Pardee Construction Co. v. City of Camarillo, 37 Cal. 3d 465 (1984), that failure of the parties in that case to provide for the timing of development resulted in a later - adopted initiative restricting the timing of development to prevail over the parties' agreement. It is the intent of Developer and the City to cure that deficiency by expressly acknowledging and providing that any Subsequent Code Change that purports to limit over time the rate or timing of development or to alter the sequencing of development phases (whether adopted or imposed by the City Council or through the initiative or referendum process) shall not apply to the Property or the Project and shall not prevail over this Agreement. In particular, but without limiting any of the foregoing, no numerical restriction shall be placed by the City on the amount of total square feet or the number of buildings, structures, residential units that can be built each year on the Property except as expressly provided in this Agreement. 32 ARTICLE 6 DESIGN REVIEW 6.1 Joint Landmarks Commission /Architectural Review Board Body. 6.1.1 This Agreement establishes a joint Landmarks Commission and Architectural Review Board body ( "Joint Design Review Body ") that shall have exclusive design review jurisdiction over the Project with respect to the Landmark Building, the New Construction, and all other improvements on the Property including landscaping, subject to the City Council's appellate jurisdiction in accordance with Chapter 9.36 of the Existing Regulations. In addition, the Joint Design Review Body's jurisdiction shall continue for the term of this Agreement and shall encompass any future activity on the Property, including the Landmark Building and the New Construction. 6.1.2 The Joint Design Review Body shall consist of seven members. Of the seven members, four shall be from the Landmarks Commission and three shall be from the Architectural Review Board. The Landmarks Commission and Architectural Review Board shall have the discretion to determine which of their Commissioners will serve on the Joint Design Review Body, however, each body must select at least one registered architect. The Director of Planning, or his or her designated representative, shall act as the Secretary of the Joint Design Review Body and shall maintain a record of all resolutions, proceedings, and actions of the Joint Design Review Body. 6.1.3 In accordance with Section 9.36.140, Developer shall obtain a certificate of appropriateness and architectural approval from the Joint Design Review Body or the City Council on appeal prior to any proposed alteration, restoration, construction, removal, relocation, or demolition, in whole or in part, to the Landmark Building and issuance of building permits for the New Construction and all other improvements on the Property including signage and landscaping. Except for the establishment of this Joint Design Review Body and an appeal process pursuant to this Agreement, Developer's application(s) for a certificate of appropriateness and architectural approval will be subject to the procedures and criteria in Chapter 9.36 and Section 9.32.140 of the Existing Regulations, except for the modifications set forth in Sections 6.1.4 through 6.1.8 below. 6.1.4 An appeal to the City Council of an action of the Joint Design Review Body shall be processed in accordance with SMMC 9.36.180 of Existing Regulations. 6.1.5 Consistent with Existing Regulations, in acting on the Architectural Approval application, the Joint Design Review Body cannot require modifications to the building design which negates the fundamental development standards established by this Agreement. For example, the Joint Design Review Body cannot require reduction in the overall height of the building, reduction in the number of stories in the building, or reduction in floor area greater than two percent (2 %). 6.1.6 Notwithstanding Section 6.1.3, neither the Joint Design Review Body nor the City Council on appeal shall have the authority in acting on a Certificate of Appropriateness 33 application to directly or indirectly require or take action that has the effect of requiring elimination of a physical connection between the Landmark Building and the New Construction. 6.1.7 Notwithstanding any provision of the Existing Regulations including 9.36.170(h), no Certificate of Appropriateness issued with respect to the Project shall expire through the Outside Building Permit Issuance Date. 6.1.8 Developer may elect from time to time, prior to filing an application for a Certificate of Appropriateness or Architectural Approval, to seek conceptual review from the Landmarks Commission, the Architectural Review Board, or the Joint Design Review Body in a duly noticed public hearing. Upon receiving such request from Developer, City shall promptly schedule such conceptual review. 6.1.9 A failure by Developer to comply with any requirement in a certificate of appropriateness or architectural approval shall constitute a Default of this Agreement. ARTICLE 7 CITY TECHNICAL PERMITS 7.1 Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: 7.1.1 "Technical City Permits" means any Ministerial Approvals, consents or permits from the City or any office, board, commission, department, division or agency of the City, which are necessary for the actual construction of the Project or any portion thereof in accordance with the Project Site Plan and this Agreement. Technical City Permits include, without limitation (a) building permits, (b) related mechanical, electrical, plumbing and other technical permits, (c) demolition, excavation and grading permits, (d) encroachment permits, and (e) temporary and final certificates of occupancy. 7.1.2 "Technical Permit Applications" means any applications required to be filed by Developer for any Technical City Permits. 7.2 Diligent Action by City. 7.2.1 Upon satisfaction of the conditions set forth in Section 7.3, the City shall accept the Technical Permit Applications filed by Developer with the City and shall diligently proceed to process such Technical Permit Applications to completion. 7.2.2 Upon satisfaction of the conditions set forth in Section 7.3, the City shall diligently issue the Technical City Permits which are the subject of the Technical Permit Applications. 7.3 Conditions for Diligent Action by the City. 7.3.1 Acceptance and Processing of Technical Permit Applications. The obligation of the City to accept and diligently process the Technical Permit Applications which 34 are filed by Developer, and then issue the Technical City Permits, is subject to the satisfaction of the following conditions: (a) . Developer shall have completed and filed all Technical Permit Applications which are required under the administrative procedures and policies of the City which are in effect on the date when the Technical Permit Application is filed; provided that such procedures and policies are uniformly in force and effect throughout the City; (b) Developer shall have paid all processing and permit fees established by the City in connection with the filing and processing of any Technical Permit Application which are in effect on the date when the Technical Permit Application is filed; provided that such fees are uniformly in force and effect throughout the City; and (c) If required for the particular Technical Permit Application, Developer shall have obtained the approval of the Landmarks Commission referred to in Section 6.1 above. 7.3.2 Issuance of a Technical City Permit. The obligation of the City to issue a Technical City Permit which is the subject of a Technical Permit Application filed by Developer is subject to the satisfaction of the following conditions (and only such conditions and no others): (a) Developer shall have complied with all of its obligations under this Agreement which are required to be performed prior to or concurrent with the issuance of the Technical City Permits for the proposed Buildings; (b) Developer shall have received any permits or approvals from other governmental agencies which are required by law to be issued prior to or concurrent with the issuance of the Technical City Permits for the proposed Buildings; (c) The proposed Buildings conform to the development standards for such Buildings established in this Agreement. In the event that a proposed Building is not in conformance with the development standards, Developer shall have the right to seek any relief from such standards under the procedures then available in the City; and (d) The proposed Buildings conform to the Administrative and Technical Construction Codes of the City (Article VIII, Chapter 1 of the Santa Monica Municipal Code) (the "Technical Codes ") in effect on the date that the Technical Permit Application is filed. 7.4 New Technical Requirements. From time to time, the City's Technical Codes are amended to meet new technical requirements related to techniques of building and construction. If the sole means of achieving compliance for the Project with such revisions to the Technical Codes made after the Effective Date ( "New Technical Requirements ") would require an increase from the allowable Building Height established in this Agreement for the Project, then the Planning Director is hereby authorized to grant Developer limited relief from the allowable Building Height without amending this Agreement if the requested relief is in compliance with the City's General Plan. Any such approval shall be granted only after the Planning Director's receipt of a written request for such relief from Developer. Developer is required to supply the 35 Planning Director with written documentation of the fact that compliance with the New Technical Requirements cannot be achieved by some other method. Any such relief shall only be granted to the extent necessary in the Planning Director's determination for Developer to comply with the New Technical Requirements. 7.5 Duration of Technical City Permits. The duration of Technical City Permits issued by the City, and any extensions of the time period during which such Technical City Permits remain valid, shall be established in accordance with the Technical Codes in effect at the time that the Technical City Permits are issued. Subject to the terms of the next sentence, the lapse or expiration of a Technical City Permit shall not preclude or impair Developer from subsequently filing another Technical Permit Application for the same matter during the Term of this Agreement, which shall be processed by the City in accordance with the provisions of this Article 7. Notwithstanding anything to the contrary in this Agreement, if Developer obtains building permits for the Project and, at any time after the Outside Construction Start Date, such building permits expire or are revoked pursuant to the applicable terms of the SMMC (as the same may be amended from time to time), then Developer may not subsequently apply for new building permits for the Project without first obtaining the prior written consent of the Planning Director, which may be granted or withheld in the Planning Director's sole discretion. ARTICLE 8 AMENDMENT AND MODIFICATION 8.1 Amendment and Modification of Development Agreement. Subject to the notice and hearing requirements of the applicable Development Agreement Statutes, this Agreement may be modified or amended from time to time only with the written consent of Developer and the City or their successors and assigns in accordance with the provisions of the SMMC and Section 65868 of the California Government Code. ARTICLE 9 TERM 9.1 Effective Date. This Agreement shall be dated, and the obligations of the Parties hereunder shall be effective as of the date upon which the ordinance approving this Agreement becomes effective (the "Effective Date "). The Parties shall execute this Agreement within ten (10) working days of the Effective Date. 9.2 Term. 9.2.1 Term of Agreement. The term of this Agreement shall commence on the Effective Date and shall continue for twenty (20) years thereafter (the "Term "), unless the Term is otherwise terminated pursuant to Section 11.41 after the satisfaction of all applicable public hearing and related procedural requirements or pursuant to Section 3.3. 9.2.2 Termination Certificate. Upon termination of this Agreement, the Parties hereto shall execute an appropriate certificate of termination in recordable form (a "Termination Certificate "), which shall be recorded in the official records of Los Angeles County. [<L 9.2.3 Effect of Termination. Except as expressly provided herein (e.g., Sections 3.8 and 4.3.2), none of the parties' respective rights and obligations under this Agreement shall survive the Term. ARTICLE 10 PERIODIC REVIEW OF COMPLIANCE 10.1 City Review. The City shall review compliance with this Development Agreement once each year, on or before each anniversary of the Effective Date (each, a "Periodic Review "), in accordance with this Section 10 in order to determine whether or not Developer is out -of- compliance with any specific term or provision of this Agreement. 10.2 Evidence of Good Faith Compliance. At least sixty (60) days prior to the applicable anniversary date, Developer shall deliver to the City a written report demonstrating that Developer has been in good faith compliance with this Agreement during the twelve (12) month period prior to the anniversary of the Effective Date. The written report shall be provided in the form established by the City. For purposes of this Agreement, the phrase "good faith compliance" shall mean the following: (a) compliance by Developer with the requirements of the Existing Regulations, except as otherwise modified by this Agreement; and (b) compliance by Developer with the terms and conditions of this Agreement, subject to the existence of any specified Excusable Delays (as defined in Section 15.8 below) which prevented or delayed the timely performance by Developer of any of its obligations under this Agreement. 10.3 Information to be Provided to Developer. Prior to any public hearing concerning the Periodic Review of this Agreement, the City shall deliver to Developer a copy of all staff reports prepared in connection with a Periodic Review, written comments from the public and, to the extent practical, all related exhibits concerning such Periodic Review. If the City delivers to Developer a Notice of Breach pursuant to Section 11.1 below, the City shall concurrently deliver to Developer a copy of all staff reports. prepared in connection with such Notice of Breach, all written comments from the public and all related exhibits concerning such Notice of Breach. 10.4 Notice of Breach; Cure Rights. If during any Periodic Review, the City reasonably concludes on the basis of substantial evidence that Developer has not demonstrated that it is in good faith compliance with this Agreement, then the City may issue and deliver to Developer a written Notice of Breach pursuant to Section 11.1 below, and Developer shall have the opportunity to cure the default identified in the Notice of Breach during the cure periods and in the manner provided by Section 11. 1.2 and Section 11.1.3, as applicable. 10.5 Failure of Periodic Review. The City's failure to review at least annually compliance by Developer with the terms and conditions of this Agreement shall not constitute or be asserted by any Parry as a breach by any other Party of this Agreement. 10.6 Termination of Development Aureement. If Developer fails to timely cure any material item(s) of non - compliance set forth in a Notice of Default, then the City shall have the right but not the obligation to initiate proceedings for the purpose of terminating this Agreement pursuant to Section 11.4 below. 37 10.7 City Cost Recovery. Following completion of each Periodic Review, Developer shall reimburse the City for its actual and reasonable costs incurred in connection with such review. ARTICLE 11 DEFAULT 11.1. Notice and Cure. 11.1.1 Breach. If either Party fails to substantially to perform any term, covenant or condition of this Agreement which is required on its part to be performed (a "Breach "), the non - defaulting Party shall have those rights and remedies provided in this Agreement; provided that such non - defaulting Party has first sent a written notice of Breach (a "Notice of Breach "), in the manner required by Section 15. 1, specifying the precise nature of the alleged Breach (including references to pertinent Sections of this Agreement and the Existing Regulations or Subsequent Code Changes alleged to have been breached), and the manner in which the alleged Breach may satisfactorily be cured. If the City alleges a Breach by Developer, the City shall also deliver a copy of the Notice of Breach to any Secured Lender of Developer which has delivered a Request for Notice to the City in accordance with Section 12. 11.1.2 Monetary Breach. In the case of a monetary Breach by Developer, Developer shall promptly commence to cure the identified Breach and shall complete the cure of such Breach within thirty (30) business days after receipt by Developer of the Notice of Breach; provided that if such monetary Breach is the result of an Excusable Delay or the cure of the same is delayed as a result of an Excusable Delay, Developer shall deliver to the City reasonable evidence of the Excusable Delay. 11. 1.3 Non - Monetary Breach. In the case of a non - monetary Breach by either Party, the alleged defaulting Party shall promptly commence to cure the identified Breach and shall diligently prosecute such cure to completion; provided that the defaulting Party shall complete such cure within thirty (30) days after receipt of the Notice of Breach or provide evidence of Excusable Delay that prevents or delays the completion of such cure. The thirty (30) day cure period for a non - monetary Breach shall be extended as is reasonably necessary to remedy such Breach; provided that the alleged defaulting Party commences such cure promptly after receiving the Notice of Breach and continuously and diligently pursues such remedy at all times until such Breach is cured. IL 1.4 Excusable Delay. Notwithstanding anything to the contrary contained in this Agreement, the City's exercise of any of its rights or remedies under this Article 11 shall be subject to the provisions regarding Excusable Delay in Section 15.8 below. 11.2 Remedies for Monetary Default. If there is a Breach by Developer in the performance of any of its monetary obligations under this Agreement which remains uncured (a) thirty (30) business days after receipt by Developer of a Notice of Breach from the City and (b) after expiration of Secured Lender's Cure Period under Section 12.1 (if a Secured Lender of Developer has delivered a Request for Notice to the City in accordance with Section 12. 1), then an "Event of Monetary Default" shall have occurred by Developer and the City shall have M. available any right or remedy provided in this Agreement, at law or in equity. All of said remedies shall be cumulative and not exclusive of one another, and the exercise of any one or more of said remedies shall not constitute a waiver or election in respect to any other available remedy. 11.3. Remedies for Non - Monetary Default. 11.3.1 Remedies of Parties. If any Party receives a Notice of Breach from the other Party regarding a non - monetary Breach, and the non - monetary Breach remains uncured: (a) after expiration of all applicable notice and cure periods, and (b) in the case of a Breach by Developer, after the expiration of Secured Lender's Cure Period under Section 12.1 (if a Secured Lender of Developer has delivered a Request for Notice to the City in accordance with Section 12.1), then an "Event of Non - Monetary Default" shall have occurred and the non - defaulting Party shall have available any right or remedy provided in this Agreement, or provided at law or in equity except as prohibited by this Agreement. All of said remedies shall be cumulative and not exclusive of one another, and the exercise of any one or more of said remedies shall not constitute a waiver or election in respect to any other available remedy. 11.3.2 Specific Performance. The City and Developer acknowledge that monetary damages and remedies at law generally are inadequate and that specific performance is an appropriate remedy for the enforcement of this Agreement. Therefore, unless otherwise expressly provided herein, the remedy of specific performance shall be available to the non - defaulting party if the other Party causes an Event of Non - Monetary Default to occur. 11.3.3 Writ of Mandate. The City and Developer hereby stipulate that Developer shall be entitled to obtain relief in the form of a writ of mandate in accordance with Code of Civil Procedure Section 1085 or Section 1094.5, as appropriate, to remedy any Event of Non - Monetary Default by the City of its obligations and duties under this Agreement. Nothing in this Section 11.3.3, however, is intended to alter the evidentiary standard or the standard of review applicable to any action of, or approval by, the City pursuant to this Agreement or with respect to the Project. 11.3.4 No Damages Relief Against City. It is acknowledged by Developer that the City would not have entered into this Agreement if the City were to be liable in damages under or with respect to this Agreement or the application thereof. Consequently, and except for the payment of attorneys' fees and court costs, the City shall not be liable in damages to Developer and Developer covenants on behalf of itself and its successors in interest not to sue for or claim any damages: (a) for any default under this Agreement; (b) for the regulatory taking, impairment or restriction of any right or interest conveyed or provided hereunder or pursuant hereto; or (c) arising out of or connected with any dispute, controversy or issue regarding the application or interpretation or effect of the provisions of this Agreement. 39 The City and Developer agree that the provisions of this Section 11.3.4 do not apply for damages which: (a) do not arise under this Agreement; (b) are not with respect to any right or interest conveyed or provided under this Agreement or pursuant to this Agreement; or (c) do not arise out of or which are not connected to any dispute, controversy, or issue regarding the application, interpretation, or effect of the provisions of this Agreement or the application of any City rules, regulations, or official policies. 11.3.5 Enforcement by the City. The City, at its discretion, shall be entitled to apply the remedies set forth in Chapters 1.09 and 1.10 of the SMMC as the same maybe amended from time to time and shall follow the notice procedures of Chapter 1.09 and 1.10 respectively in lieu of Section 11.1 of this Agreement if these remedies are applied. 11.3.6 No Damages Against Developer. It is acknowledged by the City that Developer would not have entered into this Agreement if Developer were to be liable in damages in connection with any non - monetary default hereunder. Consequently, and except for the payment of attorneys' fees and court costs, Developer shall not be liable in damages to the City for any nonmonetary default and the City covenants on behalf of itself not to sue for or claim any damages: (a) for any non - monetary default hereunder; (b) arising out of or connected with any dispute, controversy or issue regarding; or (c) the application or interpretation or effect of the provisions of this Agreement. The City and Developer agree that the provisions of this Section 11.3.6 do not apply for damages which: (a) are for a monetary default; or (b) do not arise out of or which are not connected with any dispute, controversy or issue regarding the application, interpretation, or effect of the provisions of this Agreement to or the application of, any City rules, regulations, or official policies. 11.3.7 No Other Limitations. Except as expressly set forth in this Section 11.3, the provisions of this Section 11.3 shall not otherwise limit any other rights, remedies, or causes of action that either the City or Developer may have at law or equity after the occurrence of any Event of Non - Monetary Default. 11.4 Modification or Termination of Agreement by City. all 11.4.1 Default by Developer. If Developer causes either an Event of Monetary Default or an Event of Non - Monetary Default, then the City may commence proceedings to modify or terminate this Agreement pursuant to this Section 11.4. 11.4.2 Procedure for Modification or Termination. The procedures for modification or termination of this Agreement by the City for the grounds set forth in Section 11.4.1 areas follows: (a) The City shall provide a written notice to Developer (and to any Secured Lender of Developer which has delivered a Request for Notice to the City in accordance of Section 12.1) of its intention to modify or terminate this Agreement unless Developer (or the Secured Lender) cures or corrects the acts or omissions that constitute the basis of such determinations by the City (a "Hearing Notice "). The Hearing Notice shall be delivered by the City to Developer in accordance with Section 15.1 and shall contain the time and place of a public hearing to be held by the City Council on the determination of the City to proceed with modification or termination of this Agreement. The public hearing shall not be held earlier than: (i) thirty-one (3 1) days after delivery of the Hearing Notice to Developer or (ii) if a Secured Lender has delivered a Request for Notice in accordance with Section 12. 1, the day following the expiration of the "Secured Lender Cure Period" (as defined in Section 12.1). (b) If, following the conclusion of the public hearing, the City Council: (i) determines that an Event of Non - Monetary Default has occurred or the Developer has not been in good faith compliance with this Agreement pursuant to Section 10. 1, as applicable and (ii) further determines that Developer (or the Secured Lender, if applicable) has not cured (within the applicable cure periods) the acts or omissions that constitute the basis of the determination under clause (i) above or if those acts or omissions could not be reasonably remedied prior to the public hearing that Developer (or the Secured Lender) has not in good faith commenced to cure or correct such acts or omissions prior to the public hearing or is not diligently and continuously proceeding therewith to completion, then upon making such conclusions, the City Council may modify or terminate this Agreement. The City cannot unilaterally modify the provisions of this Agreement pursuant to this Section 11.4. Any such modification requires the written consent of Developer. If the City Council does not terminate this Agreement, but proposes a modification to this Agreement as a result of the public hearing and Developer does not (within five (5) days of receipt) execute and deliver to the City the form of modification of this Agreement submitted to Developer by the City, then the City Council may elect to terminate this Agreement at any time after the sixth day after Developer's receipt of such proposed modification. 