TO: HONORABLE MAYOR FROM: Nanci Klein
AND CITY COUNCIL
SUBJECT: SEE BELOW DATE: July 24, 2023
Approved Date
8/2/23
COUNCIL DISTRICT: 3
SUBJECT: RESTATEMENT OF THE LEASE AGREEMENT BETWEEN THE CITY OF SAN JOSE AND JIM ANGELOPOULOS, DBA CAMPUS BURGERS, INC., FOR THE CITY-OWNED PROPERTY LOCATED AT 108 PASEO DE SAN ANTONIO
RECOMMENDATION
Adopt a resolution authorizing the City Manager or designee, to negotiate and execute:
a. A first restatement of the lease dated December 1, 2015 between the City of San José and Jim Angelopoulos, an individual, for the use of approximately 930 square feet of space in the City- owned building located at 108 Paseo De San Antonio, San José, California allowing for an initial term of five years at a rate of $2,790 per month for the first year with a 3% annual escalator each year thereafter, and two five-year options to extend at then-current fair market rent; and
b. All other documents or amendments necessary to effectuate the first restatement of the lease.
SUMMARY AND OUTCOME
Approval of this recommendation will direct staff to negotiate and execute a restatement of the lease dated December 1, 2015, between the City of San José (City) and Bob Schmelzer, which was subsequently assigned to Jim Angelopoulos on May 26, 2023 (original lease). The first restatement of the Lease Agreement (restated lease) will allow for Mr. Angelopoulos’ continued use of approximately 930 square feet of space at the City-owned building for an initial five-year term, with two, five-year options to extend at the tenant’s discretion provided tenant is in good standing under the lease. Campus Burgers will renovate and repurpose the retail space to be an affordable, fast-casual restaurant selling hamburgers and related foods primarily for takeaway, with outdoor common area
COUNCIL AGENDA: 8/15/23
FILE: 23-1022
ITEM: 2.11
HONORABLE MAYOR AND CITY COUNCIL
July 24, 2023
Subject: Restatement of the Lease Agreement Between the City of San José nd Jim Angelopoulos, DBA Campus Burgers, Inc., for the City-Owned Property Located at 108 Paseo De San Antonio
seating subject to planning approval. The monthly rent will increase from $2,391 a month ($2.57 a foot) to $2,790 a month ($3.00 a foot).
BACKGROUND
The subject property at 108 Paseo de San Antonio was constructed in 2003 by the San José Redevelopment Agency and is located on the Paseo de San Antonio facing a public square. The Redevelopment Agency transferred the property to the City in 2003. Other occupants of the same parcel, but in separate buildings, include the Hammer Repertory Theater, Rosies & Posies Downtown Florist, and Whispers Café & Creperie.
Since 2003, the property has been occupied by Robert Gary Schmelzer, a sole proprietor, doing business as Circle A Skateboards, a retail store selling footwear, clothing, skateboards, and related equipment and accessories.
On December 1, 2015, the City entered into the original lease agreement with Mr. Schmelzer, who subsequently added a café to the retail store. This lease had an initial three-year term and two additional three-year options. The final option term will expire on November 30, 2024.
Mr. Schmelzer accrued a back rent deficit with the City due to unpaid rent during the COVID-19 moratorium. In April of 2023, Mr. Schmelzer repaid in full his past-due rent in the amount of $48,696.58, and on May 1, 2023, entered into an agreement to sell the lease to Jim Angelopoulos.
Jim Angelopoulos is a local restaurateur who has worked in the hospitality industry since 1973. He has successfully built numerous restaurants in San José and the surrounding area, most notably the Scrambl’z chain of breakfast restaurants and most recently, Yolked in Morgan Hill. On May 26, 2023, the City consented to the assignment of the original lease from Mr. Schmelzer to Mr. Angelopoulos. On May 30, 2023, the City and Mr. Angelopoulos entered into a non-binding letter of intent outlining terms of a lease restatement.
ANALYSIS
The proposed Campus Burgers is a fast-casual restaurant selling hamburgers and related foods primarily for takeaway, and outdoor seating as allowed by applicable permits. The business will serve the demand for affordable meals from students, residents, and workers downtown and will stay open late at night, complementing the entertainment uses in the surrounding neighborhood.
Since assuming the original lease, Jim Angelopoulos has started the planning process to renovate the property and has replaced two of the large glass panels that had been damaged at an expense of roughly $17,000.
