SR-06-27-1978-11GSanta Monica, California June 19,1978
TO: Mayor and City Council
FROM: City Staff JUN 2 7 1978
SUBJECT: Lease addendum, Hamburger Haven, Santa Monica Pier
Introduction
On January 24, 1978 City Council approved in concept the proposal of
Mr. Jack Knight, lessee on the Santa Monica Pier of the Hamburger
Haven to expand his restaurant operation into "Captain Jack Knight's"
with 285 seats, two floors, and three patios. On April 25, 1978
City Council questioned the impact of the intended 3% building and
pier maintenance fund upon the master pier lease in addition to
asking if the proposed restaurant would be located totally on the
pier structure. This report answers these questions and covers the
specifics of the addendum to this lease which is attached as
Exhibit "A ".
Discussion
Restaurant Location: The new "Captain Jack Knight's" restaurant
will be totally located on the pier structure and does not encroach
onto the promenade. (See attached map)
Building & Pier Maintenance Fund': The concept of creating a
fund for the ongoing maintenance of the pier structure and restaurant
building has been abandoned because an addenda regarding normal pier
maintenance would be in conflict with the master pier lease and also
because of the difficulties involved in maintaining separate ear-
marked funds over a long period of time. The master pier lease spec-
ifically states (Sec. 7.1), "Lessee shall not be obligated to repair,
maintain or replace pier pilings or understructure except... (Sec. 16.1)
lessee shall be liable to lessor for all damages resulting from such
destruction caused by Lessee's negligence or the negligence of its
agents, servants, employees, sub lessees, concessionaires or licensees."
As far as the restaurant building is concerned, the master pier lease
(Sec. 7.1) requires the Lessee "at its sole cost and expense..." to
maintain the building and its equipment and improvements. There is no
minimum or maximum limitation on the dollar amount of the repairs
that the City may require. if
JUN 2 7 1978
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Lease Term: A straight twenty years, to June 30, 1998 -
with no option to extend beyond this period.
Rental Off -set: All rent due the City after payment of the min-
imum rental shall be off -set until all pier decking and pilings ex-
penses, to be advanced by lessee, (estimated at $50,000) are re-
imbursed, probably within four years. (see exhibit "B ")
Architectural Review Board: On November 16, 1977 the Arch-
itectural Review Board discussed the plans and concept of "Captain
Jack Knight's" at some length and voted its approval.
Landmarks Commission: On March 7, 1978 the City Landmarks
Commission voted a Certificate of Appropriateness for the proposed
construction since the site is on a designated City Landmark.
Plans: The plans of the lessee are for an expansion to a
285 seat restaurant with three patios and include an upper deck.
See "What We Propose to Do ", exhibit "C ".
Income to the City: The City shall be assured of the same
rental as it now receives for the area included in the lease, $8,196
per year. Since the recommended rental percentage is 10%, sales
of $81,960.00 are needed to be generated before any additional rental
percentage will accrue. However, to re- imburse the lessee for his pay-
ment of the pier decking and supports - -- normally a City financial
responsibility - - -all monies thus accrued shall, under the proposed
addendum, if approved by City Council, go to the lessee. Once these
costs are re- imbursed, the City shall be paid 10% of the gross sales,
under the terms of the standard Pier Lease.
Recommendation
It is the recommendation of staff that the City Council approve the
attached addendum to the lease with Hamburger Haven and authorize the
City Manager to execute the addendum.
Exhibit "A!': Lease Addendum No. 1
"B ": Revenue Projections
"C": "What We Propose to Do"
Prepared by: Jeremy B. Ferris
Peter Kipp
ADDENDUM NO. 1
This Addendum shall be attached to and become
part of .Contract Number 2262 (City Council Series) b eing .
the lease and agreement entered into between the City of
Santa Monica and Hamburger�Haven, a sole proprietor. Suc)a
Addendum is made with reference to the following facts:
A_ -On February.2,.1977, the City `of Santa Monica,
a municipal corporation .(hereinafter referred .to as "City "),
entered into a lease and agreement with Hamburger Haven,
Inc, a sole proprietor (hereinafter referred to as..
"Lessee ") whereby the City leased certain property located
within the corporate boundaries of the City of Santa I;anica„
to, Lessee for the operation of a restaurant.