11.5 Cessation of Rights and Obligations. If this Agreement is terminated by the City pursuant to and in accordance with Section 11.4, the rights, duties and obligations of the Parties under this Agreement shall cease as of the date of such termination, except only for those rights and obligations that expressly survive the termination of this Agreement. In such event, any and all benefits, including money received by the City prior to the date of termination, shall be retained by the City. 41 11.6 Completion of Improvements. Notwithstanding the provisions of Sections 11.2, 11.31 11.41 and 11.5, if prior to termination of this Agreement, Developer has performed substantial work and incurred substantial liabilities in good faith reliance upon a building permit issued by the City, then Developer shall have acquired a vested right to complete construction of the Buildings in accordance with the terms of the building permit and occupy or use each such Building upon completion for the uses permitted for that Building as provided in this Agreement. Any Building completed or occupied pursuant to this Section 11.6 shall be considered legal non- conforming subject to all City ordinances standards and policies as they then exist governing legal non - conforming buildings and uses unless the Building otherwise complies with the property development standards for the district in which it is located and the use is otherwise permitted or conditionally permitted in the district. ARTICLE 12 MORTGAGEES 12.1 Encumbrances on the Property. This Agreement shall not prevent or limit Developer (in its sole discretion), from encumbering the Property (in any manner) or any portion thereof or any improvement thereon by any mortgage, deed of trust, assignment of rents or other security device securing financing with respect to the Property (a "Mortgage "). Each mortgagee of a mortgage or a beneficiary of a deed of trust (each, a "Secured Lender ") on the Property shall be entitled to the rights and privileges set forth in this Article 12. Any Secured Lender may require from the City certain interpretations of this Agreement. The City shall from time to time, upon request made by Developer, meet with Developer and representatives of each of its Secured Lenders to negotiate in good faith any Secured Lender's request for interpretation of any part of this Agreement. The City will not unreasonably withhold, condition or delay the delivery to a Secured Lender of the City's written response to any such requested interpretation. 12.1.1 Mortgage Not Rendered Invalid. Except as provided in Section 12.1.2, neither entering into this Agreement nor a Breach of this Agreement, nor any Event of Monetary Default nor any Event of Non - Monetary Default shall defeat, render invalid, diminish, or impair the lien of any Mortgage made in good faith and for value. 12.1.2 Priority of Agreement. This Agreement shall be superior and senior to the lien of any Mortgage. Any acquisition or acceptance of title or any right or interest in or with respect to the Property or any portion thereof by a Secured Lender or its successor in interest (whether pursuant to foreclosure, trustee's sale, deed in lieu of foreclosure, lease termination or otherwise) shall be subject to all of the terms and conditions of this Agreement. 12.1.3 Right of Secured Lender to Cure Default. (a) A Secured Lender may give notice to the City, specifying the name and address of such Secured Lender and attaching thereto a true and complete copy of the Mortgage held by such Secured Lender, specifying the portion of the Property that is encumbered by the Secured Lender's lien (a "Request for Notice "). If the Request for Notice has been given, at the same time the City sends to Developer any Notice of Breach or Hearing Notice under this Agreement, then if such Notice of Breach or Hearing Notice affects the portion 42 of the Property encumbered by the Secured Lender's lien, the City shall send to such Secured Lender a copy of each such Notice of Breach and each such Hearing Notice from the City to Developer. The copy of the Notice of Breach or the Hearing Notice sent to the Secured Lender pursuant to this Section 12.1.3(a) shall be addressed to such Secured Lender at its address last furnished to the City. The period within which a Secured Lender may cure a particular Event of Monetary Default or Event of Non - Monetary Default shall not commence until the City has sent to the Secured Lender such copy of the applicable Notice of Breach or Hearing Notice. (b) After a Secured Lender has received a copy of such Notice of Default or Hearing Notice, such Secured Lender shall thereafter have a period of time (in addition to any notice and /or cure period afforded to Developer under this Agreement) equal to: (a) ten (10) business days in the case of any Event of Monetary Default and (b) thirty (30) days in the case of any Event of Non - Monetary Default, during which period the Secured Lender may provide a remedy or cure of the applicable Event of Monetary Default or may provide a remedy or cure of the applicable Event of Non-Monetary Default; provided that if the cure of the Event of Non - Monetary Default cannot reasonably be completed within thirty days, Secured Lender may, within such 30 -day period, commence to cure the same and thereafter diligently prosecute such cure to completion (a "Secured Lender's Cure Period "). If Developer has caused an Event of Monetary Default or an Event of Non - Monetary Default, then each Secured Lender shall have the right to remedy such Event of Monetary Default or an Event of Non - Monetary Default, as applicable, or to cause the same to be remedied prior to the conclusion of the Secured Lender's Cure Period and otherwise as herein provided. The City shall accept performance by any Secured Lender of any covenant, condition, or agreement on Developer's part to be performed hereunder with the same force and effect as though performed by Developer. (c) The period of time given to the Secured Lender to cure any Event of Monetary Default or an Event of Non - Monetary Default by Developer which reasonably requires that said Secured Lender be in possession of the Property to do so, shall be deemed extended to include the period of time reasonably required by said Secured Lender to obtain such possession (by foreclosure, the appointment of a receiver or otherwise) promptly and with due diligence; provided that during such period all other obligations of Developer under this Agreement, including, without limitation, payment of all amounts due, are being duly and promptly performed. 12.1.4 Secured Lender Not Obligated Under this Agreement. (a) No Secured Lender shall have any obligation or duty under this Agreement to perform the obligations of Developer's or the affirmative covenants of Developer's hereunder or to guarantee such performance unless and until such time as a Secured Lender takes possession or becomes the owner of the estate covered by its Mortgage. If the Secured Lender takes possession or becomes the owner of any portion of the Property, then from and after that date, the Secured Lender shall be obligated to comply with all provisions of this Agreement; provided that the Secured Lender shall not be responsible to the City for any unpaid monetary obligations of Developer that accrued prior to the date the Secured Lender became the fee owner of the Property. 43 (b) Nothing in Section 12.1.4(a) is intended, nor should be construed or applied, to limit or restrict in any way the City's authority to terminate this Agreement, as against any Secured Lender as well as against Developer if any curable Event of Monetary Default or an Event of Non - Monetary Default is not completely cured within the Secured Lender's Cure Period. ARTICLE 13 TRANSFERS AND ASSIGNMENTS 13.1. Transfers and Assi ng ments. 13.1.1 Not Severable from Ownership Interest in Property. This Agreement shall not be severable from Developer's interest in the Property and any transfer of the Property or any portion thereof shall automatically operate to transfer the benefits and burdens of this Agreement with respect to the transferred Property or transferred portions, as applicable. 13.1.2 Transfer Rights. Developer may freely sell, transfer, exchange, hypothecate, encumber or otherwise dispose of its interest in the Property, without the consent of the City. Developer shall, however, give written notice to the City, in accordance with Section 15.11 of any transfer of the Property, disclosing in such notice (a) the identity of the transferee of the Property (the "Property Transferee ") and (b) the address of the Property Transferee as applicable. 13.2 Release Upon Transfer. Upon the sale, transfer, exchange or hypothecation of the rights and interests of Developer to the Property, Developer shall be released from its obligations under this Agreement to the extent of such sale, transfer or exchange with respect to the Property if : (a) Developer has provided written notice of such transfer to City; and (b) the Property Transferee executes and delivers to City a written agreement in which the Property Transferee expressly and unconditionally assumes all of the obligations of Developer under this Agreement with respect to the Property in the form of Exhibit "L" attached hereto (the "Assumption Agreement "). Upon such transfer of the Property and the express assumption of Developer's obligations under this Agreement by the transferee, the City agrees to look solely to the transferee for compliance with the provisions of this Agreement. Any such transferee shall be entitled to the benefits of this Agreement as "Developer" hereunder and shall be subject to the obligations of this Agreement. Failure to deliver a written Assumption Agreement hereunder shall not affect the transfer of the benefits and burdens as provided in Section 13.1, provided that the transferor shall not be released from its obligations hereunder unless and until the executed Assumption Agreement is delivered to the City. ARTICLE 14 INDEMNITY TO CITY 14.1 Indemnity. Developer agrees to and shall defend, indemnify and hold harmless the City, its City Council, boards and commissions, officers, agents, employees, volunteers and other representatives (collectively referred to as "City Indemnified Parties ") from and against any and all loss, liability, damages, cost, expense, claims, demands, suits, attorney's fees and UJA judgments (collectively referred to as "Damages "), including but not limited to claims for damage for personal injury (including death) and claims for property damage arising directly or indirectly from the following: (1) for any act or omission of Developer or those of its officers, board members, agents, employees, volunteers, contractors, subcontractors or other persons acting on its behalf (collectively referred to as the "Developer Parties ") which occurs during the Term and relates to this Agreement; (2) for any act or omission related to the operations of Developer Parties, including but not limited to the maintenance and operation of areas on the Property accessible to the public. Developer's obligation to defend, indemnify and hold harmless applies to all actions and omissions of Developer Parties as described above caused or alleged to have been caused in connection with the Project or Agreement, except to the extent any Damages are caused by the active negligence or willful misconduct of any City Indemnified Parties. This Section 14.1 applies to all Damages suffered or alleged to have been suffered by the City Indemnified Parties regardless of whether or not the City prepared, supplied or approved plans or specifications or both for the Project. 14.2 City's Right to Defense. The City shall have the right to approve legal counsel retained by Developer to defend any claim, action or proceeding which Developer is obligated to defend pursuant to Section 14.1, which approval shall not be unreasonably withheld, conditioned or delayed. If any conflict of interest results during the mutual representation of the City and Developer in defense of any such action, or if the City is reasonably dissatisfied with legal counsel retained by Developer, the City shall have the right (a) at Developer's costs and expense, to have the City Attorney undertake and continue the City's defense, or (b) with Developer's approval, which shall not be reasonably withheld or delayed, to select separate outside legal counsel to undertake and continue the City's defense. ARTICLE 15 GENERAL PROVISIONS 15.1 Notices. Formal notices, demands and communications between the Parties shall be deemed sufficiently given if delivered to the principal offices of the City or Developer, as applicable, by (i) personal service, or (ii) express mail, Federal Express, or other similar overnight mail or courier service, regularly providing proof of delivery, or (iii) registered or certified mail, postage prepaid, return receipt requested, or (iv) facsimile (provided that any notice delivered by facsimile is followed by a separate notice sent within twenty -four (24) hours after the transmission by facsimile delivered in one of the other manners specified above). Such notice shall be addressed as follows: To City: City of Santa Monica 1685 Main Street, Room 204 Santa Monica, CA 90401 Attention: City Manager Fax: (310) 917 -6640 45 With a Copy to: City of Santa Monica 1685 Main Street, Room 212 Santa Monica, CA 90401 Attn: Planning and Community Development Director Fax: (310) 458 -3380 To Developer: Maxser & Company, LLC 710 Wilshire Blvd., #409 Santa Monica, California 90401 Attn: Alex Gorby With a Copy to: Harding Larmore Kutcher & Kozal, LLP 1250 Sixth Street, Suite 200 Santa Monica, California 90401 Attn: Kenneth L. Kutcher Fax: (310) 392 -3537 Notice given in any other manner shall be effective when received by the addressee. Any Party may change the addresses for delivery of notices to such Party by delivering notice to the other Party in accordance with this provision. 15.2 Entire Agreement; Conflicts. This Agreement represents the entire agreement of the Parties. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the Parties or their predecessors in interest with respect to all or any part of the subject matter hereof. Should any or all of the provisions of this Agreement be found to be in conflict with any other provision or provisions found in the Existing Regulations, then the provisions of this Agreement shall prevail. Should any of the Conditions of Approval set forth in Section B of Exhibit "D" attached hereto conflict with any of the Mitigation Measures set forth in Section A of Exhibit "D" attached hereto, the more stringent or exacting requirement shall control. 15.3 B indin Eg ffect. The Parties intend that the provisions of this Agreement shall constitute covenants which shall run with the land comprising the Property during the Term for the benefit thereof and that the burdens and benefits thereof shall bind and inure to the benefit of all successors -in- interest to the Parties hereto. Every Party who now or hereafter owns or acquires any right, title, or interest in or to any portion of the Project during the Term is and shall be conclusively deemed to have consented and agreed to every provision contained herein, to the extent relevant to said right, title or interest, whether or not any reference to this Agreement is contained in the instrument by which such person acquired an interest in the Project. M 15.4 Agreement Not for Benefit of Third Parties. This Agreement is made and entered into for the sole protection and benefit of Developer and the City and their respective successors and assigns. No other person shall have any right of action based upon any provision of this Agreement. 15.5 No Partnership or Joint Venture. Nothing in this Agreement shall be deemed to create a partnership or joint venture between the City and Developer or to render either Party liable in any manner for the debts or obligations of the other. 15.6 Estoppel Certificates. Either Party may, at any time, and from time to time, deliver written notice to the other Party requesting such Party to certify in writing (each, an "Estoppel Certificate "): (a) that this Agreement is in full force and effect, (b) that this Agreement has not been amended or modified either orally or in writing, or if so amended, identifying the amendments, (c) whether or not, to the knowledge of the responding Party, the requesting Party is in Breach or claimed Breach in the performance of its obligations under this Agreement, and, if so, describing the nature and amount of any such Breach or claimed Breach, and (d) whether or not, to the knowledge of the responding Party, any event has occurred or failed to occur which, with the passage of time or the giving of notice, or both, would constitute an Event of Monetary Default or an Event of Non - Monetary Default and, if so, specifying each such event. A Party receiving a request for an Estoppel Certificate shall execute and return such Certificate within thirty (30) days following the receipt of the request therefor. If the party receiving the request hereunder does not execute and return the certificate in such 30 -day period and if circumstances are such that the Party requesting the notice requires such notice as a matter of reasonable business necessity, the Party requesting the notice may seek a second request which conspicuously states "FAILURE TO EXECUTE THE REQUESTED ESTOPPEL CERTIFICATE WITHIN FIFTEEN (15) DAYS SHALL BE DEEMED WAIVER PURSUANT TO SECTIONS 15.6 AND 15.13 OF THE DEVELOPMENT AGREEMENT" and which sets forth the business necessity for a timely response to the estoppel request. If the Party receiving the second request fails to execute the Estoppel Certificate within such 15 -day period, it shall be conclusively deemed that the Agreement is in full force and effect and has not been amended or modified orally or in writing, and that there are no uncured defaults under this Agreement or any events which, with passage of time of giving of notice, of both, would constitute a default under the Agreement. The City Manager shall have the right to execute any Estoppel Certificate requested by Developer under this Agreement. The City acknowledges that an Estoppel Certificate may be relied upon by any Property Transferee, Secured Lender or other party. 15.7 Time. Time is of the essence for each provision of this Agreement of which time is an element. 15.8 Excusable Delays. 15.8.1 In addition to any specific provisions of this Agreement, non - performance by Developer of its obligations under this Agreement shall be excused when it has been prevented or delayed in such performance by reason of any act, event or condition beyond the reasonable control of Developer (collectively, "Excusable Delays ") for any of the following reasons: EVA (a) War, insurrection, walk -outs, riots, acts of terrorism, floods, earthquakes, fires, casualties, acts of God, or similar grounds for excused performances; (b) Governmental restrictions or moratoria imposed by the City or by other governmental entities or the enactment of conflicting State or Federal laws or regulations; (c) The imposition of restrictions or moratoria by judicial decisions or by litigation, contesting the validity, or seeking the enforcement or clarification of this Agreement whether instituted by Developer, the City or any other person or entity, or the filing of a lawsuit by any Party arising out of this Agreement or any permit or approval Developer deems necessary or desirable for the implementation of the Project; (d) The institution of a referendum pursuant to Government Code Section 65867.5 or a similar public action seeking to in any way invalidate, alter, modify or amend the ordinance adopted by the City Council approving and implementing this Agreement; (e) Inability to secure necessary labor, materials or tools, due to strikes, lockouts, or similar labor disputes; and (f) Failure of the City to timely perform its obligations hereunder, including its obligations under Section 7.2 above 15.8.2 Under no circumstances shall the inability of Developer to secure financing be an Excusable Delay to the obligations of Developer. 15.8.3 In order for an extension of time to be granted for any Excusable Delay, Developer must deliver to the City written notice of the commencement of the Excusable Delay within sixty (60) days after the date on which Developer becomes aware of the existence of the Excusable Delay. The extension of time for an Excusable Delay shall be for the actual period of the delay. 15.8.4 Nothing contained in this Section 15.8 is intended to modify the terms of either Section 5.1.2 or Section 5.5 of this Agreement. 15.9 Governing Law. This Agreement shall be governed exclusively by the provisions hereof and by the laws of the State of California. 15.10 Cooperation in Event of Legal Challenge to Agreement. If there is any court action or other proceeding commenced that includes any challenge to the validity, enforceability or any term or provision of this Agreement, then Developer shall indemnify, hold harmless, pay all costs actually incurred, and provide defense in said action or proceeding, with counsel reasonably satisfactory to both the City and Developer. The City shall cooperate with Developer in any such defense as Developer may reasonably request. EEO 15.11 Attorneys' Fees. If any Party commences any action for the interpretation, enforcement, termination, cancellation or rescission of this Agreement or for specific performance for the Breach of this Agreement, the prevailing Party shall be entitled to its reasonable attorneys' fees, litigation expenses and costs. Attorneys' fees shall include attorneys' fees on any appeal as well as any attorneys' fees incurred in any post - judgment proceedings to collect or enforce the judgment. Such attorneys' fees shall be paid whether or not such action is prosecuted to judgment. In any case where this Agreement provides that the City or Developer is entitled to recover attorneys' fees from the other, the Party so entitled to recover shall be entitled to an amount equal to the fair market value of services provided by attorneys employed by it as well as any attorneys' fees actually paid by it to third Parties. The fair market value of the legal services for public attorneys shall be determined by utilizing the prevailing billing rates of comparable private attorneys. 15.12 Recordation. The Parties shall cause this Agreement to be recorded against title to the Property in the Official Records of the County of Los Angeles. The cost, if any, of recording this Agreement shall be borne by Developer. 15.13 No Waiver. No waiver of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the Party against whom enforcement of a waiver is sought and referring expressly to this Section 15.13. No delay or omission by either Party in exercising any right or power accruing upon non - compliance or failure to perform by the other Party under any of the provisions of this Agreement shall impair any such right or power or be construed to be a waiver thereof, except as expressly provided herein. No waiver by either Party of any of the covenants or conditions to be performed by the other Party shall be construed or deemed a waiver of any succeeding breach or nonperformance of the same or other covenants and conditions hereof of this Agreement. 15.14 Construction of this Agreement. The Parties agree that each Party and its legal counsel have reviewed and revised this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not apply in the interpretation of this Agreement or any amendments or exhibits thereto. 15.15 Other Governmental Approvals. Developer may apply for such other permits and approvals as may be required.for development of the Project in accordance with this Agreement from other governmental or quasi - governmental agencies having jurisdiction over the Property. The City shall reasonably cooperate with Developer in its endeavors to obtain such permits and approvals. 15.15.1 Further Assurances; Covenant to Sign Documents. Each Party shall take all actions and do all things, and execute, with acknowledgment or affidavit, if required, any and all documents and writings, which may be necessary or proper to achieve the purposes and objectives of this Agreement. 15.15.2 Processing. Upon satisfactory completion by Developer of all required preliminary actions and payments of appropriate processing fees, if any, the City shall, subject to all legal requirements, promptly initiate, diligently process, and complete at the earliest possible time all required steps, and expeditiously act upon any approvals and permits necessary for the ,. development by Developer of the Project in accordance with this Agreement, including, but not limited to, the following: (a) the processing of applications for and issuing of all Discretionary Approvals requiring the exercise of judgment and deliberation by City; (b) the holding of any required public hearings; and (c) the processing of applications for and issuing of all City Technical Permits requiring the determination of conformance with the Existing Regulations. 15.15.3 No Revocation. The City shall not revoke or subsequently disapprove any approval or future approval for the development of the Project or the Property once issued by the City provided that the development of the Project or the Property is in accordance with such approval. Any disapproval by the City shall state in writing the reasons for such disapproval and the suggested actions to be taken in order for approval to be granted. 15.15.4 Processing During Third Party Litigation. If any third party lawsuit is filed against the City or Developer relating to this Agreement or to other development issues affecting the Property, the City shall not delay or stop the development, processing or construction of the Property, or issuance of the City Technical Permits, unless the third party obtains a court order preventing the activity. The City shall not stipulate to or fail to oppose the issuance of any such order. Notwithstanding the foregoing and without prejudice to the provisions of Section 15.8.1(c), after service on the City or Developer of the initial petition or complaint challenging this Agreement or the Project, the Developer may apply to the Planning Director for a tolling of the applicable deadlines for Developer to otherwise comply with this Agreement. Within 40 days after receiving such an application, the Planning Director shall either toll the time period for up to five years during the pendency of the litigation or deny the requested tolling. 