SR-07-11-1978-11C - 802-011Santa Monica, California June 20, 1978 // C
J U L 1 1 1978
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Approval of lease, Carousel Park, Santa Monica Pier
,Introduction
Several proposals regarding the Carousel have been received during the
last year and a half. In order to facilitate the development of the
Carousel, City advertised a "request for proposals" with the 30 day
period expiring on May 19, 1978. This report lists the proposals
received, provides a general background of the Carousel situation and
analyzes and recommends the Carousel Par], proposal.
Background
Mr. Roy Cruickshank and Mr. Jack Knight, principals of the Carousel
Park proposal, desire to lease the Carousel building and the areas to
the south and to the east (see Carousel Park lease map, exhibit A).
They estimate the cost of the development to be $2,553,391 and no out
of pocket funding by the City is required. Their financial statements
and resumes are included in the support data, (see exhibit C).
For many years the Carousel was operated by Mr. George Gordon, who sold
the Carousel and the Wurlitzer Organ to the City on May 10, 1977 (Contract
#2310 CCS). Mr. Gordon has been operating it since on a month to month
basis; however, because of the short term nature of his lease neither the
Carousel nor the organ have been adequately maintained. The area to
the east of the Carousel Building has been hazardous for public use
for many years and consequently has been fenced off to prevent accidents.
To the south of the Carousel Building the parking lot area has been
/s
JUL 1 1 1978
Santa Monica City Council -2- June 20, 1978
under constant repair, and is in need of a considerable investment to
permit parking over the long term.
From time to time proposals have come to City Staff for partial use
of the Carousel Building, but these have left major portions of the
area untouched, or required the expenditure of City funds, (see exhibit.
B, Comparison of Proposals). As a consequence, City staff has negotiated
from a position of restoration and development of the entire area,
i' requiring no expense from the City. City has also required that the
historical integrity of the Carousel and the Carousel Building be main-
tained and restored as it once was.
Discussion
The proposal of the Carousel Corporation will require no expenditure
of City funds. At the expense of the Carousel Corporation, that area of
the pier to be leased will be renovated to the specifications of the
City, the Carousel itself will be completely restored by a restoration
expert to be approved by the City, the Wurlitzer organ also restored by
an expert to be approved by the City, the second floor of the Carousel
building will be strengthened and renovated into a turn -of -the- century
decor restaurant seating 125 making it the largest restaurant on the
Pier. The area surrounding the Carousel will be opened up to resemble
the authentic park -like atmosphere of the original Carousel operation
with the corners of the building housing a pizzeria, a hot cookie factory,
and an ice cream parlor. Finally a water slide with multiple water
filled sliding flumes, wilh be installed, combining the best of the
former roller coasters and the other rides no longer on the pier.
A bath house to be used by tourists as well as the public for their
convenience in changing clothes and securing valuables will be installed
1 I
'manta Monica City Cotuzci_� -3-
June 20, :1.9.78
underneath the pier decking, as a part of the water slide. operation,., ,
Analysis of Lease Provisions
i
Term: .25 years, with two 5 year options
(September 15, 1978 to September 14, 2012) '
Rental:
: %of Gross. Sales .. Minimum
Carousel Restaurant 8% 39,312
Ice Cream Parlor,
10% 8,460.
Cookie Factory 10% 7,614 '
Pizzeria 10% 10,152
Water Slide 72 %/15 %* 90 000
Bath House 10% ?.,/46
Carousel 15% 71872
$ 165,856
(12% of first $300,000 sales, 15% thereafter.
Rental Off -Set:
All rent due the City after 'payment of the
minimums as above (total $165,856) per year
: shall be off -set for five years, to allow lessee.
to recapture all City verified monies for pilireg ,
and decking repairs, as well as all monies ad-
vanced for restoration costs of the City's
Carousel and organ. Five years was ,selected
by City Staff following the precedent set in
t
January, 1978 by City Council with the Boat -
house Host restaurant, whose lease was ammended
to allow a five year period for investment re-
capture. City Staff estimates that the lessee may
recapture between 19 -57% of the building costs
(estimated at $736,000) depending upon
.. .
Santa Monica City Council -4- June 20, 1978
the growth of business volume, but under
no circumstances will more than $829,280 total
be recaptured. This is equal to the amount
that will be paid to the City for the initial
five years of the lease under the minimum
rental requirements.
Landmarks Commission:
On June 20, 1978 the City Landmarks Commission
voted a Certificate of Appropriateness for
the proposed restoration since the site is on
a designated City landmark.
Architectural Review Board:
Income to the City:
On June 21, 1978 the Architectural Review Board
voted its approval.
At present the City receives $2,400 a year
from Mr. Gordon, the operator of the Carousel.
The income the City had been receiving from
the game machines in the Carousel Building
has been transferred to the Playland Arcade,
resulting in no loss of income to the City.
In the initial five years of the lease for
the Carousel Park, the City will be guaran-
teed $829,280. Thereafter, the City will
receive not only the minimum rent, but the
percentages of each operation as indicated on
page 3, with the total amount dependent upon the
gross sales of each operation.
Santa Monica City Council -5- June 20, 1978
Alternatives
Because no other proposal immediately developer
and restores the Carousel Building site, not to
mention the terribly deteriorating areas immedi-
ately south and east of the building, there ap-
pears to be no other viable alternative to the
Carousel Park proposal.
With the exception of the Waterhorn, Inc. propo-
sal, which bid only on the construction of a
Water Slide, only the Carousel Park proposal in-
volves a significant investment by the developer,
offers substantial revenues to the City, and
does not require initial out of pocket expense
by the City.
Recommendation
It is the recommendation of the City Staff that the City Council
direct the City Manager to execute all appropriate lease documents with
the Carousel Corporation.
