SR-12-12-1978-11HSanta Monica, California, December 5, 1978
!�
// 77
TO:
Mayor and City Council DEC 1 2 1978
FROM:
City Staff
SUBJECT:
Proposed Lease of remaining, unoccupied portion
of former Army'Reserve Training Facility at the
Santa Monica Municipal Airport to Biphase Energy
Systems - a research /development firm.
Introduction:
This report addresses itself to the letter proposal
(copy attached) of Donald W. Douglas, Chairman of
the Board of " Biphase Energy Systems ", to Lease the
major portion of the former Army Reserve facility
at Santa Monica Municipal Airport.
Background:
The Army Reserve Training Facility at Santa Monica
Municipal Airport is an area consisting of the
following:
1. Land Parcel #3 = 43,820.54 sq. ft.
2. Land Parcel #4 = 50,389.81 sq. ft..
Total Land Area: 94,210.35 sq. ft.
3. Main Armory Building:
a. First Floor = 13,191 sq. ft.
b. Basement = 82094 sq. ft.
Total Main Bldg. Area 21,285 sq. ft.
4. "OMS" Vehicle Repair
Station Building = 3,718 sq. ft.
5. Net Land Area- Exclus-
ive of Buildings: 77,241.95 sq. ft.
The above mentioned former Army Reserve Facility,
(upon expiration of its Lease) was transferred
mid 1978 to the City - with the U. S. Government
//
D E C 1 2 1978
T0: Mayor and City Council December 5, 1978
Background:
(Continued)
retaining a small area, (O.M.S. - Station), until
January 1979.
Subsequently City Council approved a three year
lease with Douglas Museum to occupy, rent free,
the East Wing of the Main Armory Building,(8,725 sq.ft.)
of the first floor, thereby leaving the remaining;
(4,466 sq. ft. of the first floor and 8,094 sq. ft.
of the basement in the Main Armory Building - and
the 3,718 sq. ft. of the "OMS" garage building -
and the net land area of 77,241.95 sq. ft.)
- all available for lease.
Biphase Energy System's letter lease proposal has
indicated its desire to Lease, for 3 years, all
the remaining areas that is available for lease
as indicated above.
Based upon the letter proposal - the following
rental revenue would be generated:
1. Net Land Area: Annual Revenue
(77,241.35 sq. ft.
@ .32 per sq. ft. per yr.) _ $ 24,717.42
2. First Floor - Main Armory
Building
(4,466 sq. ft. @ .40
per sq. ft. per mo. - or
4.80 per yr.) _ $ 21,436.80
-2-
TO: Mayor and City Council December 5, 1978
Background: (Continued) Annual Revenue
3. Basement area of Main
Armory Bldg. (8,094
sq. ft. @ .25 per sq.
ft. per mo. or $3.00
per yr.) = $24,282.00
4. "OMS" Vehicle repair
Building
(3,718 sq. ft.
@ .20 per sq. ft. per
mo. or $2.40 per yr.) _ $ 8,923.20
TOTAL ANNUAL REVENUE $ 79,359.42
or $6,613.28 per mo.
The rental of the remaining area, not occupied by
the Museum - to one prime tenant - would be far
more desireable than to try to rent same piece-
meal. There is also a plus factor of the City
retaining within its boundaries a research /devel-
opment firm the calibre of Biphase with the
potential for growth within the community.
(NOTE: STAFF HAS RETAINED ROBERT M. LEA, M.A.I.
to conduct a rental analysis on subject
property based on comparable properties;
it is interesting to note - appraisal
rental is $113. below ,staff's appraisal;
Copy: of said report :is attached).
Alternative Solution:
City could elect to proceed with renting the
remaining area, piecemeal; which in the opinion
of staff would not be too desireable.
-3-
T0: Mayor and City Council December 5, 1978
Recommendation:
The Airport Commission at a Special Meeting held
Monday, December 4, 1978 at 4:00 P.M. in the
Airport Director's office, formally considered the
Biphase Energy Systems Lease proposal and unanimously
recommends Council approval subject to the following
conditions:
1. Lease Rental to be set at $6,600. per month
for the 3 yr. Lease period.
