Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
JULY 19, 2017
Subject
SUBJECT: LEASE OF RETAIL SPACE TO BIKE AND PARK
SANTA MONICA, LLC
Action
ACTION: AUTHORIZE EXECUTION OF LEASE AGREEMENT
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer (CEO) to execute a five-year exclusive lease agreement and a five-year extension option with Bike and Park Santa Monica, LLC (Bike and Park) for the Kiosk S-4 space location at Union Station in the amount of $1,970.72 monthly base rent plus an annual increase of three percent, common area maintenance (CAM) fees, and a percentage rent of ten percent of gross sales above the base rent, for a total income in excess of $500,000 over the 10-year lease. Lease will start on the earlier of 60 days from completion of the Metro Bike Hub currently under construction or the day the Bike and Park actually commences conducting business.
Issue
ISSUE
Following a competitive selection process, six vendors submitted proposals in August 2015. Three proposers were found to best meet the experience requirements including having implemented similar projects at transit hubs. The bidders’ proposals were evaluated on the basis of thoroughness of their responses, historical retail experience, profitability, resourcefulness of their business plans, previous work with other public agencies, proposed organization and staff, and commitment to a quality store and program.
Staff, with assistance of County Counsel, have recently concluded negotiations with Bike and Park, a successful retail and services trade name shop that thoroughly complements the adjacent Metro Bike Hub at the Union Station. The lease retail area is 904 square feet within the Bike Hub Park facility currently under construction, and includes non-exclusive use of the common area (see Attachments A and B). Metro will be providing a shell and heating capacity when complete. The proposed tenant is expected to invest approximately $75,000 in tenant improvements. Completion of the Bike Hub construction is expected within the next six months pending permitting and licensing.
Over the proposed 10-year term (5 years plus one 5-year option dependent on performance per Attachment C term sheet), this lease is anticipated to generate in excess of $500,000 in base rent and percentage rent. Board authorization is requested because the expected lease revenue exceeds the CEO’s current authority.
Discussion
DISCUSSION
Bike and Park is a retail bike shop in the business of selling, renting, repairing, and valet parking bicycles; providing bike and Segway tours; selling bike-related apparel and supplies and grab ‘n go snacks and drinks; and providing services and activities related to three key areas of education (e.g., confident city cycling that is smart and safe), stakeholder engagement and customer service. They are passionate about increasing bicycle use for transportation and inspiring people to ride. This Bike Hub-user amenity is expected to increase bike and transit trips and achieve first/last mile strategies which are key objectives of the Metro Bike Hub program.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
The proposed lease will have no impact on safety.
Financial_Impact
FINANCIAL IMPACT
Adoption of the proposed lease could generate an excess of $500,000 in rent including the 3 percent annual increase, CAM charges, and percentage rents, over the initial 5 years of the lease and 5-year option.
Impact to Budget
Adoption of the recommended action will have no impact on the FY18 budget for bus or rail operations.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board may choose to disapprove the lease agreement. Staff does not recommend this since it would likely leave the retail space vacant at the time of opening with no income or operator to assist Bike Hub customers. The Board may instead decide to go back to the open market to find an alternate tenant. This is not recommended as staff has already conducted an exhaustive RFP process, held interviews with the qualified candidates and selected the best candidate.
Next_Steps
NEXT STEPS
The proposed terms and conditions of the lease agreement have been negotiated and approved by County Counsel and Lessee. The remaining step is approval by the Metro Board of Directors.
Attachments
ATTACHMENTS
Attachment A - Bike and Park Premises and Patio Area
Attachment B - Bike and Park Project Area
Attachment C - Bike and Park Lease Agreement Key Terms
Prepared_by
Prepared by: Ken Pratt, DEO, Countywide Planning & Development, (213) 922-6288
Cal Hollis, SEO, Countywide Planning & Development, (213) 922-7319
Reviewed_By
Reviewed by: Therese W. McMillan, Chief Planning Officer, (213) 922-7077