B. On or about September 15, 1978,-the Lessee
agrees to expand the Premises and agrees to incur substantial
capital costs for the improvement of the Premises. This
Addendum, therefor,,sets forth the terms and conditions
for the modification of the Lease.
THE PARTIES HERETO AGREE AS FOLL6ws:
1. Paragraph 1 is hereby amended and as amended
shall read as follows: /
1. TERM
The term of this lease, hereinafter
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CA 3 -14 -78
referred to as the "Lease Term" shall be twenty (20)
years, commencing July 1, 1978, and expiring on June 30,
1998,unless sooner terminated as provided below.
2. Paragraph 2.1 is hereby amended as follows.
"Four.thousand nine hundred and eighteen dollars"
is deleted, and "Eight thousand one hundred ninety -six
dollars" is.substituted in lieu of the deleted amount.
3. Paragraph 2.2 is hereby amended and as amended
shall read as followsa °
2.2 ADDITIONAL PERCENTAGE RENTAL
Initially no'additional percentage rental shall
be paid by the Lessee to the Lessor until a rental of:c "set
has been received equal to the cost incurred by the Lessee
of the repairs to the pier decking, stringers, caps, pilings
and associated supports within, underneath and appurtenant
to the area covered by this Lease. (See addendum map
which shall be considered a part of this Addendum No. 1)0
Lessee agrees that the City Engineer or his representative
shall be the sole determining authority as to what pier
repair work is required, who shall be awarded the repair
contract, when the work has been done to the satisfaction
of the City, verifying actilal costs for 'the purposes 6f '
this.rental'off -set and all other matters regarding such repairs.
Upon the Lessee having been - reimbursed through a .
rental off -set (as above) in full for pier repairs, in
addition to the minimum monthly rental, Lessee shall pay to
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Lessor percentage rental due and payable on or before the
tenth (10th) day of the month immediately following the
month in which the cumulative gross sales exceeds the
minimum annual sales. Said minimum annual: sales shall be
determined by dividing the minimum annual rental by the
percentage established below. •Said percentage rental shall
be in the amount of ten percent .(10 %) of said.cumulative
gross sales which are in excess of said minimum annual sales.
'Thereafter during each and every month of the
Lease Year, Lessee shall pay to•Lessor percentage .rental in
the amount of ten percent (10 %) of the gross sales made
during each month. Said Percentage rental shall be due and.
payable, -on or before the tenth (10th) day p£ the month
immediately following said month.
For purposes of this Article 2.2, said cumulative
gross sales shall only be accumulated during each and
every Lease Year of the Lease Term and not from Lease Year
to Lease Year.
follows:
4. Paragraph 2.8(a) (2) is hereby amended as
2.8(a)(2) ADJUSTMENT OF MINIMUM ANNUAL RENTAL
The minimum annual rental shall be increased
pursuant to the percentage increase, if any, in the Consumer
Price •Index (C.P.I.) as determined by the following calcul-
ation: The base.of computing the adjustment is the index
figure for the month of April, 1978, as shown in the
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O
CAPTAIN JACK'S REVENUE PROJECTIONS
Several similar but smaller restaurants in Venice are reporting gross sales between
$ 350,000. and $ 750,000:
Captain .lack's
Name ' seats
Number o 'Seats :Annual' G'ross' Sales E's'timate• Gross Sales
Sidewalk Cafe 210
$ 750,000 $ 947;300.
Sea & Shore Bistro 105 375,000. 611,800.
Earth`s End 115 350,000. 558;800:
*
Based on their operation, but making; an allowance for a more popular location by the
Santa Monica Pier and a larger seating capacity, City staff conservatively estimates
"Captain Jack's" possible gross sales to be: (see column "c")
(a) (b)
Year Rental
Percentage
1
2
3
4
5
(c)
(d)
Estimated
City
Gross
Rent
Sales
9 10%
10% $ 200,000 $ 20,000
10%
10%
10%
10%
400,000
500,000
600,000
600,000
40,000
(e)
Less Off -set
per year
(100% pier repairs)
$ 11,804.
31,804.
(f)
Total
Recaptured
by Lessee
$ 11,804 $
43,608.
