City Council
Report
City Council Meeting: July 9, 2024
Agenda Item: 5.G
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To: Mayor and City Council
From: David Martin, Director, Administration
Subject: Approval of Request for Proposal of a Professional Services Agreement with Rising Realty Partners for Property Management of Bergamot Station Arts Center
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) guidelines; and
2. Award RFP# 407 to Rising Realty Partners for property management services for the Community Development Department; and
3. Authorize the City Manager to negotiate and execute an agreement with Rising Realty Partners, in an amount not to exceed $667,500 including a $60,800 contingency for three years, with two-additional one-year renewal options in the amount of $479,200 on the same terms and conditions for a total amount not to exceed $1,146,700 over a five-year period, with future year funding contingent on Council budget approval.
Summary
Bergamot Station Arts Center, located at 2525 Michigan Avenue (Bergamot), is a cityowned property and one of Santa Monica’s most prominent cultural arts assets. Redcar LTD (Redcar), Bergamot’s property management firm since 2022, notified the City that it is ending its agreement with the City. Therefore, following a competitive Request for Proposal (RFP) process, staff seeks Council authorization to enter into a Contractual Services Agreement (Agreement) with Rising Realty Partners (Rising) for up to five years for Bergamot property management services.
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Discussion
Bergamot is approximately five acres, consists of five buildings totaling approximately 64,000 square feet, and is leased to 30 for-profit and non-profit galleries, creative uses, and a restaurant. Bergamot is currently fully leased.
The City purchased Bergamot in 1989 with transit funds and with the goal that the site could serve future transit needs, including providing a revenue source for the Department of Transportation (DOT). In 2013, Bergamot was designated as a Conservation - Arts Center District in the Bergamot Area Plan to help protect and preserve cultural uses and provide an affordable safe haven for the arts in Santa Monica. In 2016, the E Line light rail project was completed, including the Bergamot Station / 26th Street Light Rail Station that is adjacent to Bergamot at the corner of 26th Street and Olympic Boulevard.
On June 13, 2017, Council authorized the City Manager to negotiate and execute an interim master ground lease for Bergamot with Worthe Real Estate Group (Worthe).
The Worthe interim master ground lease expired in 2021 along with property management services when Worthe opted not to renew its master ground lease.
On February 8, 2022, Council authorized the City Manager to negotiate and execute an agreement for property management services for Bergamot with Redcar. In February 2024, Redcar notified the City of Redcar’s intention to end its agreement. Redcar has agreed to maintain services for Bergamot through July 2024 while the City transitions property management services to a new firm.
The City’s Economic Development Division worked closely with Finance’s Procurement Team to issue a request for proposals for property management services at Bergamot.
The RFP was issued in April 2024 and included a mandatory site visit for prospective operators to tour the property. The evaluation panel, overseen by Procurement, met in early June to review the three qualifying proposals and made a recommendation. 3 of 6
The City’s goal is to expeditiously retain the best qualified property management firm to manage the operational needs of this creative arts complex.
Bidder Recommendation
Best Qualified
Person/Firm
Rising Realty Partners
Evaluation Criteria Value Added / Breadth of Service
Cost of Services
Experience / Technical Competence
Plan and Approach
Stability and References
Municipal Code SMMC 2.24.180
RFPs Received
Barrister Executive Suites Clear Blue Commercial Rising Realty Partners RFP Data
Posted On Posted On Advertised In (City
Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
4/4/2024 City's Online
Bidding Site Santa Monica Daily Press 29 5/6/2024
Justification to Award
The proposals were reviewed by an evaluation panel consisting of three industry professionals. Evaluation was based on the following evaluation criteria: value added / breadth of service; cost of services; experience / technical competence; plan and approach; and stability and references. Based on these criteria, the evaluation panel unanimously recommended Rising, and staff recommends Rising as the best qualified team to property manage Bergamot. Rising’s portfolio demonstrates experience with gallery and creative art space, and management of properties owned by public agencies and in Santa Monica. Since 2012, Rising has managed 6.4 million square feet of privately- and publicly-owned real estate including gallery and creative use space.
