TITLE
Recommendation to authorize City Manager, or designee, to execute all documents necessary for a First Amendment to Lease No. 34894 with BLANKSPACES, LLC, to amend certain provisions of the Lease to facilitate opening of the Shaun Lumachi Innovation Center at 309 Pine Avenue. (District 1)
DISCUSSION
On December 5, 2017, the City Council authorized the City Manager to execute any and all documents necessary for the lease of City-owned property located at 309 Pine Avenue (Subject Property) with BLANKSPACES, LLC (Lessee), for the maintenance, operation, and programming of the Shaun Lumachi Innovation Center to create a hub for startup businesses and entrepreneurs. Capital improvements were required to make the facility functional and code compliant, including elevator recommission, bathroom improvements, ADA access upgrades, and interior redesign of the space to support co-working activities and entrepreneurial community events that contribute to economic growth. In addition to the planned repairs, there were several unforeseen repairs and replacements including HVAC units, roofing, and asbestos abatement which caused further delays; and, reopening was further impacted by COVID-19-related closures due to health orders that restricted certain business activities. Nearly three years of delays have resulted in economic opportunity costs for the City and over $130,000 of documented financial losses to the Lessee.
Given that the Subject Property is now ready for reopening to the public, City staff are seeking City Council approval to amend the Lease and compensate the Lessee for a portion of the economic losses caused by uncontrollable construction and pandemic-related delays. The City and Lessee have negotiated the proposed Lease amendments described below which provide reimbursements for a portion of costs required by the Lease; as well as, rent abatement to offset some of the documented costs incurred by the Lessee due to reopening delays. These costs include software licenses, furniture, fixtures, and other equipment required to open the facility, as well as hiring of staff in anticipation of the original reopening date. The monthly rent will be $4,800, including the rent credits described in the original Council letter. As part of the amended Lease, the facility will be required to be open and operational for economic development activities no later than July 1, 2022.
The proposed First Amendment to the Lease will include the following modifications to the terms and conditions:
• Premises: 309 Pine Avenue, Long Beach, California
• Landlord: City of Long Beach.
• Tenant: BLANKSPACES, LLC.
• Amended Commencement Date: March 1, 2022.
• Amended Term: 120 months (March 1, 2022 to February 29,
2032).
• Amended Opening Date: Activities and operations must commence by
July 1, 2022.
• Amended Rent Abatement: 16 months, beginning March 1, 2022.
• First Month Rent: Due July 1, 2023.
• One Time Reimbursement: $18,694, for documented costs required by
the Lease.
• Occupancy: Immediately upon receipt of insurance as
required in Section 10 of the current Lease.
This matter was reviewed by Principal Deputy City Attorney Richard F. Anthony on January 13, 2022 and by Budget Operations and Development Officer Rhutu Amin Gharib on January 18, 2022.
TIMING CONSIDERATIONS
City Council action is requested on February 8, 2022, to facilitate timely execution of the First Amendment to Lease No. 34894.
FISCAL IMPACT
As a part of the proposed amendment, the City will issue a one-time reimbursement to the Lessee in an amount of $18,694 for documented costs incurred for activities required by the Lease. Additionally, the original Lease included an abatement for the first six months of the lease. The proposed amendment extends the abatement for an additional 10 months, for a total period of 16 months. This results in lost revenues to the General Fund Group valued at $76,800; $33,600 in FY 22 and $43,200 in FY 23. These revenues are not budgeted due to the uncertainty of when the Lessee would be able to occupy the building.
The cost of this one-time reimbursement is not budgeted. There is no appropriation requested at this time for the unbudgeted costs. The Economic Development Department will strive to cover the unbudgeted costs within existing appropriations in the General Fund Group. This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
JOHN KEISLER
DIRECTOR OF ECONOMIC DEVELOPMENT
APPROVED:
THOMAS B. MODICA
CITY MANAGER