15.15.5 State, Federal or Case Law. Where any state, federal or case law allows the City to exercise any discretion or take any act with respect to that law, the City shall, in an expeditious and timely manner, at the earliest possible time, (i) exercise its discretion in such a way as to be consistent with, and carry out the terms of, this Agreement and (ii) take such other actions as may be necessary to carry out in good faith the terms of this Agreement. 15.16 Venue. Any legal action or proceeding among the Parties arising out of this Agreement shall be instituted in the Superior Court of the County of Los Angeles, State of California, in any other appropriate court in that County, or in the Federal District Court in the Central District of California. 15.17 Exhibits. The following exhibits which are part of this Agreement are attached hereto and each of which is incorporated herein by this reference as though set forth in full: Exhibit "A" Legal Description of the Property Exhibit `B" Project Plans Exhibit "C" Permitted Fees and Exactions 50 Exhibit "D" Mitigation Measures and Conditions Exhibit "E" SMMC Article 9 (Planning and Zoning) Exhibit "F" Hotel Conditions of Approval to Dispense Alcohol Exhibit "G" Restaurant "A" Conditions of Approval to Dispense Alcohol Exhibit "H" Restaurant "El" Conditions of Approval to Dispense Alcohol Exhibit "I" Standard Restaurant Conditions to Dispense Alcohol Exhibit "J -1" Local Hiring Program for Construction Exhibit "J -2" Local Hiring Program for Permanent Jobs Exhibit "K" Construction Mitigation Plan Exhibit "L" Assignment and Assumption Agreement Except as to the Project Plans (attached hereto as Exhibit "B ") which shall be treated in accordance with Section 2.1 above, the text of this Agreement shall prevail in the event that any inconsistencies exist between the Exhibits and the text of this Agreement. 15.18 Counterpart Signatures. The Parties may execute this Agreement on separate signature pages which, when attached hereto, shall constitute one complete Agreement. 15.19 Certificate of Performance. Upon the completion of the Project, or any phase thereof, or upon performance of this Agreement or its earlier revocation and termination, the City shall provide Developer, upon Developer's request, with a statement ( "Certificate of Performance ") evidencing said completion, termination or revocation and the release of Developer from further obligations hereunder, except for any further obligations which survive such completion, termination or revocation. The Certificate of Performance shall be signed by the appropriate agents of Developer and the City and shall be recorded against title to the Property in the official records of Los Angeles County, California. Such Certificate of Performance is not a notice of completion as referred to in California Civil Code Section 3093. 15.20 Interests of Developer. Developer represents to the City that, as of the Effective Date, it is the owner of the entire Property, subject to encumbrances, easements, covenants, conditions, restrictions, and other matters of record. 15.21 Operating Memoranda. The provisions of this Agreement require a close degree of cooperation between the City and Developer. During the Tern of this Agreement, clarifications to this Agreement and the Existing Regulations may be appropriate with respect to the details of performance of the City and Developer. If and when, from time to time, during the term of this Agreement, the City and Developer agree that such clarifications are necessary or appropriate, they shall effectuate such clarification through operating memoranda approved in writing by the City and Developer, which, after execution, shall be attached hereto and become part of this Agreement and the same may be further clarified from time to time as necessary with future written approval by the City and Developer. Operating memoranda are not intended to and cannot constitute an amendment to this Agreement but mere ministerial clarifications, 51 therefore public notices and hearings shall not be required for any operating memorandum. The City Attorney shall be authorized, upon consultation with, and approval of, Developer, to determine whether a requested clarification may be effectuated pursuant to the execution and delivery of an operating memorandum or whether the requested clarification is of such character to constitute an amendment of this Agreement which requires compliance with the provisions of Section 8.1 above. The authority to enter into such operating memoranda is hereby delegated to the City Manager and the City Manager is hereby authorized to execute any operating memoranda hereunder without further action by the City Council. 15.22 Acknowledgments, Agreements and Assurance on the Part of Developer. 15.22.1 Developer's Faithful Performance. The Parties acknowledge and agree that Developer's faithful performance in developing the Project on the Property and in constructing and installing certain public improvements pursuant to this Agreement and complying with the Existing Regulations will fulfill substantial public needs. The City acknowledges and agrees that there is good and valuable consideration to the City resulting from Developer's assurances and faithful performance thereof and that same is in balance with the benefits conferred by the City on the Project. The Parties further acknowledge and agree that the exchanged consideration hereunder is fair, just and reasonable. Developer acknowledges that the consideration is reasonably related to the type and extent of the impacts of the Project on the community and the Property, and further acknowledges that the consideration is necessary to mitigate the direct and indirect impacts caused by Developer on the Property. 15.22.2 Obligations to be Non - Recourse. As a material element of this Agreement, and in partial consideration for Developer's execution of this Agreement, the Parties each understand and agree that the City's remedies for breach of the obligations of Developer under this Agreement shall be limited as described in Sections 11.2 through 11.4 above. 15.23 Not a Public Dedication. Nothing in this Agreement shall be deemed to be a gift or dedication of the Property, or of the Project, or any portion thereof, to the general public, for the general public, or for any public use or purpose whatsoever, it being the intention and understanding of the Parties that this Agreement be strictly limited to and for the purposes herein expressed for the development of the Project as private property. Developer shall have the right to prevent or prohibit the use of the Property, or the Project, or any portion thereof, including common areas and buildings and improvements located thereon, by any person for any purpose inimical to the development of the Project, including without limitation to prevent any person or entity from obtaining or accruing any prescriptive or other right to use the Property or the Project except as provided for in Section 2.7(m). 15.24 Other Agreements. The City acknowledges that certain additional agreements may be necessary to effectuate the intent of this Agreement and facilitate development of the Project. The City Manager or his /her designee is hereby authorized to prepare, execute, and record those additional agreements. 15.25 Severability and Termination. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, or if any provision of this Agreement is superseded or rendered unenforceable according to any law which becomes 52 effective after the Effective Date, the remainder of this Agreement shall be effective to the extent the remaining provisions are not rendered impractical to perform, taking into consideration the purposes of this Agreement. This Agreement is executed by the Parties on the date first set forth above and is made effective on and as of the Effective Date. DEVELOPER: MAXSER & COMPANY, LLC A California limited liability company By: DRAFT Name: Title: .yrr•E CITY OF SANTA MONICA, a municipal corporation By: DRAFT Name: Title: By: DRAFT Name: City Clerk APPROVED AS TO FORM: By: DRAFT Name: City Attorney 53 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY LOTS R, S, T, U, V, W, X AND Z IN BLOCK 117 OF SANTA MONICA, IN THE CITY OF SANTA MONICA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 39 PAGES 45 TO 51 INCLUSIVE OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXHIBIT B PROJECT PLANS On file with City of Santa Monica EXHIBIT C PERMITTED FEES AND EXACTIONS 1. Developer shall pay the following fees and charges that are within the City's jurisdiction and at the rate in effect at the time payments are made: (a) Upon submittal for Joint Design Review Body review, Developer shall pay City fees for processing of Architectural Approval applications; (b) Upon submittal for plan check, Developer shall pay City plan check fees in effect at time of plan check; (c) Prior to issuance of construction permits, Developer shall pay the following City fees and all other standard fees imposed on similar development projects: • Building, Plumbing, Mechanical, Electrical, Grading, Seismic Mapping, Excavation and Shoring Permit fees (collected by Building & Safety) • Shoring Tieback fee (collected by PW) • Construction and Demolition (C &D) Waste Management fee (SMMC Section 8.108.140) (collected by PW). • Wastewater Capital Facilities Fee (SMMC Section 7.04.460) (collected by PW) • Water Capital Facilities Fee & Water Meter Instillation fee (Water Meter Permit fee) (SMMC Section 7.12.090) (collected by PW) • Fireline Meter fee (SMMC Section 7.12.090) (collected by PW) • Childcare Linkage Fee (SMMC Section 9.72.040). Developer shall execute a contract to pay the fee prior to issuance of a building permit. Developer shall pay the fee prior to the issuance of a final certificate of occupancy for the Project. • Cultural Arts Fee (SMMC Section 9.04.10.20). Developer shall execute a contract to pay the fee, if applicable, prior to issuance of a building permit. Developer shall pay the fee, if applicable, prior to the issuance of a final certificate of occupancy for the Project. (d) Upon inspection of the Project during the course of construction, City inspection fees. These fees shall be reimbursed to developer in accordance with the City's standard practice should Developer not proceed with development of the Project. 41 2. Prior to issuance of permits for any construction work in the public right -of -way, or use of public property, Developer shall pay the following City fees: Use of Public Property Permit fees (SMMC 7.04.670) (PW) Utility Excavation Permit fee (SMMC 7.04.790(b)) (PW) • Street Permit fee (SMMC 7.04.790) (PW) 3. Developer shall reimburse the City for its ongoing actual costs to monitor the project's compliance with this Development Agreement. The City shall bill Developer for staff time and any material used pursuant to the hourly fees in effect at the time monitoring is performed. Developer shall submit payment to the City within 30 days. EXHIBIT D MITIGATION MEASURES AND CONDITIONS OF APPROVAL SECTION A - MITIGATION MEASURES CON -1 Construction Impact Mitigation Plan. The applicant shall prepare, implement and maintain a Construction Impact Mitigation Plan which shall be designed to: • Prevent traffic impacts on the surrounding roadway network. • Minimize parking impacts both to public parking and access to private parking to the greatest extent practicable. • Ensure safety for both those constructing the project and the surrounding community. • Prevent substantial truck traffic through residential neighborhoods. The Construction Impact Mitigation Plan shall be subject to review and approval by the following City departments: Public Works Department, Fire, Planning and Community Development and Police to ensure that the Plan has been designed in accordance with this Mitigation Measure. This review shall occur prior to issuance of grading or building permits. It shall, at a minimum, include the following: Ongoing Requirements Throughout the Duration of Construction • A detailed traffic control plan for work zones shall be maintained. At a minimum, this shall include: parking and travel lane configurations; warning, regulatory, guide and directional signage; and area sidewalks, bicycle lanes and parking lanes. The plan shall include specific information regarding the project's construction activities that may disrupt normal pedestrian and traffic flow and the measures to address these disruptions. Such plans shall be reviewed and approved by the Transportation Management Division prior to commencement of construction and implemented in accordance with this approval. • Work within the public right -of -way shall be performed between 9:00 a. in. and 4: 00 p.m. This work includes dirt and demolition material hauling and construction material delivery. Work within the public right -of -way outside of these hours shall only be allowed after the issuance of an after -hours construction permit. • Streets and equipment shall be cleaned in accordance with established PW requirements. • Trucks shall only travel on a City- approved construction route. Truck queuing /staging shall not be allowed on Santa Monica streets. Limited queuing may occur on the construction site itself. • Materials and equipment shall be minimally visible to the public; the preferred location for materials is to be on -site, with a minimum amount of materials within a work area in the public right -of -way, subject to a current Use of Public Property Permit. • Any requests for work before or after normal construction hours within the public right -of -way shall be subject to review and approval through the After Hours Permit process administered by the Building and Safety Division. • Provision of off - street parking for construction workers, which may include the use of a remote location with shuttle transport to the site, if determined necessary by the City of Santa Monica. Project Coordination Elements That Shall Be Implemented Prior to Commencement of Construction The applicant shall advise the traveling public of impending construction activities (e.g., information signs, portable message signs, media listing /notication, implementation of an approved traffic control plan). The applicant shall obtain a Use of Public Property Permit, Excavation Permit, Sewer Permit or Oversize Load Permit, as well as any Caltrans Permits required, for any construction work requiring encroachment into public rights -of -way, detours or any other work within the public right -of -way. The applicant shall provide timely notification of construction schedules to all affected agencies (e.g., Big Blue Bus, Police Department, Fire Department, Public Works Department, and Planning and Community Development Department) and to all owners and residential and commercial tenants of property within a radius of 500 feet. The applicant shall coordinate construction work with affected agencies in advance of start of work. Approvals may take tip to two weeks per each submittal. The applicant shall obtain Transportation Management Division approval of any haul routes for earth, concrete or construction materials and equipment hauling. 2. CON -2(a) Restrictions on Excavation and Foundation /Conditioning. Excavation, foundation- laying, and conditioning activities (the noisiest phases of construction) shall be restricted to between the hours of 10:00 a.m. and 3:00 p.m., Monday through Friday, to the extent that they exceed the applicable construction noise limits, in accordance with Section 4.12.110(d) of the Santa Monica Municipal Code. At any time that these construction activities occur outside of the specified hours, a noise monitor shall be present on the project site in order to monitor noise levels at the nearest sensitive noise receptors (residences in the apartment building located on Lincoln Boulevard, immediately adjacent to the 1218 Lincoln Boulevard lot). If noise levels exceed the levels established in the Santa Monica Municipal Code for Zone II properties (85 dBA during the weekday daytime for a 15 minute continuous period and instantaneous construction noise level of 105 dBA during the weekday daytime for a 15 minute continuous period), construction activities shall immediately cease until noise levels can be reduced to a level consistent with the levels established in the Santa Monica Municipal Code. CON -2(b) Diesel Equipment Mufflers. All diesel equipment shall be operated with closed engine doors and shall be equipped with factory- recommended mufflers. 4. CON -2(c) Electrically- Powered Tools. Electrical powered shall be used to run air compressors and similar power tools. 5. CON -2(d) Additional Noise Attenuation Techniques. For all noise - generating construction activity on the project site, additional noise attenuation techniques shall be employed as necessary to reduce noise levels to City of Santa Monica noise standards. Such techniques may include, but are not limited to, the use of sound blankets on noise - generating equipment and the construction of temporary sound barriers between construction sites and nearby sensitive receptors. 6. CON -5(a) Fugitive Dust. All construction shall comply with the requirements of SCAQMD Rule 403, Fugitive Dust, which requires the implementation of Reasonably Available Control Measures (RACM) for all fugitive dust sources, and the Air Quality Management Plan (AQMP), which identifies Best Available Control Measures (BACM) and Best Available Control Technologies (BACT) for area sources and point sources, respectively. CON -5(b) Staging Area. Construction contractors shall establish an on -site construction equipment staging area and construction worker parking lot, located on either paved surfaces or unpaved surfaces subjected to soil stabilization treatments, as close as possible to a public highway. Control access to public roadways by limiting curb cuts /driveways to minimize project construction impacts upon roadway traffic operations. 8. CON -5(c) Non - Vehicular Equipment Engines. Construction contractors shall properly maintain non - vehicular equipment engines to minimize the volume of exhaust emissions. 9. CON -5(d) Electricity. Construction contractors shall use electricity from power poles, rather than temporary diesel or gasoline powered generators. 10. CON -5(e) Alternative Fuel Sources. Construction contractors shall use on -site mobile equipment powered by alternative fuel sources (i.e., methanol, natural gas, propane or butane) to the extent such equipment is commercially available. 11. CON -5(f) Inspection of Equipment. Construction contractors shall inspect construction equipment prior to leaving the site and wash off loose dirt with wheel washers, as necessary. 12. CON -5(g) Ridesharing /Shuttle. Construction contractors shall provide ridesharing or shuttle service for construction workers. 13. CON -5(h) PMIO Reduction Measures for Grading Activities. Particulate matter reduction measures from the SCAQMD shall be applied to all grading activities occurring on the project site throughout the construction phase. These shall include: • Apply water every 3 hours to disturbed areas within the construction site; • Require minimum soil moisture of 12% for earthrnoving by use of a moveable sprinkler system or a water truck, • Replace ground cover in disturbed areas as quickly as possible; and • All trucks hauling dirt, sand, soil, or other loose materials shall be tarped with a fabric cover and maintain a freeboard height of 12 inches. 14. CON -5(i) PM10 Reduction Measures for Haul Road Vehicle Activity. Particulate matter reduction measures from the SCAQMD shall be applied to all haul road vehicle activities occurring on the project site throughout the construction phase. These shall include: • Limit on -site vehicle speeds to 15 miles per hours with radar enforcement; • Install pipe -grid trackout- control device to reduce mud /dirt trackout from unpaved truck exit routes; • Replace ground cover in disturbed areas as quickly as possible; and • Apply chemical dust suppressant annually to unpaved parking areas. 15. CON -50) PM10 Reduction Measures for Demolition Activity. Particulate matter reduction measures from the SCAQMD shall be applied to all demolition activities occurring on the project site throughout the construction phase. These shall include: • Apply water every 4 hours to the area within 100 feet of a structure being demolished, to reduce vehicle trackout; • Apply water to disturbed soils after demolition is completed or at the end of each day of cleanup; • Prohibit demolition activities when wind speeds exceed 25 miles per hour; and • Apply dust suppressants (e.g. polymer emulsion) to disturbed areas upon completion of demolition. 16. CON -5(k) Mud /dirt Trackout onto Local Streets. Implement a street sweeping program with Rule 1186 compliant PMIO efficient vacuum units (14 -day frequency). 17. HR -1 Building Materials. In accordance with the Secretary of the Interior's Standards, the material and finish of the exterior walls of the new construction (not including new construction at the 1218 Lincoln Boulevard property) shall be compatible with, but should also be differentiated from the existing Landmark Santa Monica Professional Building. The design review body shall pay particular attention to the Landmark building's character - defining features including the "Y- shaped plan" and richly embellished ornamentation in relief, particularly surrounding the main entrance, 6'h floor elevations, and penthouse wings. 18. HR -2(a) Secretary of the Interior Standards. The rehabilitation of the Santa Monica Professional Building shall be undertaken with the assistance of a historic preservation architect meeting the Secretary of the Interior's Standards and Guidelines for Archeology and Historic Preservation, Professional Qualifications Standards. The historic preservation architect will regularly review the ongoing rehabilitation to ensure it continues to satisfy the conditions of the Certificate of Appropriateness. The historic preservation architect will submit status reports to the City of Santa Monica's Landmarks Commission Liaison according to a schedule agreed upon prior to commencement of the rehabilitation. 19. HR -2(b) Secretary of the Interior Standards. As described in Section 9.36.140 of the Santa Monica Municipal Code, the Landmarks Commission shall use the Secretary of Interior' s Standards in evaluating the proposed rehabilitation of the Santa Monica Professional Building. In order to issue a Certificate of Appropriateness, the Landmarks Commission, or the City Council on appeal, will determine whether the rehabilitation satisfies the criteria for issuance of a Certificate of Appropriateness pursuant to the Santa Monica Municipal Code Section 9.36.140. In particular, any proposed repair of the building's windows, which define the building's upper stories, should be done in accordance with the Secretary of the Interior's Standards for Rehabilitation with particular attention given to the pattern, sash type, and dimensions of the historic building's existing windows. 20. HR -3(a) Protection of Building during Excavation and Construction. A registered structural engineer, with a minimum of five years of experience in the rehabilitation and restoration of historic buildings, shall investigate the existing relationship of the foundation of the Santa Monica Professional Building along the east elevation to the foundation of the existing building at 718 Wilshire Boulevard. Any required test excavations shall be performed only in the presence of the structural engineer. The structural engineer shall prepare a report of findings, recommendations and any related design modifications necessary to retain the structural integrity of the Santa Monica Professional Building. The structural engineer (in consultation with a historic preservation architect, meeting the Secretary of the Interior's Standards and Guidelines for Archeology and Historic Preservation, Professional Qualifications Standards) shall prepare designs and specifications for protective barriers required to protect the east wall of the Santa Monica Professional Building from potential damage caused by construction activities. In addition, the structural engineer (with geotechnical consultation as necessary) shall determine whether, due to the nature of the excavations, soils, method of soil removal and the existing foundations of the historic buildings, the potential for settlement would require underpinning and /or shoring. If underpinning and /or shoring is determined to be necessary, appropriate designs shall be prepared. All documents prepared in accordance with this Measure shall be reviewed and approved by the City of Santa Monica's Historic Preservation Officer, after consultation with appropriate City staff. 