2012-27846 Reso 2012-27846
RESOLUTION NO.
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA,APPROVING FOLLOWING A DULY
NOTICED PUBLIC HEARING,THE SUBSTANTIVE TERMS OF A LEASE
AGREEMENT BETWEEN THE CITY AND SOUTH FLORIDA SALON
GROUP, INC., FOR USE OF APPROXIMATELY 1,327 SQUARE FEET
OF CITY-OWNED PROPERTY, LOCATED AT 1701 MERIDIAN AVENUE,
UNIT 1 (A/K/A 765 17TH STREET), MIAMI BEACH, FLORIDA; SAID
LEASE HAVING AN INITIAL TERM OF FIVE (5) YEARS, WITH ONE
ADDITIONAL FOUR(4)YEAR AND 364 DAY RENEWAL TERM,AT THE
CITY'S SOLE DISCRETION; AND, WAIVING BY 5/7THS VOTE, THE
COMPETITIVE BIDDING REQUIREMENTS,AS REQUIRED BY SECTION
82-39 (b) OF THE MIAMI BEACH CITY CODE; FURTHER AUTHORIZING
THE CITY ADMINISTRATION TO NEGOTIATE A FINAL LEASE
AGREEMENT, BASED UPON THE SUBSTANTIVE TERMS APPROVED
HEREIN,AND IF SUCCESSFUL,AUTHORIZING THE MAYOR AND CITY
CLERK TO EXECUTE THE LEASE.
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
(FCWPC) 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, on November 16, 2011, Koniver Stern Group, the City's contracted real
estate broker, presented the City with a Letter of Intent(LOI) on behalf of the South Florida
Salon Group, Inc., (SFSG)for use of approximately 1,327 square feet of City-owned space
located at 1701 Meridian Avenue, Unit 1 (Unit 1), formerly occupied by Leonardo's Hair
Salon which is currently vacant and available; and
WHEREAS, SFSG'S initial proposal and a competing offer were submitted to the
FCWPC at its meeting on January 19, 2012; and
WHEREAS, the FCWPC asked the Administration and the City's Broker to gather
further information and to continue negotiations with both parties, in order bring back the
best possible proposal for consideration and approval by the City Commission; and
WHEREAS, after careful deliberation, an evaluation of both proposals, and
consideration of the City's Broker's advice that securing a diverse tenant mix will best
protect the City, the Administration recommends approval of SFSG' proposal, as revised,
and attached as Exhibit "A" hereto.
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, following a duly noticed public hearing, the substantive terms
of a Lease Agreement between the City and South Florida Salon Group, Inc., for use of
approximately 1,327 square feet of City-owned property, located at 1701 Meridian Avenue,
Unit 1 (a/k/a 765 17th Street), Miami Beach, Florida, for an initial term of five (5)years, with
one additional renewal term of four (4) years and 364 days, at the City's sole discretion;
waiving by 5/7ths vote, the competitive bidding requirements, as required by sections
82-39 (b) of the Miami Beach City Code; and further authorizing the City Administration to
negotiate a final Lease Agreement, based upon the substantive terms approved herein,
and if successful, authorizing the Mayor and City Clerk to execute the Lease.
PASSED and ADOPTED this 8th day of February, 2012.
ATTEST:
�� P�
Robert Parcher, CITY CLER M� g�� atti Herrera Bower, MAYOR
JMG\HMF\AP\KOB * INCORP ORATED::
...6j-0 \Cb
T:\Agenda\2012\Feb 8\Regular\777 Retail Lease Reso. 2
APPROVED AS TO
FORM&LANGUAGE
&fOR EXECUTION
Ity t m V" Date
COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution following a duly notice Public Hearing,approving the substantive terms of a Lease Agreement between the City
and South Florida Salon Group, Inc. (SFSG),for use of 1,327 SF of City-owned property located at 1701 Meridian Avenue,
Unit 1 (a/k/a 765 17th Street), for a term of five(5)years,with one(1)additional renewal term of four(4)years and 364 days;
and, waiving by 5/7ths vote the competitive bidding requirements as required by Section 82-39 of the City Code; and
authorizing the Administration to negotiate a final Lease Agreement for execution by the Mayor and City Clerk
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?
