City Council
Report
City Council Meeting: March 24, 2026
Agenda Item: 4.N
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To: Mayor and City Council
From: Oliver Chi, City Manager, Office of Economic Development Subject: Approval of Assignment and Amendment of Lease for the Victorian, Located at 2640 Main Street
Recommended Action
Staff recommends that City Council:
1. Adopt a finding of categorial exemption pursuant to Section 15301 of the California Environmental Quality Act (CEQA) Guidelines;
2. Authorize the City Manager to negotiate and execute an Assignment and Amended Lease Agreement to transfer the leasehold interest for 2640 Main Street from Ocean Park Restaurant Corporation (OPRC) to The Santamonican Club, LLC, a California limited liability company; and,
3. Authorize the City Manager to accept payment of $278,094 for outstanding back rent due under the existing Lease Agreement with OPRC.
Executive Summary
On January 13, 2026, the City Council authorized staff to negotiate an assignment and amendment to the existing lease for the City owned property located at 2640 Main Street (The Victorian), to transition the leased premises from its current use as a restaurant, bar, and nightlife venue into a family-based recreation, events, and wellness destination serving all ages. As part of that direction, the Council requested also that the amended lease clarify the business ownership, provide repayment for back rent due to the City under the existing lease (which went unpaid by the tenant due to the City issuing incorrect lease payment amount bills), and identify new activations, community benefits, and capital investments under the amended lease. On March 10, 2026, staff presented the information requested for Council’s consideration in closed session, and direction was provided to move the new lease agreement forward. 2 of 15
Discussion
The pandemic has significantly altered the restaurant and nightlife sector, leading to a shift in customer behavior and operational strategies. Restaurants and bars have had to adapt to evolving consumer preferences. Today’s consumers are seeking unique dining and immersive experiences with programming that encourages repeat visitation and broadens appeal to a wider range of audiences, including families. In response to evolving market conditions, the Santamonican Club LLC (“Operator”), the current business operator of The Victorian, proposes to transition operations accordingly.
During the past few weeks, pursuant to Council direction, staff has negotiated updated lease terms that would allow The Victorian to be converted into a family-based recreation, events, and wellness facility for members. The terms of the amended lease include the provisions outlined below.
Lease Assignment and Ownership
The lease for 2640 Main Street is currently between the City and Ocean Park Restaurant Corporation (“OPRC”), which operates the business commonly known as “The Victorian.” On February 25, 2026, the City received confirmation from OPRC of its intent to assign the existing lease and the remaining lease term to the Operator, which proposes to continue with the existing operations but under a new business name, “The Santamonican Club.”
Under the proposed assignment, OPRC would assign its leasehold interest to the Operator. As part of the amended lease, the Operator would assume responsibility for lease obligations, including payment of outstanding past due rent. OPRC would remain liable for all obligations accrued prior to assignment unless expressly released by the City, and the Operator would assume liability for repayment of outstanding rent.
Payment of Past Due Rent
As part of the City’s tenant audit program, it was identified that the City had consistently underbilled The Victorian, resulting in additional payments owed to the City. Under the 3 of 15
amended lease, the Operator has agreed to repay $278,094 in back rent that was underbilled. The Operator will pay the full past due rent within six months of lease execution or issuance of a Certificate of Occupancy, whichever is earlier.
Lease Premises
The lease area, as outlined in yellow in the following exhibit, will remain unchanged.
The total lease premises encompass approximately 50,418 square feet. The Victorian building comprises approximately 12,961 square feet across three floors. The 25 onsite public parking spaces will also continue to utilized as they have historically been used, available for public use, consistent with current operations. The Operator has also agreed to manage and operate the parking facilities in accordance with the terms of the existing lease.
Lease Term
The original lease with OPRC commenced May 15, 1978, with five five-year options, expiring on May 14, 2033. Under the amended lease, the term would be amended to reflect a ten (10) year base term from April 1, 2026, with three five (5) year options to extend. The new 10-year base term would commence upon execution of an assignment and lease amendment.
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Updated Rent Structure
The proposed assignment and amended lease include an updated rent structure intended to support operational ramp-up and business stabilization during the renovation and transition period. The current rent under the existing lease with OPRC is approximately $22,000 per month, consisting of a combination of base rent and percentage rent.
Under the amended lease terms, the Operator would receive a one-time $10,000 rent concession upon execution of the assignment and amended lease. Thereafter, a rampup rate would be established at a fixed amount of $10,000 per month. This rent would remain in effect from lease execution through the earlier of (i) issuance of a Certificate of Occupancy for the new use or (ii) 18 months. This temporary ramp-up rent structure reflects that the facility will generate limited operating revenue during the estimated 12– 18 months renovation period and recognizes the Operator’s commitment to fund significant capital improvements to the property.
