2010-27488 Reso 2010 -27488
RESOLUTION NO.
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, APPROVING ON SECOND READING (AND
FINAL APPROVAL), FOLLOWING A DULY NOTICED PUBLIC HEARING,
A LEASE AGREEMENT BETWEEN THE CITY AND MASSAGE
PARTNERS, INC., FOR USE OF APPROXIMATELY 1,802.89 SQUARE
FEET OF CITY -OWNED PROPERTY, LOCATED AT 1701 MERIDIAN
AVENUE, UNIT 2 (A/K/A 767 17 STREET), MIAMI BEACH, FLORIDA;
SAID LEASE HAVING A TERM OF NINE YEARS AND 364 DAYS;
AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE
LEASE AGREEMENT
WHEREAS, on October 17, 2001, the City Commission adopted Resolution No.
2001 - 24661, authorizing the purchase of 1701 Meridian Avenue Building (a /k/a 777
Building) with the intention of preserving the retail environment on the ground floor of the
property; and
WHEREAS, on March 10, 2009, the Finance & Citywide Projects Committee
(F &CPC) recommended that any commercial leases (including renewals and /or
extensions) for use of space at the Building be handled as it is in the private sector and not
through a competitive bid process; and
WHEREAS, Massage Partners, Inc. has expressed interest in leasing ground floor
retail space in the Building; and
WHEREAS, the City and Tenant have negotiated the proposed Lease Agreement,
said proposed Lease Agreement having an initial term of nine (9) years and 364 days,
commencing October 2, 2010 and ending September 30, 2020; and
WHEREAS, Section 82 -39 of the Miami Beach City Code, governing the sale /lease
of public property, requires a competitive bidding process, a Planning Department analysis,
and an independent appraisal to determine the value of the leasehold interest, as well as
two (2) readings of the proposed lease, with the second (and final) reading followed by an
advertised public hearing to obtain citizen input; and
WHEREAS, on July 14, 2010, pursuant to Resolution No. 2010- 27454, the Mayor
and City Commission approved the Lease Agreement with Jon Krutchik, a married man, on
first reading; waived by 5/7 vote, the competitive bidding and appraisal requirements; and
set the public hearing on September 15, 2010, for second reading and final approval of the
Lease Agreement; and
WHEREAS, Jon Krutchik has since incorporated as Massage Partners, Inc, a
Florida corporation; and
WHEREAS, said public hearing was held on September 15, 2010.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby approve on second reading (and final reading), following a duly
noticed public hearing), a Lease Agreement between the City and Massage Partners, Inc.,
for use of approximately 1,802.89 square feet of City -owned property, located at 1701
Meridian Avenue, Unit 2 (a /k /a 767 17 Street), Miami Beach, Florida for a term of nine
years and 364 days; authorizing the Mayor and City Clerk to execute the Lease
Agreement.
PASSED and ADOPTED this 15 day of September, 2010.
ATTEST:
(utj faiaa* .0
Robert Parcher, CITY CLERK atti Herre a Bower, MAYOR
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APPROVED AS TO
FORM & LANGUAGE
& Fon EXECW SON
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COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution approving, on second reading, following a duly noticed public hearing, a lease agreement between the City and
Massage Partners, Inc., for use of 1,802.89 SF of City -owned property located at 1701 Meridian Avenue, Unit 2 (a /k/a 767
17 Street), for a term of 9 years and 364 days.
Key Intended Outcome Supported:
Increase resident satisfaction with the level of services and facilities.
Supporting Data (Surveys, Environmental Scan, etc.):
Approximately 40% of retail businesses surveyed, rank Miami Beach as one of the best places to do business and 61 % of
the same group would recommend Miami Beach as a place to do business.
