City Council
Report
City Council Meeting: October 14, 2025
Agenda Item: 11.C
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To: Mayor and City Council
From: Oliver Chi, City Manager, City Manager's Office
Subject: Approval of First Modification to Exclusive Negotiation Agreement with Revitalization Partners Group, LLC for the Civic Center Auditorium Renovation, Programming and Operation
Recommended Action
Staff recommends that the City Council:
1. Provide direction regarding the Revitalization Partners Group request to extend term for the Civic ENA.
2. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) and a finding of categorical exemption pursuant to Section 15301 of the California Environmental Quality Act (CEQA) Guidelines.
Summary
On July 23, 2024, the City Council authorized the City Manager to negotiate and execute an Exclusive Negotiation Agreement (ENA) with the Revitalization Partners Group, LLC (RPG) for the substantial rehabilitation, programming, and operation of the Santa Monica Civic Auditorium (Civic) located at 1855 Main Street. The ENA was eventually executed on April 8, 2025, for a six-month term ending October 8, 2025.
Among the issues identified to be addressed in the ENA negotiations included, but were not limited to:
• Scope of work
• Preliminary architectural design concepts
• Total anticipated development costs and financing sources 2 of 14
• Development schedule
• Community benefits
• Community engagement
• Proposed programming
• Operational plan related to the project
In particular, the financing plan was intended to address the high upfront costs of seismic upgrades and ensure long-term financial feasibility of the Civic project.
As the ENA term expired on October 8, the City is in a position to now consider whether to extend exclusive negotiations with RPG, grant a limited short-term extension, or conclude the ENA to pursue other redevelopment options for the Civic site.
Of note, through multiple meetings and discussions with the City, RPG has not provided a formal project concept that can be shared publicly. While RPG has released a proposal for the Civic to the public, they have asked that the plans that were shared with staff remain confidential.
In particular, based on the preliminary plans developed by RPG and reviewed by staff, they envision repositioning the Civic as a site for an immersive digital / holographic show theater with live music concerts, award shows, artist residencies and special events with capacity that may range between 2,800 to 3,300 seats, depending on design configurations. The proposal also contemplates the development of 14,000 square feet of new retail / commercial space on the Civic site.
While renderings and project concepts were developed in the plans that were shown to the City, RPG has not provided staff with any financial or business plan demonstrating the feasibility of their proposed concept. RPG did share limited financial information verbally with staff, and we have performed a cursory review with the details that were articulated orally. We have supplemented those details with known development constraints for the site in performing a rudimentary financial review. That assessment 3 of 14
suggests that the project, as verbally described, appears economically infeasible without substantial subsidy.
Discussion
The Civic Auditorium has been closed to the public since June 2013. Over the past decade, several efforts to identify viable redevelopment partners – including City-issued RFPs in 2010/12 and 2018/19 – were unsuccessful due to high rehabilitation costs, seismic retrofit requirements, and limited revenue potential absent public funding.
Negotiations Recap w/ RPG
At its meeting on December 12, 2023, City Council directed staff to commence a competitive Request for Letters of Interest (RLOI) process. Four entities (Sugar Monkey, The Hospitality Group, Live Nation, and RPG) submitted interest by the stated deadline, January 31, 2024. Live Nation subsequently withdrew their Letter of Interest to partner with RPG.
Following vetting and interviews, City staff presented the proposals and information for Council’s consideration on May 28, 2024. Based on RPG’s experience in developing, financing, operating and programming entertainment venues, Council directed staff to initiate work to commence exclusive negotiations with RPG. The RPG team is comprised of three entities: Make Good Group, Oakview Group, and Live Nation.
While the City Council directed staff to enter into exclusive negotiations with the Revitalization Partners Group (RPG) in July 2024, substantive work under the ENA did not begin until April 2025. The intervening period was largely devoted to negotiating the terms of the ENA itself, which required extensive review and redlining by both parties.
The following chronology outlines the sequence of events leading to execution of the ENA and subsequent due diligence activities conducted during the six-month term. 4 of 14
• July 23, 2024: Council formally authorized the City Manager to enter and negotiate an ENA with RPG.