Item Summa /Recommendation:
On November 16, 2011, Koniver Stern Group, the City's contracted real estate broker, presented the City with a Letter of
Intent (LOI) on behalf of the South Florida Salon Group, Inc., (SFSG) for use of approximately 1,327 square feet of City-
owned space located at 1701 Meridian Avenue, Unit 1 (Unit 1), formerly occupied by Leonardo's Hair Salon which is
currently vacant and available. SFSG'S proposal which was submitted to the Finance and Citywide Projects Committee
(FCWPC)at its January 19, 2012 meeting, offered a rate of$46.00 per square foot for the space. However, shortly before
the Committee meeting, the City's Broker received an offer from Massage Partners,the current tenant of the adjacent Unit 2,
operating as a Massage Envy franchise, of$50/sf,which exceeded SFSG's proposal. The FCWPC asked the City's Broker
to gather further information, continue negotiations with both parties, and bring back the best possible proposal for
consideration and approval by the City Commission. Following this development, SFSG submitted a new LOI, increasing its
proposed rent to$51.00 per square foot. SFSG is also planning significant renovations to upgrade the current condition of
the space and is currently in the process of obtaining bids for construction of tenant improvements. While both competing
proposals are acceptable, the City's Broker recommends proceeding with SFSG's proposal, generally outlined as follows:
• Square Footage: 1,327 square feet
• Term: Five (5) years, with one additional renewal term of four(4) years and 364 days
• Rent: $51.00 PSF, plus 3% annual increases
• Pre-paid Rent: One (1) month due upon execution
• Security Deposit: Six (6) months rent due upon execution
• Rent Commencement: Ninety (90) day from execution
• Construction Escrow: Construction funds based on final contract amount to be deposited in Escrow
Section 82-39 provides for the waiver of the competitive bidding 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. It is recommended that the Mayor and Commission approve the proposed lease per the negotiated terms.
Advisory Board Recommendation:
Finance & Citywide Projects Committee, January 19, 2012
Financial Information:
Source of Funds: Amount Account
n/a 1 n/a
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Anna Parekh, extension 7260
Si n-Offs:
Anna Parekh, Department Director Hilda M. FleTandTz, Assistant City Manager Jorge M. Gonzalez, City Manager
AP HF J M G
T:\AGENDA\2012\Feb 8\Regular\777 Retail Lease Summ.doc
M MIAMIBEACH AGENDA ITEM RII v
111W DATE 2-1-/Z
IM MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive,Miami Beach, Florida 33139,www.miamibeachfl.aov
COMMISSION MEMORANDUM
TO: Mayor Matti Herrera Bower and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: February 8, 2012
SUBJECT: A RESOLUTION OF THE MAYO ID CITY COMMISSION OF THE CITY OF MIAMI
BEACH, FLORIDA,APPROVING FOLLOWING A DULY NOTICED PUBLIC HEARING,
THE SUBSTANTIVE TERMS OF A LEASE AGREEMENT BETWEEN THE CITY AND
SOUTH FLORIDA SALON GROUP, INC., FOR USE OF APPROXIMATELY 1,327
SQUARE FEET OF CITY-OWNED PROPERTY, LOCATED AT 1701 MERIDIAN
AVENUE, UNIT 1 (A/K/A 765 17TH STREET), MIAMI BEACH, FLORIDA; SAID LEASE
HAVING AN INITIAL TERM OF FIVE (5) YEARS, WITH ONE ADDITIONAL FOUR (4)
YEAR AND 364 DAY RENEWAL TERM, AT THE CITY'S SOLE DISCRETION; AND,
WAIVING BY 5/7THS VOTE, THE COMPETITIVE BIDDING REQUIREMENTS, AS
REQUIRED BY SECTION 82-39 (a) OF THE MIAMI BEACH CITY CODE; FURTHER
AUTHORIZING THE CITY ADMINISTRATION TO NEGOTIATE A FINAL LEASE
AGREEMENT, BASED UPON THE SUBSTANTIVE TERMS APPROVED HEREIN,AND
IF SUCCESSFUL,AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE
LEASE.
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
Commission Memorandum
South Florida Salon Group, Inc.
February 8, 2012
Page 2 of 4
On November 16, 2011, Koniver Stern Group,the City's contracted real estate broker, presented the
City with a Letter of Intent(LOI) on behalf of the South Florida Salon Group, Inc., (SFSG)for use of
approximately 1,327 square feet of City-owned space located at 1701 Meridian Avenue, Unit 1 (Unit
1), formerly occupied by Leonardo's Hair Salon, which is currently vacant and available. SFSG is
proposing to introduce a relatively new and exciting concept taking hold in many retail markets
throughout California, New York, Arizona, Texas, Atlanta and Miami in the form of a blow-dry hair
salon. As the name implies, the facility would offer an attractively affordable fixed-price menu of
blow-dry hair styling options as well as manicuring services. A concept rendering of the proposed
space as well as an estimate for the design and construction are included as Exhibit A to this
memorandum.
In addition to SFSG, the City received inquiries about the availability of the space from Massage
Partners, the current adjacent tenant of Unit 2, currently operating as a Massage Envy franchise,
who wishes to expand its current leased space, as well as introduce certain services currently not
included in its franchise agreement. The terms proposed by Massage Partners, which originally
included amending the existing lease to incorporate additional square footage, were deemed not
favorable to the City because the initially proposed rent was below the market rate, and because the
overall proposal did not include a security deposit. Furthermore, the City's existing lease with
Massage Partners specifically states that Massage Partners' 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. The
Franchise Agreement was attached as an exhibit to the lease for Unit 2. The lease for Unit 2 also
states that any additional uses shall be subject to the prior written approval of the City Manager, in
his sole and reasonable discretion. While Massage Partners has remained interested in the vacant
Unit 1 retail space, and has consistently altered its proposal, and even verbally offered to exceed the
rent proposed in good faith by South Florida Salon Group, as presented to the Finance& Citywide
Projects Committing (FCWPC) during its January 19, 2012 meeting, the City's broker advises that
securing a diverse tenant mix would protect the City further, as compared to leasing out this space
to the adjacent tenant and thereby having one tenant control two of four retail spaces.
