SR 08-27-2019 3F
City Council
Report
City Council Meeting: August 27, 2019
Agenda Item: 3.F
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To: Mayor and City Council
From: Susan Cline, Director, Public Works, Airport
Subject: Approval of Modification to Lease Agreements at Airport Properties with
SNAP, Inc.
Recommended Action
Staff recommends that the City Council authorize the City Manage r to negotiate and
execute a third modification to month-to-month rental agreement for 3000 31st Street
Suite A-E and a first modification to lease agreement #10302 for 2772 and 2800 Donald
Douglas Loop North with Snap, Inc. (formerly known as Snapchat Inc .), a Delaware-
based company, to include, subject to strict approval requirements, industrial laboratory
and research and development uses among the permitted uses for the premises. There
is no immediate financial impact or budget action necessary as a result of the
recommended action.
Summary
Snap, Inc. (“Snap”) currently operates its research and development laboratory, which
primarily houses the tools and equipment necessary in prototyping and testing various
pieces of hardware, in Venice, California. Snap wishes to move some of its laboratory
operations from Venice into the space it leases from the City either at 2772 and 2800
Donald Douglas Loop North or 3000 31st Street Suite A – E (“Leased Space”) at the
Santa Monica Airport. Use of either space for Snap’s laboratory operations would fall
outside the current permitted uses under either lease and outside the uses currently
authorized under the Santa Monica Airport Leasing and Licensing Guidelines. Staff
recommends modifications of the leases to permit Snap to consolidate some of its
laboratory operations into its Santa Monica Airport Leased Space. Such modifications
require Council approval.
Discussion
In September 2016, the City entered into lease agreement #10302CCS for City-owned
properties at 2772 and 2800 Donald Douglas Loop North and eight small abutting
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hangars. The lease term is 67 months, expiring on April 30, 2022, with an option to
extend the lease for a period of five years. The current permitted uses of the premises
are “general commercial office and administrative uses consistent with uses related to a
technology company.”
In April 2017, the City entered into a month-to-month rental agreement with Snap for
Suites A-E and ground floor hangar space within the City-owned property located at
3000 31st Street. This rental agreement has been the subject of two prior modifications
and remains in place subject to termination by either party on 30 days written notice.
The current permitted uses of the premises are aircraft storage (in the hanga r space)
and “general office and administrative use consistent with a use expected for a
commercial business operation in the City of Santa Monica.”
Snap has approached the City seeking the ability to consolidate some of its research
and development laboratory operations from their current location in Venice, California
into the Leased Space. All costs to construct the research and development laboratory
will be the responsibility of Snap. In order to ensure that this construction does not
hinder the City’s ability to market the space in the future, Snap would be responsible for
bearing the costs of returning the premises to its original condition if Snap decides to
vacate the premises. Snap has described its research and development laboratory
operations as follows:
• The R&D lab primarily houses the tools and equipment necessary in prototyping
and testing various pieces of hardware and other projects, for example, Snap’s
Spectacles. The lab is used daily by a small team of engineers certified to
operate the equipment.
• The prototyping lab is common to the electronics industry and similar in nature to
the prior use of the space as a design center by Audi/VW. The lab operations will
be a low intensity use that is compatible with surrounding uses and will not be
obnoxious or offensive to the surrounding environment.
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• To support the operations, the team, as part of its normal business operations,
uses, stores and maintains small quantities of hazardous substances (e.g., paint
and solvents) and generates small quantities of hazardous waste (e.g., e-waste)
that is sent to a 3rd party for treatment and disposal. All such
substances/products shall be stored, used, kept and maintained by Snap in
accordance with all applicable laws, regulations or rules.
