SR-04-25-1978-11CSanta Monica, California April 17, 19781
TO: Mavor and City Council i
FROM: City Staff APR 2 5 1978
SUBJECT :Lease addendum, Hamburger Haven, Santa Monica Pier
Introduction
On January 24, 1978 City Council aDDroved 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's" with 285 seats, two floors, and three patios.
This report covers the specifics of the addendum to his lease
which is attached as exhibit "A ".
Discussion
Term: Twenty years, to September 30, 1998.
Rental: Annual Minimum: $ 8,196.
Annual Percentage of Gross Sales: 10%
Rental Off -set:
All rent due the City after payment of the
minimum rental shall be off -set until all pier decking and
pilings expenses, to be advanced by lessee, (estimated at $ 50,000.)
are re- imbursed, probably within four years. (see exhibit "B ")
Maintenance Fund: Up to three percent of gross sales
of the 5th year, 10th year, 15th year, and 19th year shall be paid
by the lessee for repairs to the building and pier as deemed
necessary by the City. These repairs are to be done to the
satisfaction of the City; to be done only upon the area covered by
the lease; and are to be done within the year that follows, i.e.,
the 6th, 11th, 16th, and 20th years.
APR 2 5 1978
Architectural Review Board; On November 16, 1977
the Architectural Review Board discussed the plans and concept
of "Captain Sack'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. are needed to be generated before
any additional rental percentage will accrue.
However, to re- imburse the lessee for his payment 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 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 Ferris
Peter Kipp
CA 3 -14 -78
ADDENDUM NO. 1
This Addendum shall be attached to and become
part of Contract Number 2262 (City Council Series) being
the lease and agreement entered into between the City of
Santa Monica and Hamburger Haven, a sole proprietor. Such
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 Monica
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 FOLLOWS:
,
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,unles8 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 follows:
2.2 ADDITIONAL PERCENTAGE RENTAL
Initially no additional percentage rental shall
be paid by the Lessee to the Lessor until a rental offset
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).
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 actual costs for'the purposes of
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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CA 3 -14 -78
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 of 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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CA 3 -14 -78
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 computed 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.
5. Paragraph 7.5 shall be added to the original
lease through this Addendum and be considered in full force
and effect as if in the original Lease, and shall read as
follows:
7.5 LESSEE'S ADDITIONAL OBLIGATION TO FUND
REPAIRS
I:n addition to and notwithstanding Paragraph
2.2 hereinabove, Lessee expressly agrees to pay for mainten-
ance and repairs, to be performed by Lessee, as deemed
necessary by the City, up to a maximum of three percent
(3°s) of gross sales during the fifth, tenth, fifteenth
and nineteenth years of the Lease Term, provided, however,
that the maintenance and repairs will be done only upon the
building, pier, and premises on or about the Premises. Said
maintenance and repairs whall be performed to the satis-
faction and approval of Lessor
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Furthermore, such repairs
CA 3 -14 -78
and maintenance shall be done within one (1) year of the
end of said fifth, tenth, fifteenth and nineteenth years
respectively and no excessive maintenance and repairs
shall be required of Lessee.
In the event Lessee fails to perform such mainten-
ance and repairs, Lessor may elect, at its sole option,
to do the same and charge the expense thereof to Lessee or,
off -set any sums due and owing from Lessor to Lessee. ,
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 agreements of whatsoever kind
or nature are merged herein. No verbal agreement of
implied covenant shall be held to very the provisions hereof.
CITY OF SANTA MONICA,
a municipal corporation
By
CITY MANAGER
(Lessor)
HAMBURGER HAVEN, INC.
BYE' .'
.!` JAC KNIG T
f t (Lessee)
APPROVED AS TO FORM:
ITY A RNE
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CAPTAIN JACK'S REVENUE PROJECTIONS
Several similar but smaller
restaurants
in Venice are reporting gross
sales between
$ 350,000. and 8 750,000:
Rental
Estimated
Captain Jack's
Name
Percentage
Gross
285 seats
Number of Seats
Annual Gross Sales
Estimate 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)
(c)
(d)
Year
Rental
Estimated
City
Recaptured
Percentage
Gross
Rent
by Lessee
Paid
Sales
@ 10%
1
10% $
200,000 $
20,000
2
10%
400,000.
40,000
3
10%
500,000.
50,000
4 10%
5 10%
600,000 60,000
600,000 60,000
(e)
Less Off -set
Der year
(100% pier repairs)
$ 11,804.
31,804.
6,392.
Kdo
(f)
(g)
(h)
(i)
Total
City
Total
Rent
Recaptured
Rent
Rec'd
$ /sq ft
by Lessee
Paid
by City
per yr
$ 11,804 $
8,196.88,196.
$ 1.86
43,608.
8,196
8,196
1.86
50,000.
8,196
(est. total
+
pier repair)
35,412
60,000
9.91
-.-
60,000
120,000
13.64
- 60,000
180,000. 13.65
WHAT WE PROPOSE TO DO
We plan to remove both the Hamburger Haven 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
defined with three foot bollards
The patio perimeter will be
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-
lections 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 facility 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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To: Mayor and City Council -2- January 11, 1978
Then, at his expense and under the approval of the City Engineering
Division, he will remove and rebuild portions of the pier which his
expanded operation would occupy, approximately 5,000 sq. ft., at a
cost of approximately $8.00 -10.00 per sq. ft.
Although this location appears to be at ground level on the Promenade,
the front of the building is actually three feet above the sand,
resting on the pier, and the rear of the building is sixteen feet
above the sand, also resting upon the pier. Although under the
terms of the standard pier lease the pier decking and below are the
responsibility of the City, Mr. Knight has offered to advance the
financing for these repairs, provided such investment is recognized
in the terms of the lease.
Reconstruction will then result in one operation with a roof garden
and three patios, all with lights for night operations, per photos
and drawings attached. The approximate cost of this project will
be $420,000. The new operation will be renamed "Captain Jack's"
and will seat 258 persons. This new facility would be an expansion
of approximately 3,000 sq. ft.; from approximately 1,412.5 sq. ft.
to approximately 4,413.5 sq. ft.
Mr. Knight has agreed to a 20 year lease, with a rental of 10% of
the gross sales (which he estimates will be between $200,000 and
$300,000 the first year) with a minimum monthly rental of $683.00
or $8,196.00 per year. This represents the present combined minimum
rentals of the two small existing food operations.
City staff has estimated his gross sales conservatively at $200,000