• July 31, 2024: City staff submitted the draft ENA to RPG. • August – October 2024: Staff reached out to check on the status of ENA (7/31, 8/13, 8/26, 9/12, 10/8).
• October 14, 2024: City staff and RPG met with Coastal Commission for initial input on the entitlement process for Civic and RPG confirmed their attorneys were working on ENA redlines.
• October 25, 2024: RPG submitted their ENA redlines to City, meeting with City staff on 10/31 to discuss ENA redlines and questions.
• November 8, 2024: City provided responses and counter provisions to RPG’s proposed redlines and changes to the ENA.
• November 18, 2024: City contacted RPG to seek status update on review of City’s redlines.
• December 2024:
o A meeting on December 5, 2024 to discuss ENA was cancelled at the request of RPG.
o On December 10, RPG communicated that the attorneys were reviewing the City’s redlines.
o On December 13, RPG indicated they would aim to have conceptual designs by the end of January 2025 with the goal to develop a pro forma by the end of Quarter 2 2025 and requested an extension to the ENA execution deadline.
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o On December 17, Council considered RPG’s request to modify ENA term from 6-months to 9-months; Council authorized an extension, providing a deadline to execute ENA by January 27, 2025.
• January – February 2025: On January 27, RPG requested an additional extension to finalize and execute ENA because two members of the RPG team lost their homes to the Palisades Fires. Council amended ENA deadline to February 28, 2025. RPG then missed the deadline to execute ENA. • March – April 2025: On March 25, 2025, Council provides an additional extension to the ENA. ENA is fully executed on April 8, 2025. • April – October 2025: RPG performs due diligence under the ENA. o On September 19, 2025, RPG presents initial design proposal to City staff. o The ENA expired October 8, 2025.
Due Diligence Progress
As noted above, the ENA officially took effect April 8, 2025, and over the six-month term, RPG:
• Completed basic due diligence and preliminary design concepts. • Presented conceptual renderings that include immersive “holographic show” technology and 14,000 square feet of new retail / restaurant space. • Did not provide a written pro forma, capital stack, or operating plan to City staff for review.
• Shared only high-level, verbal financial estimates.
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RPG’s Proposed Project Concept
In particular, RPG did assemble a team of three architectural firms (Jerde, Stufish and BluePrint Studio) to complete preliminary design concepts, which were presented onetime for City staff and Councilmember feedback. Of note, the preliminary design concept was shown to the City, however, staff was not allowed to retain the design concepts for review, with RPG stating that the designs were confidential. Thereafter, RPG released designs to the public during the week of October 6, and eventually emailed City staff a design deck on October 8 that we were again asked not to share.
In describing the preliminary design concepts, RPG has envisioned the following:
• Restoring the original design of the Civic including its original main lobby and exterior features.
• Historic elements of the Civic would be preserved or restored to meet historic tax credit requirements.
• The parking where SWIP and surface lot is located would be relocated toward the rear of the Civic, creating an open and flexible ‘green space’ park space that can be programmed for a wide variety of events on the former courthouse parking lot area, and would include a new building approximately 14,000 square feet of food and beverage offerings on the periphery of the proposed new park space.
• The proposal also envisions reconfiguring the Civic to increase its audience capacity from 3,000 to slightly more than 3,300. The draft designs also contemplate the creation of a roof top bar/restaurant atop the East Wing and stage-house that backs onto Pico Blvd.
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• The current parking located at the front of the Civic would be relocated to the rear of the building on Pico, and RPG’s design does not consider developing any additional parking capacity for the expanded venue.
For the Civic itself, RPG is proposing the installation of new technology to create immersive avatar / holographic shows that blend live performers with digital artists superimposed on the stage using motion capture technology.
Order-of-Magnitude Project Viability Assessment Performed By City Information on the preliminary business and operations plan, fiscal impact, project timeline, and financial viability analysis were not provided by RPG at any point during the ENA period. Given that factor, and because RPG did not provide a written pro forma or supporting documentation, staff developed an independent financial model based on the verbal information RPG representatives conveyed during meetings, coupled with the City’s understanding of site and facility constraints.
The analysis performed applied industry-standard discounted cash flow methods to approximate the project’s potential performance. Of note, the analysis is not intended to serve as a definitive financial marker for the project, but rather, intended to provide a rough order-of-magnitude assessment to identify the likelihood of the project being financially feasible.