The Airport’s Leasing and Licensing Guidelines (Guidelines) define authorized uses as
“low intensity uses that are compatible with surrounding uses, serve the adjacent
community, and are consistent with the City’s environmental goals and policies.” The
Guidelines list “professional and general offices” as an example of authorized uses but
not “laboratory” or “research and development” uses. The Guidelines identify as
prohibited uses “any use involving the manufacture, processing, storage, or treatment of
products, which by nature of the operation is likely to be obnoxious or offensive to the
surrounding environment.” The Guidelines state that leases “outside the parameters
established by this Policy, will require City Council approval.”
Snap has provided the City with both a list of the chemicals it will be using in its
electronics prototyping lab and the procedures it follows for handling and disposing of
those chemicals and waste. Snap’s submission has been reviewed by the City’s Water
Resources Division, which has determined that its chemical and waste handling
procedures are appropriate and that Snap’s use of the chemicals pursuant to those
handling procedures will not negatively impact the surrounding environment.
Additionally, Snap would be required to obtain an industrial wastewater permit under
Santa Monica Municipal Code Section 5.20.170 and be subject to routine inspections.
The proposed modifications would require similar review and approval for any additional
research and development use of the Leased Space that Snap may propose in the
future.
The proposed modifications would allow the tenant to consolidate its operations from
other locations to their facilities at the Santa Monica Airport and would further foster a
beneficial long-term tenant relationship between the City and Snap.
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Accordingly, staff recommends that the City Council approve the modifications to the
agreements for the Leased Space to permit industrial laboratory and research and
development uses, including the operation of an electronics prototyping lab, and any
lawful ancillary uses related thereto (e.g., the lawful disposal of any waste generated by
the prototyping lab).
Past Council Actions
08/14/2018 (Attachment A) Approved the Minimum Standards for Commercial
Aeronautical Services
05/10/2016 (Attachment B) Approved a Lease with Snapchat, Inc. for Office Space
at 2772 and 2800 Donald Douglas Loop North
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the
recommended action.
Prepared By: Kate Schlesinger, Senior Administrative Analyst
Approved
Forwarded to Council
Attachments:
A. August 14, 2018 Staff Report - Minimum Standards for Commercial Aeronautical
Service
B. May 10, 2016 Staff Report - Snapchat Lease and Corporate Realty Group
Agreement Modification 51016
C. Snap Inc. Oaks Initiative Disclosure Form
Minimum Standards for Commercial Aeronautical Services
Information
Department:Public Works, Airport Division Sponsors:
Category:03. Consent Calendar
Attachments
AIRPORT LEASING AND LICENSING POLICY
Consent Decree
Minimum Standards for Commercial Aeronautical Service Providers
August 8, 2017 Staff Report
Responses to Public Comments-First Comment Period
Responses to Public Comments-Second Comment Period
Written Comments
Recommended Action
Recommended Action
Staff recommends that the City Council:
1. Approve the attached Minimum Standards for Commercial Aeronautical Services (Minimum Standards) that must be met by any person or entity that
provides or seeks to provide commercial aeronautical services, as an addendum to the existing Santa Monica Airport Leasing and Licensing Policy
for the leasehold and license management of properties at the Santa Monica Airport (Airport or SMO).
2. Extend and clarify the City Manager’s lease-approval authority to lease terms complying with the Leasing Policy and the Minimum Standards with
terms of five years or less for non-aviation tenants and three years or less for commercial aeronautical service providers, so long as the leases have
an expiration date on or before December 31, 2028.
Staff Report Body
Summary
The City of Santa Monica manages 528 direct leasable spaces located at the Santa Monica Airport. Management of these properties is guided by the
Council-approved Santa Monica Airport Leasing and Licensing Policy (the “Leasing Policy”) (Attachment A). Staff recommends minor modifications to the
Leasing Policy to ensure consistency with the Consent Decree (Attachment B) and adoption of the Minimum Standards (Attachment C) as an addendum to
the existing Leasing Policy. The proposed Minimum Standards are based on industry best practices from general aviation airports across the nation. The
City’s adoption and uniform enforcement of the proposed Minimum Standards would ensure best practices are observed by aeronautical lessees while
complying with its obligations under the Consent Decree without impacting its rights as the Airport operator.
