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SR-12-12-1978-6NSanta Monica, California,November 30, 1978 TO: Mayor and City Council FROM: City Staff 6 A DEC 1 2 1978 SUBJECT: Santa Monica Pier Lease Assignments -- Fish N' Chips & Seaview Seafood Introduction This report covers the proposed assignment of the leases on the Santa Monica Pier from Mr. Anis Salloom dba Seaview Seafood and Mr. Raymond Weishaup dba Fish N' Chips to Mr. Robert Morris. The report discusses the improvements Mr. Morris plans, delineates the changes in the leases negotiated by staff, presents the appropriate sections of the standard pier lease and recommends City Council approve the leases and direct the City Manager to execute the appropriate documents. Background Mr. Anis Salloom and Mr. Raymond Weishaup both have opened escrows with Mr. Robert Morris to sell their leasehold interests on the pier. In turn, Mr. Morris plans to enlarge the Seaview Seafood operation into a retail and wholesale fresh fish operation and will operate Fish N' Chips as a sit -down fried fish restaurant serving beer and wine. Mr. Morris also intends to add a fast -food fried - fish-to-go operation offering outdoor tables with colorful canopys on the north side boardwalk and in the sebluded patio facing the south, adjacent to the parking lot. The new fish market would display an inventory approaching $40,000. whereas now it approximates $400.00. Seawater tanks displaying live fish, crabs, lobster and other sea life would be installed for 1 6 /v DEC At 1978 -2- viewing by the strolling public on the boardwalk. Also considerable advertising is planned to attract new visitors to the pier. The assignment of Fish N" Chips will be in the name of Mr. Robert Morris', father, Mr. Joseph Morris; the assignment of Seaview Seafood will be to California Food Ser.mice, Inc. Salient Conditions Term: Twenty -five years from date of lease execution. Rental: In return for an investment of approximately $200,000, he has agreed to the following percentage rental schedule: e Fish & Chips Restaurant 10% Fish & Chips Fast Food 10% Sea View Seafood: Retail Fish 50 Wholesale 2 1/2% Current minimum monthly rent on the two leases is $1158. ($870. from Fish N! Chips and $28.8. from the Seaview Seafood) and under the negotiated leases would rise to $2,050. ( $1,250. from Fish N' Chips and $800. from Seaview Seafood ). Rental Offset: Rental off -set from percentage rental in addition to minimum monthly rental of $2,050. would be set at a maximum of $100,000 or half of the total investment. This recapture would be an off -set from one -half the percentage rental, i.e., five per cent of the sales paying 10 per cent, two and one -half per cent of the sales paying five per cent, and one and one - fourth per cent. An estimate of sales, I -3- rents, off -sets, and recaptures by city staff is attached. ( attached Exhibit "A" ) CPI: A Consumer Price Index (cpi) differential is to be included as has been done in all previous Standard Pier Leases, to automatically adjust the lease minimums in three years. Wholesale Sales Percentage Increase: In any month that the wholesale sales of Seaview Seafood exceeds 50% of total gross sales, the rental percentage for wholesale sales rises to 4% of that amount in excess of 50% of total gross sales. chang(:s . Price Review: The City shall have the right of review for any menu price Mr. Robert Morris currently holds a lease from the City on the Sxnta Monica Pier for the area at the extreme south - westerly point where he is planning an investment of approximately $700,000. for the locat -on of his restaurant known as Gladstones 4 Fish. He also is the operai:or of the restaurant on the Pacific Coast Highway known as Jetty'.s Recommendation It is the recommendation of the City Staff that the City Council approve the assignment of the lease of Mr. Anis Salloom dba Seaview Seafood to Mr. Robert Morris, dba California Food Service, Inc., approve the assignment of the lease of Mr. Raymond Weishaup dba Fish N' Ch:_ps to Mr. Joseph Morris; and direct the City Manager to execute the appropriate documents. Exibit "A" Staff Estimate of Sales, rents, and off -sets "B" Analysis