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R7B-Approve Lease Agreement With Gigi- 1661 Pennsylvania Avenue

R7B-Approve Lease Agreement With Gigi- 1661 Pennsylvania Avenue

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Published by Jose D. Duran

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Published by: Jose D. Duran on Apr 21, 2011
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COMMISSIONITEMSUMMARY
CondensedTitle:
AResolutionapproving,followingadulynoticedpublichearing,thefollowingagreementspertainingtoaproposedLeaseAgreementhavingatermofnine(9)yearsand364days,betweentheCityandPennsylvaniaAvenue,LLCD/B/AGigi,foruseofapproximately7,000squarefeetofgroundlevelretailspaceatthePennsylvaniaAvenueGarage,1661PennsylvaniaAvenue,MiamiBeach,Floridaforahigh-qualityrestaurant(primaryuse),withancillaryusesforahigh-qualitybakery,bar/cafeandbookandgiftshop:1)aLetterofIntent(LOI)settingforththesubstantivebusinesstermsoftheLease;2)aPre-LeaseDueDiligenceReviewAgreement;and3)adraft,insubstantialform,oftheproposedlease;andauthorizingtheCityManagertoexecutethePre-LeaseDueDiligenceReviewAgreement;authorizingtheMayorandCityClerktoexecutethefinalleasebaseduponthebusinesstermsintheLOIandsubjecttothefinalreviewbytheCitymanagerandtheCityAttorney'sOffice;andfurtherwaivingby5/7thsvotethecompetitivebidrequirement.
Key_IntendedOutcomeSupported:
Increaseresidentsatisfactionwiththelevelofservicesandfacilities.
SupportingData(Surveys,EnvironmentalScan,etc.):
Approximately40%ofretailbusinessessurveyed,rankMiamiBeachasoneofthebestplacestodobusinessand61%ofthesamegroupwouldrecommendMiamiBeachasaplacetodobusiness.
I
ShalltheCityCommissionapprovetheLeaseAgreement?
Issue:ItemSummary/Recommendation:PUBLICHEARING
OnFebruary14,2011,KoniverStern,theCity'sRealEstateBroker,presentedtheCitywithaproposedLetterofIntent(LOI)fromMr.AmirBenZion,toleaseapproximately7,000squarefeetofgroundfloorretailspaceintherecentlycompletedPennsylvaniaAvenueGarage,locatedat1661PennsylvaniaAvenue.TheprospectivetenantisplanningtoopenasecondversionofitshighlyacclaimedGigi'sRestaurantcurrentlyoperatinginMiami'sWynwooddistrict.Basedonpreliminaryestimates,theTenant'scosttobuildouttheshellspaceisanticipatedtocostapproximately$2.5Million.DuetothenatureoftheCity'scharterinvolvingtheleaseofcity-ownedproperty,themaximumallowabletermunderthecharterisnine(9)yearsandthreehundredandsixtyfour(364)days.Inconsiderationofthesecircumstances,theprospectivetenanthasrequestedasix(6)monthduediligencereviewperiodtoprecedetheactualleasecommencementdate,inordertoallowthemtoreserveleasingrightswhileadvancingdesignandplandevelopmentinordertoascertainthefeasibilityofobtainingafullbuildingpermitpriortocommencementofthelease.OnMarch14,2011,theCity'sFinanceCommitteeapprovedinconceptthetermsandconditionsrelatedtoaPre-LeaseDueDiligenceAgreementandaLeaseAgreement,providedforintheattachedLetterofIntent(LOI),asfollows:ThePre-LeaseDueDiligenceAgreementreservestheretailspaceforamaximumofsix(6)months,tocommenceimmediatelyuponapprovaloftheproposedleasebytheCityCommissionandterminateupontheearlierofsixmonthsorthedateonwhichthetenantisreadytoobtainafullbuildingpermitfortheproposedimprovementstothespace.Asaconditionforreservingthespaceduringthisperiodtheprospectivetenantshallposta$25,000feewiththeCity.Theproposedleasegenerallyprovidesforatermofnineyearsand364days,ataninitialbaserentof$75.00persquarefoot(adjustedby3%annuallycommencingduringthethirdyear);percentagerent;andaproportionateshareofCommonAreaMaintenancecosts(taxesandinsurance),projectedat$10.00persquarefootduringthefirstyearofthelease.TheAdministrationrecommendsapproval,followingadulynoticedpublichearing,oftheproposedPre-LeaseDueDiligenceReviewAgreementandtheLetterofIntent(LOI),settingforththeSUbstantivebusinesstermsoftheLeaseAgreementbetweentheCityandPennsylvaniaAvenue,LLC.,andfurtherauthorizinqtheMayorandCityCommissiontoexecutetheFinalLease,baseduponthebusinesstermsintheLOIandsubjecttofinalreviewbytheCityManagerandtheCityAttorney'sOffice.
FinancialInformation:
SourceofFunds:
n/a
II
Amount
I
Account
I
1
In/a
I
FinancialImpactSummary:DepartmentDirectorCityManagerAP_
ce
MIAMIBEACH
485
AGENDAITEM
R{
!3
DATE
4-13-
1/
 
