1 STAFF REPORT
DATE: February 14, 2023
TO: Justin Hess, City Manager
FROM: Patrick Prescott, Community Development Director VIA: Simone McFarland, Assistant Community Development Director – Economic Development and Housing
BY: David Conrad, Real Estate & Project Manager
SUBJECT: Approval of a One-Year Lease Agreement Extension with Sweet 16 Musical Properties, Inc., DBA Hollywood Piano, at 323 S. Front Street
RECOMMENDATION
Approve the Third Addendum/Amendment to Lease Agreement (Third Amendment) Authorizing a One-Year Lease Agreement Extension with Sweet 16 Musical Properties, Inc., DBA Hollywood Piano , for approximately 8 ,000 square feet of space currently occupied at 323 S. Front Street (Attachment 1).
BACKGROUND
The City of Burbank closed escrow on the commercial office building located at 323-333 S. Front Street, Burbank, CA 91502 (Property) on February 26, 2021. At the time of sale, the commercial office building came with five active leases. As of this writing, besides the Hollywood Piano lease proposed extension, there remains only one other active tenancy at the Property and that is Pacific Capital Real Estate Investment Corp., who is currently occupying 3,350 square feet under a month-to-month lease term.
DISCUSSION
Hollywood Piano is currently leasing approximately 8,000 square feet of space at the Property plus shared access to two (2) first-floor ADA restrooms and the first-floor kitchen facility. Hollywood Piano is completing its fourth year of a five-year term extension, which commenced in March 2018. The current monthly rent is $13,400. The new monthly rent, as proposed by the Third Amendment, would increase to $16,000 from March 2023 to February 2024. This is a $2,600 increase per month and will increase the overall revenue
2 to the City’s General fund by $31,200 for the year . This new rental amount better approximates current market rates and covers the operating costs of the Property.
Staff anticipates this will be Hollywood Piano’s last year of the lease due to Council’s request to evaluate repurposing the Property for a possible Homelessness Services Center. Staff is currently working on this request, and i t will take staff time to research, prepare plans, obtain Council approval, and proceed with entitlement work during the next year. Approving a one-year lease extension for Hollywood Piano ensures continuity in the rental generated at the Property until the City has determined the future of the building.
At the same time, the lease extension will not affect the planning work from happening.
Upon the expiration of the one -year lease extension, if planning efforts for the future of the Property are still underway, t he one-year term may be administratively extended on a month-to-month basis if agreed upon by both parties. Due to the amount of time it would take Hollywood Piano to identify a suitable replacement location and relocate, a four (4) month written notice is necessary to terminate any exercise of the month-to-month extension.
Other business terms in the Third Amendment include a change in designation for some of the twelve parking spots currently designated for non-exclusive use by Hollywood Piano patrons or employees under the lease agreement. Three of the twelve parking spots shall now be designated as “RESERVED FOR PIANO STORE CUSTOMERS ” to accommodate Hollywood Piano patrons or employees on an exclusive basis. The other nine (9) parking spots shall remain available to Hollywood Piano on a non-exclusive basis.
During the next year, Economic Development staff will work with Hollywood Piano to help them find a new location in Burbank.
ENVIRONMENTAL REVIEW
This item is a 12-month continuation of an existing lease of a publicly owned facility, with no expansion of existing or former use. Therefore, this item is categorically exempt from the California Environmental Quality Act ( CEQA) under Class 1 ( “Existing Facilities ”), Section 15301 of the CEQA Guidelines.
FISCAL IMPACT
On September 29, 2020, City Council approved the use of rental income from the Property to offset regularly occurring building maintenance , which is approximately $72,000 annually, to help fund long-term capital expenses and set aside up to $200,000 annually for homeless services. The combined monthly rental will continue to support building maintenance, as well as homeless services , while future plans for the building are considered by Council.
3 CONCLUSION
The proposed one-year extension of the Hollywood Piano Lease Agreement will generate increased rental revenue for the City of Burbank and maintain existing revenue streams from the Property, while allowing staff to continue its due diligence work on potentially locating a Homelessness Services Center at this site for Council’s consideration.
ATTACHMENT
Attachment 1 — Third Addendum/Amendment to Lease Agreement Attachment 2 — Sweet 16 Musical, Inc Lease Agreement dated December 18, 2012 Attachment 3 — Second Addendum to Lease dated March 15, 2018