2. Approve 3 -two year option requests subject
to "all urban" C.P.I. increase at end of
each option period; - with provision for
future Lease cancellation in event of Land
use change - with Lessee re- imbursement of
un- amortized improvement costs - and reason-
able relocation costs.
Prepared by: C. V. Fitzgerald, Airport Director
attachments:
1. Biphase Energy System letter proposal.
2. M.A.I. Rental Appraisal.
3. Exhibits A -B -C & D indicating areas of
proposed lease.
-4-
�. SANTA PAONIOA
frh., ,. ,t AIRPOPT
Olphase, up s s 4P1 AP ,78
1
n
2907 C i Pads Blvd, Safe MWIM CaNP.90405
2131451. _d92
Lnergy Systems
t�escarch- Cottrrll
November 2, 1978
BES-D,VD-78 °340
Mr. Clyde Fitzgerald
Airport Director
Santa Monica Airport
3200 Airport Avenue
Santa Monica, California
90405
Dear Clyde
Biphase Energy Systems makes tho Rollowirio o�fex'Co lease the
Army.Reserve Training Center area:
We would like the term of the lease to be three years,
with three.two -year options.
We have roughly calculated the cost to us on the basis
of the following parameters:
the upstairs at 40¢ /sq. ft. per month, ,
i the basement at 25¢ /sq. ft. per month,
the garage at 20¢ /sq. ft. per month; and
� 1
the land at 32¢ per sq. ft. per-year. -
These come to 'a total of approximately $6,.600 per month
or $79,200.per year, which we, keel to be competitive with
comparable property in this area. The exact calculations
will take further study of the dimensions of the inside of
the buildings plus usable area in the parking lot.
e�
We further understand that we would pay the cost of utilities,
and upkeep in the landscaped area, but that the City would
be responsible for insurance and maintenance of the building
shell.
It is our understanding also that because the property is
owned by the City, property taxes will be nominal. If
that understanding is not correct, would you please inform''
me of what your estimate of the yearly taxes to the County
might be.
Our requirements are occupancy at the very earliest possible
date, and anything that could be done to expedite negotiations
i
® SANTA NONIOA
Ur. Clyde Fitzgerald
November -2, 1978 �OV 6 8 46
Page 2
between us and submission to the Airport Commission and the City
Council would be most sincerely appreciated. We understand that
the property we now occupy is in escrow and therefore we may
need to move in the very near future.
Biphase Energy Systems,presently has approximately 37 employees
and consultants working in Santa Monica and we very much would
like to stay in the City of Santa Monica. We believe we have a
potential of considerable growth in employees: Ile are con -
tractors to the Department of Energy, to the Department of
Defense, Electric Power Research Industry and several commercial
customers, and feel strongly that we would like to look forward
to a long relationship with the City of Santa Monica.
Since ly,
�i
D nald W. dou las, Jr
Chairman o t e Boar
DWDJR:ag
r.
,
BIPHASE ENERGY SYSTEMS, INC.
2907 Ocean Park Boulevard
Santa Monica, California 90405
ANNUALIZED PAYROLL AND CONSULTANTS FEES
1. REGULAR PAYROLL $585,000.00
2. CONSULTANTS FEES $ 66,000.00
TOTAL $651.000.00
0
ROBERT M. LEA, MEMBER. AMERICAN
INSTITUTE OF REAL ESTATE APPRAISERS
THOMAS W. ERICKSON
ROBERT M. LEA ASSOCIATES
REAL ESTATE ANALYSIS
SUITE 1100
IOBSO WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 60024
December 4; 1978
Mr. John Jalili
Acting City Manager
City of Santa Monica
City Hall
1685 Main Street
Santa Monica, California 90401
Dear Mr. Jalili:
AREA CODE 12131
TELEPHONE 475 -0606
Re: Rental Study and Analysis
of Proposed Lease of
Army Reserve Training
Center to Biphase
Energy Systems
In accordance with your request we have inspected the
subject premises, reviewed the proposed lease terms and
examined comparison data, all for the purpose of enabling
us to render an opinion concerning appropriate rental terms
for the subject space as determined by the local market.