Issue:
Should the City Commission approve the lease agreement? I
Item Summary /Recommendation:
SECOND READING & PUBLIC HEARING
On October 17, 2001, the City Commission adopted Resolution No. 2001 - 24661, authorizing the purchase of the 1701 Meridian
Avenue Building with the intention of preserving the retail environment on the ground floor of the property. On March 10, 2009, the
Finance & Citywide Projects Committee (F &CPC) recommended that any commercial leases (including renewals and /or
extensions) for use of space at the Building be handled as it is in the private sector and not through a competitive bid process. The
City and Massage Partners, Inc. have negotiated a proposed lease for use of ground floor retail space at 76717 Street, with the
following terms:
• Square Footage: 1,802.89 per updated 2007 survey;
• Term: Nine years and 364 days;
• Rent: $40.00 PSF, $72,115.60 annually;
o Base Rent: $49,763.08 annually, payable monthly @ $4,146.92, with 3% annual increase;
o Additional Rent: $22,352.52 annually, payable monthly @ $1,862.71 to offset City's operating expenses and
insurance costs;
• Security Deposit: Prior to execution of the Lease, the Tenant will furnish the City a Security Deposit in the sum of
$18,028.89 (equal to three months of Rent and Additional Rent costs).
The average PSF cost of other ground floor Tenants in the Building is $42.00. Because of a sizeable tenant improvement that will
be required that exceeds the tenant credit the City and the proposed tenant have agreed to, and in light of current retail market
conditions, the proposed psf is recommended.
Section 82 -39 provides for the waiver of the competitive bidding and appraisal requirements, by 5 /7ths vote of the Mayor and City
Commission, upon a finding by the Mayor and City Commission that the public interest would be served by waiving such
conditions. At the March 10, 2009 meeting of the F &CPC, the Committee determined that it was in the public's best interest to
forgo competitive bidding and staff should proceed in leasing available space in the Building according to market rates and
industry standards.
On July 14, 2010, pursuant to Resolution No. 2010- 27454, the Mayor and City Commission approved the lease agreement on first
reading; waived by 5 /7 vote, the competitive bidding and appraisal requirements; and set the public hearing on September 15,
2010, for second reading and final approval of the lease agreement. Subsequently, on July 29,' 2010, the F &CPC discussed the
proposed lease agreement and recommended its approval.
Advisory Board Recommendation:
Finance & Citywide Projects Committee, March 10, 2009, and July 29, 2010.
Financial Information:
1 Source of Funds: Amount Account
L ila 1 n/a
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Anna Parekh, extension 7193
Si ra -Offs:
Anna P -r- h, Department Director Hilda M. Fernandez, Assistant City Manager Jorge M. Gonzalez, City Manager
A ik HF / ,+
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AGENDA ITEM - 7 M I AM 1 BEACH Plgr tt DATE q -i S to
-6 MIAMIB
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Matti Herrera Bower and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: September 15, 2010 OND READING & PUBLIC HEARING
SUBJECT: A RESOLUTION OF THE MAYOR D CITY COMMISSION OF THE CITY OF MIAMI
BEACH, FLORIDA, APPROVING ON SECOND READING (AND FINAL APPROVAL),
FOLLOWING A DULY NOTICED PUBLIC HEARING, A LEASE AGREEMENT
BETWEEN THE CITY AND MASSAGE PARTNERS, INC., FOR USE OF
APPROXIMATELY 1,802.89 SQUARE FEET OF CITY -OWNED PROPERTY, LOCATED
AT 1701 MERIDIAN AVENUE, UNIT 2 (A/K/A 767 17 STREET), MIAMI BEACH,
FLORIDA; SAID LEASE HAVING A TERM OF NINE YEARS AND 364 DAYS;
AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE LEASE
AGREEMENT
ADMINISTRATION RECOMMENDATION
Adopt the Resolution.
KEY INTENDED OUTCOMES SUPPORTED
Increase resident satisfaction with the level of services and facilities.
BACKGROUND
On October 17, 2001, the City Commission passed Resolution No. 2001 -24661 authorizing the
purchase of the building at 1701 Meridian Avenue (a.k.a. 777 Building) in order to address the City's
ongoing need for administrative office space expansion. At the time, the preservation of a retail
environment on the ground floor of the property was considered and it was determined that retention
of the retail space was conducive to maintaining and enhancing the pedestrian character of the
linkage between Lincoln Road Mall and the Civic /Convention Center area.
At the October 21, 2008 meeting of the Finance & Citywide Projects Committee (F &CPC), and
subsequently at their meeting of March 10, 2009, and following a comprehensive review of the City's
office space use, the Committee agreed with City staff's recommendation that usage of the ground
floor of 1701 Meridian Avenue Building remain a primary use for commercial retail space.