Discussion
Since August 8, 2017, the City Manager’s authority to execute leases at the Airport has been limited to leases complying with the Leasing Policy with
expiration dates on or before December 31, 2022 (Attachment D). Staff recommends extending and clarifying the City Manager’s lease-approval authority
to leases complying with the Leasing Policy and the Minimum Standards with terms of five years or less for non-aviation tenants and three years or less for
commercial aeronautical service providers, so long as the leases have an expiration date on or before December 31, 2028. Anything beyond the five-year
term or outside the parameters established by the Leasing Policy and Minimum Standards would require Council approval. The increased authority for
lease approval would provide greater flexibility to comply with the Consent Decree’s requirements regarding use of Airport property and obtain leases that
would support the City’s goal of Airport financial self-sufficiency while the Airport continues to operate through December 31, 2028. Of the 528 leases at the
Airport, 400 are for aviation uses while 128 are for non-aviation uses.
The proposed Minimum Standards would assist in ensuring that aeronautical service providers comply with applicable regulations and requirements while
also demonstrating the City’s compliance with the standards of certain grant assurances that remain in place as a result of the Consent Decree. As a
condition of receiving federal grants, the Federal Aviation Administration (FAA) requires airport owners to comply with a number of grant assurances. While
the City no longer receives federal grants in connection with airport operations, under the terms of the Consent Decree that governs airport operations
through December 31, 2028, the City remains bound to comply with the standards of certain specified grant assurances, including grant assurances 22
pertaining to economic nondiscrimination and 23 pertaining to exclusive rights. Accordingly, the City must continue to make the Airport available to
aeronautical users on fair and reasonable terms without unjust economic discrimination and may not grant any aeronautical users an exclusive right to
operate at the Airport.
In connection with grant assurances that continue to apply to the Airport under the Consent Decree, the FAA has encouraged airport owners, such as the
City, to adopt Minimum Standards to establish specific industry benchmarks for various types of commercial aeronautical services. Many general aviation
airports in the United States have adopted such Minimum Standards, which generally set forth policy goals, objectives, and practices for leasing to
commercial aeronautical service providers on airport properties. The main objective of such Minimum Standards is to ensure that each aeronautical service
provider is reasonably fit and willing and able to perform the services it seeks to provide. This would promote good service and fair competition and
discourage unqualified applicants.
City of Santa Monica
California
Staff Report
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The Minimum Standards would establish uniform baseline requirements that must be met by providers of commercial aeronautical services at the Airport.
They would not apply to non-aviation tenants of the Airport or to aviation tenants that use hangars and aircraft parking spaces for personal use. The
Minimum Standards would not create any rights to operate at the Airport that do not already exist under the Consent Decree and would not detract from the
City’s rights under the Consent Decree, which include the City’s right to close the Airport on or after January 1, 2029.
The proposed Minimum Standards are based on best practices from general aviation airports from across the nation. Staff engaged Anderson & Kreiger
LLP, a law firm specializing in federal aviation law, to conduct research on best practices nationwide to help prepare appropriate and reasonable minimum
standards for the City of Santa Monica. Each of the proposed Minimum Standards is consistent with industry best practices across the United States.
The proposed Minimum Standards cover a wide range of commercial aeronautical services conducted at Santa Monica Airport. The Minimum Standards
include general information, application procedures, general operator requirements, and detailed specialized requirements specific to certain classes of
commercial aeronautical service operators. The Minimum Standards would require all commercial aeronautical service providers to meet specified
insurance and security requirements, pay market rates for their leases, pay additional fees as established by the City, maintain appropriate equipment and
personnel (permitting subcontracting only with approval from the Airport Director), meet specified insurance and security requirements, and comply with
applicable federal, state, and local laws, including noise restricting, environmental, and anti-discrimination laws and regulations.
