City Council Meeting: December 11, 2012

Agenda Item: 3-J

To: Mayor and City Council 

From: Andy Agle, Director of Housing and Economic Development

Subject: Solicitation of Cinema Development Proposals for 1320 Fourth Street

Recommended Action

Staff recommends that the City Council authorize staff to negotiate in the open market for cinema development at the City-owned property at 1320 Fourth Street.

Executive Summary

The development team for the proposed AMC cinema on City-owned property at 1320 Fourth Street has informed staff that they will no longer pursue exclusive negotiations for cinema development on the site. Staff seeks Council authorization to enter into discussions and negotiations with other prospective development teams regarding the cinema opportunity at the site.

Background

On September 8, 2009, Council authorized exclusive negotiations with Metropolitan Pacific Capital Inc. in partnership with AMC Entertainment Inc. (AMC Development Team) to develop a multiplex cinema on City-owned property at 1320 Fourth Street, the current site of Parking Structure 3. Authorization of the exclusive negotiations followed a formal request for proposals (RFP) process that led to selection of the AMC Development Team. An exclusive negotiating agreement with the AMC Development Team expired on November 26, 2012. On November 29, 2012, AMC informed staff that the development team would not seek an extension of exclusive negotiations.

Discussion

In ending exclusive negotiations, the AMC Development Team informed staff that the proposed project would not meet their expectations with respect to financial return. Rather than immediately discarding the cinema opportunity on Fourth Street, staff would like to explore whether other cinema providers could pursue a cinema development that generates a sufficient financial return while meeting City objectives. City staff will reach out to the two other development teams who responded to the RFP that was issued in 2008, as well as solicit offers from other qualified parties. Staff believes that soliciting offers and directly negotiating in the open market could more quickly identify prospective development teams and proposals compared to conducting a new RFP process. If any of the discussions and negotiations shows promise, staff would return to Council for further direction.

A primary advantage of leasing the City-owned site to the AMC Development Team is that AMC operates all three cinemas on the Third Street Promenade and planned to reduce its existing cinema seat-count downtown by closing one of its existing cinemas or renovating its existing cinemas to reduce the total number of seats. Such a reduction may occur nonetheless, as an administrative approval was granted in November 2012 that allows for the conversion of the 1,500-seat Criterion 6 to general retail use. If the approved conversion to retail ultimately occurs, it would result in a 27 percent reduction in the number of cinema seats downtown.

Financial Impacts & Budget Actions

There is no immediate financial impact or budget action necessary as a result of open market negotiations.

Prepared by: Erika Cavicante, Senior Development Analyst

Approved:	Forwarded to Council:
Andy Agle, Director Housing and Economic Development	Rod Gould City Manager