| | | | | | | | | TO: | Finance and Economic Resiliency Committee Members
|
|
| FROM:
| Alina T. Hudak, City Manager |
|
| | DATE: | October 31, 2022
|
|
| | SUBJECT: | A DISCUSSION OF A PROPOSED NEW LEASE AGREEMENT BETWEEN THE CITY OF MIAMI BEACH (LANDLORD) AND TASTE BAKERY CAFÉ, LLC (TENANT) FOR APPROXIMATELY 734 SQUARE FEET OF GROUND FLOOR RETAIL SPACE LOCATED AT 1701 MERIDIAN AVENUE, UNIT 4 (A/K/A 773 17TH STREET), MIAMI BEACH, FLORIDA, FOR A TERM OF FIVE (5) YEARS, WITH ONE (1) ADDITIONAL RENEWAL TERM OF FOUR (4) YEARS AND THREE HUNDRED SIXTY-FOUR (364) DAYS, AT THE CITY MANAGER’S OPTION. |
|
| | | | | | | | HISTORY:
| At the May 11, 2016, City Commission meeting, Mayor Philip Levine sponsored a discussion item (R9 T) regarding the creation of a City employee healthy cafeteria. Consequently, on December 14, 2016, the City Commission directed staff to issue a competitive solicitation seeking proposals from parties interested in maintaining, managing and operating a food and beverage establishment with the goal of providing healthy menu options for City employees.
On May 17, 2017, the Mayor and City Commission adopted Resolution No. 2017-29866, approving a Lease Agreement between the City and Taste Bakery Café, LLC. (Tenant or Concessionaire) for the use of approximately 734 square feet of ground floor, City-owned property, located at 1701 Meridian Avenue, Unit 4 (a/k/a 773 17th Street (Premises)); and a Concession Agreement allowing for an outdoor seating area adjacent to the Premises. Said Agreements having a term of three (3) years commencing on November 1, 2017, and ending on October 31, 2020, with two renewal terms of one (1) year each.
On October 30, 2020, the first renewal option was exercised commencing on November 1, 2020, and ending on October 31, 2021 (First Renewal Term). On June 18, 2021, the second renewal option was exercised commencing on November 1, 2021, and ending on October 31, 2022 (Second Renewal Term).
On April 29, 2022, the City issued, through the Procurement Department, Invitation to Negotiate (ITN) No. 2022-060-WG seeking responses from interested parties to establish a subsequent agreement for the operation of an employee café. However, no formal responses to the ITN were received.
On August 5, 2022, LTC# 377-2022 was issued advising the Mayor and the City Commission the ITN had been closed, and the cone of silence had terminated. On September 14, 2022, the Mayor and City Commission approved the extension of City-awarded contracts, which included extending the current term of the Agreement with Taste Bakery Café on a month-to-month basis, for 120 days until February 28, 2023. The Administration reviewed options and conducted their own search of qualified tenants (including considering the current Taste Bakery Café) to enter into a new agreement for the employee café concept.
At the September 14, 2022, City Commission meeting, Item C4 O, was presented as a referral to the Finance and Economic Resiliency Committee (FERC) to discuss a new agreement for an employee café at 773 17th Street. |
| | |
| | | | | | | | ANALYSIS:
| The Administration reached out to several café/restaurant operators who would be viable candidates for an employee café, but there was no interest in the space, predominantly due to location and size of the Premises. In addition, staff consulted with City employees in various City departments who expressed interest in Taste Bakery remaining as their café of choice. The replacement of the existing café, downtime, and loss of revenue was also taken into consideration. Staff proceeded to meet with the current tenant (Taste Bakery Café) to review the existing concept, rental structure, menu and negotiated a new agreement for the continued operation of an employee café.
Taste Bakery Café, LLC (Tenant) has proven to be a successful operator in implementing and developing the employee café concept since 2017. The Tenant is interested in continuing with the employee café concept and will refresh the interior design of the space, streamline the customer ordering experience, and upgrade the menu to include a variety of healthy food options containing nutritional information, which will be approved by the City Manager or her/his designee.