Inputs for the assessment performed by staff are outlined in the chart below.
CATEGORY INPUT NOTES
TOTAL CAPITAL INVESTMENT $360 million Rough order-of-magnitude Civic restoration & site redevelopment costs VENUE CAPACITY 3,300 seats RPG verbal representation
AVERAGE TICKET PRICE $125 RPG verbal representation
ANCILLARY PER-CAPITA SPEND $75 Industry norm for comparable venues GROSS REVENUE PER SHOW $200 x 3,300 = $660,000 Derived
SHOW FREQUENCY 100 – 200 per year Sensitivity scenarios assessed OPERATING MARGIN 15% – 30% Modeled range based on typical venue performance PROJECT LIFE 25 years Standard discounted cash flow horizon DISCOUNT RATE 6% Estimated opportunity cost for capital 8 of 14
Using the inputs from above, staff then calculated the projected net annual income across a range of show counts, attendance rate, and operating margin, and used those cash flows to compute an estimated unlevered internal rate of return (IRR) for the project over a 25-year period. Staff was interested in assessing the unlevered IRR given that the metric represents the expected annual rate of return generated by a project before accounting for debt financing. An unlevered IRR provides one indicator of the inherent financial performance of the project itself, independent of how it is financed. A project’s unlevered IRR generally has to exceed the developer’s required hurdle rate (often between 8% and 12%) to be considered financially viable without subsidy.
The analysis produced the following results:
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SCENARIO SHOWS / YEAR OCCUPANCY MARGIN UNLEVERED IRR NPV @ 6% BASE CASE 150 85% 20% ~3% -$120M
OPTIMISTIC 200 100% 30% ~7% -$25M
CONSERVATIVE 100 70% 15% Negative -$195M
Per the assessment, even under optimistic assumptions (200 shows / year, 100% occupancy, 30% margin), the project yields only ~7% unlevered IRR, and remains $25 million underwater on a net present value (NPV) basis, assuming a 6% discount rate.
Under a realistic base case (150 shows/year, 85% occupancy, 20% margin), the project generates an unlevered IRR of ~3% and remains $120 million underwater on an NPV basis at a 6% discount rate.
In summary, the analysis demonstrates that from a financial perspective, the project appears to perform well below industry benchmarks. Of note, staff’s analysis does not mean that the project is infeasible – given the lack of information from RPG, the inputs for the assessment were derived from verbal conversations, the City’s understanding of the site, and general industry standards. Accordingly, the analysis is not a definitive fiscal assessment of the project.
However, the rough order-of-magnitude analysis conducted does indicate that the concept being advanced by RPG appears to be financially unviable without a significant subsidy or restructured scope.
RPG’s Request for Additional Term
Currently, RPG is requesting that the City grant a 6-month extension to complete due diligence related to:
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• Scope and cost estimates. Developing construction estimates for seismic strengthening, structural remediation, building systems and programmatic improvements, including restoration of historic elements and integration of new spaces.
• Financial feasibility. A pro forma projecting capital costs, operating revenues and expenses, debt and equity requirements, potential returns, and identification of possible City participation such as ground lease terms or contingent contributions. • Financing structure. Identification of private and public funding sources, including equity, construction and permanent debt. RPG has stated their intent to leverage federal historic rehabilitation tax credits, which provide a twenty percent credit on qualified rehabilitation expenditures for income producing properties listed on the National Register. However, utilizing federal historic rehabilitation tax credits can also create significant potential constraints on a project. Financing structure details still need to be assessed.
• Community benefits and engagement strategy. Outreach to residents, arts organizations, and surrounding neighborhood associations to understand desired programming and community goals.
It is important to emphasize that RPG has been engaged in assessing this project since July 2024, with the ENA finally being executed on April 8, 2025. During that time, the RPG development team has presented only preliminary architectural concepts to City staff for internal review. These concept materials were recently made publicly available, despite direction to the City that any concepts shared should remain confidential, and broad community engagement has not yet occurred. RPG has, however, held preliminary discussions with certain preservation and conservation stakeholders interested in the restoration of the Civic building
While conceptual design work has progressed, the City has also not received any financial documentation or pro forma demonstrating the project’s financial feasibility, 11 of 14
outside of verbal representations. Without the financial data, the City cannot evaluate the economic viability of RPG’s proposal to determine whether the proposed redevelopment can realistically advance to implementation without some type of subsidy. Further, a preliminary analysis conducted by staff appears to indicate that the project is not viable without some type of subsidy.