Additionally, the Committee recommended that any commercial leases (including renewals and /or
extensions) for use of space at the Building be handled as it is in the private sector and not through
a competitive bid process.
ANALYSIS
On April 30, 2010, Koniver Stern Group, the City's contracted real estate broker, presented the City
with the first of several Letters of Intent (LOI) on behalf of Jon Krutchik, a potential Massage Envy
Spa franchisee, who expressed an interest in the ground floor retail space located at 1701 Meridian
Avenue, Unit 2 (a /k/a 76717 Street), formerly occupied by Permit Doctor which is currently vacant
and available. Koniver Stern recommended that the City consider the proposed lease terms based
on the City's ability to secure a viable tenant during this economic time and at a competitive PSF
Commission Memorandum
Massage Partners, Inc.
September 15, 2010
Page 2 of 4
rate. The average PSF rate for ground floor retail in the Building is $42.00. The prospective tenant
has offered to pay $40.00 PSF, which the Administration and the City's Broker are recommending
due to the fact that the prospective tenant will be undertaking significant renovations to upgrade the
current condition of the retail space. The proposed tenant improvement rent credit is Tess than the
cost of the build -out which the proposed tenant will be ultimately responsible to perform in order to
comply with its master franchisor agreement. While preliminary estimates of the franchisee's
requirements for start-up costs are $296,000, the Administration recommends that a one year rent
abatement credit ($72,115.60) be granted. The minimum projected hard construction costs are
$81,000.
The subject lease was contingent on the proposed tenant securing and producing a fully executed
franchise agreement with Massage Envy. The proposed tenant has provided the City with a copy of
a fully executed franchise agreement which is dated June 2, 2010. Additionally, while the draft lease
agreement approved on first reading identified the tenant as an individual (Jon Krutchik), it was
anticipated that prior to second and final reading of the lease, the tenant would be a corporate entity.
The proposed tenant incorporated on June 30, 2010, as Massage Partners, Inc., whose President
is Jon Krutchik and whose Vice President is Michael Muskat.
The Administration proceeded to negotiate a proposed lease agreement for City Commission
approval. A summary of the proposed lease terms are as follows:
TENANT: Massage Partners, Inc.
DEMISED PREMISES: 1,802.89 SF on the ground floor of the 777 Building, located at 1701
Meridian Avenue, Unit 2 (a /k/a 767 17 Street).
TERM: Nine (9) years and 364 days.
LEASE COMMENCEMENT DATE: October 2, 2010.
RENT COMMENCEMENT DATE: October 1, 2011.
RENT: $40.00 PSF; $72,115.60 annually;
BASE RENT: $49,763.08 annually, payable in monthly installments of
$4,146.92. Base Rent shall be increased annually, commencing on the third
anniversary of the Commencement Date of the Lease and on each
anniversary Commencement Date thereafter, in increments of three (3 %)
percent per year.
ADDITIONAL RENT: $22,352.52 annually, payable in monthly installments
of $1,862.71. Any increase in Operating Expenses and Insurance will result
in an increase to Tenant's proportionate share.
PARKING: Tenant may request from the City's Parking Department, the use of no more
than four (4) parking spaces. Rates for said spaces are subject to change,
and are currently $70 per month plus applicable sales tax.
SECURITY DEPOSIT: Prior to the execution of the Lease, Tenant will furnish the City with a
Security Deposit in the sum of $18,028.89 (equal to three months Rent and
Additional Rent costs).
Commission Memorandum
Massage Partners, Inc.
September 15, 2010
Page 3 of 4
CONSTRUCTION
DEPOSIT: Tenant shall be required to establish an escrow account in the amount of
$81,000 in order to guarantee the hard costs of those certain improvements
to the Demised Premises.
USES: The Demised Premises shall be used by the Tenant only for the purpose(s)
of providing therapeutic massage services, facials, and any other products or
services authorized pursuant to Tenant's franchise agreement, dated June 2,
2010, attached hereto as Exhibit 7.1. Any additionally uses shall be subject
to the prior written approval of the City Manager, in his sole and reasonable
discretion.
The Demised Premises shall be open for operation as follows:
Monday - Friday: 8:00 AM to 10:00 PM
Saturday & Sunday: 9:00 AM to 9:00 PM
IMPROVEMENTS: Tenant agrees to make certain improvement to the Demised Premises in the
minimum amount of $81,000.00 (an amount greater than one year's Rent) in
exchange for a one year credit against Rent.