Community Outreach
Staff conducted significant outreach prior to bringing this recommendation to Council. This outreach, summarized below, involved notifying stakeholders
that have an interest in these Minimum Standards, gathering and responding to stakeholder comments, and obtaining feedback from the Airport
Commission.
· January 11, 2018 – notices for review and comment sent to 247 recipients including Airport tenants, aviation groups, representatives of the FAA,
and Airport Commissioners. Notice posted on Airport website.
· January 24, 2018 – meeting with all Airport tenants and aviation stakeholder groups to answer questions about the draft document.
· February 6, 2018 – draft Minimum Standards sent for review and comment to those on the City’s Airport community distribution list, including staff
from local, state and federal elective offices. Recipients were asked to forward the draft Minimum Standards to their respective airport interest groups
and provide written comments by March 9, 2018.
· February 12-23, 2018 – six in-person meetings with members of the Airport Commission, Friends of Sunset Park, Airport 2 Park, Venice
Neighborhood Council, and Concerned Residents Against Airport Pollution.
· March 9, 2018 – 34 comments were received in writing from members of the community. The majority of the comments relating to areas within the
scope of the Minimum Standards fell under the following areas of concern: insurance requirements, auditing provisions, environmental requirements,
Airport Director’s waiver authority, security, hours of operation for commercial aeronautical service providers, and personnel requirements.
· June 5, 2018 – staff presented the revised proposed Minimum Standards including the results of the community and stakeholder outreach to the
Airport Commission for review. The presentation to the Airport Commission included a document titled “Responses to Comments – First Comment
Period,” which summarized the relevant public comments received, responded to those comments, and included a redline of the revised proposed
Minimum Standards showing the changes made from the original draft in response to the public comments (Attachment E). Based on additional
comments received from stakeholders, including insufficient time to review, the Commission recommended extending the comment period for an
additional two weeks.
· June 21, 2018 – deadline for second round of public comment. An additional 49 comments were received during the second phase of the comment
period. Staff, in consultation with the City’s outside counsel, Anderson & Krieger, reviewed all comments and prepared a document titled
“Responses to Comments – Second Comment Period,” which catalogues all of the comments received, summarizes and responds to those
comments, includes a redline of the revised proposed Minimum Standards showing changes from the draft presented to the Airport Commission on
June 5, 2018, and includes a redline of the Leasing Policy showing proposed changes in response to the public comments. (Attachment F)
Based on feedback from the Airport Commission and additional comments received from stakeholders and community members during the second phase
of the comment period, staff revised the five areas of concern listed in the proposed Minimum Standards as follows (Attachment E):
1. Insurance Requirements
Staff reviewed and evaluated comments regarding proposed insurance requirements, in conjunction with the City’s Risk Manager. To develop the
recommended insurance requirements for Commercial Aeronautical Service Operators at the Santa Monica Airport, the Risk Manager worked closely with
the Airport Director to identify the risks associated with each service contemplated in the Minimum Standards. The Risk Manager then contacted the City’s
Airport insurance brokers to discuss appropriate insurance lines (e.g., general liability, aircraft liability, pollution liability, etc.) and limits, and review
insurance requirements from other airports of similar size and aeronautical service makeup. During these discussions, the Airport insurance brokers
confirmed there are no fixed “industry standards” for aeronautical services insurance requirements and that there are constraints to the insurance limits that
small business owners providing aircraft-related services can obtain. As a result, it was incumbent on the City to ensure the Airport risk assessment was
thorough and complete, and the insurance requirements presented in the Minimum Standards document adequately protect the City and the community it
serves while not unduly burdening business owners. It is the Risk Manager ’s position that this has been achieved. Significantly, after reviewing the second
set of public comments, the Airport Director and the Risk Manager determined that additional risks had been identified, and, after further review of other
Draft
general aviation airports’ insurance requirements and further discussion with insurance brokers, the Risk Manager recommended increases to the
Commercial General Liability and Pollution insurance requirements for certain aeronautical service providers.