As Council considers whether to extend the ENA, it must weigh the limited progress made to date against the need for timely and transparent demonstration of a financially viability project. Proceeding with further extensions without this information would limit the City’s ability to make a responsible, informed decision about whether RPG remains a capable and committed partner for this project.
Options for City Council Consideration
The ENA provides that if (i) the Parties have not completed negotiations within the term and (ii) substantial progress has been made toward fulfillment of the requirements of this Agreement, the Parties may extend the Term for a maximum of three (3) consecutive ninety (90) day periods.
Accordingly, staff has identified three options for City Council consideration:
• Approve a six-month extension (two consecutive 90-day periods). This option would continue negotiations with RPG, while preserving the City’s ability to terminate if no viable plan emerges as prudent.
• Grant a three-month extension (one consecutive 90-day period). This option provides additional ENA term but requires RPG to accelerate its analysis. • Decline to extend the ENA and provide staff with direction to explore alternative options for the Civic site. This option terminates exclusive negotiations with RPG effective October 8, 2025. Under this alternative, staff would recommend that the City Council then provide staff with direction that could include the following options:
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o Assess the highest and best use for the Civic site while considering current constraints (e.g. lack of dedicated parking for the Civic, seismic retrofit and ADA requirements, SHPO historic preservation designation). o Assess highest and best use for the SM Civic site without any constraints.
Given previous studies and discussions concerning highest best use for Civic date back to 2007 (Creative Capital Plan), 2013 (Urban Land Institute) and 2014 (Civic Working Group), an updated highest best use analysis for the Civic would consider the evolving changes related to the economy, real estate, community needs, revenue generation, and other factors that impact the City currently.
Environmental Review
The Civic ENA is exempt from CEQA pursuant to Section 15061(b)(3) of the 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.” The ENA does not provide for any physical changes including improvements or development at the Civic Center. Therefore, it can be seen with certainty that actions would not result in adverse physical impacts on the environment, and as such, is categorically exempt from CEQA. Additionally, the Civic ENA is categorically exempt pursuant to Section 15301 (Class 1 – Existing Facilities) of the CEQA Guidelines. Class 1 consists of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use. The Civic ENA is a negotiating agreement for the existing Civic facility. Therefore, the ENA is exempt pursuant to Section 15301.
Past Council Actions
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Meeting Date Description
4/9/2002
(Attachment A)
Civic Auditorium Landmark Status Upheld by City Council 6/28/2005
(Attachment B)
CouncilAdopted Update Civic Center Specific Plan
10/11/2022
(Attachment C)
Adoption of a Resolution Declaring the Civic Auditorium as Surplus
12/12/2023
(Attachment D)
Authorization to Issue a Public Notice to Solicit Letters of Interest for Revitalization of the Civic Auditorium
7/23/2024
(Attachment E)
Authorization of Exclusive Negotiation Agreement
Financial Impacts and Budget Actions
The Cost Recovery Deposit from this ENA is deposited in the Civic Center Auditorium project, 01.221060. Budget adjustments would be incorporated in future budget cycles, as needed.
Prepared By: Nia Tang, Economic Development Administrator Approved Forwarded to Council
Attachments:
A. Attachment A: 4/9/2002 Staff Report - Civic Auditorium Landmark Status Upheld by Council (Web Link)
B. Attachment B: 6/28/2005 Staff Report - Council Adopted Update Civic Center Specific Plan (Web Link)
C. Attachment C: 10/11/2022 Staff Report - Adoption of Resolution Declaring the Civic as Surplus (Web Link)
D. Attachment D: 12/12/2023 Staff Report - Council Request to Issue a Public Notice to Solicit Letters of Interest for the Revitalization of Civic (Web Link) 14 of 14
E. Attachment E: 7/23/2024 - Staff Report Authorization of Exclusive Negotiation Agreement
F. Written Comments
G. Powerpoint Presentation