21. HR -3(b) Demolition Monitoring. Prior to demolition of the existing building at 718 Wilshire Boulevard, a historic preservation architect and a structural engineer shall undertake an existing condition study of the Santa Monica Professional Building to establish the baseline condition of the building prior to construction, including the location and extent of any visible cracks or spalls. The documentation shall take the form of written descriptions and photographs, and shall include those physical characteristics of the resource that convey its historic significance and that justify its inclusion on the local register. The documentation shall be reviewed and approved by the City of Santa Monica's Historic Preservation Officer, after consultation with appropriate City staff ( "monitoring team "). The historical architect and structural engineer shall monitor the Santa Monica Professional Building during construction and report any changes to existing conditions, including, but 10 not limited to, expansion of existing cracks, new spalls, or other exterior deterioration. Monitoring reports shall be submitted to the city's historic preservation officer on a periodic basis. The structural engineer shall consult with the historic preservation architect, especially if any problems with character - defining features of a historic resource are discovered. If in the opinion of the structural engineer, in consultation with the historic preservation architect, substantial adverse impacts to historic resources related to construction activities are found during construction, the monitoring team shall so inform the project sponsor or sponsor's designated representative responsible for construction activities. The project sponsor shall adhere to the monitoring team's recommendations for corrective measures, including halting construction in situations where construction activities would imminently endanger historic resources. The historic preservation officer shall establish the frequency of monitoring and reporting. The project sponsor shall respond to any claims of damage by inspecting the affected property promptly, but in no case more than five working days after the claim was filed and received by the project sponsor's designated representative. Any new cracks or other changes in the Santa Monica Professional Building shall be compared to pre- construction conditions and a determination made as to whether the proposed project could have caused such damage. In the event that the proposed project is demonstrated to have caused any damage, such damage shall be repaired to the pre- existing condition. Site visit reports and documents associated with claims processing shall be provided to the City of Santa Monica's Historic Preservation Officer. 22. HR -3(c) Vibration Specifications. The qualified structural engineer shall perform the following vibration mitigation: Prior to commencement of construction activities, measure and document the existing ground vibration environment at the vicinity of the historic buildings to establish baseline vibration conditions. The vibration measurements shall be performed during hours of the day consistent with the project's construction hours. At each site, ground vibration levels shall be measured in the vertical direction for a period of a minimum of 15 minutes. The vibration measurement equipment shall be capable to record the velocity levels in PPV (Peak Particle Velocity) and RMS (Root- Mean - Square) values in the unit of inch/ second, over the frequency range of 1 Hz to 100 Hz. Measured vibration data shall be submitted to the City and shall include; description of measurement location, measurement time and recorded values (maximum, minimum and mean levels during the measurement period) After establishing the baseline vibration conditions of the project site, develop and implement a vibration monitoring program capable of documenting the construction related ground vibration levels in the vicinity of the historic buildings. The vibration monitoring system shall be able to measure and store the PPV and RMS values over the band frequency ranges of 1 Hz to 100 Hz. The FTA identifies a threshold of 95 Vd13 for extremely fragile historic buildings. In order to ensure that construction activities remain below this threshold, the project vibration criteria shall be 0.12 inch/second (PPV) (equivalent to 90 VdB). The vibration monitoring system shall indicate any instances where the ground vibration levels 11 exceed the project vibration criteria. The vibration monitoring program shall be implemented during the site grading, excavation, and construction of the foundations only. If measurements indicate ground -borne vibration levels approach 0.12 inch /section PPV, the construction procedure /method shall be revised, including the type of equipment used, to maintain the ground -bome vibration requirements (not to exceed 0.12 inch /second PPV) at the historic buildings. The structural engineer will prepare weekly reports for the City to document the vibration monitoring program. Upon completion of construction, the structural engineer shall prepare a report for the City summarizing the results of the vibration monitoring program. In addition to vibration monitoring by the structural engineer, the architectural historian shall perform visual inspections of the historic buildings (exterior /interior structure, walls /ceilings, etc.) during site grading, excavation, and construction of the foundations, and note any new damages in a monitoring log. Similar to the structural engineer, the architectural historian shall prepare weekly reports for the City to document the vibration monitoring program. Upon completion of construction, the architectural historian shall prepare a report for.the City summarizing the results of the vibration monitoring program. 23. HR -3(d) Historic Resource Training Program. Prior to demolition of the existing building at 718 Wilshire Boulevard, the historic preservation architect shall establish a training program for construction workers involved in the project that emphasizes protection of historic resources. This program shall include information on recognizing historic fabric and materials, and directions on how to exercise care when working around and operating equipment near the Santa Monica Professional Building, including storage of materials away from the historic building. It shall also include information on means to reduce vibrations from demolition and construction, and monitoring and reporting any potential problems that could affect the historic resource. A provision for establishing this training program shall be incorporated into the contract, and the contract provisions shall be reviewed and approved by the City of Santa Monica's Historic Preservation Officer. 24. HR -3(e) California Historical Building Code. If and to the extent such an election is made by the Applicant, design development plans shall be reviewed using the California Historical Building Code (CHBC, Part 8 of Title 24) provisions for compliance to the extent authorized. 25. GEO -1(a) Tieback Anchors. The lateral load on shoring piles shall be resisted by tieback anchors which are connected to the shoring beams, and shall be installed at 10 and 20 feet below grade. The tiebacks shall be 10 degrees to 20 degrees from the horizontal, with an effective anchorage behind an imaginary 60 degree plane from the horizontal, projected upwards from the bottom of the piles. The tiebacks at the 10 foot level shall be designed to bear a maximum of 500 pounds per square foot, while the tiebacks at the 20 foot level shall be designed to bear a maximum of 750 pounds per square foot. A detailed test loading program for tiebacks shall be established. Survey monitoring stations shall be established beyond the excavation area. Lateral deflection readings shall be taken on all soldier beams with each five to six feet of vertical excavation. Monitoring of the soldier beams shall be maintained at least weekly after the final depth has been achieved. 12 These records shall be provided to the design engineer, the geotechnical consultant and the City's Building and Safety Division as they are completed. In the event that the use of tieback anchors is infeasible because an adjoining property owner will not consent to installation of tieback anchors beneath the surface of their property, other equivalent shoring options, such as a raker system, may be used, subject to review and approval as part of the City's plan check process. 26, GEO -1(b) Retaining Wall Drainage. A proper drainage system utilizing either weep holes or a drainage pipe shall be installed to prevent hydrostatic pressure behind the retaining wall. If a drainage pipe is used, it shall consist of a four -inch perforated pipe (holes down), surrounded by at least 12 inches of % -inch gravel enveloped in a drainage fabric such as Mirafi 140N or equivalent, placed at the base of the footing wall. If weep holes are used, these openings shall be four feet on center, and also situated at the base of the footing wall with a gravel and drainage fabric backdrain. 27. GEO -1(c) Temporary Excavation Slopes. Temporary excavation slopes in the existing surface soil may be made vertical for cuts of less than five feet. For deeper cuts, temporary excavation slopes shall be made no steeper than 1:1 (horizontal to vertical). In areas where soils with little or no binder are encountered, shoring or flatter excavation slopes shall be made. 28. GE 0-1(d) Shoring. If temporary support of a vertical cut slope is needed for excavation of the subterranean parking garage (including the use of permanent foundations), such temporary support structures shall conform with the recommended lateral earth pressure for different shoring designs are illustrated on Plate F of the Geotechnical Engineering Investigation Report (Coastline Geotechnical Consultants, Inc, August 2010). 29. GEO -1(e) Inspection. The project's geotechnical engineer shall inspect all shoring piles, inspect all tieback anchor installations, observe all tieback testing, inspect all foundation excavations for the structure or retaining walls, and inspect all grading operations. 30. GEO -1(f) Dewatering Requirements. If temporary and /or permanent dewatering on the project site is required, the Applicant shall obtain a dewatering permit from the City of Santa Monica Water Resources Protection Program prior to the issuance of a grading permit. Soil and groundwater testing to a minimum depth of 50 feet shall be conducted to the satisfaction of the Water Resources Protection Program staff. If contaminated groundwater is discovered on -site, treatment and discharge of the contaminated groundwater shall be conducted in compliance with applicable regulatory requirements including the Los Angeles Regional Water Quality Control Board standards. 31. GEO -2(a) Slabs -on- Grade. Slabs -on grade shall be a minimum of five inches thick and reinforced with No. 4 bars, 16 inches on- center each way. The subgrade soils shall be moistened to a depth of 18 inches prior to placing of the membrane and pouring of floor slabs. The moisture content shall be at least 3% greater than the optimum moisture content. 13 A moisture barrier beneath the slabs -on- grade, preferably consisting of at least four inches of sand, with a waterproof vapor barrier, such as a plastic membrane of at least 15 mils in thickness, covered with two inches of clean sand, shall be utilized in areas where soil moisture would be detrimental. 32. GEO -2(b) Inspection. The project's geotechnical engineer shall inspect the premoistening of subgrade soils and placement of the sand cushion and vapor barrier beneath the slab. 33. HAZ-1(a) Soil -Vapor Testing. A sub - surface soil -vapor test for traces of tri- chloroethane (TCE), tetra- chloroethane (PCE) and volatile organic compounds shall be completed at least seven locations throughout the southern and/or western portions of the site. If contaminants are detected, the results of the soil sampling shall be forwarded to the City of Santa Monica and to the local regulatory agency (Fire Department, Los Angeles Regional Water Quality Control Board, or the State of California Environmental Protection Agency Department of Toxic Substances Control). The agency shall review the data and either sign off on the property or determine if any additional investigation or remedial activities are deemed necessary. I£ concentrations of contaminants in soil or soil gas warrant site remediation, remediation shall occur prior to construction of structures. The contaminated materials shall be remediated under the supervision of an environmental consultant licensed to oversee such remediation. The remediation program shall also be approved by the appropriate regulatory oversight agency, with a copy provided to the City of Santa Monica. All proper waste handling and disposal procedures shall be followed. Upon completion of the remediation, the environmental consultant shall prepare a report summarizing the project, the remediation approach implemented, and the analytical results after completion of the remediation, including all waste disposal or treatment manifests. 34. HAZ -1(b) Excavation and Demolition Contingency Plans. All excavation and demolition projects conducted within the project site shall have a contingency plan to be implemented in the event that contaminants or structural features that could be associated with contaminants or hazardous materials are suspected or discovered. The contingency plan shall require the presence of an environmental consultant to monitor the site during removal of slab /pavement and substructures to observe for evidence of contamination. The contingency plan shall stipulate that if contaminants are found or suspected, work around the area shall temporarily cease and appropriate measures shall be undertaken. The appropriate measures shall identify personnel to be notified, emergency contacts, and a sampling protocol to be implemented. The excavation and demolition contractors shall be made aware of the possibility of encountering unknown hazardous materials, and shall be provided with appropriate contact and notification information. The contingency plan shall include a provision stating at what point it is safe to continue with the excavation or demolition, and identify the person authorized to make that determination. 35. HAZ -I(c) Soil Sampling. If contaminants are detected, the results of the soil sampling shall be forwarded to the local regulatory agency (City of Santa Monica Fire Department 14 CUPA, Los Angeles Regional Water Quality Control Board, or the State of California Environmental Protection Agency Department of Toxic Substances Control). The agency shall review the data and either sign off on the property or determine if any additional investigation or remedial activities are deemed necessary. 36. HAZ -1(d) Soil Remediation. If concentrations of contaminants warrant site remediation, contaminated materials shall be remediated either prior to construction of structures or concurrent with construction. The contaminated materials shall be remediated under the supervision of an environmental consultant licensed to oversee such remediation. The remediation program shall also be approved by a regulatory oversight agency, such as the City of Santa Monica Fire Department CUPA, Los Angeles Regional Water Quality Control Board, or the State of California Environmental Protection Agency Department of Toxic Substances Control. All proper waste handling and disposal procedures shall be followed. Upon completion of the remediation, the environmental consultant shall prepare a report summarizing the project, the remediation approach implemented, and the analytical results after completion of the remediation, including all waste disposal or treatment manifests. 37. Mitigation Monitoring and Reporting Program. Pursuant to the requirements of Public Resources Code Section 21081.6, the City Planning Division will coordinate a monitoring and reporting program regarding any required changes to the project made in conjunction with project approval and any conditions of approval, including those conditions intended to mitigate or avoid significant effects on the environment. This program shall include, but is not limited to, ensuring that the City Planning Division itself and other City divisions and departments such as the Building and Safety Division, the Department of Environmental and Public Works, the Fire Department, the Police Department, the Planning and Community Development Department and the Finance Department are aware of project requirements which must be satisfied prior to issuance of a Building Permit, Certificate of Occupancy, or other permit, and that other responsible agencies are also informed of conditions relating to their responsibilities. Project owner shall demonstrate compliance with conditions of approval in a written report submitted to the Planning Director and Building Officer prior to issuance of a Building Permit or Certificate of Occupancy, and, as applicable, provide periodic reports regarding compliance with such conditions. SECTION B - CONDITIONS OF APPROVAL Project Specific Conditions All restaurant and food service spoils from the hotel will be placed within sealed plastic trash bags before being placed outdoor refuse containers. Additionally, all outdoor refuse bins containing restaurant and food service spoils will be emptied daily at least five days per week. 2. The project shall provide LUCE Community Benefits as established in Section 2.7.1 of this Agreement. 15 The Joint Design Review Body shall pay particular attention to the following design elements of the project: • The south elevation stair tower to ensure that it provides visual interest • The south elevation above the hotel vehicle entrance to ensure that the proposed green wall is composed of a high quality material. The applicant shall be required to submit details of the green wall system to be used. • The north elevation of the southernmost wing to ensure that it continues the design detail on the remainder of the 7th Street elevation and may include wrapping around the balconies, windows, texture, and articulation • The east elevation (alley) to ensure that it reflects the same level of detail as the west elevation (7th Street) and references the belt line and upper level fenestration and detail of the 7`h Street elevation • The pedestrian entrance to the hotel requires greater prominence and features that help to activate the Public Use Area identified in the plans • The retail paseo area needs to be activated with pedestrian- oriented amenities such as outdoor dining and seating • The ground floor open space, including landscaping and any water features, needs to engage pedestrians and should incorporate amenities such as seating or built -in furniture as well as artistic design elements • The interior elevations of the new construction (facing the courtyards) to ensure consistency and level of design detail on all elevations Administrative 4. In the event permittee violates or fails to comply with any conditions of approval of this permit, no further permits, licenses, approvals or certificates of occupancy shall be issued until such violation has been fully remedied. In the event permittee violates or fails to comply with any conditions of approval of this permit, no further permits, licenses, approvals or certificates of occupancy shall be issued until such violation has been fully remedied. Conformance with Approved Plans 6. This approval is for those plans dated , a copy of which shall be maintained in the files of the City Planning Division. Project development shall be consistent with such plans, except as otherwise specified in these conditions of approval. 7. Minor amendments to the plans shall be subject to approval by the Director of Planning. A significant change in the approved concept shall be subject to review as provided in the Development Agreement. Construction shall be in conformance with the plans submitted or as modified in accordance with the Development Agreement. 8. Except as otherwise provided by the Development Agreement, project plans shall be subject to complete Code Compliance review when the building plans are submitted for plan check and shall comply with all applicable provisions of Article IX of the Municipal 16 Code and all other pertinent ordinances and General Plan policies of the City of Santa Monica prior to building permit issuance. Fees 9. No building permit shall be issued for the project until the developer complies with the requirements of Part 9.04.10.20 of the Santa Monica Municipal Code, Private Developer Cultural Arts Requirement. If the developer elects to comply with these requirements by providing on -site public art work or cultural facilities, no final City approval shall be granted until such time as the Director of the Community and Cultural Services Department issues a notice of compliance in accordance with Part 9.04.10.20. 10. No building permit shall be issued for the project until the developer complies with the requirements of Chapter 9.72 of the Santa Monica Municipal Code, the Child Care Linkage Program. Cultural Resources 11. Except as otherwise provided by the Development Agreement, no demolition of buildings or structure built 40 years of age or older shall be permitted until the end of a 60 -day review period by the Landmarks Commission to determine whether an application for landmark designation shall be filed. If an application for landmark designation is filed, no demolition shall be approved until a final determination is made by the Landmarks Commission on the application. 12. If any archaeological remains are uncovered during excavation or construction, work in the affected area shall be suspended and a recognized specialist shall be contacted to conduct a survey of the affected area at project's owner's expense. A determination shall then be made by the Director of Planning to determine the significance of the survey findings and appropriate actions and requirements, if any, to address such findings. Project Operations 13. The operation shall at all times be conducted in a manner not detrimental to surrounding properties or residents by reason of lights, noise, activities, parking or other actions. 14. The project shall at all times comply with the provisions of the Noise Ordinance (SMMC Chapter 4.12). Rent Control 15. Pursuant to SMMC Section 4.24.030, prior to receipt of the final permit necessary to demolish, convert, or otherwise remove a controlled rental unit(s) from the housing market, the owner of the property shall first secure a removal permit under Section 1803(t), an exemption determination, an approval of a vested rights claim from the Rent Control Board, or have withdrawn the controlled rental unit(s) pursuant to the provisions of the Ellis Act. 17 Final Design 16. Plans for final design, landscaping, screening, trash enclosures, and signage shall be subject to review and approval as established in the Development Agreement. 17. Landscaping plans shall comply with Subchapter 9.04.10.04 (Landscaping Standards) of the Zoning Ordinance including use of water - conserving landscaping materials, landscape maintenance and other standards contained in the Subchapter. 18. Refuse areas, storage areas and mechanical equipment shall be screened in accordance with SMMC Section 9.04.10.02.130, 140, and 150. Refuse areas shall be of a size adequate to meet on -site need, including recycling. The Joint Design Review Body in its review shall pay particular attention to the screening of such areas and equipment. Any rooftop mechanical equipment shall be minimized in height and area, and shall be located in such a way as to minimize noise and visual impacts to surrounding properties. Unless otherwise approved by the Joint Design Review Body, rooftop mechanical equipment shall be located at least five feet from the edge of the roof. 19. No gas or electric meters shall be located within the required front or street side yard setback areas. The Joint Design Review Body in its review shall pay particular attention to the location and screening of such meters. 20. Prior to consideration of the project by the Joint Design Review Body, the applicant shall review disabled access requirements with the Building and Safety Division and make any necessary changes in the project design to achieve compliance with such requirements. The Joint Design Review Body, in its review, shall pay particular attention to the aesthetic, landscaping, and setback impacts of any ramps or other features necessitated by accessibility requirements. 21. As appropriate, the Joint Design Review Body shall require the use of anti - graffiti materials on surfaces likely to attract graffiti. 22. Prior to issuance of a building permit or business license, whichever is sooner, for any establishment which qualifies as a nightclub, bar or other establishment with amplified music pursuant to SMMC 4.12.140, the design of the entryway to such establishment shall be reconfigured to provide for double doors to mitigate possible noise impacts. Construction Plan Requirements 23. Final building plans submitted for approval of a building permit shall include on the plans a list of all permanent mechanical equipment to be placed indoors which may be heard outdoors. 24. Any new restaurant at the site with fewer than 50 seats capacity shall install a grease interceptor with minimum 750 gallons static holding capacity in order to pretreat sewered grease. Facilities with greater than 50 seats are required to install an interceptor with i" 1000 gallons minimum holding capacity. The Public Works Department may modify the above requirements only for good cause. Specifically, the facility must demonstrate to the satisfaction of the Industrial Waste Section and Building and Safety Division that interceptor installation is not feasible at the site in question. In such cases where modifications are granted, grease traps will be required in the place of an interceptor. Building permit plans shall show the required installation. Demolition Requirements 25. Until such time as the demolition is undertaken, and unless the structure is currently in use, the existing structure shall be maintained and secured by boarding up all openings, erecting a security fence, and removing all debris, bushes and planting that inhibit the easy surveillance of the property to the satisfaction of the Building and Safety Officer and the Fire Department. Any landscaping material remaining shall be watered and maintained until demolition occurs. 26. Prior to issuance of a demolition permit, applicant shall prepare for Building Division approval a rodent and pest control plan to insure that demolition and construction activities at the site do not create pest control impacts on the project neighborhood. Standard Conditions 27. Mechanical equipment shall not be located on the side of any building which is adjacent to a residential building on the adjoining lot, unless otherwise permitted by applicable regulations. Roof locations may be used when the mechanical equipment is installed within a sound -rated parapet enclosure. 28. Final approval of any mechanical equipment installation will require a noise test in compliance with SMMC Section 4.12.040. Equipment for the test shall be provided by the owner or contractor and the test shall be conducted by the owner or contractor. A copy of the noise test results on mechanical equipment shall be submitted to the Community Noise Officer for review to ensure that noise levels do not exceed maximum allowable levels for the applicable noise zone. 29. Final parking lot layout and specifications shall be subject to the review and approval of the Transportation Management Division. 