INSURANCE: Tenant shall comply with the following insurance requirements throughout
the Term:
Comprehensive General Liability in the minimum amount of $1,000,000 per
occurrence for bodily injury and property damage. The City of Miami Beach
must be named as additional insured parties on this policy, subject to
adjustment for inflation.
Workers Compensation and Employers Liability coverage in accordance with
Florida statutory requirements.
All -Risks property and casualty insurance, written at a minimum of 80% of
replacement cost value and with replacement cost endorsement, covering all
of Tenant's personal property in the Demised Premises (including, without
limitation, inventory, trade fixtures; floor coverings, furniture and other
property removable by Tenant under the provisions of this Agreement) and
all leasehold improvements installed in the Demised Premises by or on
behalf of Tenant, subject to adjustment for inflation.
PROPERTY TAXES: Tenant shall pay its proportionate share of the property tax bill. Any property
tax payment shall be payable by Tenant immediately upon receipt of notice
from the City. Tenant's property taxes payments are included within
Additional Rent costs.
UTILITIES: Tenant retains sole responsibility for all utilities (not included as part of
Operating Expenses) including electric, janitorial, Internet and telephone
services.
MAINTENANCE
AND REPAIR: Tenant shall be responsible for day -to -day maintenance and repairs of the
Commission Memorandum
Massage Partners, Inc.
September 15, 2010
Page 4 of 4
Demised Premises, including, without limitation, all fixtures, appurtenances,
equipment, furnishings and HVAC system.
CONCLUSION
Section 82 -39 of the Miami Beach City Code, governing the sale /lease of public property, provides
that the lease of any City -owned property, including renewal option periods, requires the following:
1) a public bidding process;
2) Planning Department analysis;
3) an independent appraisal to determine the value of the leasehold interest;
4) two (2) readings of the proposed lease; and
5) a public hearing to obtain citizen input.
Section 82 -39 further provides for the waiver of the competitive bidding and appraisal requirements,
by 5 /7 vote of the Mayor and City Commission, upon a finding by the Mayor and City Commission
that the public interest would be served by waiving such conditions.
A Planning Department analysis finds that the use of this area as office space is consistent with the
land use designation contained in the Comprehensive Plan.
On July 14, 2010, the Mayor and City Commission adopted Resolution No. 2010- 27454, approving
the proposed lease agreement on first reading; waived by 5 /7 vote, the competitive bidding and
appraisal requirements; and set a public hearing on September 15, 2010, for second reading (and
final approval) of the lease agreement. Additionally, the City Commission referred the proposed
lease agreement to the F &CPC for discussion.
Subsequently, on July 29, 2010, the F &CPC discussed the proposed agreement and recommended
that the City Commission approve the lease with two recommended changes. The lease term on
first reading was for four (4) years and 364 days, with one five (5) year renewal term at the City's
sole option. It was recommended that the lease term be increased to nine (9) years and 364 days,
with no renewal term, which is consistent with the franchise agreement term. Additionally, the
F &CPC approved the incorporation of an escrow requirement to ensure that funds are available to
cover the minimum projected hard costs, estimated to be $81,000.00
The proposed lease terms are within the range of comparable spaces in the area, and reflect the
current economic reality. Tenant's use is consistent with prior uses on the ground floor of the
Building and the surrounding commercial area. Based on the aforementioned; the Administration
recommends that the Mayor and City Commission approve on second and final reading, following a
duly noticed public hearing, the lease agreement between the City and Massage Partners, Inc., for
use of the ground floor commercial retail space with the proposed terms, as delineated herein.
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KONIVER
s Tripm GROUP
Lam RETAIL REAL ESTATE & EITOKERAGE
July 8, 2010
Ms. Hilda M. Fernandez
City of Miami Beach
1700 Convention Center Drive
Miami Beach, FL 33139
Re: 777 17 Street retail space for Massage Envy
Dear Hilda:
Koniver Stern endorses the City of Miami Beach moving forward with the above referenced
lease. The reasons are: 1) the tenant must be willing to pay for their required tenant specific
build -out since no cash tenant improvement allowance is offered; 2) the retail space is B/C
space and currently the general retail market is not robust; 3) to better protect the City we
have outlined a construction deposit guaranty with staff. We are recommending the space to be
leased at $40 per square foot based upon the space size and location. We also recommend a 12
month rent abatement based upon the improvements the tenant will be making for the space.
