Administrative
Report
H.11., File # 23-5370 Meeting Date: 2/21/2023
To: MAYOR AND CITY COUNCIL
From: GREG KAPOVICH, WATERFRONT & ECONOMIC DEVELOPMENT DIRECTOR TITLE
APPROVE THE CONSENT TO SUBLEASE BETWEEN RDR PROPERTIES, LLC. AND CNN LOGISTICS, LLC., DBA MERMAID TAVERNS, FOR THE PREMISES AT 100 “I” AND 100 “J” FISHERMAN’S WHARF
EXECUTIVE SUMMARY
RDR Properties, LLC (Lessee), is the current Lessee under a ground lease with the City of Redondo Beach (City), dated July 1, 2008 (Master Lease), for the premises located at 100 (A-L) Fisherman’s Wharf on the Redondo Beach Pier, commonly referred to as the Redondo Pier Approach and/or the Redondo Landing. Under the Master Lease, the City, as Lessor, retains the right to consent to all subleases, amendments and assignments within the leasehold. The Lessee has requested the City’s consent to a sublease between RDR Properties, LLC. and CNN Logistics, LLC., dba Mermaid Taverns, for the two basement level spaces of 100 “I” and 100 “J” Fisherman’s Wharf. The premises, which have been used consistently for nightclub uses since the building was constructed in 1972, will again be used to operate a nightclub, lounge or bar concept with dancing and live music and entertainment. The two basement locations have been vacant for over six years, with Brixton South Bay as the last operating tenant.
BACKGROUND
On July 1, 2008, the City of Redondo Beach entered into a Master Lease with RDR Properties, LLC for the premises located at 100 (A-L) Fisherman’s Wharf on the Redondo Beach Pier. The Master Lease between the City and Lessee is for a term that runs from July 1, 2008 to June 30, 2063 and includes two options to extend the Lease an additional eleven years. The Master Lease allows for portions of the leasehold property to be subleased. The leasehold is comprised of approximately 30,000 square feet of retail and food service businesses located at 100 (A-L) Fisherman’s Wharf on the Redondo Beach Pier. In accordance with the Master Lease, Lessee is required to obtain City consent for all subleases, amendments and assignments.
Lessee has requested approval of a new sublease with CNN Logistics, LLC. to operate Mermaid Tavern, a nightclub, lounge or bar concept in 100 “I” and 100 “J” Fisherman’s Wharf. The combined premises total approximately 10,000 rentable square feet of interior space. The venue will operate under a Type 48 ABC approved liquor license for on-site sale of full bar alcoholic and non-alcoholic beverages. Live music entertainment will be provided at the premises no less than two times per week. The owners desire to grow a strong local following and will focus their outreach and marketing on the South Bay community.
H.11., File # 23-5370 Meeting Date: 2/21/2023
The Master Lease specifies that rent is paid to the City as a percentage of gross sales. On April 6, 2021, the City Council approved the second amendment to the Master Lease that modified the calculation of percentage rent for spaces 100 “I” and 100 ”J” Fisherman’s Wharf from a 3.5% share of all gross revenues to a 12% share of all monthly rent collected by RDR Properties from any tenant occupying the basement spaces. The basement rent may be comprised of base rent, percentage rent or a combination of both. The basement spaces have been vacant for several years and the modification to the percentage rent structure was expected to enhance the marketability and occupancy of the spaces. To further improve the marketability of the two basement spaces, RDR Properties requested the City approve a Master Conditional Use Permit (CUP) that would apply a consistent set of operating conditions to both spaces. The Harbor Commission considered the matter at their March 8, 2021 meeting and it master CUP was approved unanimously.
The City’s Consent to Sublease document provides assurance by the Lessee and Sublessee that all requirements of the Master Lease and Municipal Code will be followed in the course of their business. Additionally, Lessee and Sublessee agree to comply with administrative design guidelines and standards applying to the area. As landlord to the Sublessee, the Lessee performs the due diligence to validate the tenancy of the business. Staff’s review of the proposed sublease is limited to verification that the Lessee and the potential Sublessee have satisfied all obligations to the City. The sublease is for a term of five years with a five year option to extend. It is anticipated that the subtenants will invest a minimum of $100,000 to improve the interior of the two basement spaces.
COORDINATION
The Consent to Sublease was reviewed by the Waterfront and Economic Development Department and the document was approved as to form by the City Attorney’s Office.
FISCAL IMPACT
The City will receive rent in the amount of a 12% share of all rent collected by RDR Properties from space 100 “I and 100 “J” Fisherman’s Wharf. The basement rent may be comprised of base rent, percentage rent or a combination of both, and will accrue to the Harbor Uplands Fund.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Agmt - Proposed Consent to Sublease Document Between the City of Redondo Beach, RDR Properties, LLC and CNN Logistics, LLC
· Agmt - Sublease Between RDR Properties, LLC and CNN Logistics, LLC, December 1, 2022 · Agmt - Second Amendment to the Lease between the City of Redondo Beach and RDR Properties, April 6, 2021
· Agmt - First Amendment to the Lease between the City of Redondo Beach and RDR Properties, November 20, 2013
· Agmt - Lease between the City of Redondo Beach and RDR Properties, May 6, 2008