The old Army Reserve Training Center is comprised basically
of two concrete structures, a training building and garage
surrounded primarily by asphalt -paved parking. A portion
of the training center building is currently under lease
to the Donald Douglas Museum. The balance of the training
center building, the site and the garage are the subjects
of a pending proposal to lease by Biphase Energy Systems.
The proposed tenant has suggested a rental amount of approxi-
mately $6,600 per month for the subject property with the
landlord (City) paying building insurance and exterior
maintenance.
Based on information supplied us by the Airport Director,
supplemented by our field inspections and measurements, the
areas to be leased appear to be as follows:
Army Reserve Training Center Building:
First Floor:
Finished Basement:
Subtotal:
Garage:
Total Building Area:
Site Area:
(excluding unusable drainage
ditch area)
4,465 sf
8,094 sf
12,559 sf
3,718 sf
16,277 sf
700580( ±) sf
Mr. John Jalili
Page Two
December 4, 1978
Site Coverage: 23%
The building areas stated above are gross building areas
in all cases, consistent with local market practice. While
all areas are believed reasonably reliable, they are subject
to review, especially with regard to site area, based upon
future survey or engineered drawing of the site to be leased.
Summarizing the subject, the property is surrounded by
industrial or quasi - industrial uses and is comprised of
basically office space and garage or industrial space.
Although apparently structurally sound, the "office" space
within the training center building is distinctly inferior
by present standards especially in terms of interior finish
and lighting.
The lease proposal indicates separate rental rates for the
upstairs and basement areas of the center, the garage
building and the site itself. Throughout our following
discussion of comparisons and in arriving at a conclusion
of reasonable rent for the subject, we have translated
the total rental figure into market terms. The local market
states rents on the basis of gross building area and considers
site area only implicitly. Hence, although the market
certainly considers not only building features, but the
amount of available site, it simplifies the ultimate
calculation and comparison of rental amounts on the basis
of rental per square foot of building area. It is also
our experience that the current leasing market for industrial/
research and development space calls for leases on an
absolute net basis. That is, the tenant bears all expenses
of maintaining the property over the term of the lease,
including insurance and any taxes.
Our extensive investigations to discover and confirm details
of reasonably comparable leases included both Santa Monica
Airport and the surrounding industrial /business park districts.
As is typically the case, much of the initially - gained data
was selected out as noncomparable or non -open market in
nature. Ultimately six items were selected for direct
comparison and to serve as foundational support for our
opinion.
In comparing these leases to the subject, a number of factors
of comparison were important. These included': the percentage
of building area devoted to office use, the age and condi-
tion of the structure, specific features of the structural
improvements (including such items as truss height, amount
of available electrical power, etc.) locational features,
the date of the transaction and the percentage of the site
Mr. John Jalili
Page Three
December 4, 1978
covered by buildings. The last item, referred to as site
coverage, warrants a note of explanation. Basically, the
more "extra" land is available to serve in a support role
to the building (low site coverage), the higher the
observation of rent per square foot building one can expect
to observe. That is, some premium can be expected in
renting buildings with more rather than less open adjacent
site area available for parking, loading and /or future
expansion.
The following briefly summarizes information concerning
the six comparison leases.
Item No. 1: 3400 Airport Avenue. This represents the lease,
at Santa Monica Airport, of the former Navy Reserve Training
Center. This lease was basically arranged in 1976 and
includes structural improvements which have a number of
similarities to the subject. All expenses except insurance
are borne by the,tenant. Site coverage is 54 %. Rental
is 300 psf of gross building area which we adjust to 280
psf to reflect a triple net lease situation. This lease
item should be considered inferior, primarily due to the
date of the transaction.
Item No. 2: 1617 Stanford Street. This item represents the
November 1978 lease, at 450 psf gross, of a new industrial
building of 3,960± sf covering two- thirds of the 'total
available site. Adjusting to a triple net basis, an
indication of 360 psf is obtained. This item is rated
comparable to very slightly inferior to the subject in an
overall sense. It is decidedly inferior to the subject in
terms of percentage of office space and in the degree of
site coverage but is certainly superior in terms of
building age and condition as well as building features.
Item No. 3: Southwest Corner Colorado Avenue and 17th Street.