2. Airport Directors’ Waiver Authority
After review of public comments, the Minimum Standards were modified both to place stricter limits on the Airport Director’s waiver authority and to impose
procedural requirements intended to ensure transparency of the waiver process. In particular, the Minimum Standards were revised to make clear that
certain requirements would not be subject to waiver by the Airport Director, including insurance, airport security, nondiscrimination, and legal compliance
requirements. In addition, the Minimum Standards were revised to make clear that any waiver by the Airport Director must be justified by clear
circumstances rendering the waiver in the City’s best interest, must be presented to the Airport Commission and approved by the City Manager (or in
certain limited circumstances the City Council), and must be recorded in a publicly available log that provides the basis for the waiver, the date of its
presentation to the Airport Commission, and the date of its final approval or denial.
3. Noise Restrictions
The Minimum Standards would not alter the pre-1990 noise restrictions currently set out in the Municipal Code, which are grandfathered and cannot be
changed without compliance with the Airport Noise and Capacity Act of 1990 (ANCA). The Minimum Standards would require compliance with these noise
restrictions. In response to public comments, the Minimum Standards were revised to make clear that the Airport Director may not waive compliance with
these noise restrictions and would require certain Operators to provide pilots with information on the Airport’s Fly Neighborly Program, which suggests
operational methods to decrease noise levels over residential neighborhoods.
4. Hours of Operation
The Minimum Standards would not alter the Airport’s hours of operation, which are set by the Municipal Code. In response to public comments, the
Minimum Standards were modified so that they would not require Operators to provide services during later evening hours, which might be viewed as
encouraging operations during these hours.
5. Audit Requirements
In response to public comments, the Minimum Standards were revised to require Aircraft Charter, Air Taxi Operators and Air Transportation Arrangers, for
each flight providing commercial air transportation, to provide the Airport Director, on request made within 180 days, a report stating the type of aircraft, the
number of passenger seats, and the number of passengers actually carried. This information would provide the Airport Director with information necessary
to ensure that aircraft operations do not go beyond the scope of those permitted by Operators’ lease or license agreements and to assist in enforcement of
the Airport’s noise restrictions. Staff declined to impose additional audit requirements that would require the provision of information not typically required or
needed at general aviation airports.
Airport Commission
On July 23, 2018, staff presented the additionally revised proposed Minimum Standards reflecting the second round of public comments to the Airport
Commission. The Airport Commission recommended that City Council adopt the revised minimum standards with consideration of three additional areas:
· Provide more specific safety information to pilots rather than just the Fly Neighborly program;
· Consider higher insurance levels for limited liability companies; and
· Flag air transportation arrangers as an issue to be considered moving forward.
Past Council Actions
Meeting Date Description
08/08/17 (Attachment D)Council-approved Leasing Policy
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended actions. While there is no reliable way to project the
possible impacts of the adoption of the Minimum Standards, the proposed standards would allow all commercial aeronautical service providers to compete
at the Airport on a level playing field.
Meeting History
Aug 14, 2018 5:30 PM City
Council Regular Meeting
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City Council
Report
City Council Meeting: May 10, 2016
Agenda Item: 8.A
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To: Mayor and City Council
From: Elaine Polachek, Asst. City Manager, City Manager's Office, Administration
Subject: Office Space Lease at 2772 and 2800 Donald Douglass Loop North, and
Second Modification to Professional Services Agreement No.10248 (CCS) for
Commercial Real Estate Leasing Services for the Santa Monica Airport
Recommended Action
Staff recommends that the Council
1. Authorize the City Manager to negotiate and execute a Lease with Snapchat, Inc.
(Snapchat) for office space located at 2772 and 2800 Donald Douglas Loop
North, and 8 hangars, reflecting the general terms and conditions below.
2. Authorize the City Manager to negotiate and execute a second modification to
professional services agreement No.10248 (CCS) in the amount of $744,844
with Corporate Realty Group (“CRG”), a California-based corporation, to provide
additional commercial real estate leasing services for the Santa Monica Airport.