30. Construction period signage shall be subject to the approval of the Joint Design Review Body. 31. The property owner shall insure any graffiti on the site is promptly removed through compliance with the City's graffiti removal program. 19 PUBLIC LANDSCAPE 32. Street trees shall be maintained, relocated or provided as required in a manner consistent with the City's Urban Forest Master Plan, per the specifications of the Public Landscape Division of the Community Maintenance Department and the City's Tree Code (SMMC Chapter 7.40). No street trees shall be removed without the approval of the Public Landscape Division. CONDITION MONITORING 33. The applicant authorizes reasonable City inspections of the property to ensure compliance with the conditions of approval imposed by the City in approving this project and will bear the reasonable cost of these inspections. GENERAL CONDITIONS 34. Developer shall be responsible for the payment of the following Public Works Department (PWD) permit fees prior to issuance of a building permit: a. Water Services b. Wastewater Capital Facility C. Water Demand Mitigation d. Fire Service Connection e. Tieback Encroachment f. Encroachment of on -site improvements into public right -of -way g. Construction and Demolition Waste Management (deposit) These fees shall be reimbursed to developer in accordance with the City's standard practice should Developer not proceed with development of the Project. 35. Any work or use of the public right -of -way including any proposed encroachments of on- site improvements into the public right -of -way will require a permit from the Public Works Department (PWD) - Administrative Services Division. 36. Plans and specifications for all offsite improvements shall be prepared by a Registered Civil Engineer licensed in the State of California for approval by the City Engineer prior to issuance of a building permit. 37. Immediately after demolition and during construction, a security fence, the height of which shall be the maximum permitted by the Zoning Ordinance, shall be maintained around the perimeter of the lot. The lot shall be kept clear of all trash, weeds, etc. 38. A sign shall be posted on the property in a manner consistent with the public hearing sign requirements, which shall identify the address and phone number of the owner, developer and contractor for the purposes of responding to questions and complaints during the construction period. Said sign shall also indicate the hours of permissible construction work. 20 39. A copy of these conditions shall be posted in an easily visible and accessible location at all times during construction at the project site. The pages shall be laminated or otherwise protected to ensure durability of the copy. 40. Prior to the demolition of any existing structure, the applicant shall submit a report from an industrial hygienist to be reviewed and approved as to content and form by the Office of Sustainability and Environment Division. The report shall consist of a hazardous materials survey for the structure proposed for demolition. The report shall include a section on asbestos and in accordance with the South Coast AQMD Rule 1403, the asbestos survey shall be performed by a state Certified Asbestos Consultant (CAC). The report shall include a section on lead, which shall be performed by a state Certified Lead Inspector /Assessor. Additional hazardous materials to be considered by the industrial hygienist shall include: mercury (in thermostats, switches, fluorescent light), polychlorinated biphenyls (PCBs) (including light Ballast), and fuels, pesticides, and batteries. Water Resources 41. Connections to the sewer or storm drains require a sewer permit from the PWD - Civil Engineering Division. Connections to storm drains owned by Los Angeles County require a permit from the L.A. County Department of Public Works. 42. Parking areas and structures and other facilities generating wastewater with potential oil and grease content are required to pretreat the wastewater before discharging to the City storm drain or sewer system. Pretreatment will require that a clarifier or oil /water separator be installed and maintained on site. 43. If the project involves dewatering, developer /contractor shall contact the LA Regional Water Quality Control Board (RWQCB) to obtain an NPDES Permit for discharge of groundwater from construction dewatering to surface water. For more information refer to: http: / /www.waterboards.ca.gov /losangeles/ and search for Order # R4- 2003 -0111. 44. Prior to issuance of a first building permit, applicant shall be required to submit the results of hydrant flow tests on existing adjacent public fire hydrants. If the hydrant flow tests show adequate flow and pressure to support the project as determined by the City's Water Resources Manager, no further studies are required. 45. Developer shall not directly connect to a public storm drain pipe or direct site drainage to the public alley. 46. All existing sanitary sewer "house connections" to be abandoned, shall be removed and capped at the "Y" connections. 47. The fire services and domestic services 3- inches or greater must be above ground, on the applicant's site, readily accessible for testing. Commercial or residential units are required to either have an individual water meter or a master meter with sub - meters. 21 48. Developer is required to meet state cross - connection and potable water sanitation guidelines. Refer to requirements and comply with the cross - connections guidelines available at: http:// www.lapublicbealtb.org /eh /progs /envirp /eheross.htm. Prior to issuance of a Certificate of Occupancy, a cross - connection inspection shall be completed. 49. All new restaurants and cooking facilities at the site are required to install Gravity Grease Interceptors to pretreat wastewater containing grease. The minimum capacity of the interceptor shall be determined by using table 10 -3 of the 2007 Uniform Plumbing Code, Section 1014.3. All units shall be fitted with a standard final -stage sample box. The 2007 Uniform Plumbing Code guideline in sizing Gravity Grease Interceptors is intended as a minimum requirement and may be increased at the discretion of PWD, Water Resources Protection Program. 50. Ultra -low flow plumbing fixtures are required on all new development and remodeling where plumbing is to be added. (Maximum 1.6 gallon toilets and 1.0 gallon urinals and low flow showerhead.) Urban Water Runoff Mitigation 51. To mitigate storm water and surface runoff from the project site, an Urban Runoff Mitigation Plan shall be required by the PWD pursuant to Municipal Code Chapter 7.10. Prior to submittal of landscape plans for Architectural Review Board approval, the applicant shall contact PWD to determine applicable requirements, such as: a. The site must comply with SMMC Chapter 7.10 Urban Runoff Pollution Ordinance for the construction phase and post construction activities; b. Non - stormwater runoff, sediment and construction waste from the construction site and parking areas is prohibited from leaving the site; C. Any sediments or materials which are tracked off -site must be removed the same day they are tracked off -site; d. Excavated soil must be located on the site and soil piles should be covered and otherwise protected so that sediments are not tracked into the street or adjoining properties; e. No runoff from the construction site shall be allowed to leave the site; and f. Drainage control measures shall be required depending on the extent of grading and topography of the site. g. Development sites that result in land disturbance of one acre or more are required by the State Water Resources Control Board (SWRCB) to submit a Storm Water Pollution Prevention Plan ( SWPPP). Effective September 2, 2011, only individuals who have been certified by the Board as a "Qualified SWPPP Developer" are qualified to develop and /or revise SWPPPs. A copy of the SWPPP shall also be submitted to the PWD. Public Streets & Ri2ht- of -Way 52. Unless otherwise approved by the PWD, all sidewalks shall be kept clear and passable during the grading and construction phase of the project. 22 53. Sidewalks, curbs, gutters, paving and driveways which need replacing or removal as a result of the project as determined by the PWD shall be reconstructed to the satisfaction of the PWD. Approval for this work shall be obtained from the Department of Public Works prior to issuance of the building permits. Utilities 54. Make arrangements with utility companies and pay for undergrounding of all overhead utilities within and along the development frontages. Existing and proposed overhead utilities need to be relocated underground. 55. Location of Southern California Edison electrical transformer and switch equipment/structures must be clearly shown of the development site plan and other appropriate plans within the project limits. The SCE structures serving the proposed development shall not be located in the public right -of -way. Resource Recovery and Recycling 56. Development plans must show the refuse and recycling (RR) area dimensions to demonstrate adequate and easily accessible area. If the RR area is completely enclosed, then lighting, ventilation and floor drain connected to sewer will be required. Section 9.04.10.02.151 of the SMMC has dimensional requirements for various sizes and types of projects. Developments that place the RR area in subterranean garages must also provide a bin staging area on their property for the bins to be placed for collection. 57. Contact the PWD — Resource Recovery and Recycling (RRR) Division for specific requirements of the refuse and recycling enclosure and where feasible install trash compaction devices to reduce the volume of refuse for disposal. Show compliance with these requirements on the building plans. Prior to issuance of a Certificate of Occupancy, submit a recycling plan to the RRR Division for its approval. The recycling plan shall include: a. List of materials such as white paper, computer paper, metal cans, and glass to be recycled; b. Location of recycling bins; C. Designated recycling coordinator; d. Nature and extent of internal and external pick -up service; e. Pick -up schedule; and f. Plan to inform tenants/ occupants of service. Miscellaneous: 58. For temporary excavation and shoring that includes tiebacks into the public right -of -way, a Tieback Agreement, prepared by the City Attorney, will be required. FIRE GENERAL REQUIREMENTS The following comments are to be included on plans if applicable. 23 Requirements are based on the California Fire Code (CFC), the Santa Monica Municipal Code (SMMC) and the California Building Code (CBC). For the Landmark building, Developer may request exceptions from these requirements pursuant to the State Historic Building Code. California Fire Code/ Santa Monica Fire Department Requirements I. A fire apparatus access road shall be provided to within 150 feet of all exterior walls of the first floor of the building. The route of the fire apparatus access road shall be approved by the fire department. The 150 feet is measured by means of an unobstructed route around the exterior of the building. 2. Apparatus access roads shall have a minimum unobstructed width of 20 feet. A minimum vertical clearance of 13 feet 6 inches shall be provided for the apparatus access roads. 3. Dead -end fire apparatus access roads in excess of 150 feet in length shall be provided with an approved means for turning around the apparatus. 4. A "Knox" key storage box shall be provided for ALL new construction. For buildings, other than high -rise, a minimum of 3 complete sets of keys shall be provided. Keys shall be provided for all exterior entry doors, fire protection equipment control equipment rooms, mechanical and electrical rooms, elevator controls and equipment spaces, etc. For high -rise buildings, 6 complete sets are required. 5. Santa Monica Municipal Code Chapter 8 section 8.44.050 requires an approved automatic fire sprinkler system in ALL new construction and certain remodels or additions. Any building that does not have a designated occupant and use at the time fire sprinkler plans are submitted for approval, the system shall be designed and installed to deliver a minimum density of not less than that required for ordinary hazard, Group 2, with a minimum design area of not less than three thousand square feet. Plans and specifications for fire sprinkler systems shall be submitted and approved prior to system installation. 6. Buildings four or more stories in height shall be provided with not less than one standpipe during construction. 7. The standpipe(s) shall be installed before the progress of construction is more than 35- feet above grade. Two - and - one - half -inch valve hose connections shall be provided at approved, accessible locations adjacent to useable stairs. Temporary standpipes shall be capable of delivering a minimum demand of 500 gpm at 100 -psi residual pressure. Pumping equipment shall be capable of providing the required pressure and volume. 8. Provide Multipurpose Dry Chemical type fire extinguishers with a minimum rating of 2A- IOB:C. Extinguishers shall be located on every floor or level. Maximum travel distance from any point in space or building shall not exceed 75 feet. Extinguishers shall be mounted on wall or installed in cabinet no higher than 4 ft. above finished floor and plainly visible and readily accessible or signage shall be provided. 9. An automatic fire extinguishing system complying with UL 300 shall be provided to protect commercial -type cooking or heating equipment that produces grease -laden vapors. A separate plan submittal is required for the installation of the system and shall be in accordance with UFC Article 10, NFPA 17A and NFPA 96. Provide a Class "K" type portable fire extinguisher within 30 feet the kitchen appliances emitting grease -laden vapors. 10. Every building and /or business suite is required to post address numbers that are visible from the street and alley. Address numbers shall be a minimum of six (6) inches in 24 height and contrast with their background. Suite or room numbers shall be a minimum of four (4) inches in height and contrast with their background. Santa Monica Municipal Code Chapter 8 Section 8.48.130 (1) (1) 11. When more than one exit is required they shall be arranged so that it is possible to go in either direction to a separate exit, except deadends not exceeding 20 feet, and 50 feet in fully sprinklered buildings. 12. Exit and directional signs shall be installed at every required exit doorway, intersection of corridors, exit stairways and at other such locations and intervals as necessary to clearly indicate the direction of egress. This occupancy /use requires the installation of approved floor level exit pathway marking. Exit doors shall be openable from the inside without the use of a key, special effort or knowledge. 13. Show ALL door hardware intended for installation on Exit doors. 14. In buildings two stories or more in height an approved floor plan providing emergency procedure information shall be posted at the entrance to each stairway, in every elevator lobby, and immediately inside all entrances to the building. The information shall be posted so that it describes the represented floor and can be easily seen upon entering the floor level or the building. Required information shall meet the minimum standards established in the Santa Monica Fire Department, Fire Prevention Division, information sheet entitled "Evacuation Floor Plan Signs." (California Code of Regulations Title 19 Section 3.09) 15. Stairway Identification shall be in compliance with CBC 1022.8 16. Floor -level exit signs are required in Group A, E, I, R -1, R -2 and R -4 occupancies. 17. In buildings two stories in height at least one elevator shall conform to the California Building Code Chapter 30 section 3003.5a for General Stretcher Requirements for medical emergency use. a. The elevator entrance shall not be less than 42 inches wide by 72 inches high. b. The elevator car shall have a minimum clear distance between walls excluding return panels of not less than 80 inches by 54 inches. C. Medical emergency elevators shall be identified by the international symbol (star of life) for emergency elevator use. The symbol shall be not less than 3- inches in size. 18. Storage, dispensing or use of any flammable or combustible liquids, flammable compressed gases or other hazardous materials shall comply with the Uniform Fire Code. The Santa Monica Fire Department prior to any materials being stored or used on site shall approve the storage and use of any hazardous materials. Complete and submit a "Consolidated Permit Application Package." Copies may be obtained by calling (310) 458 -8915. 19. Alarm- initiating devices, alarm - notification devices and other fire alarm system components shall be designed and installed in accordance with the appropriate standards of Chapter 35 of the Building Code, and the National Fire Alarm Code NFPA 72. The fire alarm system shall include visual notification appliances for warning the hearing impaired. Approved visual appliances shall be installed in ALL rooms except private (individual) offices, closets, etc 20. An approved fire alarm system shall be installed as follows: 21. Group A Occupancies with an occupant load of 1,000 or more shall be provided with a manual fire alarm system and an approved prerecorded message announcement using an 25 approved voice communication system. Emergency power shall be provided for the voice communication system. 22. Group E Occupancies having occupant loads of 50 or more shall be provided with an approved manual fire alarm system. 23. Group R -1, R -2 Apartment houses containing 16 or more dwelling units, in building three or more stories in height R -2.1 and R -4 Occupancies shall be provided with a manual alarm system. Smoke detectors shall be provided in all common areas and interior corridors of required exits. Recreational, laundry, furnace rooms and similar areas shall be provided with heat detectors. 24. Plans and specifications for fire alarm systems shall be submitted and approved prior to system installation Santa Monica Fire Department - Fire Prevention Policy Number 5 -1 Subject: Fire Apparatus Access Road Requirements Scope: This policy identifies the minimum standards for apparatus access roads required by California Fire Code, Section 503. Application 25. Fire apparatus access roads shall comply with the following minimum standards: a. The minimum clear width shall be not less than 20 feet. No parking, stopping or standing of vehicles is permitted in this clear width. b. When fire hydrants or fire department connections to fire sprinkler systems are located on fire apparatus access roads the minimum width shall be 26 feet. This additional width shall extend for 20 feet on each side of the centerline of the fire hydrant or fire department connection. C. The minimum vertical clearance shall be 13 feet, 6 inches. d. The minimum turn radius for all access road turns shall be not less than 39 feet for the inside radius and 45 feet for the outside radius. e. Dead -end access roads in excess of 150 feet in length shall be provided with either a 96 feet diameter "cul -de- sac," 60 foot "Y" or 120 -foot "hammerhead" to allow the apparatus to turn. f. The surface shall be designed and maintained to support the imposed loads of at least 75,000 -pound and shall be "all- weather." An "all- weather" surface is asphalt, concrete or other approved driving surface capable of supporting the load. 26. Gates installed on fire apparatus access roads shall comply with the following: a. The width of any gate installed on a fire apparatus access road shall be a minimum of 20 feet. 26 2s' 96' DIAMETER CUL -DE -SAC 60' °Y' z —> rt-- 26' <— 20' MINIMUM CLEARANCE AROUND A FIRE HYDRANT -x 28'R `K" TYP" 20'--1 —> —26` —> x-20' 124' HAMMERHEAD ACCEPTABLE ALTERNATIVE TO 120' HAMMERHEAD b. Gates may be of the swinging or sliding type. C. Gates shall be constructed of materials that will allow for manual operation by one person. d. All gate components shall be maintained in an operative condition at all times and shall be repaired or replaced when defective. e. Electric gates shall be equipped with a means of opening the gate by fire department personnel for emergency access. The Fire Prevention Division shall approve emergency opening devices. f. Manual opening gates may be locked with a padlock, as long it is accessible to be opened by means of forcible entry tools. g. The Fire Prevention Division shall approve locking device specification. 27. Fire apparatus access roads shall be marked with permanent NO PARKING — FIRE LANE CVC SECTION 22500.1. Signs shall have a minimum dimension of 12 inches wide and 18 inches high having red letters on a white reflective background. a. Fire apparatus access roads signs and placement shall comply with the following: i. Fire Apparatus access roads 20 to 26 feet wide must be posted on both sides as a fire lane. ii. Fire Apparatus access roads 26 to 32 feet wide must be posted on one side as a fire lane. 28. Buildings or facilities exceeding 30 feet in height or more than 3 stories in height shall have at least 2 fire apparatus access roads for each structure. 27 29. Fire apparatus access roads for commercial and industrial development shall comply with the following: i. Buildings or facilities exceeding 30 feet in height or more than 3 stories in height shall have at least 2 means of fire apparatus access for each structure. ii. Buildings or facilities having a gross floor area of more than 62,000 square feet shall be provided with 2 fire apparatus access roads. iii. When two access roads are required, they shall be placed a distance apart equal to not less than one half of the length of the maximum overall diagonal dimension of the property or area to be accessed measured in a straight line between access. 30. Aerial apparatus access roads shall comply with the following: i. Buildings or portions of buildings or facilities exceeding 30 feet in height from the lowest point of Fire Department access shall be provided shall be provided with approved apparatus access roads capable of accommodating aerial apparatus. ii. Apparatus access roads shall have a minimum width of 26 feet in the immediate vicinity of any building or portion of a building more than 30 feet in height. iii. At least one of the required access roads meeting this condition shall be located within a minimum of 15 feet and maximum of 30 feet from the building and shall be a positioned parallel to one entire side of the building. 31. California Buildine Code / Santa Monica Fire Department Requirements Occupancy Classification and Division • If a change in occupancy or use, identify the existing and all proposed new occupancy classifications and uses • Assembly (A -1, A -2, A -3), Business (B), Mercantile (M), Residential (R), etc. • Include all accessory uses Building Height • Height in feet (SMMC defines a High -Rise as any structure greater then 55 feet.) • Number of stories Detail increase in allowable height Type I (II -FR.) buildings housing Group B office or Group R, Division 1 Occupancies each having floors used for human occupancy located more than 55 feet above the lowest level of fire department vehicle access shall comply with CBC Section 403. a. Automatic sprinkler system. b. Smoke - detection systems. c. Smoke control system conforming to Chapter 9 section 909. d. Fire alarm and communication systems. 1. Emergency voice alann signaling system. 2. Fire department communication system. e. Central control station. (96 square feet minimum with a minimum dimension of 8' ft) f. {omitted) g. Elevators. h. Standby power and light and emergency systems. i. Exits W j. Seismic consideration. Total Floor Area of Building or Project • Basic Allowable Floor Area • Floor Area for each room or area • Detail allowable area increase calculations Corridor Construction • Type of Construction • Detail any and all code exceptions being used Occupant Load Calculations • Occupancy Classification for each room or area. • Occupant Load Calculation for each room or area based on use or occupancy • Total Proposed Occupant Load Means of Egress • Exit width calculations • Exit path of travel • Exit Signage and Pathway Illumination (low level exit signage) Atria - Atria shall comply with CBC Section 404 as follows: • Atria shall not be permitted in buildings containing Group H Occupancies. • The entire building shall be sprinklered. • A mechanically operated smoke - control system meeting the requirements of Section 909 and 909.9 shall be installed. • Smoke detectors shall be installed in accordance with the Fire Code. • Except for open exit balconies within the atrium, the atrium shall be separated from adjacent spaces by one -hour fire - resistive construction. See exceptions to Section 404.6. • When a required exit enters the atrium space, the travel distance from the doorway of the tenant space to an enclosed stairway, horizontal exit, exterior door or exit passageway shall not exceed 200 feet. • In other than jails, prisons and reformatories, sleeping rooms of Group I Occupancies shall not have required exits through the atrium. • Standby power shall be provided for the atrium and tenant space smoke - control system. Sections 404.7 and 909.11. • The interior finish for walls and ceilings of the atrium and all unseparated tenant spaces shall be Class 1. Section 404.8. Atriums of a height greater than 20 feet, measured from the ceiling sprinklers, shall only contain furnishings and decorative materials with potential heat of combustion less than 9,000 Btu's per pound. All furnishings to comply with California Bureau of Home Furnishings, Technical Bulletin 133, "Flammability Test for Seating Furniture in Public Occupancies." 29 All furnishings in public areas shall comply with California Bureau of Home Furnishings, Technical Bulletin 133, "Flammability Test for Seating Furniture in Public Occupancies." Fire — Los Aneeles Countv 32. Fire Flow Requirements I. INTRODUCTION A. Purpose: To provide Department standards for fire flow, hydrant spacing and specifications. B. Scope: Informational to the general public and instructional to all individuals, companies, or corporations involved in the subdivision of land, construction of buildings, or alterations and /or installation of fire protection water systems and hydrants. C. Author: The Deputy Chief of the Prevention Services Bureau through the Assistant Fire Chief (Fire Marshal) of the Fire Prevention Division is responsible for the origin and maintenance of this regulation. D. Definitions: 1. GPM — gallons per minute 2. psi — pounds per square inch 3. Detached condominiums — single detached dwelling units on land owned in common 4. Multiple family dwellings — three or more dwelling units attached 11. RESPONSIBILITY A. Land Development Unit 1. The Department's Land Development Unit shall review all subdivisions of land and apply fire flow and hydrant spacing requirements in accordance with this regulation and the present zoning of the subdivision or allowed land use as approved by the County's Regional Planning Commission or city planning department. B. Fire Prevention Engineering Section 1. The Department's Fire Prevention Engineering Section shall review . building plans and apply fire flow and hydrant spacing requirements in accordance with this regulation. 