Administrative
Report
H.8., File # 22-5335 Meeting Date: 1/17/2023
To: MAYOR AND CITY COUNCIL
From: GREG KAPOVICH, WATERFRONT & ECONOMIC DEVELOPMENT DIRECTOR TITLE
ADOPT BY TITLE ONLY RESOLUTION NO. CC-2301-004, A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF REDONDO BEACH, CALIFORNIA, LEASING CERTAIN PROPERTY
TO HYE SUN, AN INDIVIDUAL, DBA KONA KOFFEE
APPROVE A LEASE WITH HYE SUN, AN INDIVIDUAL, DBA KONA KOFFEE FOR THE PREMISES AT 138 INTERNATIONAL BOARDWALK FOR A MONTHLY AMOUNT OF $1,125 WITH AN ANNUAL 3% BASE RENT INCREASE FOR THE TERM JANUARY 17, 2023 THROUGH JANUARY 16, 2028
EXECUTIVE SUMMARY
In July 2012, the City purchased the International Boardwalk leasehold and began the process of direct leasing to various tenants. The International Boardwalk is comprised of a narrow linear development of approximately 17,200 square feet that is fronted by a public walkway. The City has negotiated a new lease with Hye Sun, owner of Kona Koffee (Tenant) for the space at 138 International Boardwalk for approximately 500 rentable square feet. Kona Koffee has been in operation at this location since 2008 and has been operating on a month-to-month term since 2019.
The proposed lease is for a sixty (60) month term with the City retaining the option to terminate the lease with a twelve (12) month prior written notice. Rental to the City’s Harbor Uplands Fund is the greater of the minimum monthly rent of $1,125, or 10% of gross sales.
BACKGROUND
Kona Koffee, which specializes in gourmet coffee, tea, juices, smoothies, sandwiches and snacks, has occupied the space at 138 International Boardwalk since 2008 and has been operating on a month-to-month term since 2019. The space measures 500 square feet and will be accepted “as is” by the Tenant. The proposed lease carries a sixty month term with a minimum monthly rent of $1,125, or approximately $2.25 per square foot, which is consistent with other similar retail leases in the waterfront. The monthly rent paid to the City will be the greater of the minimum monthly rent of $1,125, or 10% of gross sales. The minimum monthly rent increases by 3% on the anniversary date for each year the lease remains in effect.
The lease is personally guaranteed by the owner Hye Sun and a security deposit of $2,025 will be kept on file. The City retains the right to terminate the lease with a twelve-month written notice.
COORDINATION
The Waterfront and Economic Development Department collaborated with the City Attorney’s Office
H.8., File # 22-5335 Meeting Date: 1/17/2023
on the preparation of the lease. The City Attorney’s Office has approved the document as to form.
FISCAL IMPACT
Lease revenue from the property will accrue to the City’s Harbor Uplands Fund. The proposed lease will result in a minimum monthly rent of $1,125 for the first lease year with an annual increase of 3% to the base rent. Over the five-year term of the lease, revenue to the Uplands Fund will be a minimum of $71,672.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Reso - No. CC-2301-004, Lease Certain Property to Hye Sun dba Kona Koffee · Proposed Lease Between the City of Redondo Beach and Hye Sun dba Kona Koffee · Existing Lease Between the City of Redondo Beach and Hye Sun dba Kona Koffee, March 4, 2014