This will result in a (3) three-year amended agreement expiring on June 30, 2018
for a total amount not to exceed $1,104,834 with future year funding contingent
on Council budget approval.
3. Authorize budget changes as outlined in the Financial Impacts & Budget Actions
section of this report.
Executive Summary
In accordance with the recently adopted Santa Monica Airport (SMO) Leasing Policy,
the City is moving forward with leasing city-owned properties, including those that were
formerly the subject of subleases. The City owns the two office buildings located at
2772 and 2800 Donald Douglas Loop North and eight hangars. The combined square
footage is as follows: 2772 Donald Douglas has 47,343 and 2800 Donald Douglas has
23,130, for a total of 70,473. The eight hangars are small and total 8,900 square feet.
Snapchat is an innovator in the creative space realm, with a specialty in image
messaging. The proposed lease agreement with Snapchat is for a period of five years,
with an option for an additional five year period. The base rent at full occupancy begins
at $3.07 per square foot and includes an annual escalator of 3%.
A real estate commission fee of $804,834 based on 5% of the value of the total 5 -year
lease term, would be due to Corporate Realty Group (CRG) for the proposed lease
agreement should the lease be executed on July 1, 2016 The commiss ion would
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exceed the funding currently authorized in CRG’s agreement No. 10248(CCS) with the
City. Staff anticipates the use of CRG to negotiate additional lease agreements at the
Airport during FY2016-17 and FY2017-18. The anticipated commissions through June
30, 2018 would be in an amount not-to-exceed $1,104,834.
Background
On June 9, 2015 (Attachment A), Council authorized the City Manager to negotiate and
execute a month-to-month lease with Milstein Adelman LLP for 23,130 square feet on
the second and third floors at 2800 Donald Douglas Loop North and a three year lease
agreement with Volkswagen Group of America (Volkswagen) for 43,471 square feet of
office space and 8,900 square feet of hangar space at 2772 Donald Douglas Loop
North. Milstein Adelman LLP vacated the premises in December 2015. Volkswagen
gave notice that it will be vacating the premises at 2772 Donald Douglas Loop North on
December 31, 2016.
On February 9, 2016 (Attachment B), the City approved a first modification to increase
Agreement No.10248 (CCS) with CRG by $180,000 expiring on June 30, 2016 with two
annual renewals of $50,000, for a total agreement amount not to exceed $359,990 to
provide assistance to City staff in negotiating leases for properties located at Santa
Monica Airport, including brokerage services for vacancies that might arise within the
contract period.
Discussion
In April, 2016 CRG notified staff that it had an offer from Snapchat to lease the subject
property. Snapchat is an innovator in the creative space realm, with a specialty in
image messaging. Snapchat is currently headquartered in Venice, California. Due to
significant growth, Snapchat seeks additional office space in Santa Monica. Snapchat
proposes to lease both buildings, with a combined square footage of 70,473 for five
years, plus eight small abutting hangars for a period of five years plus one option of five
years.
It should be noted that the subject buildings were and/or are currently occupied by office
users, (attorneys and auto designers) hence there is no change in use. Although
Snapchat will modify the building with minor interior tenant improvements, Snapchat
does not propose to expand the buildings. Accordingly, the proposed project is exempt
from CEQA pursuant to CEQA Guidelines Section 15301. Additionally, the proposed
project is exempt pursuant to CEQA Guidelines Section 15061(b)(3) in that it can been
seen with certainty that the proposed project does not have the potential to significantly
impact the environment, since the new and existing uses are largely the same.
Snapchat will employ approximately 300 workers on site. Therefore, it should be noted
that Snapchat will be subject to the transportation demand management (TDM)
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requirements of the City in order to address, any transportation and/or parking
management issues. Moreover, Snapchat would be required to comply with all city
building code regulations, planning standards, and any applicable FAA regulation, as a
condition of the lease. Finally, the lease is consistent with the terms of the voter-
approved Measure LC passed in 2014 to regulate future use of SMO property.
