ATTACHMENT A
 
REVISED LEASING GUIDELINES

 

GUIDELINE OBJECTIVES

The purpose of these guidelines is to allow for the Airport Fund to remain viable during the uncertainty that lies over the future of the Airport and the recent legal process that are not anticipated to be resolved prior to the current leases expiring.Leases represent the largest revenue source for the Airport by far, accounting for 63%, of the Airport Divisionís total revenue.Maintaining the Fundís independence from subsidies from the General Fund necessitates those Airport properties, especially non-aviation use spaces, to remain an attractive and stable inventory for businesses requiring space in Santa Monica.††

 

The City has not yet determined what changes can and will be made to Airport property after June 30, 2015.It is important that the Airport has the ability to offer a lease term beyond this date in order to attract and maintain a good tenant base for non-aviation properties located on Airport Avenue, Donald Douglas Loop South, and Donald Douglas Loop North.Currently the properties located on Donald Douglas Loop North are managed by Atlantic Aviation and Gunnell Properties that were established under a thirty year development agreement where only a land lease rental rate is paid to the Airport.This development agreement expires on July 1, 2015 and at that time these properties will revert back to the City.Any new leases for these two properties will follow the guidelines for aviation and non-aviation areas separately so as to offer the City the most flexibility during these legal uncertainties.

This report excludes portions of 3400 Airport Avenue as most or all of this building will be operated by Santa Monica College as of July 1, 2015.

 

USES

Currently, non-aviation airport properties are used by an eclectic mix of occupants that include: a museum, technical offices, artist day studios, educational facilities, contractor facilities, architectural offices, law offices, film related businesses, and general office space.Diversity of tenants will be maintained based on the following criteria: provide for a historic connection to the property; ability to pay market rental rates as a means to support Airport fiscal self-sufficiency; purposes which serve broader community interests and needs as long as they fall within the Cityís legal constraints.

 

RENTABLE AREA

Single occupancy and/or master tenant buildings will be leased on the basis of gross building area.New leases for multi-user buildings will be on the basis of net interior rentable area excluding building common areas.

 

TERM OF YEARS

Beginning July 1, 2015 or as vacancies arise either by lease expiration or early termination, available non-aviation space will be leased for up to a five-year term with five (5) 1-Year options to be exercised at the Cityís own discretion.After five (5) years, tenants who wish to be considered for lease option extensions would need to contact City staff in writing, no more than six months or less than 60 days before the lease terminates, to request the one-year lease extension.The City at its own digression will approve or disapprove the one year extension.

 

Prospective tenants for leasing of vacant space will be selected from applications received by City staff.Prospective tenants will be screened for confirmation of use and credit-worthiness.All existing non-aviation airport tenants that are current in rent payments and not otherwise in default of their current agreements, and in good standing, will be offered the opportunity to retain use and occupancy of their currently leased premises for up to a five-year term with the five (5) 1-Year options.At their option, existing tenants may request shorter lease duration.

 

Available Aviation-Use space will be leased for up to a one (1) Year with two (2) 1-Year Options; these options will be solely exercised at the Cityís discretion. Tenants who wish to be considered for lease option extensions would need to contact City staff in writing not more than six months or less than 60 days before the lease terminates to request the one-year lease extension.The City at its own digression will approve or disapprove the one year extension.

 

Prospective tenants for leasing of vacant space will be selected from applications received by City staff.Prospective tenants will be screened for confirmation of use and credit-worthiness.All existing aviation airport tenants that are current in rent payments and not otherwise in default of their current agreements, and in good standing, will be offered the opportunity to retain use and occupancy of their currently leased premises for up to one-year term with the two (2) 1-Year options.At their option, existing tenants may request shorter lease duration.

 

PERIODIC REVIEW OF RENTAL RATES

Fair market rents for individual buildings on non-aviation airport properties and prevailing market rents for aviation properties will be appraised in the as-is condition quantified in the spring of 2014 appraisal.Rental rates for new or renewed leases of airport properties will be set, effective July 1, 2014, as follows:

       2900 Airport Avenue and 3000 Airport Avenue will be dedicated to artist day studios at market rate and subject to the guidelines of the Santa Monica Airport Artist Space Program

       All leases will be subject to annual CPI adjustment on their anniversary month with a 3% Minimum and a 6% Maximum

       Airport properties will continue to be appraised for fair market rental rates at five year intervals

       New and renewed tenancies will pay prevailing market rates for the space used Prevailing market rates are based upon current appraisal rates with CPI adjustments.

 

FACILITY CONDITION REVIEW

Master tenant leaseholds will be responsible for any and all improvements, including roofs and exteriors of the facilities.For all other tenancies, airport facilities will be inspected prior to new leasehold occupancy and refurbished, by the City or tenant, to a decent, safe and sanitary condition appropriate for use.If tenant makes improvements to the facility as a mutually agreed upon condition of a lease, the City must first review and approve the proposed design and scope of work.All necessary building permits must be obtained and the work must be inspected for compliance with applicable code(s).Appropriate rental credits for the approved work performed will be negotiated as part of the lease.

 

TENANCY RELATIONSHIPS

Facilities appropriate and suitable for leasing by the City to a master tenancy basis, in accordance with agreements prepared by the City, the master tenant will be responsible for any structural improvements or modifications necessary and will be responsible for all interior and exterior facility maintenance, repairs and utilities associated with operation of the property.Master tenant activities must be compatible with airport operations and the adjacent residential neighborhoods.Subletting of interior space by the master tenants would be permitted.

 

All other airport facilities appropriate and suitable for leasing by the City to individual occupants will also be in accordance with agreements prepared by the City with each tenant responsible for interior maintenance and repair and prorated utility consumption; the City will retain responsibility for maintenance and repair of roofs, building exteriors, landscaping and common use parking.Subletting of interior space by the individual tenants would be explicitly prohibited.Artists, however, may cooperatively share individual Artist Day Studio spaces provided that rents charged do not exceed lease rates.

 

TENANT RECRUITMENT

2900 Airport Avenue and 3000 Airport Avenue are dedicated to artist day studios.Recruitment for these two facilities will follow the following criteria:Cultural Affairs Division of Community and Cultural Services Department has defined eligible visual artist criteria, and has provided to the Airport Division a waiting list of qualified artist-candidates for leasing of individual Artist Day Studios.The Airport and Cultural Affairs work together to maintain the list and update financial qualifications.Candidate tenants for available Artist Day Studio space are required to file Program applications for screening purposes, and qualifying artists are selected only from the screened waiting list.

 

All prospective tenants must file a Lease Application.Upon confirmation that the proposed tenancy is consistent with: Guideline Objectives; verification of references and credit history; and mutual preliminary concurrence in proposed lease terms and conditions, a lease agreement will be prepared for review by the City Attorney and execution by the prospective tenant before being referral to the City Manager for approval.Leases for terms greater than terms specified in the Guideline Objectives will require Council approval.

 

The City will neither pay nor receive commissions for leasing of City-owned property.Staff will cooperate with commercial real estate brokers who are authorized to negotiate leases on behalf of prospective tenants.

 

DELEGATION OF AUTHORITY

The City Manager may negotiate and execute leases of City owned non-aviation use property providing terms of occupancy up to five years with five (5) 1-Year options at the Cityís discretion in accordance with these Leasing Guidelines on the basis of written agreements prepared and approved as to form by the City Attorney.The City Manager may negotiate and execute leases of City owned aviation use property providing terms of occupancy up to one year with two (2) 1-Year options at the Cityís discretion in accordance with these Leasing Guidelines on the basis of written agreements prepared and approved as to form by the City Attorney.