The City and Jim Angelopoulos have entered into a non-binding letter of intent outlining the following terms of the restated lease:
HONORABLE MAYOR AND CITY COUNCIL
July 24, 2023
Subject: Restatement of the Lease Agreement Between the City of San José nd Jim Angelopoulos, DBA Campus Burgers, Inc., for the City-Owned Property Located at 108 Paseo De San Antonio
Building Address: 108 Paseo De San Antonio, San José, California.
Landlord: City of San José, a municipal corporation of the State of California.
Tenant: Jim Angelopoulos, an individual (Campus
Burgers, Inc., a California corporation).
Rentable Area of Premises: Approximately 930 square feet.
Term: Five years.
Commencement Date: September 1, 2023.
Expiration Date: August 31, 2028.
Options to Extend: Two five-year options
at then-current fair market value.
Rent Abatement: Nine months abated rent to reflect buildout period.
Rent: $2,790 monthly ($3.00 a foot), escalating 3% annually.
Year Month Date Escalation
Monthly
Base
Rental
Rate
$/SF
Monthly
Base Rent
Annual
Rent
1 1-9
09/01/2023
-
05/31/2024
0% $0.00 $0.00 $0.00
1 10-12
06/01/2024
-
08/31/2024
0% $3.00 $2,790.00 $8,370.00
2 13-24
09/01/2024
-
08/31/2025
3% $3.09 $2,873.70 $34,484.40
3 25-36
09/01/2025
-
08/31/2026
3% $3.18 $2,957.40 $35,488.80
4 37-48
09/01/2025
-
08/31/2026
3% $3.28 $3,050.40 $36,604.80
5 49-60
09/01/2025
-
08/31/2026
3% $3.38 $3,143.40 $37,720.80
HONORABLE MAYOR AND CITY COUNCIL
July 24, 2023
Subject: Restatement of the Lease Agreement Between the City of San José nd Jim Angelopoulos, DBA Campus Burgers, Inc., for the City-Owned Property Located at 108 Paseo De San Antonio
Utilities: Tenant pays all utilities.
Condition of Premises “As is”
Common Area Maintenance None.
Insurance Tenant at his sole cost and expense and for the full term of this lease and any extensions thereof shall obtain and
maintain or shall cause to be obtained and maintained
insurance against claims for injuries to persons or
damages to property in or about the premises which may
arise from or in connection with the activities of tenant and his agents, employees, and contractors.
Jim Angelopoulos will obtain all the applicable permits and will comply with all City ordinances, rules, and regulations pertaining to any proposed use areas, including any outdoor seating. Maintenance of furniture shall be the responsibility of the tenant. The five-year initial term will yield $152,668.80 for the City’s General Fund.
EVALUATION AND FOLLOW-UP
Staff will negotiate and execute a restated lease with Jim Angelopoulos consistent with the terms outlined in this memorandum.
FISCAL/POLICY ALIGNMENT
This action is consistent with the Economic Development Strategy approved by City Council, specifically Initiative No. 1, “Encourage Companies and Sectors that Can Drive the San José/Silicon Valley Economy and Generate Revenue for City Services and Infrastructure.” A successful lease agreement will consequently result in revenue for the City.
COST SUMMARY/IMPLICATIONS
The estimated five-year rental revenue to the General Fund under this first restatement is anticipated to be $152,668.80. After accounting for the nine-month abated rent period, projected revenue for Fiscal Year 2023-2024 will decrease by $15,872 but increase over the forecasted five year period (FY 2023- 2024 to FY 2027-2028) by $10,659.98.
COORDINATION
This memorandum has been coordinated with the City Attorney’s Office, City Manager’s Budget
HONORABLE MAYOR AND CITY COUNCIL
July 24, 2023
Subject: Restatement of the Lease Agreement Between the City of San José nd Jim Angelopoulos, DBA Campus Burgers, Inc., for the City-Owned Property Located at 108 Paseo De San Antonio
Office, and the Department of Planning, Building and Code Enforcement.
PUBLIC OUTREACH
This memorandum will be posted on the City’s Council Agenda website for the August 15, 2023 City Council meeting.
COMMISSION RECOMMENDATION/INPUT
No commission recommendation or input is associated with this action.
CEQA
Not a Project, File No. PP17-003, Agreements/Contracts (New or Amended) resulting in no physical changes to the environment.
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.
/s/
NANCI KLEIN
Director of Economic Development and
Cultural Affairs
For questions, please contact Kevin Ice, Senior Real Estate Manager, at (408) 535-8197.