DATE: March 19, 2024
TO: Mayor and City Council
FROM: Director of Public Works
SUBJECT: Adopt a Resolution Authorizing the City Manager to Negotiate and Execute a Ground Lease with Raja Indian Cuisine for Property at 1275 West Winton Avenue
RECOMMENDATION
That the City Council adopts a resolution (Attachment II) authorizing the City Manager to negotiate and execute a ground lease with Raja Indian Cuisine.
SUMMARY
Raja entered into an assignment in 2002 for the leasehold previously held by Manzella’s Seafood Loft after the latter decided to sell their leasehold interest. The restaurant is located at 1275 West Winton Avenue and encompasses 60,437 square feet.
The current lease agreement expired in January 2023 and the tenants are currently paying rent on a month-to-month basis as a tenant holding over. However, the principals of the restaurant desire to enter into a new lease agreement with the following deal points:
Thirty-five-year lease term
A rent increase to $5,540.06 per month
Significant interior and exterior capital improvements totaling approximately $1 million Council Airport Committee Review
This item was initially presented to the Council Airport Committee (CAC) during their June 24, 2022 meeting. After review, the Committee suggested changes to the building façade and landscaping plan, commensurate with other improvements planned for the West Winton corridor near the Airport. Those changes were incorporated into the design and reviewed by the CAC at their October 27, 2022 meeting.
BACKGROUND
The parcel of land is located on the south side of the Airport at 1275 West Winton Avenue and encompasses 1.4 acres. The property was originally leased to Manzella’s Seafood Loft (Manzella) restaurant in 1972. However, in 2002, Manzella sold their restaurant and leasehold interest to Makhan Bains and Ravinder Singh.
Now known as Raja Indian Cuisine, the restaurant’s business primarily focuses on catering, with limited walk-in traffic.
DISCUSSION
The lease term commenced on February 1, 1973 and ended on January 31, 2023. Prior to the expiration of their lease, the principals requested a new lease and have been treated as tenants holding over since January 31, 2023 until a new lease could be developed. Their leasehold is 60,437 square feet, or approximately 1.4 acres, and contains one building for the restaurant, and outdoor parking.
The following revisions are proposed:
General Terms
The new lease will have a term of thirty-five years.
Fifty years was requested, but the Airport rarely enters into such lease agreements, the maximum permitted under the City Charter and by the Federal Aviation Administration (FAA). The term limit is a function of future job production and capital investment.
For refurbishments and improvements to existing buildings, a thirty-five-year lease is appropriate and consistent with past tenants who proposed similar capital improvements.
The new lease will take effect on the first day of the month after full execution of the agreement.
Since this lease was executed 50 years ago and reflected market rates from that time, rent is currently $1,510.93 per month, but will increase to $5,540.06 per month to reflect the current rent structure.
During the construction period, which is expected to take approximately nine months, the Airport would consider maintaining rent at the existing amount of $1,510.93 until the improvements are completed and a Certificate of Occupancy is issued, and then full rent would be assessed.
Surplus Land Act Requirements
Since the leasehold is situated on Airport Land, provisions of the Surplus Land Act (AB 1486), which was signed by the Governor in 2019, applied to the parcel. In brief, the Act stated that the creation of housing for persons and families of low and moderate income is a priority and that surplus government land, prior to disposition, should be made available for that purpose. As a secondary use, the Act stated that surplus land, prior to disposition, should be made available for park and recreational purposes or for open-space purposes. During the 2023-2024 Assembly session, a bill was introduced (AB 480) that would exempt airport lands from this Act. This bill was approved and signed by the Governor on October 11, 2023, thereby allowing this new lease with Raja to proceed with no restrictions.
Capital Improvements
Per input from CAC members, the proponents for Raja provided an enhanced version of the project, including a more detailed narrative outlining the proposed improvements, as well as revised and enhanced renderings that better depict the vision for the restaurant (Attachment III). Special attention was paid to developing architectural features commensurate with the West Winton corridor, as the restaurant will be a high-visibility gateway to that corridor. The total cost for the improvements is expected to be approximately $1 million.
ECONOMIC IMPACT
Raja will provide employment opportunities for skilled and unskilled workers during the construction of the above noted capital improvements.
FISCAL IMPACT
As noted, Raja is currently paying $1,510.93 per month, or $18,131.16 per year. Under the terms of the new lease, the monthly amount would increase to $5,927.86 per month, or $71,134.32 annually; this new rate reflects the existing non-aeronautical rate charged to all aviation-related tenants of $1.18 per square foot, per year. Therefore, the net annual increase over the current amount of $18,131.16 per year would be $53,003.16 ($71,134.32 minus $18,131.16). Rents will be adjusted by a market appraisal every ten years starting in 2028 (i.e. 2038, 2048, 2058, and 2068) as well as by CPI every ten years starting in 2033 (i.e. 2043, 2053, 2063, and 2073).
STRATEGIC ROADMAP
This agenda item pertains to development at the Airport and does not directly relate to any of the six priorities outlined in the Council’s Strategic Roadmap.
SUSTAINABILITY FEATURES
The Airport is committed to developing projects that are environmentally responsible.
Therefore, staff will ensure than the work scope incorporates features that are in line with the City’s sustainability guidelines.
PUBLIC CONTACT
The agenda and staff report for this item have been posted on the City’s website and distributed to interested parties. In addition, Airport staff have held meetings with Raja over the past year to finalize the terms of the new lease. Furthermore, this item was discussed at the CAC’s June 24, 2022 and October 20, 2022 meetings.
NEXT STEPS
If approved, Airport staff will circulate the ground lease for execution by the City Manager once the document has been approved to form by the City Attorney’s office.
Prepared by: Doug McNeeley, Airport Manager
Recommended by: Alex Ameri, Director of Public Works
Approved by:
_____________________________________
Kelly McAdoo, City Manager
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