This item reports two leases covering a total of 14,400 sf
of new building area, the total of which covers approximately
two- thirds of the site. These leases are on a triple net
basis at the rate of 500 psf gross building area. This
item is generally comparable to the subject in an overall
sense. However, as was the case with many of the comparison
items, considerable exercise of judgement was required.
The building is far superior to the subject in age, condition,
building features and in the prominence of its location.
However, no office space is provided and site coverage is
considerably inferior to the subject.
Item No. 4: 1714 16th Street. This item concerns a lease
at the rate of 330 psf, triple net, arranged in August 1978.
Site coverage is approximately 60%. This item is considered
Mr. John Jalili
Page Four
December 4, 1978
inferior to the subject in terms of amount of office space
and site coverage. However, it is considerably superior
in age and condition of building (approximately six years
old) and building features. In an overall sense this item
was considered slightly inferior to the subject.
Item No 5• Northeast Corner Sunset Avenue and Main Street,
Venice. This item reports the current asking rate of 50re psf
triple net, for new industrial buildings to be constructed
on the site. Building features and age are, of course,
superior while the percentage of office space and site
coverage are inferior to the subject. An additional point
of "superiority" is, of course, represented by the fact that
this item reports no signed leases but rather the asking
price for this space.
Item 'No 6 Southerly Extension of 282 Street, South of
e
Ocean Park Boulevard. This item represnts the lease being
currently negotiated by SDC for an approximately 40,000 sf
structure at the triple net rate of 550 to 600 psf. The
building will obviously be superior to the subject structures
and this property will enjoy locat1onal superiority due to
its location in a new business park. This building will
be roughly equivalent in percentage of office space but
inferior in site coverage. Overall, this item will be
considerably superior to the subject.
Based on our study of these items and our other investigations,
including conversations with brokers and informed parties
in the area, we conclude thaL the appropriate rental for
the subject space at this time is at the unit rate of 40% psf
of gross building area indicating a total rental (rounded)
of $6,500 per month. This compares very favorably with the
proposed rental of $6,600 per month. However, it should be
borne in mind that our opinion reflects the situation in which
the tenant will bear all costs of operation and maintenance
of the subject premises including any property taxes and
insurance. Furthermore, consistent with current practice in
the market, increases in rent consistent with increases
in the Consumer Price Index would be appropriate at the end
of each lease or option.
I hope that this information satisfies your present needs.
Should any questions remain concerning this writing or the
subject matter thereof, please call and I will respond
promptly.
4a� Lindley
RML : of
Respectfully submitted,
ROBERT M. LEA ASSOCIATES
������
Robert M. L a, M.A,I.
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ARMY RESERVE TRAINING CENTER
\\
2800 AIRPORT AVENUE
jll r i,
SANTA MONICA,, CALIFORNIA
Fll?sr FLO ®R PLAN
®
8,094 sq. ft. \ \
O m 1,353 sq. ft. \
® 3,744 sq. ft.
13,191 sq. ft, 7'otol
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ARMY RESERVE TRAINING,CENTER .
2500 AIRPORT AVENUE
SANTA MONICA, CALIFORNIA
0
RASEnIfENT FLOOR PLAN
® 8,094 ;sq. ft.
NOTE:
BASEMENT ROOM 6 1VISI'ONS NOT
AVAILABLE AT THIS TIME
FIRST FLOOR TOTAL ' /3,/9/ sq. ft.
BASEMENT TOTAL 8,094 sq. ft.
Grand Toto/ 21,285 sq. ft,
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TRANSMITTAL INSTRUCTIONS
FOR CITY AGREEMENTS, DEEDS,
RESOLUTIONS, ETC.
DATE January 19, 1979
TO City Clerk
FROM City Manager's Office
SUBJECT: BIPHASE ENERGY SYSTEMS, INC. Lease
EFFECTIVE DATE: January 18, 1979
(Date approved by Council, signed by Manager, calendar date, other)
The attached material is to be distributed as outlined below:
Letter $ signed document to:
(include address)
Mr. Donald W. Douglas, Jr.
Chairman of the Board - BIPHASE ENERGY SYSTEMS, INC.
2907 Ocean Park Blvd.
Santa Monica, California 90405
Carbon copy of letter
and document to:
(include address)
1) City Manager's Office
2) Director of Airport, Clyde Fitzgerald
Other instructions:
Kindly forward attached lease to Mr. Douglas for his signature.