After consideration and negotiations, the Administration has selected Taste Bakery Café, LLC to continue as the Tenant for the employee café concept. Attached hereto as Exhibit A is the Letter of Intent (LOI), containing the below basic terms and conditions of the proposal:
|
Premises:
|
Approximately 734 square feet of City-owned property, located at 1701 Meridian Avenue, Unit 4 (a/k/a 773 17th Street), Miami Beach, Florida
|
|
Lease Term:
Renewal Option:
Commencement Dates & Rent Abatement:
|
The term of this Lease shall be for a period of five (5) Years.
One (1) renewal option of four (4) years and three hundred sixty-four (364) days, at the City Manager’s sole option.
The Lease Commencement and Tender date will be the earlier of: 1) February 1, 2023 or 2) the date Tenant and Landlord execute the new Lease Agreement.
|
|
|
|
|
Minimum Base Rent
Schedule:
|
|
Initial Term
|
|
Year(s)
|
Annual Rent/SF
|
Annual
Rent
|
|
1
|
$41.00
|
$30,094.00
|
|
Rent to increase 3% per year during the Lease Term.
|
|
|
Sales Tax:
Prepaid Rent:
Security Deposit:
|
Tenant shall pay the applicable sales tax currently equivalent to 6.5% in Miami Dade County.
N/A
The amount of $5,000.00, which is currently being held by the City of Miami Beach from Tenant’s current Lease Agreement shall be transferred to the new agreement.
|
|
Operating Expenses:
|
Tenant shall pay its pro rata share of Real Property Taxes, Property Insurance and Common Area Maintenance for the Project. Tenant’s pro rata share shall be determined based upon the ratio of Tenant’s floor area to the total floor area of all the retail space in Landlord’s Parcel (to be further clarified in the Lease). Current estimate for NNN Costs are $12.85 per square foot. Operating Expenses will be effective on the Rent Commencement Date.
|
|
Concession Area:
|
Tenant shall be required to execute a Concession Agreement co-terminus with the Lease Agreement, at no additional cost to Tenant, which are the same terms that exist under the existing Concession Agreement in connection with the use of the Concession Area.
|
|
Utilities:
|
Tenant shall pay for all utilities within the Premises.
|
|
Delivery Conditions:
Tenant Improvement Allowance:
|
Tenant shall accept the Premises in “As-Is” condition with no Landlord Work. Tenant shall be responsible for the costs of any building permits, licenses, impact fees and any other costs associated with Tenant’s use.
N/A
|
|
Tenant’s Work:
|
Tenant will refresh the location with some new furniture, decorations, update some cabinetry, and paint. Possibly change of the layout of the space slightly, if necessary, to accommodate for increased sales, including a larger prep area for the kitchen. All work performed by Tenant for space improvements is at Tenant’s sole cost and expense. Tenant’s work is subject to Landlord’s review and approval of Tenant’s plan and specifications, which shall be drawn by a licensed architect if a building permit is required. All of Tenant’s works shall be performed by licensed contractors and in accordance with all applicable codes.
|
|
Maintenance &
Repair:
|
Landlord shall be responsible for all repairs to the foundations and for all structural components of the Project. Tenant’s obligation for repairs, replacements and maintenance shall include, but not be limited to, its equipment; fixtures; improvements; floor covering; the exterior and interior portions of all doors, door locks, security gates, and windows; plumbing and sewage facilities not Landlord's obligation; walls; ceilings; and all plate glass; all electrical systems and equipment; plumbing, mechanical equipment; heating, ventilating and air- conditioning machinery. Additionally, Tenant shall maintain and keep in good repair, all heating and air-conditioning equipment. Tenant further agrees to regularly service said machinery and change the filters in the air-conditioning system in the Premises through a monthly filter and equipment service contract.
|
|
Assignment &
Subletting:
|
Tenant shall not assign the lease or sublet the Premises without the prior written consent of Landlord, which consent may be withheld at the sole and absolute discretion of the Landlord.