30 III. POLICY A. The procedures, standards, and policies contained herein are provided to ensure the adequacy of, and access to, fire protection water and shall be enforced by all Department personnel. IV. PROCEDURES A. Land development: fire flow, duration of flow, and hydrant spacing The following requirements apply to land development issues such as: tract and parcel maps, conditional use permits, zone changes, lot line adjustments, planned unit developments, etc. 1. Residential Fire Zones 3 Very High Fire Hazard Severity Zone (VHFHSZ) Public Fire Flow Duration Hydrant of Flow Spacing a. Single family dwelling 1,250 GPM 2 hrs. 600 ft. and detached condominiums (1 — 4 Units) (Under 5,000 square feet) b. Detached condominium 1,500 GPM 2 hrs. 300 ft. (5 or more units) (Under 5,000 square feet) C. Two family dwellings 1,500 GPM 2 hrs. 600 ft. (Duplexes) NOTE: FOR SINGLE FAMILY DWELLINGS OVER 5,000 SQUARE FEET. SEE, TABLE 1 FOR FIRE FLOW REQUIREMENTS PER BUILDING SIZE. 2. Multiple family dwellings, hotels, high rise, commercial, industrial, etc. a. Due to the undetermined building designs for new land development projects (undeveloped land), the required fire flow shall be: 5,000 GPM 31 5 hrs. 300 ft. NOTE: REDUCTION IN FIRE FLOW IN ACCORDANCE WITH TABLE 1. b. Land development projects consisting of lots having existing structures shall be in compliance with Table I (fire flow per building size). This standard applies to multiple family dwellings, hotels, high rise, commercial, industrial, etc. NOTE: FIRE FLOWS PRECEDING ARE MEASURED AT 20 POUNDS PER SQUARE INCH RESIDUAL PRESSURE. B. Building plans The Department's Fire Prevention Engineering Section shall review building plans and apply fire flow requirements and hydrant spacing in accordance with the following: 1. Residential Building Occupancy Classification a. Single family dwellings - Fire Zone 3 (Less than 5,000 square feet) Duration Public Hydrant Fire Flow of Flow Spacine On a lot of one acre or more 750 GPM 2 hrs. 600 ft. On a lot less than one acre 1,250 GPM 2 hrs 600 ft. b. Single family dwellings — VHFHSZ (Less than 5,000 square feet) On a lot of one acre or more 1,000 GPM 2 hrs. 600 ft. On a lot less than one acre 1,250 GPM 2 hrs 600 ft. NOTE: FOR SINGLE FAMILY DWELLINGS GREATER THAN 5,000 SQUARE FEET IN AREA SEE TABLE 32 C. Duration Fire Flow of Flow c. Two family dwellings — VHFHSZ (Less than 5,000 square feet) Duplexes 2. Mobile Home Park a. Recreation Buildings 1,500 GPM 2 hrs Public Hydrant Suacin2 600 ft. Refer to Table 1 for fire flow according to building size. b. Mobile Home Park 1,250 GPM 2 hrs 600 ft. 3. Multiple residential, apartments, single family residences (greater than 5,000 square feet), private schools, hotels, high rise, commercial, industrial, etc. (R -1, E, B, A, I, H, F, M, S) (see Table 1). Public fire hydrant requirements 1. Fire hydrants shall be required at intersections and along access ways as spacing requirements dictate 2. Spacing a. Cul -de -sac When cul -de -sac depth exceeds 450' (residential) or 200' (commercial), hydrants shall be required at mid - block. Additional hydrants will be required if hydrant spacing exceeds specified distances. b. Single family dwellings Fire hydrant spacing of 600 feet NOTE: The following guidelines shall be used in meeting single family dwellings hydrant spacing requirements: (1) Urban properties (more than one unit per acre): No portion of lot frontage should be more than 450' via vehicular access from a public hydrant. 33 (2) Non -Urban Properties (less than one unit per acre): No portion of a structure should be placed on a lot where it exceeds 750' via vehicular access from a properly spaced public hydrant that meets the required fire flow. c. All occupancies Other than single family dwellings, such as commercial, industrial, multi - family dwellings, private schools, institutions, detached condominiums (five or more units), etc. Fire hydrant spacing shall be 300 feet. NOTE:The following guidelines shall be used in meeting the hydrant spacing requirements. (1) No portion of lot frontage shall be more than 200 feet via vehicular access from a public hydrant. (2) No portion of a building should exceed 400 feet via vehicular access from a properly spaced public hydrant. d. Supplemental fire protection When a structure cannot meet the required public hydrant spacing distances, supplemental fire protection shall be required. NOTE: Supplemental fire protection is not limited to the installation of on -site fire hydrants; it may include automatic extinguishing systems. 3. Hydrant location requirements - both sides of a street Hydrants shall be required on both sides of the street whenever: a. Streets having raised median center dividers that make access to hydrants difficult, causes time delay, and /or creates undue hazard. b. For situations other than those listed in "a" above, the Department's inspector's judgment shall be used. The following items shall be considered when determining hydrant locations: (1) Excessive traffic loads, major arterial route, in which traffic would be difficult to detour. 34 (2) Lack of adjacent parallel public streets in which traffic could be redirected (e.g., Pacific Coast Highway). (3) Past practices in the area. (4) Possibility of future development in the area. (5) Type of development (i.e., flag -lot units, large apartment or condo complex, etc.). (6) Accessibility to existing hydrants (7) Possibility of the existing street having a raised median center divider in the near future. D. On -Site Hydrant Requirements 1. When any portion of a proposed structure exceeds (via vehicular access) the allowable distances from a public hydrant and on -site hydrants are required, the following spacing requirements shall be met: a. Spacing distance between on -site hydrants shall be 300 to 600 feet. (1) Design features shall assist in allowing distance modifications. b. Factors considered when allowing distance modifications. (1) Only sprinklered buildings qualify for the maximum spacing of 600 feet. (2) For non - sprinklered buildings, consideration should be given to fire protection, access doors, outside storage, etc. Distance between hydrants should not exceed 400 feet. 2. Fire flow a. All on -site fire hydrants shall flow a minimum of 1,250 gallons per minute at 20 psi for a duration of two hours. If more than one on -site fire hydrant is required, the on -site fire flow shall be at least 2,500 gallons per minute at 20 psi, flowing from two hydrants simultaneously. On site flow may be greater depending upon the size of the structure and the distance from public hydrants. 35 NOTE: ONE OF THE TWO HYDRANTS TESTED SHALL BE THE FARTHEST FROM THE PUBLIC WATER SOURCE. 3. Distance from structures All on -site hydrants shall be installed a minimum of 25 feet from a structure or protected by a two -hour firewall. 4. Shut -off valves All on -site hydrants shall be equipped with a shut -off (gate) valve, which shall be located as follows: a. Minimum distance to the hydrant 10 feet. b. Maximum distance from the hydrant 25 feet 5. Inspection of new installations All new on -site hydrants and underground installations are subject to inspection of the following items by a representative of the Department: a. Piping materials and the bracing and support thereof. b. A hydrostatic test of 200 psi for two hours. c. Adequate flushing of the installation. d. Flow test to satisfy required fire flow. (1) Hydrants shall be painted with two coats of red primer and one coat of red paint, with the exception of the stem and threads, prior to flow test and acceptance of the system. 6. Maintenance It shall be the responsibility of the property management company, the homeowners association, or the property owner to maintain on -site hydrants. a. Hydrants shall be painted with two coats of red primer and one coat of red, with the exception of the stem and threads, prior to flow test and acceptance of the system. b. No barricades, walls, fences, landscaping, etc., shall be installed or planted within three feet of a fire hydrant. E. Public Hydrant Flow Procedure The minimum acceptable flow from any existine public hydrant shall be 1,000 36 GPM unless the required fire flow is less. Hydrants used to satisfy fire flow requirements will be determined by the following items: 1. Only hydrants that meet spacing requirements are acceptable for meeting fire flow requirements. 2. In order to meet the required fire flow: a. Flow closest hydrant and calculate to determine flow at 20 pounds per square inch residual pressure. If the calculated flow does not meet the fire flow requirement, the next closest hydrant shall be flowed simultaneously with the first hydrant, providing it meets the spacing requirement, etc. b. If more than one hydrant is to be flowed in order to meet the required fire flow, the number of hydrants shall be flowed as follows: One hydrant Two hydrants Three hydrants F. Hydrant Upgrade Policy 1,250 GPM and below 1,251— 3,500 GPM flowing simultaneously 3,501— 5,000 GPM flowing simultaneously 1. Existing single outlet 2 1/2" inch hydrants shall be upgraded to a double outlet 6" x 4" x 2 1/2" hydrant when the required fire flow exceeds 1,250 GPM. 2. An upgrade of the fire hydrant will not be required if the required fire flow is between the minimum requirement of 750 gallons per minute, up to and including 1,250 gallons per minute, and the existing public water system will provide the required fire flow through an existing wharf fire hydrant. 3. All new required fire hydrant installations shall be approved 6" x 4" x 2 1/2" fire hydrants. 4. When water main improvements are required to meet GPM flow, and the existing water main has single outlet 2 1/2" fire hydrant(s), then a hydrant(s) upgrade will be required. This upgrade shall apply regardless of flow requirements. 5. The owner - developer shall be responsible for making the necessary arrangements with the local water purveyor for the installation of all public facilities. 37 6. Approved fire hydrant barricades shall be installed if curbs are not provided (see Figures 1, 2, and 3 following on pages 11 and 12). G. Hydrant Specifications All required public and on -site fire hydrants shall be installed to the following specifications prior to flow test and acceptance of the system. 1. Hydrants shall be: a. Installed so that the center line of the lowest outlet is between 14 and 24 inches above finished grade b. Installed so that the front of the riser is between 12 and 24 inches behind the curb face C. Installed with outlets facing the curb at a 45- degree angle to the curb line if there are double outlet hydrants d. Similar to the type of construction which conforms to current A.W.W.A. Standards e. Provided with three -foot unobstructed clearance on all sides. £ Provided with approved plastic caps g. Painted with two coats of red primer and one coat of traffic signal yellow for public hydrants and one coat of red for on -site hydrants, with the exception of the stems and threads 2. Underground shut -off valves are to be located: a. A minimum distance of 10 feet from the hydrant b. A maximum distance of 25 feet from the hydrant Exception: Location can be less than 10 feet when the water main is already installed and the 10 -foot minimum distance cannot be satisfied. 3. All new water mains, laterals, gate valves, buries, and riser shall be a minimum of six inches inside diameter. 4. When sidewalks are contiguous with a curb and are five feet wide or less, fire hydrants shall be placed immediately behind the sidewalk. Under no circumstances shall hydrants be more than six feet from a curb line. 38 5. The owner - developer shall be responsible for making the necessary arrangements with the local water purveyor for the installation of all public facilities. 6. Approved fire hydrant barricades shall be installed if curbs are not provided (see Figures 1, 2, and 3 following on pages 11 and 12). Barricade /Clearance Details CONCRETE CAP (-� C BARRICADE POST 6 FIA RRTE EPOS 3,MW h A" DIA. SCHEDULE 44 STEEL SEE NOTE #1 14 Figure 1 CONCRETE 4' MIN, 6' .PLAN FIRE HYDRANT BARRICADES (TYPICAL) 39 Figure 2 Figure 3 Notes: a C 1. Constructed of steel not less than four inches in diameter, six inches if heavy truck traffic is anticipated, schedule 40 steel and concrete filled. 2. Posts shall be set not less than three feet deep in a concrete footing of not less than 15 inches in diameter, with the top of the posts not less than three feet above ground and not less than three feet from the hydrant 3. Posts, fences, vehicles, growth, trash storage and other materials or things shall not be placed or kept near fire hydrants in a manner that would prevent fire hydrants from being immediately discernable. 4. If hydrant is to be barricaded, no barricade shall be constructed in front of the hydrant outlets (Figure 2, shaded area). 5. The exact location of barricades may be changed by the field inspector during a field inspection. 6. The steel pipe above ground shall be painted a minimum of two field coats of primer. 7. Two finish coats of "traffic signal yellow" shall be used for fire hydrant barricades. 8. Figure 3 shows hydrant hook up during fireground operations. Notice apparatus (hydra - assist- valve) connected to hydrant and the required area. Figure 3 shows the importance of not constructing barricades or other obstructions in front of hydrant outlets. 40 H. Private fire protection systems for rural commercial and industrial development Where the standards of this regulation cannot be met for industrial and commercial developments in rural areas, alternate proposals which meet NFPA Standard 1142 may be submitted to the Fire Marshal for review. Such proposals shall also be subject to the following: 1. The structure is beyond 3,000 feet of any existing, adequately -sized water system. a. Structures within 3,000 feet of an existing, adequately -sized water system, but beyond a water purveyor service area, will be reviewed on an individual basis. 2. The structure is in an area designated by the County of Los Angeles' General Plan as rural non - urban. 1. Blue reflective hydrant markers replacement policy Purpose: To provide information regarding the replacement of blue reflective hydrant markers, following street construction or repair work. a. Fire station personnel shall inform Department of Public Works Road Construction Inspectors of the importance of the blue reflective hydrant markers, and encourage them to enforce their Department permit requirement, that streets and roads be returned to their original condition, following construction or repair work. b. When street construction or repair work occurs within this Department's jurisdiction, the nearest Department of Public Works Permit Office shall be contacted. The location can be found by searching for the jurisdiction office in the "County of Los Angeles Telephone Directory" under "Department of Public Works Road Maintenance Division." The importance of the blue reflective hydrant markers should be explained, and the requirement encouraged that the street be returned to its original condition, by replacing the hydrant markers. 41 TABLE I * BUILDING SIZE (First floor area) Fire Flow *(1) (2) Duration Hydrant Spacin 1,000 GPM 2 hrs. Under 3,000 sq. ft. 300 ft. sq. ft. 3,000 to 4,999 sq. ft. 1,250 GPM 2 hrs. 300 ft. sq. ft. 5,000 to 7,999 sq. ft. 1,500 GPM 2 hrs. 300 ft. 8,000 to 9,999 2,000 GPM 2 hrs. 300 ft. 10,000 to 14,999 2,500 GPM 2 hrs. 300 ft. 15,000 to 19,999 sq. ft. 3,000 GPM 3 hrs. 300 ft. sq. ft. 20,000 to 24,999 sq. ft. 3,500 GPM 3 hrs. 300 ft. sq. ft. 25,000 to 29,999 sq. ft. 4,000 GPM 4 hrs. 300 ft. 30,000 to 34,999 4,500 GPM 4 hrs. 300 ft. 35,000 or more 5 000 GPM 5 hrs. 300 ft. * See applicable footnotes below: (FIRE FLOWS MEASURED AT 20 POUNDS PER SQUARE INCH RESIDUAL PRESSURE) (1) Conditions requiring additional fire flow. a. Each story above ground level - add 500 GPM per story. b. Any exposure within 50 feet - add a total of 500 GPM. c. Any high -rise building (as determined by the jurisdictional building code) the fire flow shall be a minimum of 3,500 GPM for 3 hours at 20 psi. d. Any flow may be increased up to 1,000 GPM for a hazardous occupancy. (2) Reductions in fire flow shall be cumulative for type of construction and a fully sprinklered building. The following allowances and /or additions may be made to standard fire flow requirements: a. A 25% reduction shall be granted for the following types of construction: Type I- F.R, Type II -F.R., Type Il one -hour, Type H -N, Type III one -hour, Type III -N, Type IV, Type IV one hour, and Type V one -hour. This reduction shall be 42 automatic and credited on all projects using these types of construction. Credit will not be given for Type V -N structures (to a minimum of 2,000 GPM available fire flow). b. A 25% reduction shall be granted for fully sprinklered buildings (to a minimum of 2,000 GPM available fire flow). C. When determining required fire flows for structures that total 70,000 square feet or greater, such flows shall not be reduced below 3,500 GPM at 20 psi for three hours. 43 EXHIBIT E SMMC ARTICLE 9 (PLANNING AND ZONING) EXHIBIT F HOTEL CONDITIONS TO DISPENSE ALCOHOL In the Hotel rooms, Hotel common areas, Second Floor Bar, Rooftop food service /bar area, Wine Storage /Tasting Room, and Meeting /Banquet Rooms A, B, and C, Developer or a hotel /business operator may sell or furnish alcoholic beverages for consumption on the following terms and conditions without obtaining a Conditional Use Permit. This approval is for Type 47 (On Sale General -- Eating Place), Type 70 (On -Sale General Restrictive Service),' Type 42 (On Sale Beer & Wine - Public Premises), Type 58 (Caterer's Permit), Type 48 (On Sale General — Public Premises), Type 66 (Controlled Access Cabinet) and Type 68 (Portable Bar) alcohol licenses only. 2. Seating and Floor Areas. Seating and floor areas in which alcohol is served shall not exceed the following: • Hotel minibars and room service • Hotel common area, including the lobby, hotel entry plaza, second floor podium and the rooftop deck area; • Second Floor Bar: 14 seats, 6 bar seats and 1,027 square feet; • Rooftop food service /bar area: 24 interior seats and 354 square feet and 20 exterior seats and 673 square feet. • PI Level Wine Storage/Tasting Room: 20 seats and 415 square feet; • Meeting /Banquet Room A: 3,950 square feet; Meeting /Banquet Room B: 2,208 square feet; and Meeting /Banquet Room C: 1,283 square feet (collectively the "Meeting /Banquet Rooms "). Meeting/Banquet Room A and Meeting /Banquet Room B contain removable partitions and may be combined for up to 6,158 square feet. The seating configurations for each of the alcohol serving areas as shown on the Project Plans shall not be altered so as to increase occupancy of those areas. The Meeting/Banquet Rooms may be rearranged as appropriate for special events or conferences. 4. Hours a. First and Second Floor Common Area. Hotel employees may sell or furnish alcoholic beverages for consumption within the first floor and second floor common area of the hotel premises, including the lobby, to hotel guests and their invitees between the hours of: • Sunday through Thursday: 11:00 AM to 12:00 AM (midnight), interior common areas 11:00 AM to 11:00 PM, outdoor common areas • Friday and Saturday: 45 11:00 AM to 1:00 AM (next day), interior common areas 11:00 AM to 12:00 AM (midnight), outdoor common areas Alcoholic beverage purchases pursuant to this Section 4a shall be charged to guest's room bill or by method of payment permissible by the State's Department of Alcoholic Beverage Control for a Type 70 alcohol license. b. Second Floor Bar. The permitted hours of alcohol consumption shall be from 11:00 AM to 2:00 AM (next day). Alcohol may only be served within interior areas of the bar. C. Wine Storage /Tasting Room. The permitted hours of alcohol consumption shall be from 6:00 AM to 2:00 AM (next day) d. Rooftop. The permitted hours of alcohol consumption shall be from: Sunday through Thursday: 11:00 AM to 11:00 PM Friday and Saturday 11:00 AM to 12:00 AM (Midnight) e. Meeting/Banquet Rooms. The permitted hours of alcohol consumption in the Meeting/Banquet rooms shall be 6:00 AM to 2:00 AM (next day). Notwithstanding the foregoing, alcohol service is only permitted within the Meeting/Banquet Rooms provided these rooms at the time alcohol is served are being used in the manner other similar hotels normally and customarily use such spaces. This Exhibit does not authorize alcohol service in the Meeting /Banquet Rooms unless associated with activities normally and customarily occurring in similar hotels. Such uses include, but are not limited to, meetings, conferences, lectures, training or instructional classes, conventions, demonstrations, competitions, speeches, services, presentations, celebrations, contests, fundraisers, commemorations, reunions, performances, auctions, ceremonies, parties, banquets, receptions, and other analogous events or activities occurring in comparable hotel meeting and banquet facilities. 5. Hotel Rooms. a. Mini - bars /refrigerators shall be permitted in individual hotel rooms, subject to the terms and conditions in this Exhibit "F" in addition to the following conditions if they will contain alcoholic beverages: 1. Restocking of the mini - bars /refrigerators shall be performed in the course of scheduled room service activities, but shall not be performed between the hours of 2:00 am and 6:00 am; and 2. Alcohol shall be stored only within approved liquor cabinets, which shall be accessible through key access or other controls restricting availability only to registered guests 21 years of age or older. b. Room service of alcoholic beverages for consumption in guest rooms or adjoining private outdoor space is permitted to hotel guests 21 years of age or older who EN provide proof of age if requested by room service personnel and subject to the terms and conditions in this Exhibit "F ". c. With respect to the mini - bars /refrigerators in individual hotel rooms described in subsection (a) of this Section 5 and room service of alcoholic beverages as provided in subsection (b) of this Section 5, the Developer shall not be obligated to obtain any additional Discretionary Approvals from the City, including without limitation any Conditional Use Permits, so long as they are operated within the scope of this Agreement. 6. Minor amendments to the Hotel seating and floor area where alcohol is served as shown on the Project Plans shall be subject to approval by the Director of Planning in accordance with Section 2.4.2 (Minor Modifications). A significant change in the approved concept for Hotel alcohol service areas or any increase in the square footage or in the number of seats shall require either a Conditional Use Permit or a Development Agreement amendment pursuant to Section 2.4.3 (Major Modifications). Construction shall be in substantial conformance with the plans submitted or as modified by the Planning Commission, Architectural Review Board, or Director of Planning. No expansion in number of seats of any alcohol serving area, intensity of operation of any alcohol serving area, or outdoor alcohol serving areas shall occur without prior approval from the City of Santa Monica and State ABC (if required by the ABC). Concurrently with filing an application to the State ABC for one or more alcohol licenses, the applicant shall provide a copy of this signed Exhibit "F" to the local office of the State Alcoholic Beverage Control Department. The operation of the hotel, including the common areas, Rooftop, Second Floor Bar and Wine Storage /Tasting Room, and Meeting /Banquet Rooms, shall at all times be conducted in a manner not detrimental to surrounding properties or residents by reason of lights, noise, activities, parking or other actions. 9. No alcoholic beverage shall be sold for consumption beyond the hotel premises unless in a Retail Use which has an approved Conditional Use Permit. 10. No more than 35% of total gross revenues per year shall be from alcohol sales. The operator shall maintain records of gross revenue sources which shall be submitted annually to the City's Planning Division at the beginning of the calendar year and also available to the City and the State ABC upon request. 11. The primary use of the hotel shall be for Hotel Use. Alcohol may be available to registered guests and their visitors, persons attending private functions Meeting /Banquet Rooms, and patrons of the Second Floor Bar, Rooftop dining areas, Wine Storage /Tasting Room and Restaurants in accordance with Exhibits IV% "H" and "I ". 12. Live, non - amplified, acoustical music shall be permitted in the Second Floor Bar, Wine Storage /Tasting Room, and hotel indoor common areas provided there is no dancing or dance floor and there is no cover charge or minimum drink purchase requirement. No 47 dancing or live entertainment is permitted in any of the Hotel outdoor areas. Live amplified music, disc jockey, or recorded music shall be permitted in the Meeting/Banquet Rooms for events with alcohol service similar to events occurring in other similar hotels with meeting and banquet rooms; and dancing shall also be permitted in these rooms when associated with such an event and only within the Meeting /Banquet Rooms. 13. No outside promoter shall be permitted to rent or lease the hotel. No event held at the hotel shall be advertised under another name. All private parties shall be operated through the hotel. 14. Except for special events and on the rooftop (or in the area of the pool deck), alcohol shall not be served in any disposable container such as disposable plastic or paper cups. 15. Any portable bars shall only be located and used in the Meeting /Banquet Rooms associated with special events and shall be permitted on the pool deck. 16. The hotel operator shall prohibit loitering and control noisy guests leaving the hotel. 