LORETO PLAZA - LEASE OF ADDITIONAL AIRSPACE

Recommendation:

1. That the City Council determine whether or not to lease additional airspace.
   
2. If the City Council decides to lease the additional airspace, City Manager should be directed to contract for the appraisal upon payment of the deposit and direct that the lease be revised to reflect your decision.

Background:

The City Attorney and I met with Leslie Newton on March 23, 1998 concerning the proposal to use additional airspace over Loreto Plaza to expand an existing restaurant space on the second level. Based on our discussion during that meeting, I obtained a proposal to have the airspace appraised in order to fix a fair market rental rate for the space. The quote for the work was $3,500 for the airspace rental plus $1700 to develop a sale value. This information was passed on to Mr. Newton.

Mr. Newton met with his tenants and they both declined to pay for the appraisal because they did not believe it would be conclusive due to the uniqueness of the space. Instead, they provided a proposal for a new lease, keeping the existing area at 50¢ per square foot and proposing $1.00 per square foot for the new space, forgoing the reservation of rights and acknowledging in the lease that the City can charge for the airspace. The proposed term was 10 years, plus a 10 year option, with payment for the new area beginning when the construction was completed.

A second proposal has been submitted that addresses staff's concern about the appraisal. The tenants are now willing to pay for the cost of appraisal and the rent as determined by the professional appraiser if the City is willing to lease the additional space. The appraisal can be done in 4-5 weeks and is a company selected by the City which is Lee & Associates of Los Angeles.

Assuming that the City Council is willing to allow the lease of the additional area, staff would propose the following items be included in the lease:

1. Newtons acknowledge that they need a lease to use the area for the restaurant and they have an obligation to pay rent. This would eliminate any disputes in the future about the easement.
   
2. The new lease include both the existing lease area and the proposed lease area. Together this will total 744 square feet as proposed (see Exhibit A) The new lease will have a minimum rent of $1.00 per square foot. If the appraisal comes in at a higher rate then the higher rate would be charged. This would be $744.00 per month or $8,928.00 per year. The new lease have a 10 year term with a 10 year option as proposed. This is the same as the original lease.
   
3. The new lease effective date would be when the City Council grants approval. In other words, rent would be due as soon as the leasee starts work on the leasehold. Any additional rent due as a result of the appraisal would be retroactive to the effective date.
   
4. Applicant deposit a check for the amount of the appraisal before the work is started.

Analysis

The issue for the City Council to decide is whether or not to lease this airspace to the property owner (Mr. Newton) for the fair market rent as determined by the appraiser. In addition to determining the rent, the actual space being rented will be verified. The minimum rent, effective date, and term will be as outlined by staff above.

Agendas / Minutes Menu | Top of Page | Back to Agenda