SR 02-08-2022 3A
City Council
Report
City Council Meeting: February 8, 2022
Agenda Item: 3.A
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To: Mayor and City Council
From: David Martin, Director, Administration
Subject: Award Request for Proposal to Redcar Properties LTD and Authorize City
Manager to Execute Contract for Property Management for Bergamot Station
Arts Center
Recommended Action
1. Award RFP# 303 to Redcar Properties LTD for property management services
for the Community Development Department;
2. Authorize the City Manager to negotiate and execute an agreement with Redcar
Properties LTD, for a management fee of up to $90,000 per annum for two years,
three additional one-year renewal options, for a total amount not to exceed
$450,000 and future year funding contingent on Council budget approval.
Summary
Bergamot Station Arts Center (Bergamot), one of Santa Monica’s most prominent
cultural arts assets includes a five-acre City-owned property. With the expiration of the
Worthe Real Estate Group (Worthe) master ground lease in 2021, staff seeks Council
authorization to enter into a professional services agreement for property management
services with Redcar Properties LTD (Redcar) for up to five years at Bergamot property.
During that time, staff would seek Council direction regarding future redevelopment
plans for Bergamot.
Discussion
Bergamot, located at 2525 Michigan Avenue, consists of City-owned and privately-
owned properties. The City-owned Bergamot property (Site) consists of five buildings
totaling approximately 62,000 square feet that is leased to 30 galleries, creative tenants,
a nonprofit theatre company, and a café at full lease up.
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The City purchased the Site in 1989 with transit funds with the goal the site could serve
future transit needs, including providing a revenue source for the Department of
Transportation (DOT). In 2013, the Site was designated as a Conservation - Arts Center
District in the Bergamot Area Plan to help protect and preserve cultural uses at the Site
and provide an affordable safe haven for the arts in Santa Monica. In 2016, the Expo
Light Rail project was completed, including the Bergamot Station / 26th Street Light Rail
Station that is adjacent to Bergamot at the corner of 26th Street and Olympic Boulevard.
The Bergamot complex also includes approximately 1.3 acres of privately-owned
adjacent property with approximately 30,000 square feet of building space that houses
galleries, other creative businesses, and a restaurant. The privately-owned portion is
owned and managed by Redcar. The Site and building layout, as well as adjacent
properties, are shown in the following Illustration 1.
Illustration 1 – Aerial Plan
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On June 13, 2017, Council authorized the City Manager to negotiate and execute an
interim master ground lease for the Site with Worthe in anticipation of the Bergamot
Station Arts Center redevelopment project and an Exclusive Negotiation Agreement
(ENA) between Worthe and the City. The interim master ground lease granted Worthe
exclusive use of the Site including property management responsibilities. The ENA and
master ground lease expired in 2021 along with property management services when
Worthe opted not to renew its master ground lease. Worthe has agreed to maintain only
property management services for the Site through March 2022 while the City
transitions property management services to a new property management firm.
The City’s goal is to expeditiously retain the best qualified property management firm to
manage the operational needs of a creative arts complex.
Bidder Recommendation
Best Qualified Person/Firm Redcar Properties Ltd
Evaluation Criteria
Experience / technical competence, conceptual plan and approach,
quality control, cost of services, and stability and references.
Municipal Code SMMC 2.24.190
RFPs Received
Clear Blue Commercial Fertig and Gordon Companies Redcar Properties Ltd
Rising Realty Partners Varsobia Property Management
and Realty Services, LLC
n/a
RFP Data
Posted On Posted On
Advertised In
(City Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
11/16/2021 City's Online
Bidding Site Santa Monica Daily Press 18 12/14/2021
Justification to Award
The proposals were reviewed by a selection panel consisting of staff from Cultural
Affairs, Economic Development, and a representative of the Bergamot Station Arts
Center Tenants Association. Evaluation was based on the following selection criteria:
experience / technical competence; conceptual plan and approach; quality control; cost
of services; and operational stability and references. Based on these criteria, the
selection panel unanimously voted for Redcar Properties LTD, and staff recommends
Redcar as the best qualified team to property manage the Site. Redcar’s portfolio
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demonstrates vast experience with managing properties in Santa Monica and at
Bergamot in particular. Since 2017, Redcar has owned and managed the privately-
owned portion of Bergamot which houses similar art and creative uses, and shares the
fundamental understanding of the unique cultural dynamics of the Site. Additionally,
Redcar is headquartered at the privately-owned portion of Bergamot which offers
economies of scale for on-site supervision and shared services further unifying the
publicly- and privately-owned properties. Redcar proposes property management fee of
3% of gross receipts with a minimum of $2,500 per month, and 3% of construction costs
to oversee any construction / capital projects; the most competitive of all proposed fees.
Redcar’s tenant and professional references speak highly of its personnel,
responsiveness, and steadfast standard of service.
At capacity, the Site would generate approximately $133,000 monthly in rent with
common area maintenance (CAM) fees paid by the tenants to fund CAM expenses.
From this revenue source, $50,992 per month would be remitted to the DOT to cover
the land rental cost as a condition of the original Site Purchase and Sale Agreement.
The balance would fund operating expenses, including and not limited to on-going
maintenance, property management, accounting, and administrative fees. Net operating
income would be reinvested into the Site to fund capital improvements and arts center
programming.
Redcar proposes property management fee of 3% of gross receipts and capital
improvement construction costs. Staff estimates up to $90,000 in property management
fees per annum in the first two years of operation with future increases tied to the
Consumer Price Index.
Description
Estimated
Amount
Estimated Fee at 3%
Year 1
Estimated Fee at 3%
Year 2
Annualized Gross Receipts $1,600,000 $48,000 $48,000
Capital Improvements $300,000 $9,000 $9,000
Collection of Deferred Rent $500,000 $15,000 $15,000
Pass-Through Expenses* $10,000 $10,000 $10,000
Sub-Total $82,000 $82,000
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10% Contingency $8,000 $8,000
Total Not to Exceed $90,000 $90,000
* Expenses include bank fees, property management software subscription, accounting, etc.
With Council authorization, staff would work with Redcar to schedule a meet-and-greet
with Site tenants and to refine a schedule of services to include tenant feedback. Staff
anticipates that the new property management contract would commence by April 1,
2022, to coincide with the expiration of the Interim Property Management Agreement
with Worthe.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the
recommended action. Staff would return to Council if specific budget actions are
required in the future. Redcar as property manager would be responsible for collection
of rent and payment of all management, operational, and capital improvement expenses
directly to vendors, subject to City approval; remit monthly rent to the DOT Fund; and
provide the City with monthly expenditure reports. Operational funds would be held in a
Redcar / City joint account overseen by the City and subject to annual audits. Monthly
revenues of $50,992 to DOT would be deposited into account 60600002.415950.
Prepared By: Ava Lee, Senior Development Analyst
Approved
Forwarded to Council
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