~MIAMI
BEACH
CityofMiamiBeach,
1700ConventionCenterDrive,MiamiBeach,Florida33139,www.miamibeachfl.gov
COMMISSIONMEMORANDUM
TO:
MayorMattiHerreraBowerandMembersoftheCityCommission
FROM:
JorgeM.Gonzalez,CityManager~
~y
April13,2011()
U
PUBLICHEARING
ATE:SUBJECT:
ARESOLUTIONOFTHEMAYORANDCITYCOMMISSIONOFTHECITYOFMIAMIBEACH,FLORIDA,APPROVING,FOLLOWINGADULYNOTICEDPUBLICHEARING,THEFOLLOWINGAGREEMENTSPERTAININGTOTHEPROPOSEDLEASEAGREEMENT(THELEASE),HAVINGATERMOFNINE(9)YEARSAND364DAYS,BETWEENTHECITYANDPENNSYLVANIAAVENUELLC,
D/B/A
GIGI,FORTHEUSEOFAPPROXIMATELY7000SQUAREFEETOFGROUNDLEVELRETAILSPACEATTHEPENNSYLVANIAAVENUEGARAGE,1661PENNSYLVANIAAVENUE,MIAMIBEACH,FLORIDA,FORAHIGH-QUALITYRESTAURANT(PRIMARYUSE),WITHANCILLARYUSESFORAHIGH-QUALITYBAKERY,BAR/CAFE,ANDBOOKANDGIFTSHOP:1)ALETTEROFINTENT(LOI),SETTINGFORTHTHESUBSTANTIVEBUSINESSTERMSOFTHELEASE;2)APRE-LEASEDUEDILLIGENCEREVIEWAGREEMENT;AND3)ADRAFT,INSUBSTANTIALFORM,OFTHEPROPOSEDLEASE;AUTHORIZINGTHECITYMANAGERTOEXECUTETHEPRE-LEASEDUEDILLIGENCEREVIEWAGREEMENT;AUTHORIZINGTHEMAYORANDCITYCLERKTOEXECUTETHEFINALLEASE,BASEDUPONTHEBUSINESSTERMSINTHELOIANDSUBJECTTOFINALREVIEWBYTHECITYMANAGERANDCITYATTORNEY'SOFFICE;ANDFURTHERWAIVING,BY5/7THSVOTE,THECOMPETITIVEBIDDINGANDAPPRAISALREQUIRMENTS(ASPERMITTEDPURSUANTTOSECTION82-39OFTHECITYCODE),FINDINGSUCHWAIVERTOBEINTHEBESTINTERESTOFTHECITY.ADMINISTRATIONRECOMMENDAliONAdopttheResolution.KEYINTENDEDOUTCOMESSUPPORTEDIncreaseresidentsatisfactionwiththelevelofservicesandfacilities.BACKGROUNDAsyouareaware,therecentlycompletedPennsylvaniaAvenueGaragelocatedat1661PennsylvaniaAvenue(theGarage)wasbuiltwithapproximately7,000squarefeetofretailspace.TheAdministrationhasbeenworkingwiththeKoniverSternGroup(KSG),theCity'scontractedrealestatebroker,tomarketthisspaceasavailableforlease.Thespaceisavailableinitsentirety,orcanbesub-dividedintosmallerspaces.KSGresearchedandmarketedthespaceaccordingtoindustrystandard.
486
 
