City of Culver City, California
Agenda Item Report
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Meeting Date: 08/03/09 Item Number: _A-2
REDEVELOPMENT AGENCY BOARD AGENDA ITEM: Approval of a Tenant
Improvement Loan in the Amount of $200,000 to Improve the Former Crest House
Restaurant Located at 12517 Washington Boulevard.
Contact Person/Dept.: Kriss Casanova,
Economic Development Manager
Phone Number: (310) 253-5769
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [X] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (USPS) All businesses, occupants and property owners within a 500
foot radius of the site (07/22/09); (E-Mail) Meetings and Agendas – Redevelopment
Agency (07/29/09).
Department Approval:
Sol Blumenfeld (07/27/09)
Agency General Counsel Approval:
Murray Kane (07/28/09)
Chief Financial Officer Approval:
Jeff Muir (07/29/09)
Executive Director Approval:
Mark Scott (07/29/09)
RECOMMENDATION:
Staff recommends the Redevelopment Agency Board (the “Board”) approve a
Tenant Improvement loan in the amount of $200,000 with Gooseberry Partners LP
to improve the former Crest House restaurant located at 12517 Washington
Boulevard (the “Property”).
BACKGROUND:
The Redevelopment Agency has traditionally provided financial incentives in the
form of low interest loans to preferred businesses within the Redevelopment Project
Areas. Preferred businesses have included creative uses (architects and
designers), restaurants, retail stores, commercial and professional businesses, and
non-polluting industrial and manufacturing businesses. A new restaurant proposed
for the former Crest House Family Restaurant site at 12517 Washington Boulevard,
has requested similar assistance.
The Crest House Family Restaurant was established in the 1970’s and provided
continuous food service to the West Washington area until 2006 when the restaurant
ceased operating. The Property has remained unoccupied since the Crest House’s
closing. There have been a few restaurant operators interested in the site, but none
were willing to successfully negotiate a lease with the property owner.
City of Culver City, California
Agenda Item Report
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DISCUSSION:
The Property is located on west Washington Boulevard where the Agency has been
implementing its Area Improvement Program (AIP) revitalization strategy (see
attached map). The Property is located between the Agency’s Baldwin office/retail
project and the Washington/Centinela market hall. Those redevelopment projects
have been delayed pending settlement of the financial markets.
To date, the AIP has assisted with the rehabilitation of multiple building facades and
completion of plans for landscape street medians. In addition, the businesses in the
area have formed a median maintenance assessment district to maintain the
medians. Median construction is scheduled to commence by the end of the year.
These efforts are intended to improve the area’s appearance, spur private
reinvestment, and attract new businesses to serve the community.
Restaurant Proposal
On June 22, 2009, Thierry Perez, Managing Partner of Gooseberry Partners LP (the
“Tenant”), met with staff to discuss the proposed business and present a business
plan. Mr. Perez and his partners have over 50 years of collective culinary experience
in the restaurant and hospitality industry. The partners feel strongly that they have a
successful concept that “offers a relaxed atmosphere with a feeling of home and
comfort.” Once improved, the building will include open wood beamed ceilings,
simply painted walls and art from local artists.
The food will emphasize fresh, regional European cuisine from France and Italy in a
pub-like atmosphere that will encourage meeting and socializing. The concept will
also include a retail component where fine wines and cheeses are sold. Additional
information related to the concept and the operators is attached.
The Tenant’s architect/designer has estimated the total tenant improvement costs to
be approximately $680,000 (attached). The Tenant is requesting Agency financial
assistance in the amount of $200,000 to fund costs related to the installation of ADA
compliant improvements, a fire suppression system, a grease interceptor, kitchen
equipment, and exterior façade work. The Tenant has a signed Letter of Interest
and is currently working with the property owner’s broker to execute a ten year lease
with two, five-year options.
It is important to note that the Agency loan will enable the Tenant to fully fund the
project with enhanced improvements. Staff will require a plan submittal detailing the
proposed restaurant design prior to releasing loan funds. Staff will also work with
the property owner and the Tenant to ensure future participation in the proposed
maintenance assessment district to construct new landscape medians as part of the
Phase II AIP. City of Culver City, California
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To assist the Tenant, staff is recommending approval of a Tenant Participation Loan
to fund the improvements listed above. The terms of the loan are as follows:
• Principal amount of $200,000.
• Maximum term of eleven (11) years, less if certain revenue triggers are met
within the first two years of the loan as described below.
• If gross receipts do not exceed $4,000,000 during the first year after the
issuance of the first Business Tax Certificate, no interest will accrue during
the first two years of the loan. Interest will begin to accrue at the beginning of
the third year from the issuance of the first Business Tax Certificate, at an
annual rate of 6% compounded annually.