When signed and-returned to your office, please transmit copy
to Clyde Fitzgerald, Airport Director.
Santa Monica, California, December 5, 1978
TO: Mayor and City Council DEC 1 2 1978
FROM: City Staff
SUBJECT: Proposed Lease of remaining, unoccupied portion
of former Army Reserve Training Facility at the
Santa Monica Municipal Airport to Biphase Energy
Systems - a research /development firm.
Introduction: This report addresses itself to the letter proposal
(copy attached) of Donald W. Douglas, Chairman of
the Board of " Biphase Energy Systems ", to Lease the
major portion of the former-Army Reserve facility
at Santa Monica Municipal Airport.
Background: The Army Reserve Training Facility at Santa Monica
Municipal Airport is an area consisting of the
following.
1. Land Parcel #3 = 43,820.54 sq. ft.
2. Land Parcel #4 = 50,389.81 sq. ft.
Total Land Area: 94,210.35 sq. ft.
3. Main Armory Building:
a. First Floor = 13,191 sq. ft.
b. Basement = 8,094 sq. ft.
Total Main Bldg. Area 212285 sq. ft.
4. "OMS" vehicle Repair
Station Building = 3,718 sq. ft.
5. Net Land Area- Exclus-
ive of Buildings: 77,241.95 sq. ft.
The above mentioned former Army Reserve Facility,
(upon expiration of its Lease) was transferred
mid 1978 to the City - with the U. S. Government
//9
D E C 1 2 1978
T0: Mayor and City Council December 5, 1978
Background: (Continued)
retaining a small area, (O.M.S. - Station), until
January 1979.
Subsequently City Council approved a three year
lease with Douglas Museum to occupy, rent free,
the East Wing of the Main Armory Building,(8,725 sq.ft.)
of the first floor, thereby leaving the remaining;
(4,466 sq. ft. of the first floor and 8,094 sq. ft.
of the basement in the Main Armory Building - and
the 3,718 sq. ft. of the "OMS" garage building -
and the net land area of 77,241.95 sq. ft.)
- all available for lease.
Biphase Energy System's letter lease proposal has
indicated its desire to Lease, for 3 years, all
the remaining areas that is available for lease
as indicated above.
Based upon the letter proposal - the following
rental revenue would be generated:
1. Net Land Area: Annual Revenue
(77,241.35 sq. ft.
@ .32 per sq. ft. per yr.) _ $ 24,717.42
2. First Floor - Main Armory
Building
(4,466 sq. ft. @ .40
per sq. ft, per mo. - or
4.80 per yr.) _ $ 21,436.80
-2-
TO:
Background:
Mayor and City Council December 5, 1978
(Continued)
Annual Revenue
3. Basement area of Main
Armory Bldg. (8,094
sq. ft. @ .25 per sq.
ft. per mo. or $3.00
per yr.) _ $24,282.00
4. "OMS" Vehicle repair
Building
(3,718 sq. ft.
@ .20 per sq. ft. per
mo. or $2.40 per yr.) _ $ 8,923.20
TOTAL ANNUAL REVENUE $ 79,359.42
or $6,613.28 per mo.
The rental of the remaining area, not occupied by
the Museum - to one prime tenant - would be far
more desireable than to try to rent same piece-
meal. There is also a plus factor of the City
retaining within its boundaries a research /devel-
opment firm the calibre of Biphase with the
potential for growth within the community.
(NOTE: STAFF HAS RETAINED ROBERT M. LEA, M.A.I.
to conduct a rental analysis on subject
property based on comparable properties;
it is interesting to note - appraisal
rental is $113. below staff's appraisal;
Copy of said report.is attached).
Alternative Solution:
City could elect to proceed with renting the
remaining area, piecemeal; which in the opinion
of staff would not be too desireable.
-Z_
T0: Mayor and City Council December 5, 1978
Recommendation:
The Airport Commission at a Special Meeting held
Monday, December 4, 1978 at 4:00 P.M. in the
Airport Director's office, formally considered the
Biphase Energy Systems Lease proposal and unanimously
recommends Council approval subject to the following
conditions:
1. Lease Rental to be set at $6,600. per month
for the 3 yr. Lease period.
