TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Michael Codron, Interim Community Development Director
Adam Finestone, AICP, Planning Manager
Tari Kuvhenguhwa, Associate Planner
SUBJECT:Title
Consideration of Resolution No. 25-0024 Approving a Master Use Permit Amendment and Coastal Development Permit to Modify the Established Size Limitations for Specific Land Uses at an Existing Commercial Development Located at 451 Manhattan Beach Boulevard, Subject to Conditions, and the Fourth Amendment to the Disposition And Development Agreement & Ground Lease, and Finding the Project is Within the Scope of, and Adequately Analyzed in, a Previously Certified Final Environmental Impact Report (Potential Budget Impact) (Interim Community Development Director Codron).
ADOPT RESOLUTION NO. 25-0024
Body
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RECOMMENDATION:
Staff recommends that the City Council adopt Resolution No. 25-0024, approving the proposed Master Use Permit (“MUP”) Amendment, Coastal Development Permit (“CDP”) and the Fourth Amendment to the Disposition & Development Agreement & Ground Lease (“Ground Lease”), and finding the project is within the scope of, and adequately analyzed in, a previously certified Environmental Impact Report (SCH 1999121090).
FISCAL IMPLICATIONS:
It is anticipated that the modifications to the MUP and Ground Lease to increase size limitations will generate additional income to the applicant, which, in turn, will increase the City’s Profit Participation Rent. The MUP Amendment and CDP will not be effective until the Fourth Amendment to the Ground Lease is fully executed.
BACKGROUND:
On January 21, 2025, the City Council conducted a duly noticed public hearing to consider a request to modify the established size limitations for specific land uses, including “Eating and Drinking Establishments”, at the Metlox property. After the close of the public hearing, the Council directed staff to draft a resolution approving the request for Council consideration, subject to certain conditions. (The January 21, 2025 staff report, which includes a full discussion of the proposal and the necessary findings for approval, is linked as an attachment for reference.) Staff also presented a draft list of standard conditions for the Council to consider in the event it directed staff to prepare a resolution approving the request for Council consideration at a later date. Based upon the City Council discussion and the public comments received, the City Council directed staff to address concerns raised about future outdoor dining at the site. Accordingly, staff revised the conditions of approval proposed in Resolution No. 25-0024 to address the topics of outdoor dining and noise.
In addition to the MUP, the City and Metlox, LLC (“Metlox”) entered into that certain Disposition & Development Agreement & Ground Lease ("Ground Lease") dated May 13, 2002 as to the Property. The Ground Lease identifies uses that the City, as Lessor, and Metlox, as Lessee, have agreed upon as uses that would best serve the interests of the public, some of which require discretionary permits such as MUP Amendments and CDPs. To adapt to changing times, the Ground Lease has been subsequently amended three times, most recently in 2018 in connection with modifications to uses requested by Metlox at that time. As was true in 2018, in order for Metlox to modify the uses (e.g., square footage, etc., of certain uses identified in the Ground Lease) both the Ground Lease and the MUP must be amended. In addition, staff is recommending additional amendments addressing lease commissions. Section 3.5(b) defines “Operating Expenses.” Included within the definition of Operating Expenses is subsection (xi): “Leasing commissions related to subsequent tenancies following the initial lease-up of the Buildings.” Despite such clear and unequivocal language that such subsequent lease commissions are Operating Expenses, not Project Costs, in 2023, 21 years after the Ground Lease was executed, Metlox began, for the first time, characterizing leasing commissions related to subsequent tenancies as “Project Costs,” and has deducted a percentage of such expenses from the City’s Profit Participation Rent for the years 2007-2024. In addition, the Applicant has claimed deductions for lease commissions that it claims it paid to Metlox related entities. The clean-up language is designed to eliminate future disputes concerning whether claimed deductions are appropriately offset from the City’s Profit Participation Rent. In addition, to avoid future disputes, the Ground Lease amendment will require Metlox to pay for and provide to the City on an annual basis an audit of the Profit Participation Rent and the calculation thereof, prepared by an independent certified public accountant.
CONCLUSION:
Staff recommends that the City Council adopt Resolution No. 25-0024, approving the MUP Amendment, CDP and the Fourth Amendment to the Ground Lease, and finding the project is within the scope of, and adequately analyzed in, a previously certified Environmental Impact Report (SCH 1999121090).
ATTACHMENTS:
1. Draft Resolution No. 25-0024
2. January 21, 2025, City Council Staff Report (Web-Link Provided)
3. Draft Fourth Amendment to the Ground Lease.
4. Legislative Digest Showing the Proposed Amendments to the Ground Lease.