(S)
City
Rent
Paid
8,196
8,196
(h)
Total
Recd
by City
58,196.
(1)
Rent
$ /sa ft
per yr
$ 1.86
1.86
50,000. 6,392. 50,000. 8,196
(est. total +
pier repair)
35,412 60,000 9.91
60,000 .-OR Prrn 60,000
120,000 13.64
60,000 -0- 60,000
180,000. 13.65
WHAT WE PROPOSE TO D0
We plan to remove both the Hamburger Haveri Restaurant and the
International Cafe, including their associated patios. We will
remove and rebuild the portion of the pier these two restaurants
currently occupy, approximately 4,700, sq.ft. On this site will be
constructed a beautiful new establishment called Captain Jack's
Restaurant..
The exterior of Captain Jack's will be rough sawn cedar to blend
with the wooden nature of the pier. Two of the three patios sur-
rounding Captain Jack's will be shaded by umbrellas and the roof
garden by awnings, all brightly colored to highlight the cheerful
:atmosphere of the beach area. All three of the patios will be "land-
scaped with potted trees and shrubs. The patio perimeter will be
defined with three foot bollards made from piling stumps and
connected with old anchor chain. The roof garden, in addition to
being landscaped with potted trees and shrubs, will feature hanging
plants, flowers, an aquarium and a lighted waterfall.
Captain Jack's menu will remain essentially the same with emphasis
on hand held fast food items high in quality, yet reasonably priced.
However, some new additions will be made to the menu. A line of
breakfast and brunch items as well as a limited number of- dinner se-
lee tions will also be added. Every Sunday will feature a champaign
brunch in the roof garden. For the sports enthusiasts all significant
televised events will be shown in the roof garden on wide screen TV.
To simulate a game site atmosphere, beer, lemonade, sodas, hot dogs,
peanuts and popcorn will be sold at a reduced rate during the game
or event. All holidays will be celebrated with a promotion tailored
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Page 2 of
What We Propose To Do.
to the specific day, i.e. Dinner for two for the price of one
on Valentine's Day for lovers, a rose for Mother on Mother's
Day; etc.
The key to a successful restaurant is;
1. Location
2. Service
3. Good Food.'
First, our location is excellent., Over 3 million people come to
Santa Monica Pier each year. Second, to serve the 3 million
people we just mentioned, we have designed a:faeility with em-
phasis on maximum.output and comfort. Hamburger Haven and the
International Cafe were designed to serve a relatively small
number of people at a time, and had a combined seating capacity
of 50 in very shabby surroundings. Captain Jack's will seat
285 people. The inside dining area will seat 56, the roof garden
100 and the patios 129 all in clean, beautiful surroundings that
everyone will enjoy. .Third, Good food. We have always prided
ourselves in serving well above average quality food. However,
Captain Jack's will serve the very best food it is possible to
produce'. We have added a butcher to our staff. We will cut our
own meat on the premises. We will grind our own burger meat fresh
each day. No canned or frozen food items will be used where fresh
foods are.available. We are going back to the basics to build
a reputation.for fine food.
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Page 3 of
What We Propose To Do.
Any one of these three keys to success can secure the future of
a restaurant. We are.fortunate that we have'all three.
In New York's Coney Island the place to go is Nathans. On the
Santa Monica Pier it will be Captain Jack's.
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Consumer Price Index (all items) Los Angeles -Long Beach, based on
the period 1967 =100. The adjustment date shall be the month of
April, 1981, and said index published for that month shall be com-
puted as a percentage of the base figure. For example, assuming
the index figure on the base date is 110 and the index figure on the,
adjustment date is 121, the percentage to be applied is 121/110 =
1.10 = 110 percent. That percentage shall be applied to the minimum
annual rent for the lease year commencing July 1, 1981.
This Agreement represents the full and complete understanding of
every kind or nature whatsoever between the parties hereto with
respect to the Premises and all preliminary negotiations and agree-
ments of whatsoever kind or nature are merged herein. No verbal
agreement of implied covenant shall be he'.ld to vary the provisions
hereof.
...;cr .' a t• �'
CITY OF SANTA MONICA,
a municipal corporation
0
CITY MANAGER
(Lessor)
HAMBURGER HAVEN, INC.
By
JACK KNIGHT
(Lessee)
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