2. Approve 3 -two year option requests subject
to "all urban" C.P.I. increase at end of
each option period; - with provision for
future Lease cancellation in event of Land
use change - with Lessee re- imbursement of
un- amortized improvement costs - and reason-
able relocation costs.
Prepared by: C. V. Fitzgerald, Airport Director
attachments:
1. Biphase Energy System letter proposal.
2. M.A.I. Rental Appraisal.
3. Exhibits A -B -C & D indicating areas of
proposed lease.
-4-
SANTA MONICA .
It :AIRPORT
131phase Plot/ 6 A 40 DN'78
Energy Sgstems
nesearch•Cottrell
2907 an Pa`k OW, Santa MmIcs Catlt, 80405
21314 _•d892
November 2, 1978
BES- DWD -78 -340'
Mr. Clyde Fitzgerald
Airport Director
Santa Monica Airport
3200 Airport Avenue
Santa Monica, California.
90405
Dear Clyde
Biphase Energy Systems makes the following offer to lease the
Army, Reserve Training Center area:
We would like the term of the lease to be three years,
with three.two -year options.
We have roughly calculated the Bost to us on the basis
of the following parameters:
the upstairs at 40� /sq. ft. per month, ,
the basement at 25� /s.q. ft. per month,
the garage at 20¢ /sq. ft. per month; and.
the land at 32¢ per sq. ft. per ,year..
These come to'a total of approximately $6,600 per month
or $79,200.per year, which we. feel to be competitive with ,
comparable property in this area. The exact calculations
will take further study of the dimensions of the inside of
the buildings plus usable area in the parking lot.
We further understand that we would pay the cost of utilities,
and upkeep in the landscaped area, but that the City would
be responsible for insurance and maintenance of the building
shell.
It is our understanding also that because the property is
owned by the City, property taxes will be nominal. If
that understanding is not correct, would you please inform"
me of what, your estimate of the yearly taxes to the County
might be.
Our requirements are occupancy at the very earliest possible
date, and anything that could be done to expedite negotiations
BIPHASE ENERGY SYSTEMS, INC.
2907 Ocean Park Boulevard
Santa Monica, California 90405
ANNUALIZED PAYROLL AND CONSULTANTS FEES
1. REGULAR PAYROLL $585,000.00
2. CONSULTANTS FEES $ 66,000.00
TOTAL $651.000.00
ROBERT M. LEA. MEMBER. AMERICAN
INSTITUTE OR REAL ESTATE APPRAISERS
THOMAS W. ERICKSON
ROBERT M. LEA ASSOCIATES
REAL ESTATE ANALYSIS
SUITE 1100
10850 " WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90084
December 4; 1978
Mr. John Jalili
Acting City Manager
City of Santa Monica
City Hall
1685 Main Street
Santa Monica, California 90401
Dear Mr. Jalili:
AREA CODE 12131
TELEPHONE 479 -0609
Re: Rental Study and Analysis
of Proposed Lease of
Army Reserve Training
Center to Biphase
Energy Systems
In accordance with your request we have inspected the
subject premises, reviewed the proposed lease terms and
examined comparison data, all for the purpose of enabling
us to render an opinion concerning appropriate rental terms
for the subject space as determined by the local market.
The old Army Reserve Training Center is comprised basically
of two concrete structures, a training building and garage
surrounded primarily by asphalt -paved parking. A portion
of the training center building is currently under lease
to the Donald Douglas Museum. The balance of the training
center building, the site and the garage are the subjects
of a pending proposal to lease by Biphase Energy Systems.
The proposed tenant has suggested a rental amount of approxi-
mately $6,600 per month for the subject property with the
landlord (City) paying building insurance and exterior
maintenance.
Based on information supplied us by the Airport Director,
supplemented by our field inspections and measurements, the
areas to be leased appear to be as follows:
Army Reserve Training Center Building:
First Floor:
Finished Basement:
Subtotal:
Garage:
Total Building Area: .
4,465 sf
8,094 sf
12,559 sf
3,718 sf
16,277 sf
Site Area: 70,580(±) sf
(excluding unusable drainage
ditch area)