Rising proposes property management fee of $6,000 per month and management staff salary reimbursement at $9,500 per month - the most competitive of all proposed fees.
At capacity, Bergamot generates approximately $142,000 monthly in rent with common area maintenance (CAM) fees paid by the tenants to fund CAM expenses. From this revenue source, $54,089 per month is remitted to the DOT as a condition of the original Purchase and Sale Agreement. The balance would fund operating expenses, including 4 of 6
and not limited to on-going maintenance, property management, accounting, and administrative fees. Net operating income is reinvested into Bergamot to fund capital improvements and arts center programming.
Rising proposes property management fee at $6,000 per month and management staff salary reimbursement at $9,500 per month. Staff estimates up to $230,000 in property management fees per annum in the first three years of operation with future increases at three percent (3%) annually. Rising’s estimated fee is approximately 155% greater than Redcar’s current property management fees.
Estimated Fee
Description Year 1 Year 2 Year 3
Management Fee $186,000 $192,000 $197,800
Pass-Through
Expenses*
$10,000 $10,300 $10,600
Sub-Total $196,000 $202,300 $208,400
10% Contingency $19,600 $20,300 $20,900
Total Not to Exceed $215,600 $222,600 $229,300
* Expenses include bank fees, property management software subscription, accounting, etc.
Estimated fee rounded to the nearest 00’s.
With Council authorization, staff would work with Rising to schedule a meet-and-greet with Bergamot tenants and to refine a schedule of services. Staff anticipates the Agreement with Rising would commence around August 1, 2024, to coincide with Redcar’s exit.
Past Council Actions
Meeting Date Description
June 13, 2017 1. Provide conceptual direction
regarding a preliminary plan for
revitalization of the City-owned
Bergamot Station Arts Center (Arts
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Center);
2. Authorize the City Manager to
negotiate an extension of the
exclusive negotiating agreement with
the Worthe Group for a period of three
years, with two, one-year options;
3. Authorize the City Manager to
negotiate and execute an interim,
master ground lease with the Worthe
Group, for a period of three years, with
two, one-year options, pursuant to: (a)
the terms included in the staff report,
including that existing tenants would
face lease rate increases no greater
than the consumer price index during
the interim period, in order to ensure
stability while future plans are
developed, and (b) development of an
arts center management plan in
collaboration with the Arts
Commission, as further discussed in
the staff report.
February 8, 2022 1. Award RFP# 303 to Redcar
Properties LTD for property
management services for the Commun
ity Development Department;
2. Authorize the City Manager to
negotiate and execute an agreement
with Redcar Properties LTD, for a
management fee of up to $90,000 per
annum for two years, three additional
one-year renewal options, for a
total amount not to exceed
$450,000 and future year funding
contingent on Council budget
approval.
Environmental Review
The Agreement is exempt from CEQA pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) guidelines, which states that CEQA does not apply “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” 6 of 6
The Agreement would provide property management services and would not result in adverse physical impacts on the environment, and as such, is exempt from CEQA.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. Staff will return to Council if specific budget actions are required in the future. Rising as property manager would be responsible for collection of rent and payment of all management, operational, and capital improvement expenses directly to vendors, subject to City approval; remit monthly rent to the DOT Fund; and provide the City with monthly expenditure reports. Until this transition, Redcar would continue to provide property management services. Operational funds would be held in a Rising / City joint account overseen by the City and subject to annual audits. Monthly revenues of $54,089 to DOT would be deposited into account 60600002.415950.
Prepared By: Beth Rolandson, Administrative Services Officer Approved Forwarded to Council
Attachments:
A. OAKS_INITIATIVE_FORM
B. Levine_Act_Disclosure_Form
C. 20170613
D. 20220208