CommissionMemorandumGIGI'sApril13,2011Page2of4
ThespacehasbeenavailablesincetheCOwasissuedforthebuildingonOctober29,2010.TheCity,viaKSG,hasshownthespacetoseveralrestaurateursandretailoperations.Whileshowingthespace,prospectivetenantswereinformedthatitisnottheCity'sintentiontoprovideorfundanyofthenecessaryimprovementsforprospectivetenants,whichwillinclude,amongotherthings,installationofHVAC,bathrooms,lighting,drywall,flooring,etc.Further,thespacewasnotbuiltwithanyventingsystemorgreasetraptosupportarestauranttenant.Inaddition,pursuanttoCityCode,leasetermsbeyondtenyearsrequireareferendum.Asaresult,themaximumleasetermforthespacewithoutareferenduminnineyears,364days.IndiscussingpotentialprospectsforthisspacewithKSG,theCitywasadvisedthattheshorttermrestrictionmaypresentanissueforcertaintenants,asthenecessarybuild-outforcertainuses(suchasarestaurant)canbeextensive,whichinturnwoulddriveupthecostofamortizingthecapitalinvestmentovertheshorterterm.Bycomparison,privatelandlordscanoftenoffertermsfarexceedingtenyearstoaccommodatesizeabletenantinvestmentinthespace.Asaresult,inordertobemorecompetitivewithprivatemarketlandlords,theCitywouldneedtoconsiderotherwaysofmakingapotentialleasemorefavorable.
ANALYSIS
OnFebruary14,2011,KSGpresentedtheCitywithaproposedLetterofIntent(LOI)fromMr.AmirBenZion,ofPennsylvaniaAvenue,LLCD/B/AGigi(tenantorGigi),toleaseapproximately7,000squarefeetofgroundfloorretailspaceavailableintherecentlycompletedPennsylvaniaAvenueGarage,locatedat1661PennsylvaniaAvenue.TheprospectivetenantisplanningtoopenasecondversionofitshighlyacclaimedGigi'sRestaurantcurrentlyoperatinginMiami'sWynwooddistrict.AsindicatedintheattachedconceptproposalfromGigi,AmirBenZionhasanextensivebackgroundintherestaurantindustryandhascreatedmanylandmarkculinaryandhospitalitylandmarksinMiamiandMiamiBeach,including,butnotlimitedto,TheTownhouseHotelandBondStreetJapaneseRestauranton20
th
Street,MissYipChineseCafeonLincolnRoadandSra.MartinezintheDesignDistrict.Thetenant'splanwhichgenerallyencompassestheentireretailspaceoftheGarage,providesforaneclecticmixofuses,whichwillincludeGigi'snoodles,bunsandBBQ,Gigi'sburgersandbeers,Gigi'scoffeeandbakeryandtheGigiminibar.Acopyofthetenant'spreliminaryconceptplanisincludedas"ExhibitAntothismemorandum.Basedonpreliminaryestimates,theTenant'scosttobuildouttheshellspaceisanticipatedtocostapproximately$2.5Million,whichincludestheinstallationofagreasetrap,additionalsub-gradeplumbingandkitchenexhaustventing,noneofwhichareprovidedforinthecurrentdesignofthebuilding.Typically,abuild-outofthisnaturewouldcommandaterminexcessoftenyearsinordertoamortizethecapitalinvestmentintheproject.However,duetotheCity'scharterinvolvingtheleaseofcity-ownedproperty,thetenantwillinsteadagreetothemaximumallowabletermunderthecharterofnine(9)yearsandthreehundredandsixtyfour(364)days.Theprospectivetenantisnonethelesscommittingtoaminimumcapitalinvestmentof$1.2millionasaconditionoftheLease.However,theprospectivetenanthasrequestedconsiderationofasix(6)monthduediligenceperiodtoprecedetheactualleasecommencementdate,inordertoallowthemtoreserveleasingrightswhileadvancingdesignandplandevelopmentandconsultingwiththeCity'sPlanningandBuildingDepartmentsinordertoascertainthefeasibilityofobtainingafullbuildingpermitpriortocommencementoftheLease.Theprospectivetenantiswillingtoinvestaconsiderablesumandtimenecessarytodevelopfullplanswithoutthefullbenefitandsecurityofanexecutedlease,whilepostinga$25,000feewiththeCity,whichwillberefundableintheeventtheprospectivetenantisunabletoobtainafullbuildingpermitwithinsixmonthsinspiteofreasonableandverifiableeffortstodoso.Duringthesix-monthduediligenceperiod,theCityretainstherighttocontinuetomarketthe
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