|
|
Permitted Use:
|
The Demised Premises shall be used by Tenant solely for the purpose(s) of
operating a cafe, with the primary objective being to provide the City of Miami
Beach employees with healthy food choices at a price which is discounted by
forty percent (40%) off the approved price schedule. Tenant shall cook,
prepare, or cause food to be prepared, for sale within the Demised Premises, such cooked, prepared, and/or prepackaged foods, and such non-alcoholic
beverages as those set forth in Exhibit B ("Menu/Price Schedule"), attached
hereto. Any subsequent changes to the Menu and Price Schedule must be
approved in writing by the City Manager or his/her designee.
|
|
Exclusive Use:
Additional Services:
Hours of Operation:
Percentage Rent:
Sales Reporting:
|
N/A
Tenant shall provide:
· A forty percent (40%) discount on the purchase price
of all food and beverages from any Taste Bakery Café location, within the City of Miami Beach (a "Separate Taste Bakery Location"), to City employees with an active and verified City of Miami Beach issued employee identification ("Employee ID"); whether the purchase was made onsite or ordered for delivery ("City Employee Discount"). Notwithstanding the foregoing, the Employee Discount shall not be applied to any delivery charges.
· Tenant will also provide a free coffee or tea with the purchase of any item.
· Tenant will include City employees as part of their Rewards program to be eligible for a ten ($10) dollar credit to be used exclusively on the employee’s birthday week at any Taste Bakery Café location.
· The City may choose to impose additional requirements, such as a card reader, in order to ensure the integrity of the City Employee Discount. The term "City Employee Purchases" is understood to mean the sales price of any purchases to which a City Employee Discount is applied, inclusive of the City Employee Discount amount. It does not include the price of any other discounts Tenant may offer to City employees or customers in general.
· Tenant will provide healthy conscious food, fruits and quick snacks.
· Tenant will provide a takeaway menu and/or have QR codes and online menus available.
The City will reimburse Tenant a maximum of Two Hundred Thousand and 00/100 Dollars ($200,000.00) * per contract year towards the City Employee Discount at the following rates:
|
Annual City
|
Maximum Annual
|
Reimbursement
|
|
Employee Purchases
|
Reimbursement
|
Rate
|
|
$0-$422,400
|
$ 168,960.00
|
40%
|
|
$422,400-$629,333.33
|
$ 31,040.00
|
20%
|
|
Greater than $629,333.33
|
$0.00
|
0%
|
*The Maximum reimbursement will be revisited at the Lease option term to determine cost of living increases.
Thereafter, Tenant will continue to provide the City Employee Discount
regardless of any reimbursement amount. The City reserves the right to notify Tenant, in advance of any purchases, of City's objection to provide the City Employee Discount to any particular City employee, thereafter authorizing Tenant to deny the City Employee Discount to said employee. City will not reimburse Tenant for: 1) any amounts discounted above 40% of the purchase price, 2) unauthorized employees as Tenant has been Notified by the City, or 3) persons without an active Employee ID. Along with any reimbursement request, Tenant shall provide a Daily Sales Summary Report in a digital spreadsheet format (such as Excel) which includes, Employee ID numbers, and categories for City Employee Discounted Sales, from each store location as well as the Gross Receipts from the Demised Premises. Tenant shall also provide Special Summary Reports for any period(s) upon request by the City. Any Summary Reports provided from any Taste Bakery location shall not be intermingled with any other location. Tenant may request a reimbursement, by providing an Invoice along with any documents and files which may reasonably be requested by the City Manager or his designee, no more than once a month. The City shall have thirty (30) days to pay the reimbursement.
Mon-Fri: 7AM-5PM
Weekends: 8AM-2PM
Tenant may consider opening in the evening until 9pm or 10pm, if there is enough demand from City Employees who work in the evening that want to eat at Taste.
N/A
Within fifteen (15) days after the end of each month, Tenant shall submit to Landlord a written statement showing the gross sales of all merchandise sold and/or services rendered in or from the Leased Premises for such month, and year, as applicable.
|
|
|
|
|
Operations:
|
Tenant agrees that on Rent Commencement Date, it will open and continuously operate the entire Premises to the public, fully fixtured, staffed and stocked.
|
|
Tenant’s Signage:
|
Per City of Miami Beach sign criteria and approval of all necessary Governmental agencies.
|
|
Tenant Financials:
Guarantor(s):
|
This proposal is subject to Landlord’s review and approval of Tenant’s financial statements.
