Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
NOVEMBER 15, 2017
Subject
SUBJECT: TRAXX RESTAURANT LEASE AGREEMENT
Action
ACTION: APPROVE 3-YEAR LEASE WITH A 3-YEAR OPTION TO EXTEND
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer to execute a three-year exclusive lease agreement and a three-year extension option with Tara Thomas Enterprises, Inc., a California corporation for the Traxx Restaurant and the Bar located in Union Station.
Issue
ISSUE
The lease area consists of 4,276 square feet on the west side of Union Station including seating area in the waiting room, entry vestibule, and north patio. In addition, the tenant has an office and two storage areas with stair access on the 2nd floor and in the basement totaling 702 square feet (see Attachment A).
Metro and Tara Thomas Enterprises, Inc. (Lessee) have conducted negotiations and desire to enter into a new lease that will replace and supersede all prior agreements and understandings between the parties. The prior lease expired and, per that agreement, the tenancy reverted to a month-to-month lease term. A new agreement and monthly base rent of $9,080.00 has been negotiated with the assistance of County Counsel.
Over the proposed 6-year term (3 years plus one 3-year option dependent on performance per Attachment B term sheet), this lease is anticipated to generate in excess of $1,100,000 in base rent, three percent annual increase, eight percent of gross sales percentage rent, and common area maintenance fees. Board authorization is requested because the expected lease revenue exceeds the CEO’s current authority.
Discussion
DISCUSSION
The Traxx Restaurant and Bar is a fine dining amenity for our public transit customers. It has been in operation in Union Station for twenty years and has created a following. Over the years, Traxx has been featured in many articles in restaurant magazines, the Los Angeles Times, and LA Weekly. The tenant also negotiates on a case-by-case basis special event catering services to various event licensees throughout the station.
As a material consideration of Metro entering into this agreement and subject to Metro’s approval, the Lessee is to install certain improvements to the premises, including but not limited to, internet speed upgrade, new point of sale system, restroom remodel, bar fixtures and plumbing upgrade and new seating and umbrellas for the patio. Tenant shall be entitled to reimbursement of actual out-of-pocket costs of the foregoing not to exceed $34,050.
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 $1,100,000 in rent including the 3 percent annual increase, CAM charges, and percentage rents, over the initial 3 years of the lease and 3-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 negotiated lease terms. Staff does not recommend this since it would likely leave the retail space vacant for a time causing an interruption in service to regular Metro and Traxx customers. This would also trigger a loss of rent income to Metro during the vacancy. The Board may instead decide to go back to the open market to find an alternate tenant. This is not recommended as any new tenant would want to negotiate new improvements to the premises at Metro’s expense. Additionally staff has already conducted an exhaustive lease negotiation process and settled with the tenant on terms and conditions within market parameters and favorable to Metro.
Next_Steps
NEXT STEPS
Upon approval by the Metro Board of Directors, the lease agreement will be executed with all new terms, conditions and exhibits as of the retroactive date of October 1, 2017 per the negotiated lease start date.
Attachments
ATTACHMENTS
Attachment A - Lease Area
Attachment B - Traxx Lease Agreement Key Terms
Prepared_by
Prepared by: Rich Darby, Manager, Transportation Planning, (213) 418-3298
Ken Pratt, DEO, Countywide Planning & Development, (213) 418-3297
Calvin E. Hollis, SEO, Countywide Planning & Development, (213) 922-7319
Reviewed_By
Reviewed by: Therese W. McMillan, Chief Planning Officer, (213) 922-7077
