Adopt the Resolution.

BACKGROUND

On November 9, 2016, the City Commission adopted Resolution No.  2016-29638 approving and authorizing a new lease agreement with Florida Food District Inc., involving the use of approximately 2,216 square feet of City owned unimproved land, located at 22 Washington Avenue, Miami Beach, Florida (Property).  The Property is adjacent to an existing restaurant space located at 816 Commerce Street, Miami Beach, Florida (Restaurant), and was used as an outdoor seating area.  The Restaurant accommodates approximately 60 seats and the Property accommodates outdoor seating for approximately 65 seats.  On May 16, 2017, Florida Food District Inc. requested the assignment of their lease agreement to Sobe Toscana LLC (Tenant). The City Attorney’s Office recommends that a new lease agreement be executed with Tenant since Florida Food District Inc. has ceased operations and vacated the Property.

The principal of Sobe Toscana, Catherine Arrighi Guitera, has extensive experience operating restaurants in Miami Beach, including Ocean’s 10, located at 960 Ocean Drive, for over fifteen (15) years.  The new restaurant at 816 Commerce Street will be operated as an Italian pizzeria.

The basic terms and conditions of the proposed lease agreement are generally consistent with the previous lease, with the continuation of the base rent schedule and annual rent increases, as follows:

Premises:                    22 Washington Avenue             

Size:                              Approximately 2,216 square feet

Initial Term:                 Five (5) years, commencing August 1, 2017 and ending July 31, 2022

Base Rental Rate:     $22.51 per rentable square foot ($49,882.20 annually, $4,156.85 monthly), plus applicable sales tax. 

Increases:                   The Base Rental Rate shall be increased by three percent (3%) annually.

Renewal Option:        Tenant shall have one (1) renewal option, at the City Manager’s sole discretion, for a period of four (4) years and nine (9) months.  Subject to the City’s approval of the renewal term, the City has the right to re-negotiate the Base Rent amount based upon a percentage of gross receipts or may continue to be assessed as a fixed annual rent, based upon the fair market rent at the time, to be escalated annually by three percent (3%); however, at no time will the Base Rent during the renewal term be less than the rent for the previous lease year plus the three percent (3%) escalation.

Security Deposit:      $12,470.55 (three (3) month’s rent)

Personal Guaranty:  A rolling six (6) month personal guaranty shall be provided by Tenant’s principal, Catherine Arrighi Guitera.

Termination

For Convenience:     The lease agreement may be terminated, in whole or in part, by the City, for convenience and without cause, upon furnishing sixty (60) days prior written notice to Tenant.

Improvement             

Allowance:                  Tenant shall accept the Premises in “as-is” condition.

FINANCE AND CITYWIDE PROJECTS COMMITTEE

The Administration submitted the terms and conditions to the Finance and Citywide Projects Committee (FCWPC) at its June 30, 2017 meeting, and the FCWPC recommended approving a new lease agreement with Tenant, for a period of five (5) years, with one (1) renewal option for an additional four (4) years and nine (9) months, at the City Manager’s sole discretion. 

Additionally, at the FCWPC meeting, Tenant requested the City remove the termination for convenience provision since they will be investing approximately $300,000 for the renovation and buildout of the interior restaurant.  Additionally, even though the one-time concurrency fees had previously been paid for the indoor restaurant space, they had never been paid for the outdoor seating area, and Tenant is currently being required to pay said fees in the amount of $29,575.  Tenant is also being required to pay one-time DERM fees for the outdoor seating area estimated to be $50,000.  The FCWPC recommended retaining the termination for convenience but, in the event the City exercises the provision, reimbursing Tenant for the unamortized upfront costs of its concurrency and DERM fees up to $80,000.

CITY MANAGER’S RECOMMENDATION

While the FCWPC recommended in favor of retaining the termination for convenience, the City Manager recommends the provision shall not apply to the first three (3) years of the initial five (5) year term for the following reasons:

            1. providing Tenant a guaranteed three (3) years allows them the opportunity to achieve  a return on their initial capital investment; and

            2. it has been challenging to retain a quality operator at this location as the previous two operators were unsuccessful; and

            3. due to its limited size and shape, the Property serves little more than to provide access to 816 Commerce Street and it is unlikely the City would generate any other revenue from the Property other than as an outdoor seating area for the indoor Restaurant.   

After the first three (3) years of the initial term, and throughout the renewal term, the termination for convenience shall apply. During said time, in the event the termination for convenience is exercised by the City, there shall be no reimbursement to Tenant for any costs whatsoever.

Based upon the foregoing, and as permitted under Section 2-367(e) of the City Code, the City Manager recommends that the Mayor and City Commission waive, by a 5/7^ths vote, the formal competitive bidding requirement, and find that such waiver is in the best interest of the City.

The Administration recommends that the Mayor and City Commission: 1) accept the recommendation of the FCWPC to execute a new lease agreement with Sobe Toscana LLC, including the termination for convenience provision as recommended by the City Manager and 2) adopt the Resolution approving and authorizing the Mayor and City Clerk to execute said new lease agreement.