17. Except in guest rooms and the Meeting /Banquet Rooms for events, no video or other amusement games shall be permitted in any area where alcohol is sold unless such games are authorized by a Conditional Use Permit. 18. Except in the Second Floor Bar and Wine Storage /Tasting Room, any minimum purchase requirement may be satisfied by the purchase of beverages or food. 19. The hotel shall at all times comply with the provisions of the Noise Ordinance (SMMC Chapter 4.12). 20. The hotel shall not conduct recycling deposits, pressure washing, or other noise generating activity audible from the exterior of the buildings between the hours of I 1 PM and 7 AM. 21. Window or other signage visible from the public right -of -way that advertises beer or alcohol shall not be permitted. 22. Prior to issuance of a Certificate of Occupancy, or a business license, or commencement of alcohol service as applicable, a security plan shall be submitted to the Chief of Policy for review of approval. The plan shall address both physical and operational security issues. 23. Prior to the commencement of alcohol service, the hotel operator, restaurant operator or business operator, as applicable, shall participate in the Santa Monica Alcohol Awareness for Retailers Training (S.M.A.A.R.T) program conducted by the Santa Monica Police Department. 48 24. The Developer authorizes reasonable City inspection of the Property to ensure compliance with the conditions set forth in this Exhibit "F" and will bear the reasonable costs of these inspections as established by SMMC Section 2.72.010 and Resolution No. 9905 (CCS) or any successor legislation thereto. These inspections shall be no more intrusive than necessary to ensure compliance with this Section. 25. Prior to exercising the rights of this Exhibit "F ", the applicant shall post a notice at the hotel entry stating that the Property is regulated by a Development Agreement and the Development Agreement, which includes the hotel's alcohol related conditions of approval, is available upon request. This notice shall remain posted at all time the hotel is in operation. 26. The hotel operator shall employ staff to patrol the licensed premises to ensure patrons of the hotel are not disruptive to adjoining properties and area residents. Acknowledeement of Hotel Operator I hereby agree to the above conditions of approval and acknowledge that failure to comply with such conditions shall constitute grounds for potential revocation of the approval to dispense alcoholic beverages. Print Name and Title Signature M Date EXHIBIT G RESTAURANT "A" (FINE DINING) CONDITIONS TO DISPENSE ALCOHOL Within the Restaurant located on the ground floor of the Landmark Building and designated as "Restaurant `A "' on the Project Plans, Developer or a business operator may dispense for sale or other consideration, alcoholic beverages, including beer, wine, malt beverages, and distilled spirits for on -site consumption, on the following terms and conditions: This approval is for a Type 47 (On Sale General -- Eating Place) alcohol license only. Any request to modify the license type shall require either a conditional use permit or a Development Agreement amendment pursuant to Section 2.4.3 (Major Modifications). 2. Seating arrangements for sit -down patrons in Restaurant A shall not exceed 121 interior seats and 14 exterior seats. 3. The permitted hours of alcohol consumption in Restaurant A shall be: Sunday through Wednesday 11:00 AM to 12:00 AM (next day), interior dining area 11:00 AM to 11:00 PM, outdoor dining area Thursday through Saturday 11:00 AM to 1:00 AM (next day), interior dining area 11:00 AM to 12:00 AM (midnight), outdoor dining area Complete closure and all employees shall vacate the tenant space one hour after regular business closure. No "after hours" operations shall be permitted. 4. Alcoholic beverage orders shall cease 30 minutes prior to closure of Restaurant A, or no later than the closing of the associated food service of the restaurant, whichever is first. Prior to issuance of a final inspection or a business license for Restaurant A, the restaurant operator shall post a notice at the entry stating that the site is regulated by a Development Agreement and the Development Agreement, which includes the restaurant's conditions of approval is available upon request. This notice shall remain posted at all times the establishment is in operation. 6. Concurrently with filing an application with the State ABC, the restaurant operator shall provide a copy of this signed Exhibit "G" to the local office of the State Alcoholic Beverage Control Department. 7. Prior to issuance of a Certificate of Occupancy, or a business license, or commencement of alcohol service in Restaurant A as applicable, the operator shall submit a plan for approval by the City's Planning Director regarding employee alcohol awareness training 50 programs and policies. The plan shall outline a mandatory alcohol awareness training program for all employees having contact with the public and shall state management's policies addressing alcohol consumption and inebriation. The program shall require all employees having contact with the public to complete a California Department of Alcoholic Beverage Control (ABC) sponsored alcohol awareness training program within 90 days of the effective date of the approval by the Planning Director of the plan. In the case of new employees, the employee shall attend the alcohol awareness training within 90 days of hiring. In the event the ABC no longer sponsors an alcohol awareness training program, all employees having contact with the public shall complete an alternative program approved by the Planning Director. The operator shall provide the City with an annual report regarding compliance with this condition. This project shall be subject to any future City -wide alcohol awareness training program condition affecting similar establishments. 8. Prior to issuance of a Certificate of Occupancy, or a business license, or commencement of alcohol service in Restaurant A as applicable, the operator shall also submit a plan describing the establishment's designated driver program, which shall be offered by the operator to the establishment's patrons. The plan shall specify how the operator will inform patrons of the program, such as offering on the menu a free non - alcoholic drink for every party of two or more ordering more than one alcoholic beverage. 9. In the event Restaurant A operator fails to comply with any conditions of approval of this Exhibit, no further permits, licenses, approvals or certificates of occupancy for Restaurant A shall be issued to such applicant until such violation has been fully remedied. 10. Minor amendments to Restaurant A as shown on the Project Plans shall be subject to approval by the Director of Planning in accordance with Section 2.4.2 (Minor Modifications). A significant change in the approved concept for Restaurant A or any increase in the square footage of Restaurant A or in the number of seats in Restaurant A shall require either a conditional use permit or a Development Agreement amendment pursuant to Section 2.4.3 (Major Modifications). Construction shall be in substantial conformance with the plans submitted or as modified by the Planning Commission, Architectural Review Board, or Director of Planning. No expansion in number of seats of any alcohol serving area, intensity of operation of any alcohol serving area, or outdoor alcohol serving areas shall occur without prior approval from the City of Santa Monica and State ABC (if required by the ABC). 11. Restaurant A shall at all times be conducted in a manner not detrimental to surrounding properties or residents by reason of lights, noise, activities, parking or other actions. 12. No alcoholic beverage shall be sold for consumption beyond Restaurant A premises. Notwithstanding the foregoing, if Restaurant A offers room service of meals to the hotel rooms as part of its regular operations, then alcoholic beverages may be sold for consumption in guest rooms or adjoining private outdoor space to hotel guests 21 years of age or older who provide proof of age if requested by room service personnel. 51 13. Except for special events, alcohol shall not be served in Restaurant A in any disposable container such as disposable plastic or paper cups. 14. No more than 35% of total gross revenues per year of Restaurant A shall be from alcohol sales. The operator of Restaurant A shall maintain records of gross revenue sources which shall be submitted annually to the City's Planning Division at the beginning of each calendar year after the first year of operation and also available to the City and the State ABC upon request. 15. The primary use of Restaurant A shall be for sit -down meal service to patrons. Alcohol shall not be served to persons except those intending to purchase meals. 16. Restaurant A shall maintain a kitchen or food - serving area in which a variety of food is prepared and cooked onsite. 17. Restaurant A shall serve food to patrons during all hours the establishment is open for customers. 18. Any minimum purchase requirement may be satisfied by the purchase of beverages or food. 19. Take out service (not including room service) shall be only incidental to the primary sit - down use. 20. No dancing or live entertainment beyond in that allowed in the definition of "Restaurant" contained in SMMC Section 9.04.02.030.730 shall be permitted in Restaurant A. 21. No video or other amusement games shall be permitted in Restaurant A. 22. Restaurant A operator shall prohibit loitering in the restaurant area and shall control noisy patrons leaving the restaurant. 23. Window or other signage on or in Restaurant A visible from the public right -of -way that advertises beer or alcohol shall not be permitted. 24. The operator of Restaurant A is on notice that all temporary signage is subject to the restrictions of the City's sign ordinance included in Exhibit "E" SMCC Article 9 (Planning and Zoning) to this Agreement. 25. Restaurant A shall at all times comply with the provisions of the Noise Ordinance (SMMC Chapter 4.12). 26. Restaurant A shall not conduct recycling deposits, pressure washing or other noise generating activity audible from the Property between the hours of 11PM and 7AM. 52 27. Prior to issuance of a Certificate of Occupancy, or a business license, or commencement of alcohol service in Restaurant A, as applicable, a security plan shall be submitted to the Chief of Police for review and approval. The plan shall address both physical and operational security issues. 28. Prior to commencement of alcohol service in Restaurant A, the restaurant operator shall participate in the Santa Monica Alcohol Awareness for Retailers Training (S.M.A.A.R.T.) program conducted by the Santa Monica Policy Department. 29. Restaurant A operator authorizes reasonable City inspection of Restaurant A to ensure compliance with the conditions set forth in this Exhibit "G" and will bear the reasonable cost of these inspections as established by SMMC Section 2.72.010 and Resolution No. 9905 (CCS) or any successor legislation thereto. These inspections shall be no more intrusive than necessary to ensure compliance with this Exhibit. Acknowledgement of Restaurant Operator I hereby agree to the above conditions of approval and acknowledge that failure to comply with such conditions shall constitute grounds for potential revocation of the approval to dispense alcoholic beverages. Print Name and Title Signature 53 Date EXHIBIT H RESTAURANT ` EV (24 -HOUR CAM CONDITIONS TO DISPENSE ALCOHOL Within the Restaurant located on the ground floor of the Landmark Building Addition and designated as "Restaurant `El' " on the Project Plans, Developer or a business operator may dispense for sale or other consideration, alcoholic beverages, including beer, wine, malt beverages, and distilled spirits for on -site consumption, on the following terms and conditions: 1. This approval is for a Type 47 (On Sale General -- Eating Place) alcohol license only. Any request to modify the license type shall require either a conditional use permit or a Development Agreement amendment pursuant to Section 2.4.3 (Major Modifications). 2. Seating arrangements for sit -down patrons in Restaurant El shall not exceed 103 interior seats and 14 exterior seats. Restaurant E1 may be operated 24 hours a day but the permitted hours of alcohol consumption in Restaurant E shall be: • Sunday through Wednesday 11:00 AM to 12:00 AM (midnight), interior dining area 11:00 AM to 11:00 PM, outdoor dining area • Thursday through Saturday 11:00 AM to 1:00 AM (next day), interior dining area 11:00 AM to 12:00 AM (midnight), outdoor dining area 4. Prior to issuance of a final inspection or a business license for Restaurant El, the restaurant operator shall post a notice at the entry stating that the site is regulated by a Development Agreement and the Development Agreement, which includes the restaurant's conditions of approval is available upon request. This notice shall remain posted at all times the establishment is in operation. 5. Concurrently with filing an application with the State ABC, the restaurant operator shall provide a copy of this signed Exhibit "H" to the local office of the State Alcoholic Beverage Control Department. 6. Prior to issuance of a Certificate of Occupancy, or a business license, or commencement of alcohol service in Restaurant E1 as applicable, the operator shall submit a plan for approval by the City's Planning Director regarding employee alcohol awareness training programs and policies. The plan shall outline a mandatory alcohol awareness training program for all employees having contact with the public and shall state management's policies addressing alcohol consumption and inebriation. The program shall require all employees having contact with the public to complete a California Department of Alcoholic Beverage Control (ABC) sponsored alcohol awareness training program within 54 90 days of the effective date of the approval by the Planning Director of the plan. In the case of new employees, the employee shall attend the alcohol awareness training within 90 days of hiring. In the event the ABC no longer sponsors an alcohol awareness training . program, all employees having contact with the public shall complete an alternative program approved by the Planning Director. The operator shall provide the City with an annual report regarding compliance with this condition. This project shall be subject to any future City -wide alcohol awareness training program condition affecting similar establishments. Prior to issuance of a Certificate of Occupancy, or a business license, or commencement of alcohol service in Restaurant El as applicable, the operator shall also submit a plan describing the establishment's designated driver program, which shall be offered by the operator to the establishment's patrons. The plan shall specify how the operator will inform patrons of the program, such as offering on the menu a free non - alcoholic drink for every party of two or more ordering more than one alcoholic beverage. 8. In the event Restaurant El operator fails to comply with any conditions of approval of this Exhibit, no further permits, licenses, approvals or certificates of occupancy for Restaurant E1 shall be issued to such applicant until such violation has been fully remedied. 9. Minor amendments to Restaurant El as shown on the Project Plans shall be subject to approval by the Director of Planning in accordance with Section 2.4.2 (Minor Modifications). A significant change in the approved concept for Restaurant El or any increase in the square footage of Restaurant El or in the number of seats in Restaurant El shall require either a conditional use permit or a Development Agreement amendment pursuant to Section 2.4.3 (Major Modifications). Construction shall be in substantial conformance with the plans submitted or as modified by the Planning Commission, Architectural Review Board, or Director of Planning. No expansion in number of seats of any alcohol serving area, intensity of operation of any alcohol serving area, or outdoor alcohol serving areas shall occur without prior approval from the City of Santa Monica and State ABC (if required by the ABC). 10. Restaurant E shall at all times be conducted in a manner not detrimental to surrounding properties or residents by reason of lights, noise, activities, parking or other actions. 11. No alcoholic beverage shall be sold for consumption beyond Restaurant E1 premises. Notwithstanding the foregoing, if Restaurant El offers room service of meals to the hotel rooms as part of its regular operations, then alcoholic beverages may be sold for consumption in guest rooms or adjoining private outdoor space to hotel guests 21 years of age or older who provide proof of age if requested by room service personnel. 12. Except for special events, alcohol shall not be served in Restaurant E1 in any disposable container such as disposable plastic or paper cups. 55 13. No more than 35% of total gross revenues per year of Restaurant El shall be from alcohol sales. The operator of Restaurant El shall maintain records of gross revenue sources which shall be submitted annually to the City's Planning Division at the beginning of each calendar year after the first year of operation and also available to the City and the State ABC upon request. 14. The primary use of Restaurant El shall be for sit -down meal service to patrons. Alcohol shall not be served to persons except those intending to purchase meals. 15. Restaurant El shall maintain a kitchen or food - serving area in which a variety of food is prepared and cooked onsite. 16. Restaurant El shall serve food to patrons during all hours the establishment is open for customers. 17. Any minimum purchase requirement may be satisfied by the purchase of beverages or food. 18. Take out service (not including room service) shall be only incidental to the primary sit - down use. 19. No dancing or live entertainment beyond in that allowed in the definition of "Restaurant" contained in SMMC Section 9.04.02.030.730 shall be permitted in Restaurant El. 20. No video or other amusement games shall be permitted in Restaurant El. 21. Restaurant El operator shall prohibit loitering in the restaurant area and shall control noisy patrons leaving the restaurant. 22. Window or other signage on or in Restaurant El visible from the public right -of -way that advertises beer or alcohol shall not be permitted. 23. The operator of Restaurant El is on notice that all temporary signage is subject to the restrictions of the City's sign ordinance included in Exhibit "E" SMCC Article 9 (Planning and Zoning) to this Agreement. 24. Restaurant El shall at all times comply with the provisions of the Noise Ordinance (SMMC Chapter 4.12). 25. Restaurant El shall not conduct recycling deposits, pressure washing or other noise generating activity audible from the Property between the hours of 11 PM and 7AM. 26. Prior to issuance of a Certificate of Occupancy, or a business license, or commencement of alcohol service in Restaurant El, as applicable, a security plan shall be submitted to Mr the Chief of Police for review and approval. The plan shall address both physical and operational security issues. 27. Prior to commencement of alcohol service in Restaurant El, the restaurant operator shall participate in the Santa Monica Alcohol Awareness for Retailers Training (S.M.A.A.R.T.) program conducted by the Santa Monica Policy Department. 28. Restaurant El operator authorizes reasonable City inspection of Restaurant El to ensure compliance with the conditions set forth in this Exhibit "H" and will bear the reasonable cost of these inspections as established by SMMC Section 2.72.010 and Resolution No. 9905 (CCS) or any successor legislation thereto. These inspections shall be no more intrusive than necessary to ensure compliance with this Exhibit. Acknowledgement of Restaurant Operator I hereby agree to the above conditions of approval and acknowledge that failure to comply with such conditions shall constitute grounds for potential revocation of the approval to dispense alcoholic beverages. Print Name and Title Signature 57 Date EXHIBIT I STANDARD RESTAURANT CONDITIONS TO DISPENSE ALCOHOL The DA provides flexibility for Retail and Restaurant uses to be shifted, up to 9,730 square feet of Restaurant Use in the Project. In the event a Restaurant is commenced in any area otherwise designated as a Retail Use on the Project Plans, the Restaurant business operator may dispense for sale or other consideration, alcoholic beverages, including beer, wine, malt beverages, and distilled spirits, on the following terms and conditions: 1. This approval is for a Type 47 (On Sale General -- Eating Place) alcohol license only. Any request to modify the license type shall require either a conditional use permit or a Development Agreement amendment pursuant to Section 2.4.3 (Major Modifications). 2. The primary use of the Restaurant premises shall be for sit -down meal service to patrons. Alcohol shall not be served to persons except those intending to purchase meals. 3. If a counter service area is provided in the Restaurant, a patron shall not be pennitted to sit at the counter unless the patron is ordering a meal in the same manner as patrons ordering meals at the table seating. The seats located around the counter service area cannot be used as a waiting area where patrons may drink before being seated or as a bar where beverages only are served. 4. Window or other signage visible from the public right -of -way that advertises the Restaurant's beer or alcohol shall not be permitted. 5. Customers shall be permitted to order meals at all times and at all areas of the Restaurant where alcohol is being served. The Restaurant shall serve food to patrons during all hours the Restaurant is open for customers. 6. The Restaurant shall maintain a kitchen or food - serving area in which a variety of food is prepared and cooked on the premises. 7. Take out service from the Restaurant shall be only incidental to the primary sit -down use. 8. No alcoholic beverage shall be sold for consumption beyond the Restaurant premises. 9. Except for special events, alcohol shall not be served by the Restaurant in any disposable containers such as disposable plastic or paper cups. 10. No video or other amusement games shall be permitted in the Restaurant. 11. No dancing is permitted at the Restaurant. Live entertainment may only be permitted in the manner set forth in Section 9.04.02.030.730 of the SMMC. 12. Any minimum purchase requirement may be satisfied by the purchase of beverages or food. W-1 13. The primary use of any outdoor dining area shall be for seated meal service. Patrons who are standing in the outdoor seating area shall not be served. 14. The Restaurant operation shall at all times be conducted in a manner not detrimental to surrounding properties by reason of lights, noise, activities or other actions. The Restaurant operator shall control noisy patrons leaving the restaurant. 15. The permitted hours of alcohol consumption in Restaurant shall be: Sunday through Thursday 11:00 AM to 12:00 AM (next day), interior dining area 11:00 AM to 11:00 PM, outdoor dining area Friday and Saturday 11:00 AM to 1:00 AM (next day), interior dining area 11:00 AM to 12:00 AM (midnight), outdoor dining area Complete closure and all employees shall vacate the tenant space one hour after regular business closure. No "after hours" operations shall be permitted. 16. No more than thirty -five percent (35 %) of the Restaurant's total gross revenues per year shall be from alcohol sales. The Restaurant operator shall maintain records of gross revenue sources which shall be submitted annually to the City's Planning Division at the beginning of each calendar year after the first year of operation and also available to the City and the California Department of State Alcoholic Beverage Control ( "ABC ") upon request. 17. Prior to final inspection for occupancy of the Restaurant, a Restaurant security plan shall be submitted to the Chief of Police for review and approval. The plan shall address both physical and operational security issues. 18. Prior to final inspection for occupancy of the Restaurant, the Restaurant operator shall submit a plan for approval by the Planning Director regarding its employee alcohol awareness training programs and policies. The plan shall outline a mandatory alcohol - awareness training program for all Restaurant employees having contact with the public and shall state management's policies addressing alcohol consumption and inebriation. The program shall require all Restaurant employees having contact with the public to complete an ABC - sponsored alcohol awareness training program within ninety days of the effective date of the exemption determination. In the case of new Restaurant employees, the employee shall attend the alcohol awareness training within ninety days of hiring. In the event the ABC no longer sponsors an alcohol awareness training program, all Restaurant employees having contact with the public shall complete an alternative program approved by the Planning Director. The Restaurant operator shall provide the City with an annual report regarding compliance with this requirement. The Restaurant operator shall be subject to any future citywide alcohol awareness training program affecting similar establishments. 