STAFF REPORT
DATE: September 26, 2023
TO: Justin Hess, City Manager
FROM: Patrick Prescott, Community Development Director BY: David Kriske, Assistant Community Development Director
SUBJECT: Approval of an Amendment to a Parking Lease with Creative International Investment, Inc. for 190 Parking Spaces at the Courthouse Parking Structure Located at 301 East Angeleno Avenue
RECOMMENDATION
Approve a First Amendment to a Parking Lease (Attachment 1) with Creative International Investment, Inc. (Creative) for lease of 190 parking spaces at the Courthouse Parking Structure located at 301 East Angeleno Avenue to provide parking for the office building at 250 East Olive Avenue, and authoriz e the Community Development Director, as the City Manager’s Designee, to execute the First Amendment.
BACKGROUND
The City of Burbank (City) owns and operates the Courthouse Parking Structure (Parking Structure), which provides parking for the adjacent Burbank Courthouse as well as general public parking. In 2003, the City authorized the former Redevelopment Agency , as the City’s agent , to lease 190 spaces in the Parking Structure to the owner of the adjacent Burbank Civic Plaza office building at 250 East Olive Avenue, to help satisfy that development’s required parking (Attachment 2). Lease revenues flow to the City to fund operations and maintenance costs of the leased parking spaces and other Downtown Burbank facilities, and the City maintains administ rative authority over the Lease. The Lease grants Creative International Investment, Inc. (Creative), as the current owner of the Burbank Civic Plaza, 1 exclusive use of these 190 parking spaces during weekday business hours; outside of these exclusive hours the spaces are made available as public parking.
1 The former owner of the Burbank Civic Plaza (and original party to the Lease) was Burbank Civic Plaza, L.L.C.
COMMUNITY
DEVELOPMENT
2 Creative is required to pay 90 percent of the fair rental value of each parking space, as determined every five years through a survey of market parking rental rates. Rent for the current five-year period is $81 per space and was last adjusted in 2019. Since March 2019, Creative’s monthly rent for the 190 spaces is $15,390.
DISCUSSION
Creative has failed to pay rent in accordance with the Lease since May 2020, coinciding with Los Angeles County shutdown orders resulting from the COVID -19 Pandemic.
Creative also owes the City for underpayment of rent for the first three months subsequent to the last rent adjustment made in 2019. The total amount of unpaid rent is $597,645 for the period of May 2020 through June 2023. Beginning in November 2020, the City and Creative informally discussed how to resolve the back-due rent due to Creative’s financial hardship resulting from the Pandemic.
In March 2023 , the City received a formal letter from Creative whereby they requested relief from all back-due rent between May 2020 and December 2022, and a reduction in the rental amount charged for future rent. Based on discussions with Creative, staff recommends an Amendment to the Parking Lease with Creative that includes the following provisions:
1. Full re ntal abatement for the period of May 2020 through May 5, 2021, which corresponds with the Los Angeles County Department of Public Health office work site closures under COVID -19 Health Orders. This would constitute a deduction of $187,162.25 from the total amount of back -due rent owed between May 2020 through June 2023. All other back-due rent owned by Creative will be paid in full.
2. For the period beginning on January 1, 2023, and continuing until March 1, 2024, rent (including back-due rent for this period) would be adjusted to $52 per month per space, contingent on Creative reopening the Fourth Floor of the Parking Structure for general public use during weekday business hours. Starting in March 2024, rent would be readjusted for the next five-year period based on fair rental value of the parking spaces, in accordance with the formula in the existing Lease.
3. Update the legal entities that are currently bound by the Lease, to recognize the assignment of the Lease to Creative that took place in 2014, and remo ve references to the former City Redevelopment Agency.
Staff believes that Creative may justifiably receive some rent relief related to the COVID- 19 pandemic, when businesses faced unprecedented financial hardships. Specifically, rent abatement for the period when office buildings could not be occupied due to County health orders is consistent with other relief granted by the City Council for facility operators 3 during the pandemic, 2 and the Lease provisions relating to force majeure. However, staff believes Creative’s request for nearly three years of full rent relief is not justified.