of original Proposal from Mr. Robert Morris "C" Copy of Proposed Lease Assignment "D" Applicable sections of standard Pier Lease �z Total, End 4,386,096 276,661 123,000(1) 153,661 76,831 76,831(2) 199,831 of Five Year Period Note: (1) Previous lessee's guaranteed minimum is $69,480, therefore these new leases guarantee the City an increase of 77 %. (2) Staff estimates recapture provision will total $76,831 with an equal amount to City in Additional % Rental, over the five year period, during which time the total City revenues will be $199,831. (EXHIBIT "A ") SEAVIEW SEAFOOD &'FISH N_' CHIPS Annual Estimated Total Guaranteed Recapture Annual % Sales Rental Minimum $ Above (1/2 of %) Total Total Increase 10 % -5%- Paid to Minimum After Min. Pay- for to Per Year Year Sales 2 1/2% City Available ment to City Recapture City Base 1 390,000 24,600 24,600 -0- -0- -0- 24,60C, 60% 2 624,000 39,360 24,600 14,760 7,380 7,380 31,980 40% 3 873,600 55,104 24,600 30,504 15,252 22,632 39,852 308 4 1,135,680 71,635 24,600 47,035 23,518 46,150 48,118 20% 5 1,362,816 85,962 24,600 61,362 30,681 76,831 55,281 Total, End 4,386,096 276,661 123,000(1) 153,661 76,831 76,831(2) 199,831 of Five Year Period Note: (1) Previous lessee's guaranteed minimum is $69,480, therefore these new leases guarantee the City an increase of 77 %. (2) Staff estimates recapture provision will total $76,831 with an equal amount to City in Additional % Rental, over the five year period, during which time the total City revenues will be $199,831. ( Exhibit "B" ) ANALYSIS OF .ORIGI14AL PROPASAL FROM MR. ROBERT MORRIS for SEAVIEW SEAFOOD, INC (To include Fish N' Chips) Mr. Robert Morris has opened an escrow for the purchase of the leasehold interest of both the Seaview Seafood Fish Market, and the restaurant known as "Fish N' Chips ". He plans an investment of over $200,000 to operate the Fish N' Chips Restaurant as both a fast food take out operation and a sit down facility with beer and wine; and the fish market as both a retail and wholesale enterprise serving the entire bay area. He plans on a much =xpanded operation, with extensive advertising to draw new visitors to the pier. In place of the use of a display which now is estimated a-- $400. of inventory, approximately $40,000 inventory will be shown, . including live fish, crab, and lobster tanks with continually circulating salt water. In front of the exs: =sting restaurant Mr. Morris plans to put tables and canopy's for Luncheon dining, and decorate the exsisting back patio for secluded :lied fresh fish dining, opening onto the parking area to the south. Term: 25 years Minimum: $1,000 pe:: month Rental Off -Set: After payment of Minimum rental, one -half the additional percentage rental up to a maximum of $ 100, 000, or no more than five years. Rental Percentage: 10% Food t3 Go 8% Sit Down Food, and Beer and Wine 5% Retail Fresh Fish 22% Wholesale Fresh Fish ( Exhibit "D" ) APPLICABLE SECTIONS OF STANDARD PIER LEASE Sections of the Standard Pier Lease which govern a transfer of a lease are: 13.1 Restrictions on Assignments -- This article of the lease requires prior written consent of the City, and requires assignee to agree to all the previous conditions of the lease, It states: Lessor's consent will not be unreasonably withheld. 13.2 Termination -- This article of the lease provides for the termination of the lease if an assignment is made without prior approval. 13.3 Effect of Lessor's Consent -- This Article of the lease provides that all the restriction3 of the lease shall be equally binding upon the assignee. 13.4 Written Assumption Agreement -- This article of the lease provides that the original lessee is not released from liability under the lease except in the case of a valid assignment, where the assignee in writing has assumed all obligations of the lease. 13.5 Transfer on Termination -- This article of the lease provides for complete discretion by the City if previous to the lease term, the lease is terminated; the City can terminate the sublease, or can continue them on the origi:zal lease, or transfer the sublessees to a new lease. 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