Exhibit "A" Standard Pier Lease Map
Exhibit "B" Proposal Comparison
Exhibit "C" Carousel Park Principals Financial :Statement
Prepared by: Jeremy Ferris
Peter Kipp
Gary Ferguson
i, %y LINE OF MUNICIPAL PIER
COLORADO AVE. PRODUCED
CAROUSEL
Ci
m
..
SE'Iy LINE OF SANTA MONICA PIER
LEGEND
O
2
Q)
i
ti
O
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SCALE' I 40'
O Lease Parcel N° Per Pier Lease Map (5239 sht. I )
® Existing Open Area Lease
Proposed Lease Area PROPOSED "CAROUSEL PARK
L EASE
(301)
Exhibit B
INITIAL 'FIVE YEAR
ACCUMULATIVE ANAJ',''SIS OF THE FOUR PROPOSALS THP
MERRY -GO -ROUND SITE ON THE SANTA MONICA PIER
Notes:
1)1 Swenson's require that the City bring Merry -Go -Round up to code
and includes no restoration of the Merry -Go -Round or organ. They
do propose an additional investment of. '$100,000 to $200,000 for
restaruant construction in about the fifth year.
2). Perry /Edwards investment would not restore building adequately to
bringtit up to mandated code and includes no Merry -Go -Round or organ
restoration. The $62,000 'revenue is guaranteed the City.
1). Swenson's - April, 1977
(Wayne Sansbury.) .... ... .....
2). Perry /Edwards - November ®1977
.......
Initial
Investment
Accumulative
Gross
Revenue.
Accumulative
Revenue
To.City..
Initial
Investment.
Accumulative
Gross
Revenue
Accumulativell
Revenue
To City
1st Yr.
$40- 50,000
$150,000
$80,000 .$-50,000
$ 7,000 _
2nd Yr.
300,000
100,000
16,000
3rd Yr.
550,00.0
155,000
27,000 _II
4th Yr.
800,000
210,000
42,000
5th Yr.
See Note
No Estimate
271,500
62,000
3). Waterhorn, Inc.
Waterslide - May, 1978
4). Carousel Park - May, 1978
r).
Initial
Investment.
Accumulative
Gross
Revenue
Accumulative
Revenue
To City
Initial
Inv.estme nt.
Accumulative
Gross
Revenue
Accumulative
Revenue
To City
1st Yr.
$747,831
$ 627,350
$ 54,735
$2,553,391
$`.1,490;600
$165,856
2nd Yr.
1,254,700
128,564
3,279,320
331,712
3rd Yr.
1,882,050
203,846
5,425,782
497,508
4th Yr.
2,509,400
279'1128
8,001,536
663,424
5th Yr.
3,136,750
354,410
11,092,440
.829,280
Notes:
1)1 Swenson's require that the City bring Merry -Go -Round up to code
and includes no restoration of the Merry -Go -Round or organ. They
do propose an additional investment of. '$100,000 to $200,000 for
restaruant construction in about the fifth year.
2). Perry /Edwards investment would not restore building adequately to
bringtit up to mandated code and includes no Merry -Go -Round or organ
restoration. The $62,000 'revenue is guaranteed the City.
-2-
3). The Waterhorn Waterslide proposal includes no restoration or
investment in the Merry-Go-Round, buildincj, or organ, nor
operation of same. Of the projected Revenue To City only
$40,000 is guaranteed.
4). Carousel Park's proposal completely restores the Pier area
covered, the Merry -Go -Round and organ. The Revenue To City
projected is guaranteed.
> n.
ROY CRUICKSHANK
Financial Statement
As of January 31, 1978
Assetts
Cash
Stocks and Bonds (At fair market value)
Real Estate (At fair market Value) -See Attached
Note Receivable
Auto
Boat
Motor Home
Personal Property
Life Insurance Surrender Value
Total Assets
Notes Payable
Owing on Real Estate (See Attached)
Owing on Auto
Owing on Boat
Owing on Motor Home
Total Liabilities
NET WORTH
$ 10,000
)1,000
392,000
23,500
11,000
17,000
20,800
30,000
4,000
$ 1,500
136,250
8,000
7,500
14,000
COWD TIAL
1/
$ 519,300
$ 167.250
$ 352,050
**Life Insurance: Allstate , Face Value $ 140,000.00, Beneficiary Virginia
Cruickshank.
Prepared Without Audit
(WiQQiamcw- gattin
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SCHEDULE OF STOCKS AND BONDS — LISTED
NUMBER
OFSHANES
OR PAR VALUE
OF BONDS
NAME OF
COMPANY
CLASSOCK
O OFST
RATE AND
MATURITY
PAP VALUE
MARKET
VALUE
VALUE ON
MY BOOKS
lANO
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AMOUNT
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TOTAL. ................... ......
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SCHEDULE OF STOCKS AND BONDS — UNLISTED
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TOTAL ... ...............................
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SCHEDULE OF REAL ESTATE AND IMPROVEMENTS
LEGAL DESCflIPTIONa ADDRESS
IEALSO GIVE BRIEF PHYSICAL �� CRIPTIONI
VALUATION
MORTGAGEORLIEN
MO.
PMT.
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RATE
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AMOUNT
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IS ANY OF ABOVE REAL ESTATE SUBJECT TO DECLARATION OF HOMESTEAD? IF SO, HAS DECLARATION BEEN
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PREVIOUS MAXIMUM AMOUNT BORROWED FROM BANKS 11
PAST AND PRESENT BUSINESS CONNECTIONS:
NAME OF EMPLOYERS OR ASSOCIATES
LOCATION
DATE OFCONNECTION
DATE
CONNECTION TERMINATED
F.ePJr !-�. ULIa.�
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