We have been showing the space since January and have been negotiating this proposal for
four months. Additionally, the tenant is currently leasing space in Miami Beach.
Based on all these factors, Koniver Stern recommends that the City lease the retail space at 777
17 Street to Massage Envy.
Thank you.
Lyle B. Stern
1665 Washington Avenue, Penthouse
Miami Beach, Florida 33139
T (305) 532 -6100 F (305) 532 -6101
www.koniversterngroup.com
•
o [► M IAMI BEACH
1 CITY OF MIAMI BEACH
N` NOTICE OF PUBLIC HEARINGS
NOTICE IS HEREBY given that second readings and p ublic hearings will be held by the Mayor and
9 9 P 9 y y City Commission of the City of Miami Beach, Florida, in the
< Commission Chambers, 3rd floor, City Hall, 1700 Convention Center Drive, Miami Beach, Florida, on Wednesday, September 15"2010, to consider the following:
} ' 10• 25 a.m.
p ; :: Approving On Second Reading, Public Hearing, A Lease Agreement Between The City And David A. Wrubel, CPA, P.A., For Use Of
Approximately 1,518 Square
v) .` Feet Of City -Owned Property, Located At 1130 Washington Avenue, 5th Floor, Miami Beach, Florida; Said Lease Having An initial Term Of Three Years, With Two
Additional Three Year Renewal Terms, At The City's Sole Discretion.
Inquiries may be directed to the Real Estate, Housing & Community Development Department (305) 673- 7260.
F-- 9 itY P P ( )
10:30 a.m.
Approving On Second Reading, Public Hearing, A Lease Agreement Between The City And Leonardo Salon, Inc., For Use Of Approximately 1,326.78 Square Feet
Z Of City -Owned Property, Located At 1701 Meridian Avenue, Unit 1 (A/K/A 76517th Street), Miami Beach, Florida; Said Lease Having An Initial Term Of Four Years
R And 364 Days, With One Additional Five Year Renewal Term, At The City's Sole Discretion.
N quiries may be directed to the Real Estate, Housing & Community Development Department (305) 673- 7260.
10:35 a.m.
Approving On Second Reading, Public Hearing, A Lease Agreement Between The City And Jon Krutchik, For Use Of Approximately 1,802.89 Square Feet Of City -
Owned Property, Located At 1701 Meridian Avenue, Unit 2 (A/K/A 76717th Street), Miami Beach Florida; Said Lease Having An Initial Term Of Four Years And
364 Days, With One Additional Five Year Renewal Term, At The City's Sole Discretion.
Inquiries may be directed to the Real Estate, Housing & Community Development Department (305) 673- 7260.
INTERESTED PARTIES are invrted'to appear at this meeting, or be represented by an agent, or to express their views in writing addressed to the City Commission,
c/o the City Clerk, 1700 Convention Center Drive, 1st Floor, City Hall, Miami Beach, Florida 33139. Copies of these ordinances are available for public inspection
during normal business hours in the City Clerk's Office, 1700 Convention Center Drive, 1st Floor, City Hall, and Miami Beach, Florida 33139 or via the City's web ,
site at www.miamibeachfl.gov. This meeting may be continued and under such circumstances additional legal notice would not be provided.
Robert E. Parcher, City Clerk
City of Miami Beach
Pursuant to Section 286.0105; Fla. Stat., the City hereby advises the public that if a person decides to appeal any decision made by the City Commission
with respect to any matter considered at its•meeting or its hearing, such person must ensure that a verbatim record of the proceedings is made, which record
includes the testimony and evidence upon which the appeal is to be based. This notice does not constitute consent by the City for the introduction or admission
of otherwise inadmissible or irrelevant evidence, nor does it authorize challenges or appeals not otherwise allowed by law.
To request this material in accessible format, sign language interpreters, information on access for persons with disabilities, and /or any accommodation to
review any document or participate in any city- sponsored proceeding, please contact (305) 604 -2489 (voice), (305)673- 7218(TTY) five days in advance to initiate
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