Furthermore, staff believes there is no justification for the three months of underpaid rent in 2019 and the full amount should be paid for this period.
Staff also believes it is appropriate to temporarily reduce Creative’s monthly rental payments from $81 per space to $52 per space. Under the existing Lease, Creative’s tenants receive guaranteed parking at the $81 per space rental rate in a reserved area on the Fourth Floor of the Parking Structure. However, many tenants are currently choosing to purchase the City’s cheaper $52 per month parking permits, which allow the tenants to park on any of the other public parking floors of the Parking Structure or in other parking areas of the City. The City’s $52 monthly parking permit does not guarantee an available space; however, spaces have been more readily available in Downtown Burbank due to lower overall occupancy of the Parking Structure and other nearby public parking structures during weekday office hours.
Staff believes this lowered weekday parking demand throughout Downtown Burbank will begin to disappear as economic activity continues to rebound, which is why s taff recommends this reduced rent only apply until the next rental adjustment period in March 2024. Further, s taff believes the reduction in rent is appropriate as long as Creative releases its exclusive use of the Fourth Floor of the Parking Structure and reopens the floor for general public parking. Reopening the Fourth Floor will benefit the City by making more spaces available for the general public, and improving utilization so that floors are not vacant for prolonged periods of time. Staff proposes that this rent reduction be effective from January 2023 ending on March 1, 2024. At that point, the rental rate will be readjusted for the next five -year period of the Lease in accordance with the existing Lease provisions, which requires Creative to pay 90% of the fair rental value as determined by a survey of nearby private parking structure rates.
By approving the proposed Amendment, the City’s Parking Authority Fund will receive back-due rent in the amount of $377,422.75 that will be used to continue to fund operations and maintenance of the Parking Structure and other structures in Downtown Burbank. This is $220,222.25 less than the $597,645 otherwise owed under the Lease .
The Amendment would also reduce rental income collected between July 1, 2023 through February 29, 2024 from $123,120 to $79,040 (a difference of $44,080) due to the rental rate reduction from $81 to $52.However, in exchange, the City would be able to offer the currently-exclusive 190 parking spaces to other public parkers, and could potentially sell more monthly parking passes for these spaces to other members of the public to be used on a non- exclusive basis along with Creative. As stated above, this temporary shared
2 See Staff Report dated November 10, 2020
(https://burbank.granicus.com/MetaViewer.php?view_id=6&clip_id=9251&meta_id=376281 ) 4 parking arrangement will improve utilization within the Parking Structure so that floors do not remain vacant for prolonged periods of time. Finally, beginning in March 2024, the regular payment terms of the Parking Lease Agreement would be restored , and the City would once again be able to reassess a rental rate that would reflect 90 percent of the market rate for parking spaces.
ENVIRONMENTAL REVIEW
Approving the proposed Lease Amendment with Creative will have no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment since all infrastructure will remain the same as it exists today. As such, this action is not a “project” subject to the requirements of the California Environmental Quality Act (CEQA) pursuant to 14 Cal.
Code Regs. §15378.
FISCAL IMPACT
By approving the proposed Amendment, the City’s Parking Authority Fund will receive back-due rent in the amount of $377,422.75 that will be used to continue to fund operations and maintenance of the Parking Structure and other structures in Downtown Burbank.
CONCLUSION
The City currently leases 190 spaces in its Courthouse Parking Structure to Creative to provide parking for its office building at 250 E. Olive Avenue, but has not received rental payments since May 2020, due in large part to the financial effects of the COVID -19 Pandemic. The proposed Amendment to the Parking Lease for these spaces would recover 63 percent of the total rent owed to support City parking operations and maintenance and would also offer a similar discount on future rents until March 2024.
While this Amendment would provide lower revenues to the City versus what is currently owed by Creative, it avoids potentially costly methods to recover this rent through litigation and restores an important recurring rental revenue source to the City’s Parking Authority, while preserving the ability for the City to collect future rates closer to market beginning in March 2024.
ATTACHMENT
Attachment 1 – Proposed Amendment to Parking Lease
Attachment 2 – Parking Lease