SR-03-27-1984-11BC /ED--PO:SM:mh
COUNCIL MTG: 3/27/84
TO: Mayor and City Council
FROM: City Staff
Santa Monica, California
SUBJECT: Recommendation to Approve Expansion of Surf View Cafe
Lease Premises
I
W 2 7 1984
Introduction
This report explains the rationale for expanding the Surf View Cafe lease premises
on the Santa Monica Pier, includes architectural drawings of the expansion (Exhibit
A), proposes an increase to the minimum monthly rent in proportion to the additional
square footage and describes an investment recapture program for fifty percent (50%)
of the total investment in the lease premises.
Background
In January, 1983, the
lease from Ms. Camden
ten (10) months, Mr.
per week resulting in
operator for the same
in 1981.
City Council approved the assignment of the Surf View Cafe
to the present leasehold owner, Mr. Suh. During the following
Suh has operated the business longer hours and six to seven days
an 18% increase in sales over those reported by the previous
months in 1982, and a 25% increase in sales for the same months
In order to increase sales further, Mr. Suh has applied for a beer and wine license.
This license has been issued with the condition that the property meet County Health
Department regulations, which requires one men's and one women's public restroom
within any building serving alcohol.
To comply with this regulation, Mr. Suh proposes to extend the lease premises in the
rear by 161 square feet. Mr. Suh also proposes to extend the rear patio by 282 square
feet which will bring the patio boundry fence flush with the rear wall of the new
extension (see Exhibit A). Neither the building nor patio extension will affect
(1-0
MAR 2 7 1984
parking or any other Lessee or City operation. It will be located on "dead"
space (see photos, Exhibit B).
The addition of these handicap- accessible public restrooms will be a significant
improvement to the lease premises and will help to alleviate the Pier's overall
problem of insufficient restroom facilities.
The benefits of additional restrooms to the Pier as well as the likelihood of
generating more revenue to the City, based on increased gross sales from beer
and wine, are the basis of staff's decision to proceed with this action at the
present time rather than to defer it to the Pier Restoration Corporation (PRO.
The PRC has been advised of the proposed expansion and the terms described
herein and have not expressed any concerns or problems.
Rent and Recapture
The Surf View Cafe currently covers 1,749 square feet (building and patio). The
minimum monthly rent is $574 plus ten percent (100) of the annual sales over $68,880.
The current minimum monthly rent is therefore 33 cents per square foot.
Staff recommends increasing the Surf View Cafe's minimum monthly rent and therefore
the minimum annual sales in proportion to the number of additional square feet at the
same rate per square foot that is currently charged.
The minimum monthly rent would increase from $574 to $720 ($574 plus 443 sq.ft. x
33t)• The minimum annual sales would increase from $68,880 to $86,400 ($720 per
month x 12 months divided by 10 %) (see Table A).
Staff further recommends a recapture program which will permit Mr. Suh to receive
credit for fifty percent (500) of his investment by applying fifty percent (50o) of
the percentage overage on sales against the investment credit until the balance is
zero or June 30, 1986, whichever comes first.
-2-
This recapture program will be nontransferable. If the Surf View Cafe lease is
assigned, the recapture program will be cancelled and the credit balance, if any,
will not be due to the assignee or Mr. Suh, the assignor.
For example, the total investment is estimated at $10,000. Recapture would be
permitted on up to $5,000 maximum.
Estimated FY 1984 -85 Gross Sales
Recommended Min. Annual Sales
Sales Overage
100 of Sales Overage
One -half Paid to City
One -half Applied to Recapture Credit
Balance of Recapture Credit 6/30/85
'Estimated FY 1985 -86 Gross Sales
'Recommended Min. Annual Sales
Sales Overage
100 of Sales Overage
Amount Applied to Recapture Credit Balance
Percentage Overage Paid to City
Balance of Recapture Credit 6/30/86
'Using estimated CPI increase of 40
$150,000
- 86,400
63,600
6,360
3,180
3,180
$ 1,820 ($5,000 minus $3,180)
$156,000
89,856
6,614
1,820
4,794
$ -0-
All receipts submitted by Mr. Suh in support of the total investment must be
confirmed by the City Engineer prior to commencement of the recapture program.
Recommended maximum recapture for this project is $5,000.
City, County and State Agency Approvals
Approvals or support from the City Landmarks Commission, Architectural Review
Board, Building Department, County Health Department, State Coastal Commission
and the PRC will be sought with all final approvals or statements of support
expected by April, 1984.
Financial Analysis
This project will not impact FY 1983 -84 budget. The recapture program will begin
the latter of two dates: July, 1984, or upon completion and review of construction.
-3-
The Surf View Cafe lease term expires June 30, 1991. For the balance of the lease
term, beginning July, 1984 (seven years), the City will receive a guaranteed
$12,264 (plus yearly CPI increases) additional rent.due to the increase in the
minimum monthly rent.
The increase of approximately eight patio tables plus the additional revenue from
beer and wine should increase this Lessee's annual gross sales of which the City
receives ten percent.
Over the next two fiscal years, a maximum of $5,000 will be withheld from the
percentage overage due the City in order for this Lessee to recoup fifty percent
of his investment.
Recommendation
Staff respectfully recommends that Council:
1. Approve the expansion of-the Surf View.Cafe .lease premises by 443 square feet
to include public handicap- accessible restrooms and additional patio.space.
2. Increase the minimum monthly rent to $720 and increase the minimum annual
sales to $86,400 beginning July 1, 1984.
3. Approve the recapture program with maximum recapture of $5,000 to be completed
when the balance is zero or June 30, 1986, whichever comes first.
4. Direct the City Attorney to prepare appropriate lease documents.
Prepared by: Susan Mullin
Manager, C /ED -Pier Operations
Attachments: Exhibit A, Architectural Floor Plan
Exhibit B, Photo of Existing Elevation
Table A, Comparison of.Current E Recommended Rent
-4-
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11 -B: SURF VIEW CAFE LEASE /SANTA MONICA PIER: Presented was a
staff report recommending approval of expansion of lease premises
of Surf View Cafe, Contract No. 3379(CCS�Y;' on Santa Monica Pier.
Councilmember Reed moved to approve the expansion of the Surf View
Cafe lease premises by 443 square feet to include public
handicapped- accessible restrooms and additional patio space; to
increase the minimum monthly rate to $720 and increase the minimum
annual sales $86,400 beginning July 1, 1984; to approve the
recapture program with maximum recapture of $5,000 to be completed
when the balance is zero or June 30, 1986, which ever comes first;
to direct the City Attorney to prepare appropriate lease documents;
further that it be stipulated that approval be contingent on the
rear security fence and gate meeting approval by the Landmarks
Commission and the Architectural Review Board. Second by
Councilmember Epstein. Discussion was held. After discussion, the
motion was approved by the following vote:
Council Vote: Unanimously approved 7 -0
CITY COUNCIL MINUTES
MARCH 27, 1.984
Reference:
ATTACHED is a set of Plan's.
Toilet Room Addition — Surf
View Cafe
#10 Santa Monica Pier — Lease
Map #5239