At full occupancy, the rent shall be $3.07 per square foot, and includes a 3% annual
escalation provision. Annual rent paid by Snapchat to the City will be approximately
between $2.9M and $3.2M, depending on the year. The proposed rent reflects a
market price. Securing this major tenant helps ensure the Airport Fund’s financial self -
sufficiency and allow it to repay its $13M debt obligation to the City.
Additionally, Snapchat has agreed to spend at least $1.4M in tenant improvements in
the two buildings. Any improvements undertaken by Snapchat will revert to the City at
the conclusion of the lease term. If Snapchat installs the required tenant improvements,
the City will provide a rent credit equal to five months of rent.
Commencement
Date:
Upon execution of Lease Document
Term Ends:
January 31, 2022 or 67 months from the date of lease
execution.
Options
One five-year option at Fair Market Value
Base Rental Rate Rent and absorption of the premises shall be in accordance
with the following schedule (includes a three percent annual
increase).
Execution Date – December 2016: $69,390.00 /
month or $3.00/SF Modified Gross – 23,130 SF
January 2017 – December 2017: $243,866.90 / month or
$3.07SF Modified Gross.
January 2018 – December 2018: $251,182.91 / month or
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$3.16/SF Modified Gross
January 2019 – December 2019: $258,718.39/ month or $3.26
SF Modified Gross
January 2020 – December 2020: $266,479.95/ month or
$3.36/SF Modified Gross
January 2021 – December 2021: $274,474.34/ month or
$3.46/SF Modified Gross
January 2022 $282,708.57/ month or $3.56/SF Modified Gross
Escalations
3% per year starting January 2018. Parking is not subject to
escalators.
Tenant
Improvement
Allowance
Tenant shall receive a rent credit that is equivalent to Five (5)
Months’ rent, with one month payable on January of each year,
for a total of ($1,402,784.99)
Parking at full
occupancy
133 parking spaces at $150 per month equals to $19,950 per
month.
Modification to CRG Contract
Should the proposed lease be approved and executed, the real estate commission fee
due to CRG would exceed the current amount authorized in the City’s Agreement No.
10248(CCS). CRG’s real estate commission fee is based on 5 percent of the initial 67
months term. The commission for this proposed lease is estimated to be $804,834.
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Staff anticipates CRG will negotiate additional leases in FY 2016-17 and FY 2017-18.
Staff anticipates $150,000 in commissions to be paid in each of the fiscal years.
Therefore, staff recommends a second modification to increase the professional
services agreement with CRG by $744,844 for a total agreement amount not to exceed
$1,104,834 expiring on June 30, 2018 for additional commercial lease brokerage and
negotiation services for the Santa Monica Airport.
It should be noted should Snapchat exercise its option to renew for an additional five -
year lease at fair market value, the City would have a future commission obligation to
CRG. This obligation would be based on 3% of the value of the total lease term for
years six through ten.
Financial Impacts & Budget Actions
The recommended lease with Snapchat Inc. will generate an estimated $1,782,225 in
Airport revenues for FY2016-17, at account 33431.402120. Revenue increases
associated with the new lease agreements will be included in the FY 2016-17 Proposed
Budget and FY 2017-19 Proposed Biennial Budget.
The agreement modification to be awarded to CRG is $744,844 for an amended
agreement total not to exceed $1,104,834. In addition to the current budget of
$259,990, award of the agreement modification requires an appropriation of $844,844
from the Airport Fund to account 33431.555060 in FY 2015-16.
Prepared by:
Nelson Hernandez, Senior Advisor to the City Manager
Prepared By: Nelson Hernandez, Senior Advisor for Airport Affairs
Approved
Forwarded to Council
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Attachments:
A. Staff Report June 9, 2015
B. Staff Report February 9, 2016
C. Written comments
D. Powerpoint
REFERENCE:
Agreement No. 10919 (CCS)
&
Modified Agreement No. 10302
(CCS)