59 19. Concurrently with filing an application with the State ABC, the Restaurant applicant shall provide a copy of this signed Exhibit "I" to the local office of the State ABC. 20. Prior to final inspection for occupancy of the Restaurant, the Restaurant operator shall submit a plan describing the establishment's designated driver program, which shall be offered by the operator to the establishment's patrons. The plan shall specify how the Restaurant operator will inform patrons of the program, such as offering on the menu a free non - alcoholic drink for every party of two or more ordering alcoholic beverages. Acknowledeement of Restaurant Operator I hereby agree to the above conditions of approval and acknowledge that failure to comply with such conditions shall constitute grounds for potential revocation of the approval to dispense alcoholic beverages. Print Name and Title Signature RE Date EXHIBIT J -1 LOCAL HIRING PROGRAM FOR CONSTRUCTION Local Hiring Policy For Construction. Developer shall implement a local hiring policy (the "Local Hiring Policy ") for construction of the Project, consistent with the following guidelines: Propose. The purpose of the Local Hiring Policy is to facilitate the employment by Developer and its contractors at the Project of residents of the City of Santa Monica (the "Targeted Job Applicants "), and in particular, those residents who are "Low- Income Individuals" (defined below) by ensuring Targeted Job Applicants are aware of Project construction employment opportunities and have a fair opportunity to apply and compete for such jobs. 2. Findings. a. Approximately 73,000- 74,000 individuals work in the City. The City has a resident labor force of approximately 56,800. However, only about one -third (32.2 percent) of the City's resident labor force works at jobs located in the City, with the balance working outside of the City. Consequently, a significant portion of the City's resident and non - resident work force is required to commute long distances to find work, causing increased traffic on state highways, increased pollution, increased use of gas and other fuels and other serious environmental impacts. b. Due to their employment outside of the City, many residents of the City are forced to leave for work very early in the morning and return late in the evening, often leaving children and teenagers alone and unsupervised during the hours between school and the parent return from work outside the area. C. Absentee parents and unsupervised youth can result in increased problems for families, communities and the City as a whole, including, but not limited to, increased crime, more frequent and serious injuries, poor homework accomplishments, failing grades and increased high school dropout rates. d. Of the approximately 45,000 households in the City, thirty percent are defined as low- income households or lower, with eleven percent of these households defined as extremely low income and eight percent very low income. Approximately 10.5% of the City's residents are unemployed. e. By ensuring that Targeted Job Applicants are aware of and have a fair opportunity to compete for Project Construction jobs, this local hiring policy will facilitate job opportunities to City residents which would expand the City's employment base and reduce the impacts on the environment caused by long commuting times to jobs outside the area. 61 3. Definitions. a. "Contract" means a contract or other agreement for the providing of any combination of labor, materials, supplies, and equipment to the construction of the Project that will result in On -Site Jobs, directly or indirectly, either pursuant to the terms of such contract or other agreement or through one or more subcontracts. b. "Contractor" means a prime contractor, a sub - contractor, or any other entity that enters into a Contract with Developer for any portion or component of the work necessary to construct the Project (excluding architectural, design and other "soft" components of the construction of the Project). C. "Low Income Individual" means a resident of the City of Santa Monica whose household income is no greater than 80% of the Median Income. d. "Median Income" means the median income for the Los Angeles Metropolitan Statistical Area, as published from time to time by the City in connection with its Affordable Housing Production Program pursuant to SMMC section 9.56. e. "On -Site Jobs" means all jobs by a Contractor under a Contract for which at least fifty percent (50 %) of the work hours for such job requires the employee to be at the Project site, regardless of whether such job is in the nature of an employee or an independent contractor. On -Site Jobs shall not include jobs at the Project site which will be performed by the Contractor's established work crew who have not been hired specifically to work at the Project site. Priority for Targeted Job Applicants. Subject to Section 7 below in this Exhibit "J -1," the Local Hiring Policy provides that the Targeted Job Applicants shall be considered for each On -Site Job in the following order of priority: a. First Priority: Low Income Individuals living within one mile of the Project; b. Second Priority: Low Income Individuals living in census tracts throughout the City for which 51 % or more of the households have an income that is no greater than 80% of the Median Income; C. Third Priority: Low Income Individuals living in the City, other than the first priority and second priority Low Income Individuals; and d. Fourth Priority: City residents other than the first priority, second priority, and third priority City residents. 5. Coverage. The Local Hiring Policy shall apply to all hiring for On -Site Jobs related to the construction of the Project, by Developer and its Contractors. 6. Outreach. So that Targeted Job Applicants are made aware of the availability of On -Site Jobs, Developer or its Contractors shall advertise available On -Site Jobs in the Santa Monica Daily Press or similar local newspaper. In addition, Developer shall provide M telephonic or email notice to two community based organizations to be jointly selected by the Developer and the City. At least thirty days prior to the commencement of construction, Developer's general contractor shall meet with the head of each organization to discuss the types of construction jobs available at the Project site. Hidne. Developer and its contractor(s) shall consider in good faith all applications submitted by Targeted Job Applicants for On -Site Jobs in accordance with their normal practice to hire the most qualified candidate for each position and shall snake a good faith effort to hire Targeted Job Applicants when most qualified or equally qualified as other applicants. The City acknowledges that the Contractors shall determine in their respective subjective business judgment whether any particular Targeted Job Applicant is qualified to perform the On -Site Job for which such Targeted Job Applicant has applied. Contractors are not precluded from advertising regionally or nationally for employees in addition to its local outreach efforts. 8. Term. The Local Hiring Policy shall continue to apply to the construction of the Project until the final certificate of occupancy for the Project has been issued by the City. 63 EXHIBIT J -2 LOCAL HIRING PROGRAM FOR PERMANENT EMPLOYMENT Local Hiring Policy For Permanent Employment. The Developer (if an Operator) or Hotel /Restaurant Operator shall implement a local hiring policy (the "Local Hiring Policy "), consistent with the following guidelines: I. Purpose. The purpose of the Local Hiring Policy is to facilitate the employment by the Hotel and Restaurant tenants of the Project of residents of the City of Santa Monica (the "Targeted Job Applicants "), and in particular, those residents who are "Low- Income Individuals" (defined below) by ensuring Targeted Job Applicants are aware of Project employment opportunities and have a fair opportunity to apply and compete for such jobs. 2. Findin s. a. Approximately 73,000- 74,000 individuals work in the City. The City has a resident labor force of approximately 56,800. However, only about one -third (32.2 percent) of the City's resident labor force works at jobs located in the City, with the balance working outside of the City. Consequently, a significant portion of the City's resident and non- resident work force is required to commute long distances to find work, causing increased traffic on state highways, increased pollution, increased use of gas and other fuels and other serious environmental impacts. b. Due to their employment outside of the City, many residents of the City are forced to leave for work very early in the morning and return late in the evening, often leaving children and teenagers alone and unsupervised during the hours between school and the parent return from work outside the area. C. Absentee parents and unsupervised youth can result in increased problems for families, communities and the City as a whole, including; but not limited to, increased crime, more frequent and serious injuries, poor homework accomplishments, failing grades and increased high school dropout rates. d. Of the approximately 45,000 households in the City, thirty percent are defined as low - income households or lower, with eleven percent of these households defined as extremely low income and eight percent very low income. Approximately 10.5% of the City's residents are unemployed. e. By ensuring that Targeted Job Applicants are aware of and have a fair opportunity to compete for Project jobs, this local hiring policy will facilitate job opportunities to City residents which would expand the City's employment base and reduce the impacts on the environment caused by long commuting times to jobs outside the area. 3. Definitions. a. "Low Income Individual" means a resident of the City of Santa Monica whose household income is no greater than 80% of the Median Income. lil b. "Median Income" means the median income for the Los Angeles Metropolitan Statistical Area, as published from time to time by the City in connection with its Affordable Housing Production Program pursuant to SMMC section 9.56. C. "On -Site Jobs" means all jobs on the Project site within the Hotel or Restaurant uses (Restaurants greater than 1,500 gross square feet), regardless of whether such job is in the nature of an employee or an independent contractor. d. "Operator" means the Hotel or Restaurant operators on the Project site. 4. Priority for Targeted Job Applicants. Subject to Section 7 below in this Exhibit "J -2," the Local Hiring Policy provides that the Targeted Job Applicants shall be considered for each On -Site Job in the following order of priority: a. First Priority: Low Income Individuals living within one mile of the Project; b. Second Priority: Low Income Individuals living in the City, other than the first priority Low Income Individuals; and C. Third Priority: City residents other than the first priority and second priority City residents. For purposes of this Local Hiring Policy, the employer is authorized to rely on the most recent year's income tax records (W -2) and proof of residency (e.g. driver's license, utility bill, voter registration) if voluntarily submitted by a prospective job applicant for purposes of assessing a Targeted Job Applicant's place of residence and income. 5. Coverage. The Local Hiring Policy shall apply to all hiring for On -Site Jobs. Notwithstanding the foregoing, the Local Hiring Policy shall not apply to temporary employees utilized while a permanent employee is temporarily absent or while a replacement is being actively sought for a recently- departed permanent employee. Furthermore, the Local Hiring Policy shall not preclude the re- hiring of a prior employee or the transfer of an existing employee from another location. 6. Recruitment. a. Advanced Local Recruitment - Initial Hiring for New Business. So that Targeted Job Applicants are made aware of the availability of On -Site Jobs, at least 30 days before recruitment ( "Advanced Recruitment Period ") is opened up to general circulation for the initial hiring by a new business, Operator shall advertise available On -Site Jobs in the Santa Monica Daily Press or similar local media and electronically on a City - sponsored website, if such a resource exists. In addition, Developer shall consult with and provide written notice to at least two of the following: i. Local first source hiring programs H. Trade unions iii. Apprenticeship programs at local colleges iv. Other non -profit organizations involved in referring eligible applicants for job opportunities lg b. Advanced Local Recruitment - Subsequent Hiring. For subsequent employment opportunities, the Advanced Recruitment Period for Targeted Job Applicants can be reduced to at least 7 days before recruitment is opened up to general circulation. Alternatively, the Developer or Hotel/Restaurant Operator may also use an established list of potential Targeted Job Applicants of not more than one year old. C. Obligations After Completion of Advanced Recruitment Period. Once these advanced local recruitment obligations have been met, Developer or Hotel/Restaurant Operator are not precluded from advertising regionally or nationally for employees. Hiring. Developer or Hotel/Restaurant Operator shall consider in good faith all applications submitted by Targeted Job Applicants for On -Site Jobs in accordance with their normal practice to hire the most qualified candidate for each position and shall be make good faith efforts to hire Targeted Job Applicants when such Applicants are most qualified or equally qualified as other applicants. The City acknowledges that the Developer or Hotel/Restaurant Operator shall determine in their respective subjective business judgment whether any particular Targeted Job Applicant is qualified to perform the On -Site Job for which such Targeted Job Applicant has applied. 8. Outreach. The Hotel Operator shall designate a "First- Source Hiring Coordinator" (FHC) that shall manage all aspects of the Local Hiring Policy. The FHC shall be responsible for actively encouraging and making available information on first- source hiring to all commercial tenants of the Project. The FHC shall contact new employers on the Project site to inform them of the available resources on first- source hiring and to offer a means by which they can participate in the Hotel's program. In addition to implementation of the Local Hiring Policy, the FHC can have other work duties unrelated to the Local Hiring Policy. 9. Collective Bargainine Agreement. The provisions of this Local Hiring Policy may be pre - empted, in full or in part, in a bona fide collective bargaining agreement, but only if and to the extent the pre- emption is clear and unambiguous. 10. Term. The Local Hiring Policy shall apply for the life of the Project. M EXHIBIT K CONSTRUCTION MITIGATION PLAN Construction Period Mitigation I. A construction period mitigation plan shall be prepared by the applicant for approval by the Public Works Director prior to issuance of a building permit. The approved mitigation plan shall be posted on the site for the duration of the project construction and shall be produced upon request. As applicable, this plan shall: a. Specify the names; addresses, telephone numbers and business license numbers of all contractors and subcontractors as well as the developer and architect; b. Describe how demolition of any existing structures is to be accomplished; C. Indicate where any cranes are to be located for erection /construction; d. Describe how much of the public street, alleyway, or sidewalk is proposed to be used in conjunction with construction; e. Set forth the extent and nature of any pile-driving operations; f. Describe the length and number of any tiebacks which must extend under the public right -of -way and other private properties; g. Specify the nature and extent of any dewatering and its effect on any adjacent buildings; h. Describe anticipated construction - related truck routes, number of truck trips, hours of hauling and parking location; i. Specify the nature and extent of any helicopter hauling; j. State whether any construction activity beyond normally permitted hours is proposed; k. Describe any proposed construction noise mitigation measures, including measures to limit the duration of idling construction trucks; 1. Describe construction- period security measures including any fencing, lighting, and security personnel; m. Provide a grading and drainage plan; n. Provide a construction - period parking plan which shall minimize use of public streets for parking; o. List a designated on -site construction manager; P. Provide a construction materials recycling plan which seeks to maximize the reuse /recycling of construction waste; q. Provide a plan regarding use of recycled and low - environmental- impact materials in building construction; and 67 r. Provide a construction period urban runoff control plan. Air Quality 2. Dust generated by the development activities shall be kept to a minimum with a goal of retaining dust on the site through implementation of the following measures recommended by the SCAQMD Rule 403 Handbook: a. During clearing, grading, earth moving, excavation, or transportation of cut or fill materials, water trucks or sprinkler systems are to be used to the extent necessary to prevent dust from leaving the site and to create a crust after each day's activities cease. b. Vehicles hauling dirt or other construction debris from the site shall cover any open load with a tarpaulin or other secure covering to minimize dust emissions. Immediately after commencing dirt removal from the site, the general contractor shall provide the City with written certification that all trucks leaving the site are covered in accordance with this condition of approval. C. During clearing, grading, earth moving, excavation, or transportation of cut or fill materials, streets and sidewalks within 150 feet of the site perimeter shall be swept and cleaned a minimum of twice weekly or as frequently as required by the PWD. d. During construction, water trucks or sprinkler systems shall be used to keep all areas of vehicle movement damp enough to prevent dust from leaving the site. At a minimum, this would include wetting down such areas in the later morning and after work is completed for the day and whenever wind exceeds 15 miles per hour. e. Soil stockpiled for more than two days shall be covered, kept moist, or treated with soil binders to prevent dust generation. Construction equipment used on the site shall meet the following conditions in order to minimize NOx and ROC emissions: a. Diesel- powered equipment such as booster pumps or generators should be replaced by electric equipment to the extent feasible; and b. The operation of heavy -duty construction equipment shall be limited to no more than 5 pieces of equipment at one time. Noise Attenuation 4. All diesel equipment shall be operated with closed engine doors and shall be equipped with factory - recommended mufflers. A., 5. Electrical power shall be used to run air compressors and similar power tools. 6. For all noise - generating activity on the project site associated with the installation of new facilities, additional noise attenuation techniques shall be employed to reduce noise levels to City of Santa Monica noise standards. Such techniques may include, but are not limited to, the use of sound blankets on noise generating equipment and the construction of temporary sound barriers between construction sites and nearby sensitive receptors. Construction Period Immediately after demolition and during construction, a security fence, the height of which shall be the maximum permitted by the Zoning Ordinance, shall be maintained around the perimeter of the lot. The lot shall be kept clear of all trash, weeds, etc. 8. Vehicles hauling dirt or other construction debris from the site shall cover any open load with a tarpaulin or other secure covering to minimize dust emissions. Immediately after commencing dirt removal from the site, the general contractor shall provide the City of Santa Monica with written certification that all trucks leaving the site are covered in accordance with this condition of approval. During demolition, excavation, and construction, this project shall comply with SCAQMD Rule 403 to minimize fugitive dust and associated particulate emission, including but not limited to the following: • All material excavated or graded shall be sufficiently watered to prevent excessive amounts of dust. Watering shall occur at least three times daily with complete coverage, preferably at the start of the day, in the late morning, and after work is done for the day. • All grading, earth moving, or excavation activities shall cease during periods of high winds (i.e., greater than 20 mph measured as instantaneous wind gusts) so as to prevent excessive amounts of dust. • All material transported on and off -site shall be securely covered to prevent excessive amounts of dust. • Soils stockpiles shall be covered. • Onsite vehicle speeds shall be limited to 15 mph. • Wheel washers shall be installed where vehicles enter and exit the construction site onto paved roads or wash off trucks and any equipment leaving the site each trip. • An appointed construction relations officer shall act as a community liaison concerning onsite construction activity including resolution of issues related to PMto generation. • Streets shall be swept at the end of the day using SCAQMD Rule 1186 certified street sweepers or roadway washing trucks if visible soil is carried onto adjacent public paved roads (recommend water sweepers with reclaimed water). • All active portions the construction site shall be sufficiently watered three times a day to prevent excessive amounts of dust. 10. All material excavated or graded shall be sufficiently watered to prevent excessive amounts of dust. Watering shall occur at least three times daily with complete coverage, preferably at the start of the day, in the late morning, and after work is done for the day. 11. All grading, earth moving, or excavation activities shall cease during periods of high winds (i.e., greater than 20 mph measured as instantaneous wind gusts) so as to prevent excessive amounts of dust. 12. All material transported on and off-site shall be securely covered to prevent excessive amounts of dust. 13. Soils stockpiles shall be covered. 14. Onsite vehicle speeds shall be limited to 15 mph. 15. Wheel washers shall be installed where vehicles enter and exit the construction site onto paved roads or wash off trucks and any equipment leaving the site each trip. 16. An appointed construction relations officer shall act as a community liaison concerning onsite construction activity including resolution of issues related to PM 10 generation. 17. Streets shall be swept at the end of the day using SCAQMD Rule 1186 certified street sweepers or roadway washing trucks if visible soil is carried onto adjacent public paved roads (recommend water sweepers with reclaimed water). 18. All active portions the construction site shall be sufficiently watered three times a day to prevent excessive amounts of dust. 19. Developer shall prepare a notice, subject to the review by the Director of Planning and Community Development, that lists all construction mitigation requirements, permitted hours of construction, and identifies a contact person at City Hall as well as the developer who will respond to complaints related to the proposed construction. The notice shall be mailed to property owners and residents within a 200 -foot radius from the subject site at least five (5) days prior to the start of construction. 20. A sign shall be posted on the property in a manner consistent with the public hearing sign requirements which shall identify the address and phone number of the owner and /or applicant for the purposes of responding to questions and complaints during the construction period. Said sign shall also indicate the hours of permissible construction work. 21. A copy of these conditions shall be posted in an easily visible and accessible location at all times during construction at the project site. The pages shall be laminated or otherwise protected to ensure durability of the copy. 70 22. No construction- related vehicles may be parked on the street at any time or on the subject site during periods of peak parking demand. All construction - related vehicles must be parked for storage purposes at on offsite location on a private lot for the duration of demolition and construction. The offsite location shall be approved as part of the Department of Environmental and Public Works review of the construction period mitigation plan and by the Department of City Planning if a Temporary Use Permit is required. 71 EXHIBIT L ASSIGNMENT AND ASSUMPTION AGREEMENT Recording Requested By and When Recorded Mail To: Hardin Larmore Kutcher & Kozal, LLP 1250 6t Street, Suite 200 Santa Monica, CA 90401 Attn: Kenneth L. Kutcher ASSIGNMENT AND ASSUMPTION AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT ( "Agreement ") is made and entered into by and between MAXSER & COMPANY, LLC, a California limited liability company ( "Assignor "), and a ( "Assignee "). RECITALS A. The City of Santa Monica ( "City ") and Assignor entered into that certain Development Agreement dated 2012 (the "Development Agreement "), with respect to the real property located in the City of Santa Monica, State of California, and more particularly described in Exhibit "A" attached hereto (the "Project Site "). B. Assignor has obtained from the City certain development approvals and permits with respect to the development of the Project Site, including without limitation, approval of the Development Agreement and for the Project Site (the "Project Approvals "). C. Assignor intends to sell, and Assignee intends to purchase, the Project Site. D. In connection with such purchase and sale, Assignor desires to transfer all of the Assignor's right, title, and interest in and to the Development Agreement and the Project Approvals with respect to the Project Site. Assignee desires to accept such assignment from Assignor and assume the obligations of Assignor under the Development Agreement and the Project Approvals with respect to the Project Site. THEREFORE, the parties agree as follows: I. Assignment. Assignor hereby assigns and transfers to Assignee all of Assignor's right, title, and interest in and to the Development Agreement and any other Project Approvals with respect to the Project Site. Assignee hereby accepts such assignment from Assignor. 2. Assumption. Assignee expressly assumes and agrees to keep, perform, and fulfill all the terms, conditions, covenants, and obligations required to be kept, performed, and fulfilled by Assignor under the Development Agreement and the Project Approvals with respect to the Project Site. 72 3. Effective Date. The execution by City of the attached receipt for this Agreement shall be considered as conclusive proof of delivery of this Agreement and of the assignment and assumption contained herein. This Agreement shall be effective upon its recordation in the Official Records of Los Angeles County, California, provided that Assignee has closed the purchase and sale transaction and acquired legal title to the Project Site. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the dates set forth next to their signatures below. "ASSIGNOR" MAXSER & COMPANY, LLC a California limited liability company C "ASSIGNEE" C 73 RECEIPT BY CITY The attached ASSIGNMENT AND ASSUMPTION AGREEMENT is received by the City of Santa Monica on this day of CITY OF SANTA MONICA C 74 Planning Director Reference Resolution Nos. 10663 (CCS) and 10664 (CCS).