Upon issuance of the Certificate of Occupancy or the 18-month period, whichever is earlier, rent would increase to a fixed amount of $20,000 per month. Beginning in Year 5, rent would escalate by 3% annually, consistent with the escalation provisions outlined in the amended lease. Further, the amended lease will provide that the rent structure shall be available for City review at Year 5. This provision would provide the City an opportunity to negotiate rent adjustments based on market conditions and financial feasibility, as needed. This structure balances near-term revenue with long-term investment and activities of a City-owned asset.
Capital Investments & Project Scope
The Victorian, formerly known as the “Kyte House,” was constructed in 1903 and originally located at 1003 Ocean Avenue. In 1977, the structure was relocated to its current site at 2640 Main Street, together with the Heritage Museum’s “Roy Jones House.” Both houses were donated by a private developer who had initially planned to 5 of 15
demolish the buildings but instead agreed to donate them and fund their relocation as a concession for redevelopment of the properties at 1003 and 1007 Ocean Avenue.
At nearly 123 years old, the Victorian has undergone various repairs and improvements over time. However, many building systems and prior capital improvements are now approaching the end of their useful life and require modernization. Under the amended lease, the Operator proposes to undertake significant capital improvements at Operator’s own expense, without public subsidy or rent credits. As part of the amended lease, the Operator proposes the following investments, with an estimated renovation and construction period of 12–18 months:
• Roof replacement
• Replacement of mechanical and HVAC systems
• Replacement interior and exterior flooring
• Exterior siding, paint, and façade improvements
• Commercial kitchen renovation
• Re-imagined all-day quick service coffee bistro
• Re-imagined full-service restaurant and bar
• Spa and wellness center
• A new pool
• Family/youth facility
• Fitness center featuring TechnoGym equipment
• Design, furniture, fixtures, and equipment
• Tile work, paneling, faux finishes, wall coverings, moldings, artwork & decorative finishes
• Built-in cabinetry and storage
• New audio/video and low-voltage automation systems for the entire property • Landscaping, preservation and addition of mature trees • Full perimeter fencing and security including new windows and doors Initial concept designs envision expanded green space, flexible outdoor programming areas, enhanced exterior improvements, a new pool, and additional wellness amenities. 6 of 15
Green spaces
Flexible outdoor programing
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Extensive exterior improvements
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New pool
Wellness amenities
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Community Benefits
To ensure that proper community benefits are delivered, Council requested the following provisions for the amended lease:
• Support Sunday Farmers Market operations
• Maintain public access to the Santa Monica Heritage Museum Lawn • Host community events
• Local scholarship membership program
• Local hiring program
Based on that direction, staff engaged in discussions with The Victorian and have confirmed that the amended lease would require the Operator to provide an annual report to the City summarizing the community benefits that Operator provided under the lease, including community events, attendance, and partnerships. The other Community Benefit provisions we have been able to negotiate for the Operator to provide include:
Sunday Farmers Market Operations
The Sunday Farmers Market operates between 6:30 am and 3:00 pm. About 28 farmers, 14 food vendors, and 5 Main Street merchants set up on the parking lot, with community education booths and musicians operating on the driveway and lawn between the Victorian and Santa Monica Heritage Museum. The Victorian will makes its restrooms available to farmers and customers during the Market’s hours of operation and allows the Market to store items on-site.
As part of the amended lease, the Operator commits to continue providing the City with support, access, and use of the Victorian’s restrooms, storage, power / electricity, and water facilities to support the Sunday Farmer’s Market on Main Street.
Public Access to the Cultural Heritage Museum Lawn
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The amended lease would provide that the Operator will maintain the historic museum lawn as an open and visible community amenity consistent with the requirements of the Santa Monica Heritage Museum Lease. Of the customers who visit the Farmer’s Market each week, it is estimated that approximately 70% stay for one to two hours.
Many visitors picnic on the lawn while enjoying the food vendors and live entertainment.
Of the City’s four weekly farmers markets, the Sunday Market is widely regarded as the most family-friendly, largely due to the presence of this lawn. Public access to the lawn will not be reduced from existing conditions.
To improve safety and circulation between public and operational areas, the Operator proposes to locate the primary pedestrian access point to the lawn directly from Main Street rather than requiring pedestrians to cross through the active driveway circulation area to improve and enhance:
• Pedestrian safety by avoiding conflicts with vehicles entering and exiting the property
• A clear and visible entry point to the lawn from the public sidewalk • Allows the lawn to remain accessible while maintaining appropriate separation between the public green space and the operational areas of the Victorian lease premises
Historically, the site experienced operational challenges when circulation between the driveway and lawn areas was not clearly defined. Establishing a dedicated pedestrian access point from Main Street provides a safer and more predictable access point for visitors while maintaining the lawn's visibility and openness from the street.
The amended lease would provide that public access to the lawn will not be reduced and will remain consistent with existing Heritage Museum lease requirements. The lawn itself will remain visible and accessible from the street and available for public use during designated access periods. The Operator would commit continuing to work with the City to support appropriate public safety and maintenance efforts, to ensure the 11 of 15
lawn remains a safe and welcoming environment for community use consistent with its intended purpose.