• If gross receipts do exceed $4,000,000 during the first year after the issuance
of the first Business Tax Certificate, interest will begin to accrue at the
beginning of the second year at an annual rate of 6% compounded annually.
• Principal repayment will be made over an eight (8) year period, commencing
as follows:
o If gross receipts do not exceed $4,000,000 during the first two years after
the issuance of the first Business Tax Certificate, principal payments will
commence in year three; or
• If gross receipts do exceed $4,000,000 during one of the first two years after
the issuance of the first Business Tax Certificate, principal payments will
commence in the following year.
• The Agency’s loan will be in a form acceptable to the Agency Executive
Director and Agency General Counsel.
• The loan will be secured by the Tenant’s personal or business property or a
letter of credit from an approved bank, secured by Mr. Perez. The security is
subject to the approval of the Agency General Counsel and the Executive
Director with such approval being at the sole discretion of the Agency General
Counsel and the Executive Director and is a condition precedent to
disbursement of any funds under the Tenant Participation Loan.
• The loan balance (including interest) will be repaid within eleven years or
sooner according to a monthly amortization schedule. The total principal and
interest paid (if the loan were to go to full term of eleven years and 100% of
the principal amount were advanced in one lump sum) is $266,000. This
amount would be less if the loan were repaid prior to the eighth year.
In addition, the Tenant has offered to sponsor one community event per year for the
life of the loan. The community event would be at the discretion of the Tenant and
would be agreed upon in cooperation with the Agency’s Executive Director.
Conclusion
Staff believes that the proposed Tenant occupying the former Crest House space
warrants Agency assistance for the following reasons:
• The Property is centrally located in the AIP area; City of Culver City, California
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• The Property is of considerable size (approximately half of an acre) and has
over fifty parking spaces;
• The space has been vacant for almost three years and has not been
rehabilitated since the 1970s;
• The proposed concept is an upscale, full service restaurant offering three
meals a day and will serve as an amenity to the surrounding community;
• The restaurant team is established and experienced; and
• The proposed business format is expected to attract other quality businesses
that generate increased pedestrian activity and sales for the area.
The Tenant has agreed to the terms listed above and therefore staff recommends
that the Agency approve a “Gap Closer” loan agreement to help offset the costs
associated with improving the former Crest House restaurant into a new, high-quality
restaurant. The lease terms have been negotiated and the project is ready to start
construction, pending the Agency’s loan contribution. Without the Agency’s
subsidy, improvements to the space may be of lesser quality and the project may
take longer to complete.
FISCAL ANALYSIS:
If the Agency were to participate in the form of a $200,000 loan, unrestricted tax
increment funds would need to be used. The loan would be funded from the
Agency’s Economic Development Program (55090200), Business Development
Expenses. The account has $100,000 budgeted for FY 2009-10, which would be
entirely depleted. The remaining $100,000 would be funded from other Economic
Development programs such as the Rehabilitation Grant Fee Incentives ($50,000)
and/or Marketing Services ($50,000). This will reduce the Agency’s ability to fund
other potential projects that may arise during the year. In the event that the
Agency’s marketing funds are utilized, staff recommends that the Tenant include
promotion of the west Washington area as part of whatever marketing is done for the
business over the first two years of operation.
The Tenant estimates that the restaurant and retail business will produce over $3
million in gross annual sales revenues annually and can open by October 2009 (and
ultimately projected to exceed $4 million in gross annual sales revenues no later
than the third year of operations). The proposed use would generate approximately
$35,000 annually in sales tax, business tax and utility tax for the City. Additionally,
improvements to the site will generate approximately $6,000 a year in additional tax
increment.
ATTACHMENTS:
1. Business Plan Summary;
2. List of Costs and Improvements approved by the designer/architect; and
3. Aerial map.
City of Culver City, California
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MOTION:
That the Redevelopment Agency Board:
1. Approve a Tenant Improvement Loan with Gooseberry Partners LP to
improve the former Crest House restaurant located at 12517 Washington
Boulevard; and,
2. Authorize the Agency General Counsel to review/prepare the necessary
documents; and.
3. Authorize the Executive Director to execute such documents on behalf of the
Agency.
MEETING DATE: 08.03.09
AGENDA ITEM: Approval of a Tenant Improvement Loan in the Amount of
$200,000 to Improve the Former Crest House Restaurant
Located at 12517 Washington Boulevard.
ATTACHMENTS
Pages
1. Business Plan Summary;
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2. List of Costs and Improvements; and
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3. Aerial map.
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