Full personal guaranty shall be required by all owners and spouses.
|
|
|
|
|
Brokers:
|
N/A
|
|
|
|
The Minimum Base Rental Rate is $41.00 per square foot, with three percent (3%) annual increases. The Operating Expenses for the building are estimated at $12.85 per square foot for 2022. The schedule of Base Rent and Operating Expenses due over the initial term are illustrated in the following chart:
|
|
|
Annual
|
Monthly
|
Annual
|
Monthly
|
|
Increase
|
Year
|
Base Rent
|
Base Rent
|
OPEX
|
OPEX
|
|
0
|
1
|
$ 30,094.00
|
$ 2,507.83
|
$ 9,431.90
|
$ 785.99
|
|
3%
|
2
|
$ 30,996.82
|
$ 2,583.07
|
$ 9,714.86
|
$ 809.57
|
|
3%
|
3
|
$ 31,926.72
|
$ 2,660.56
|
$ 10,006.30
|
$ 833.86
|
|
3%
|
4
|
$ 32,884.53
|
$ 2,740.38
|
$ 10,306.49
|
$ 858.87
|
|
3%
|
5
|
$ 33,871.06
|
$ 2,822.59
|
$ 10,615.69
|
$ 884.64
|
|
3%
|
6
|
$ 34,887.19
|
$ 2,907.27
|
$ 10,934.16
|
$ 911.18
|
|
3%
|
7
|
$ 35,933.81
|
$ 2,994.48
|
$ 11,262.18
|
$ 938.52
|
|
3%
|
8
|
$ 37,011.82
|
$ 3,084.32
|
$ 11,600.05
|
$ 966.67
|
|
3%
|
9
|
$ 38,122.18
|
$ 3,176.85
|
$ 11,948.05
|
$ 995.67
|
|
3%
|
364 Days
|
$ 39,158.27
|
$ 3,263.19
|
$ 12,306.49
|
$ 1,025.54
|
|
|
|
$ 344,886.41
|
$ 28,740.53
|
$ 108,126.16
|
$ 9,010.51
|
The proposed Agreement provides for a Base Rental Rate of $41.00 per square foot, plus estimated Operating Expenses of $12.85 per square foot. The Base Rent will be increased by three percent (3%) annually. Commencing on year six (6) of the new Agreement, (the first year of the renewal option term), the Base Rent shall be increased to the current market rent, but no less than 3% above the prior term year. The proposed rent structure over the nine-year, three hundred and sixty-four-day term will bring the City an estimated $453,046.58 over the life of the agreement. The current Agreement with the Tenant contains a Base Rent structure based on $1.00 per year plus Operating Expenses (currently $12.85 PSF). With the proposed new rent structure, the Tenant will pay current market rents while maintaining the City employee benefits for the term of the agreement. |
| | |
| | | | | | | | CONCLUSION:
| The Administration recommends the Finance and Economic Resiliency Committee approve in favor of presenting this item before the City Commission for a new Lease Agreement with Taste Bakery Café, LLC to bring an employee café concept to City employees, while continuing to serve the general public at the City-owned property located at 1701 Meridian Avenue, Unit 4 (a/k/a 773 17th Street) . In accordance with the above essential terms and conditions of the proposed Lease Agreement, the Lease would provide: 1) competitive rental rate and favorable lease terms; 2) Tenant accepts the premises in “as-is” condition; and 3) the Tenant will provide an employee café where City employees will receive the discount at the Premises as well as at Taste Bakery Café’s existing location at 900 Alton Road. The discount will also be applied to all delivery items, but not the delivery fee itself. |
| | |
| | | | | | | | Applicable Area
| | South Beach |
| | |
| | | | | | | | | Is this a "Residents Right to Know" item, pursuant to City Code Section 2-14? | | Does this item utilize G.O. Bond Funds? | | | No | | No | |
| | |
|