Supporting Cultural Heritage Museum & Community Partnership Events The Operator will continue to collaborate with the California Heritage Museum to support community-focused programming. While the museum will serve as the lead organizer and public-facing entity, the Operator will provide in-kind support including food and beverage, event resources, and marketing. These events, held multiple times per year, may benefit youth organizations, educational initiatives, or other charitable causes identified by the museum’s leadership further enriching community engagement through arts and cultural preservation.
Community Events
In response to Council’s desire for community events and activations, the amended lease would commit Operator to hosting free community gatherings throughout the year in coordination with neighborhood groups and local partners. The amended lease will include language that requires the Operator to provide an annual list of community events, and for the initial opening year, specific events include:
• A winter community event open to the broader Santa Monica community that could activate the lawn and surrounding Main Street area; • A spring event coordinated with the Main Street Business Improvement Association and neighborhood groups such as the Ocean Park Association; and, • A fall seasonal gathering celebrating neighborhood businesses and community organizations.
These events may be hosted directly by Operator, coordinated with neighborhood organizations, or co-sponsored with the City depending on the nature of the event.
Engagement & Community Support Activities
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The amended lease will include provisions requiring the Operator to perform numerous engagement & community support activities. In negotiations with the Operator, staff has been able to secure commitments for the following activities that will be included in the amended lease:
• Santa Monican Cares: Annual Charity Auction Gala
• The Operator will be required to host an annual, fully funded charity gala (valued at approximately $80,000), with all proceeds directed toward local organizations. The funds raised each year provide meaningful support to the selected beneficiary.
• Member-Selected Annual Charity Initiative
• Each year, the Operator will designate a “Member Charity of the Year,” selected by a member of The Victorian, to support a local nonprofit of their choice. The Operator will host a dedicated fundraising event, with proceeds supplemented by a direct contribution from the Operator. • Thanksgiving Foster Youth Giving Initiative
• The Operator will organize an annual Thanksgiving program supporting foster youth. Contributions will include bicycles, holiday meals, clothing, and essential care packages in partnership with local foster organizations. • Holiday Giving Initiative
• The lease will require the Operator to coordinate a seasonal donation initiative where members contribute curated gift packages for children and essential supply kits (hygiene products, warm clothing, etc.) for individuals experiencing homelessness throughout Santa Monica and greater Los Angeles.
• Local School Support Partnership
• The Operator will be required to connect with Santa Monica Malibu Unified School District to ascertain, identify, and develop an annual partnership 13 of 15
program, to provide both financial and in-kind support for classroom resources, program funding, and enrichment initiatives. • Coastal Stewardship & Environmental Support
• The Operator will be required to coordinate and host at least one environmental initiative per year. Environmental initiatives could involve beach clean-up events / activities.
• First Responders Partnership & Annual Recognition Program • The Operator has offered to have the lease require them to establish an ongoing partnership with Santa Monica first responders by hosting an annual First Responders Recognition Dinner.
Local Hiring and Vendors
In support of the City’s goals to support the local economy and enhance employment opportunities, the amended lease would create a structure whereby the Operator would agree to retain all existing employees currently working at The Victorian. Further, the amended lease would require that the Operator hire local Santa Monica residents whenever possible, and would further set local hiring benchmarks and requirements.
The Operator will also be required via the amended lease to prioritize working with local Santa Monica vendors and businesses for services, programming partnerships, and event support, including a requirement that the Operator source a certain percentage of their ingredients for their food and beverage program from local farmers markets and producers.
“First Job” Program
The lease will also require that the Operator establish a “first job” program for local Santa Monica youth interested in the hospitality industry. The program will be structured to provide local youth with work and mentorship opportunities at The Victorian.
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Local Scholarship Membership Program
The amended lease would commit Operator to reserving up to 20% of total membership capacity for scholarship memberships available to qualifying Santa Monica residents.
Membership will be structured on a household basis, and programming is designed to serve the entire household together. Under this program, the Operator will waive membership fees, allowing scholarship members full access to the clubhouse.
Attachment A, prepared by the Operator, provides additional detail on the club’s commitment to fostering a diverse and inclusive membership base. It also outlines the framework for the family-oriented membership model and the structure and eligibility criteria of the scholarship program.
Environmental Review
This agreement is exempt from California Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing Facilities) of the CEQA Guidelines. Section 15301 provides exemption for the operation, repair, maintenance, permitting, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of use beyond that existing at the time of the lead agency’s determination. The lease would be for the operation of the existing Victorian building and therefore, is exempt from CEQA pursuant to Section 15301.
Financial Impacts and Budget Actions
The recommended action is estimated to generate lease revenues of approximately $120,000 to $180,000 to the General Fund during the 12- to 18-month renovation phase. Once operational, the lease will generate $240,000 annually. The revenues will be deposited into account 01200016.414000.
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Prepared By: Nia Tang, Economic Development Administrator Approved Forwarded to Council
Attachments:
A. Attachment A - Santamonican Club Membership Program
B. Attachment B - Santamonican - Levine (2026)
C. Attachment C - Santamonican Oaks (2026)