City Council
Report
City Council Meeting: November 12, 2019
Agenda Item: 3.H
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To: Mayor and City Council
From: Andy Agle, Director, Housing and Economic Development, Economic Development Division
Subject: Modifications to Professional Services Agreements for Real Estate and Economic Advisory Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and execute:
1. A third modification to Professional Services Agreement # 9539 (CCS) with Keyser Marston Associates to increase the compensation by $200,000 and to extend the term by five additional one-year options for services related to the Fourth Street and Arizona project, Bergamot Station Arts Center project, and affordable housing projects. The proposed modification would result in a 14-year amended agreement with a new total not to exceed $480,000, with future-year funding contingent on Council budget approval; and,
2. A fourth modification to Professional Services Agreement # 9543 (CCS) with Allan D. Kotin & Associates to increase compensation by $40,000 and to extend the term by three additional one-year options for services related to the Santa Monica Pier, Beach, and Civic Auditorium. The proposed modification would result in an 11-year amended agreement with a new total not to exceed $340,000, with future-year funding contingent on Council budget approval; and,
3. A reimbursement agreement with SM Park Holdings, LLC, doing business as Pacific Park, or designee, related to the City’s expenses in evaluating proposed changes to the subtenant’s interest on the Pier.
Summary
The City has an extensive real estate portfolio with prominent assets such as the Santa Monica Pier, Civic Auditorium, and Bergamot Station Arts Center, as well as other commercial properties at the beach and downtown. As a best practice, the City retains advisory services specializing in economic and real estate analysis to inform and assist the City with valuations and negotiations. Keyser Marston Associates, Inc. is currently assisting the City with analysis and negotiations of the business terms associated with the proposed public/private partnerships at Fourth Street and Arizona and Bergamot Station Arts Center, as well as numerous affordable housing projects. Allan D. Kotin & 2 of 5
Associates is currently evaluating the feasibility and business terms associated with leases and licenses of several City-owned properties including the Civic Auditorium, beach concessions, and Pacific Park. In order to support continuity for existing negotiations, staff recommends modifying the existing professional service agreements with Keyser Marston Associates, Inc. and Allan D. Kotin & Associates. In cases requiring outside consultant services, the City seeks reimbursement for its consultant fees. As the operators of Pacific Park have recently proposed potential modifications to their existing lease, staff seeks authorization to enter into a reimbursement agreement with SM Park Holdings, LLC, d/b/a Pacific Park Discussion
For complex development projects, the City, through its Housing and Economic Development Department, engages highly specialized real estate advisory services.
The City currently contracts with two consultants to perform such services, Keyser Marston Associates, Inc. (KMA) and Allan D. Kotin & Associates (Kotin & Associates).
Both consultants were selected following a Request for Qualifications (RFQ) process in 2011 and Council approval on January 24, 2012 (Attachment A). Due to the complexity and duration of significant real estate transactions that can take many years to evaluate and negotiate, the consultant contracts have been modified to extend the original term and increase the original budget as summarized in the Past Council Actions table below. As negotiations on several complex public/private partnership development projects are ongoing (Fourth Street and Arizona project, Bergamot Station Arts Center, the Civic Auditorium) and the Santa Monica Pier tenant operating Pacific Park has requested to modify their lease agreement, further modifications of the consultant agreements are recommended.
KMA currently provides real estate financial analysis and economic development consulting services for the Fourth Street and Arizona and Bergamot Station Arts Center projects, including assisting the City with negotiating business terms associated with proposed disposition and development agreements and long-term ground leases for the projects, as well as conducting economic modeling of alternative development scenarios and assisting in analyzing affordable housing projects. The fees charged by 3 of 5
KMA are reimbursed by the respective development proponents through two separate cost-recovery agreements. To ensure that the economic analysis and negotiations are completed for the two projects, staff recommends modifying PSA # 9539 (CCS) with KMA to increase the compensation by $200,000 and to include five additional one-year options to extend the term, resulting in a total contract amount of $480,000 and a fourteen-year term.
Kotin & Associates is currently working on a variety of complex real estate transactions providing financial analysis and economic considerations for beach concessions, reuse of the Civic Auditorium, and lease negotiations for Pacific Park. To ensure consistency in the financial analysis and negotiations, staff recommends modifying PSA # 9543 (CCS) with Kotin & Associates to increase the compensation by $40,000 and to include three additional one-year options to extend the term, resulting in a total contract amount of $340,000 and an eleven-year term. The costs associated with the Pacific Park lease negotiations are proposed to be reimbursed through a cost reimbursement agreement with the subtenant operators of Pacific Park, the amusement park on Santa Monica Pier.
Vendor/Consultant Selection
The services of KMA and Kotin & Associates were procured through an RFQ process in 2011. Both firms were selected based on their qualifications and extensive financial and development advisory experience consulting for public agencies throughout the state.
Past Council Actions
Meeting Date Description
January 24, 2012
(Attachment A)
KMA. Original award of PSA # 9539 (CCS) authorizing KMA to provide professional real estate and economic development consultant services in an amount not to exceed $80,000. A first modification was executed on June 25, 2014 that extended the term through June 30, 2015.
Kotin. Original award of PSA # 9543 (CCS) authorizing Allan D.
Kotin and Associates to provide real estate economic and financial advisory services in amount not to exceed $70,000. A 4 of 5
first modification was executed on June 26, 2014 to extend the term to June 30, 2016. At its June 23, 2015 meeting, Council authorized a second modification to the PSA 9543 to extend the term through December 31, 2019 and increase contract by $130,000 for a total amount not-to-exceed $200,000.
May 12, 2015
(Attachment B)
KMA. Council authorized a second modification to KMA’s PSA # 9539 (CCS) to extend the term to June 30, 2018, with three, oneyear options to extend and increase its contract authority by $200,000 for a total amount not to exceed $280,000.
June 27, 2017
(Attachment C)
Kotin. Council authorized a third modification to Kotin & Associates PSA to increase of contract authority by $100,000 for a total amount not to exceed $300,000.
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the General Fund to increase the amount of the agreements with Keyser Marston Associates, Inc. and Allan D. Kotin & Associates to continue to provide real estate consulting services. The City will be reimbursed for consultant costs by the development teams for the Fourth Street and Arizona and Bergamot Station Arts Center projects, and from SM Park Holdings, LLC for Pacific Park lease negotiations.
Agreement Modification Request
Agreement #
Current
Authorized
Amount
FY 2019-20
Request
Future Year
Requests Account Number
Total Revised
Contract
Amount
9543 (CCS) $ 300,000 $ 20,000 $ 20,000 01160004.552010 $ 340,000 9539 (CCS) $ 280,000 $ 20,000 $ 130,000 01160004.552010 $ 430,000 $ 0 $ 50,000 $ 0 01160002.552010 $ 50,000
Total $ 480,000
Future-year funding is contingent on Council budget approval. 5 of 5
Prepared By: Ramandeep Kaur, Management Fellow
Approved Forwarded to Council
Attachments:
A. Attachment A - Council Report January 24, 2012
B. Attachment B - Council Report May 12, 2015
C. Attachment C - Council Report June 27, 2017
D. Attachment D - Oaks Initiative Form Kayser Marston Associates Inc.
E. Attachment E - Oaks Initiative Form Allan D. Kotin & Associates