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Title:
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Approval of a First Amendment to the Disposition and Development Agreement and Grant Deed Covenant for the Property Located at 5640 Sepulveda Boulevard.
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City of Culver City, California
Agenda Item Report
Meeting Date: 2/25/2013 Item Number: C-7
CITY COUNCIL AGENDA ITEM: Approval of a First Amendment to the Disposition
and Development Agreement and Grant Deed Covenant for the Property Located at
5640 Sepulveda Boulevard.
Contact Person/Dept.:
Kriss Casanova, CDD
Todd Tipton/CDD
Phone Number:
(310) 253-5769
(310) 253-5783
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [] Attachments: []
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: On February 11, 2013, notice was mailed to all property owners and
occupants within a 500-foot radius from the property line extended to end of city block. (E-
Mail) Meetings and Agendas – City Council (02/19/13), BevMo! and CFT Developments.
Department Approval:
Sol Blumenfeld (02/13/13)
City Attorney Approval:
Carol Schwab (by H. Baker) (02/19/13)
Chief Financial Officer Approval:
Jeff Muir (02/19/13)
City Manager Approval:
John M. Nachbar (02/19/13)
RECOMMENDATION:
Staff recommends the City Council approve an amendment to the Disposition and
Development Agreement and Grant Deed Covenant for the property located at 5640
Sepulveda Boulevard (the Site) in order for BevMo! to sublease a portion of the Site.
BACKGROUND:
In the early 1990’s, the former Culver City Redevelopment Agency (CCRA)
assembled the Site and subsequently entered into a Disposition and Development
Agreement (DDA) with Office Depot to develop the Site as an Office Depot store.
The Site was conveyed with the expectation that it would remain a “big box” retailer
similar to Office Depot.
The DDA and the Grant Deed conveying the Site contain a covenant that protects
the former CCRA’s investment. The covenant ensures that all future uses are high
quality and defines alternate use criteria|1010| should Office Depot no longer occupy the
Site. Per the criteria, an acceptable alternate use is a retailer having at least 50
other locations, each with a minimum floor area of 12,500 square feet with per
square foot taxable sales of $300 (in 1994 dollars), which when adjusted to 2013
dollars equates to approximately $450 per square foot. On February 22, 2011, the
former CCRA assigned the DDA to the City. Additionally, on December 10, 2012 the
City Council adopted Resolution 2012-R098 which transferred to the City certain
land use related plans and functions of the former CCRA.
City of Culver City, California
Agenda Item Report
The alternate use criteria ensures credit worthy national tenants occupy the Site and
limits competition with Culver City’s regional mall by attracting complementary
tenants who strengthen the market place by creating additional retail destinations.
On September 24, 2012, BevMo!, a specialty beverage retailer, submitted a letter to
staff requesting to sublease a portion of the existing Office Depot space and to
amend the covenant’s “minimum rentable space” requirement.
DISCUSSION:
BevMo! proposes to sublease 8,546 sq. ft. from Office Depot, which is downsizing
stores in order to respond to changes in the retail market such as on-line shopping
and new consumer spending habits.
The proposed amendment to the DDA and Grant Deed Covenant would modify the
alternate use criteria by reducing the minimum floor area requirement from 12,500
sq. ft. to 8,500 sq. ft. to accommodate the addition of a BevMo! store at the Site. If
the City Council approves the proposed amendments, Office Depot will reduce the
size of its existing location from 27,386 sq. ft. to 18,764 sq. ft. BevMo! would like to
open in mid-2013.
FISCAL ANALYSIS:
The City’s sales tax consultant (HdL Companies) indicates that approximately 95%
of BevMo! merchandise is taxable. As a result, an average BevMo! store in Los
Angeles County generates between $30,000 to $90,000 in annual local tax (1%) with
the average store generating between $50,000 to $60,000 per year. This average
amount would satisfy the $450 per square foot requirement established by the
alternate use criteria.
Additionally, HdL believes sales from Office Depot will remain constant as its
inventory will likely be reduced in order to remove the slowest selling merchandise,
maximizing the efficiency of the remaining floor area.
MOTION:
That the City Council:
1. Approve a First Amendment to the Disposition and Development Agreement
and Grant Deed Covenant affecting 5640 Sepulveda Boulevard in order to
reduce the minimum floor area requirement for an alternate use from 12,500 sq.
ft. to 8,500 sq. ft. City of Culver City, California
Agenda Item Report
2. Authorize the City Attorney to review/prepare the necessary documents; and,
3. Authorize the City Manager to execute such documents on behalf of the City
NOTES:
|1010| The per foot taxable sales criteria is used to determine whether or not a proposed use is eligible to
occupy the site and is not a performance criteria guaranteeing any specified level of taxable sales to
be generated.