Administrative
Report
H.13., File # 23-6509 Meeting Date: 8/15/2023
To: MAYOR AND CITY COUNCIL
From: GREG KAPOVICH, WATERFRONT & ECONOMIC DEVELOPMENT DIRECTOR TITLE
ADOPT BY TITLE ONLY RESOLUTION NO. CC-2308-085, A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF REDONDO BEACH, CALIFORNIA, LEASING CERTAIN PROPERTY
TO CALIFORNIA LOCAL, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY APPROVE THE LEASE WITH CALIFORNIA LOCAL, LLC FOR THE PREMISES AT 239 NORTH HARBOR DRIVE, REDONDO BEACH, CA FOR A MONTHLY MINIMUM RENT OF $13,828, OR 8
PERCENT OF TOTAL GROSS SALES, WHICHEVER IS GREATER, AND THE TERM SEPTEMBER 1, 2023 THROUGH FEBRUARY 28, 2034
EXECUTIVE SUMMARY
In May 2014, the City completed its purchase of the Redondo Beach Marina leasehold, which includes stand-alone restaurants, a marina, a large surface parking lot, and a public boat hoist.
California Local LLC is seeking a new lease for the building at 239 N. Harbor Drive (the “Premises”).
Currently, the building is being utilized by Sanford Ventures, LLC to store materials associated with the BeachLife Music Festival. Sanford Ventures has occupied the space since 2021. Prior to 2021, the building served as the location for “On the Rocks Bar and Restaurant” and the waterfront project visitor center. California Local, LLC intends to utilize the space for food and beverage services, alcohol services, retail sales, and music performances. The leased space totals 8,597 square feet and is comprised of 5,231 interior square feet and 3,366 exterior square feet.
The proposed lease is for a 10.5-year term and the period September 1, 2023 through February 28, 2034. Minimum rent to the City’s Harbor Uplands Fund begins at a rate of $13,828 per month, or eight percent of total gross sales, whichever is greater. The minimum rent is subject to a three percent increase each year.
BACKGROUND
On July 13, 2021, the City entered into a Lease with Sanford Ventures LLC (“Tenant”) for the space at 239 North Harbor Drive to provide office space, operational support services, and equipment storage for the BeachLife Music Festival. The 2021 lease was for a seven-month term with a monthly rent of $2,500. Rent began on August 1, 2021 and continues on a month-to-month basis.
California Local, LLC intends to utilize the space for food and beverage services, alcohol services, supporting offices and consumer space, retail sales, live music performances, and lifestyle membership, all of which must be consistent with the municipal code, as well as all State, Federal, and Coastal Commission regulations. In anticipation of an executed lease, California Local, LLC appeared before the Harbor Commission on December 12, 2022 to request approval of a Conditional
H.13., File # 23-6509 Meeting Date: 8/15/2023
appeared before the Harbor Commission on December 12, 2022 to request approval of a Conditional Use Permit to operate the space. The Harbor Commission unanimously approved the Conditional Use Permit.
The proposed 10.5-year (126 month) lease term would commence on September 1, 2023 and extend to February 28, 2034. In exchange for the proposed 10.5-year term, the tenant proposes building improvements to the interior and exterior of the building with an estimated budget of approximately $1.5 million. Improvements include an exterior façade enhancement, interior tenant improvements, and improved landscaping. As part of the proposed improvements, the tenant will convert underutilized exterior space into outdoor seating areas. As a result, the proposed lease includes a minimum monthly rent based on size to capture the future improvements rather than a flat rate.
Specifically, the monthly rate is $2 per square-foot of interior space and $1 per square-foot of exterior space, or eight percent of gross sales, whichever is greater. Currently, the calculation results in a minimum monthly rent of $13,828. Additionally, the minimum rent is subject to a three percent increase each year.
If gross sales exceed the minimum monthly rent, then the City would receive eight percent of those gross sales. Total gross sales include all goods, tickets, memberships, wares and services sold in or from the Premises by the Tenant, its permitted subtenants (if any), licensees, agents or concessionaires, whether for cash or on credit (whether collected or not), including the gross amount received by reason of orders taken on the Premises although filled elsewhere, and whether made by any of the foregoing parties or vending machines.
The tenant will be required to obtain approval from the City for any expansion plans in addition to obtaining any associated licenses and permits from any required or necessary agencies. The lease also includes 12 employee parking passes without fee.
COORDINATION
The Waterfront and Economic Development Department coordinated with the City Attorney’s Office on the preparation of the lease document.
FISCAL IMPACT
Lease revenue from the property will accrue to the City’s Harbor Uplands Fund. Rent will begin on September 1, 2023 at a rate of $13,828 per month, or 8 percent of gross sales, whichever is greater.
Over the 10.5-year term of the lease, revenue to the Uplands Fund will be a minimum of $1,902,147.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Resolution No. CC-2308-085 - CA Local, LLC 239 N. Harbor Drive · Lease with California Local, LLC - 239 N. Harbor Drive