City Council Meeting: July 8, 2008

Agenda Item: 1-K

To: Mayor and City Council

From: Andy Agle, Director of Housing and Economic Development

Subject: City TV Space at 1654 19^th Street

Recommended Action

Staff recommends that the City Council authorize the City Manager to negotiate and execute a lease with Guntram & Liane Ossa Trust for 4,700 sq. ft at 1654 19^th Street, for a ten-year term beginning November 1, 2008, for use as a broadcast production facility and office space for City TV.

Executive Summary

Since 1999, the City TV staff has occupied leased office space at 525 Broadway. The current lease for this space expires on May 1, 2009, and the owner of the property is not renewing leases because he has redevelopment plans pending. In its current space, City TV can accommodate its offices, editing rooms and a small studio. City TV also rents studio space outside the City. The proposed space would be large enough to accommodate all functions, including build-out of a broadcast facility and office space. The proposed term would commence November 1, 2008, and would continue for 10 years, with two five-year options. The rental rate is $2.95 per sq. ft. per month with an escalation of three percent per year, and triple net charges. The proposed lease also includes an option to purchase the property during the initial twelve months of the lease. After expiration of this option period, the City retains the first right of refusal to match any bona fide offer for the property. There are sufficient funds in the FY 2008/09 adopted budget to cover the proposed lease.

Discussion

Historically, City TV has rented studio space to produce shows or has gone on location in lieu of videotaping in a studio. The lack of studio space has made it difficult for City TV to produce new shows or initiate new concepts. Operational costs incurred for renting available studio space has been as much as $30,000 a year. Given that City TV’s programming is an integral part of the City’s multimedia community outreach, on-site access to a state-of-the-art broadcast facility would greatly enhance operational efficiencies as well as provide the capacity for expansion of community programming.

City TV is currently located in a private office building at 525 Broadway along with staff from Code Enforcement and Information Services Department. The lease for the space expires May 1, 2009, and the owner will not be renewing leases because he has redevelopment plans pending. Staff in the Housing and Economic Development Department began looking for a new location for City TV in December 2007. After placing offers on five other properties, staff has been able to negotiate a Letter of Intent to negotiate a lease with the owner of the property located at 1654 19^th Street, Santa Monica.

The available space, currently used as an automotive repair shop, is 4,700 sq. ft., built of concrete masonry units, in a rectangular form. This configuration is ideal for redesign into a studio and office space. The proposed rent is $2.95.per sq. ft. per month, which would increase 3% annually. Triple net expenses comprised of real estate taxes and insurance are capped at $.20 per sq. ft. per month, and would be increased at no more than 3% annually. The initial rental payment would be $3.15 per sq. ft. per month. Compared to other properties that staff investigated, where the asking rents ranged from $3.25-$3.85 per sq. ft. per month and additional charges for parking spaces were required, the rental rate at 1654 19^th Street is very competitive for the quality of space. The ten-year term would commence November 1, 2008, with two five-year options and a rental abatement period of three months Additional costs to the City include janitorial and utilities, which are estimated to be $2,100 per month; on-site parking is free. To protect the City’s investment, the lease provides for an option to purchase during the initial first twelve months of the lease for $3,200,000, and a first right of refusal provision to match any bona fide offer and a sub-lease provision.

Tenant improvements would include studio and control room, lighting, sound proofing, acoustics, equipment, edit bays, painting and carpeting, and are anticipated to cost approximately $1.5 million. Following execution of lease, staff will be seeking an architect with specialized studio design experience and will return to Council for further authorization to design and construct the improvements. Sufficient funds for tenant improvements are available from two sources:

1) Cable Television Public, Educational or Governmental (PEG) Fees. The City of Santa Monica’s cable provider, Time Warner, is required by State law to provide one percent of its gross revenues to facilitate Public, Education, and Government (PEG) access to the cable system. Since January 2008, the City has received quarterly PEG fees that are anticipated to generate approximately $240,000 annually. In addition, these funds can only be used for support of capital needs such as PEG access facilities and equipment.

2) Cable Fees and Penalties. This source of funding has been set aside as a funding source for build-out of a broadcast studio and office space for City TV. The amount in the account is approximately $2 million.

At a later date, staff will seek further authorization regarding the Option to Acquire provision in the lease.

Financial Impacts

Sufficient funds in the amount of $168,100 are available in Account Number

01207.522622 for rent during FY 2008/09.

Prepared by:

Donna Rickman, Senior Administrative Analyst

Approved:	Forwarded to Council:
Andy Agle, Director Housing and Economic Development	P. Lamont Ewell City Manager