ANALYSIS
SFSG'S initial proposal, submitted to the FCWPC at its meeting on January 19,2012, offered a rate
of$46.00 per square foot for the space. However, shortly before the Committee meeting,the City's
Broker received an offer from Massage Envy of $50/sf, which exceeded SFSG's proposal. The
FCWPC asked the City's Broker to gather further information and to continue negotiations with both
parties, in order bring back the best possible proposal for consideration and approval by the City
Commission.
Following this development, SFSG proposed to increase its rent to$51.00 per square foot. SFSG is
also planning significant renovations to upgrade the current condition of the space and is currently in
the process of obtaining bids for architectural services. The proposed budget for tenant
improvements is under development but is currently estimated at approximately $138,000 for the
design and build-out of the space. This proposed budget far exceeds the ninety (90) day tenant
improvement rent credit proposed and outlined below.
Currently,we have two competing LOIs for the use of Unit 1. While the Administration recommends
acceptance of the proposal by South Florida Salon Group (SFSG),the terms proposed by Massage
Envy, as well as by SFSG are outlined below for the Commission's consideration.
Commission Memorandum
South Florida Salon Group, Inc.
February 8, 2012
Page 3 of 4
Tenant: MASSAGE ENVY SOUTH FLORIDA SALON GROUP
Use: Spa/salon Blow Dry Salon
Term: 5 yrs+4 yrs 364 days 5 yrs+4 yrs 364 days
Rent: $50/sf $51/sf
Increases: 3%per year 3%per year
Lease Commencement: Lease execution Lease execution
Rent Commencement: Earlier of 90 days from Landlord's 90 days from Landlord's delivery
delivery;or the date Tenant opens for
business
Condition of Delivery: As-is As-is
Prepaid Rent: One month's rent due upon Lease One month's rent due upon Lease
execution execution
Minimum Security Deposit: Two months rent Six months rent
Construction Escrow: N/A Construction funds to be deposited into
the tenant's attorney's escrow account
to securitize construction. To be based
upon General Contractor's final contract.
Early Termination: N/A N/A
Guaranty: Personal guarantee by principal(s)and N/A
their respective spouses,of the
business corporation with the same
terms as in the adjacent leased space.
RECOMMENDATION
The rent and uses proposed by both prospective tenants are relatively comparable. However, and
despite Massage Envy's continued verbal offers to further negotiate, in light of our broker's
recommendation to minimize the City's risk by not having one single tenant control two of the four
spaces within one building, as well as due to the other, below described considerations, the
Administration recommends approval of South Florida Salon Group's proposal to lease Unit 1.
Other matters considered by the Administration prior to this recommendation were:
Commission Memorandum
South Florida Salon Group, Inc.
February 8,2012
Page 4 of 4
• SFSG has consistently presented written offers for market, and then above-market terms,for
the use of the space
• SFSG has produced professional renderings and estimates for the intended improvements
and presents a well-thought out use of space
• SFSG proposes to greatly exceed the security deposit proposed by Massage Envy
• SFSG proposes to post a construction escrow account to securitize construction
• Massage Envy, as a franchisee, is not permitted by its master franchisor to utilize the
proposed space for spa/salon services. While the City would entertain such use if the
franchisor agreed to such use/services, or if a separate corporate entity were established for
purposes of leasing Unit 1, there is neither any guarantee that such approval would be
granted by the master franchisor, nor a proposed time frame within which such written
approval would be produced, nor has a separate corporate entity been established by the
principals of Massage Envy for such purposes.
CONCLUSION
Section 82-37 (b) of the Miami Beach City Code, governing the sale/lease of public property,
provides that the lease of any City-owned property for a term of ten years or less (including option
periods), requires the following:
(1) The proposed lease shall be transmitted by the city manager (without the need for
referral by the city commission)to the finance and citywide projects committee,for its
review: and
(2) The city commission may approve the lease on one reading, which shall be
accompanied by a public hearing,which may be set by the city manager and shall be
advertised not less than seven days prior to said hearing, in order to obtain citizens
input into the proposed lease.
Furthermore, pursuant to Section 82-39 (a) of the Miami Beach Code, for sale or leases of City
property, the conditions of the public bidding process may be waived by a five-sevenths vote of the
City Commission, upon a finding by the City Commission that the public interest would be served by
waiving such conditions.
The proposed lease terms are within the range of comparable spaces in the area, and reflect the
current economic reality. The recommended Tenant's use is consistent with prior uses on the
ground floor of the building and the surrounding commercial area. After compliance with Code
provisions and having considered all relevant information, the Administration recommends that a
lease agreement with South Florida Salon Group, for use of the ground floor commercial retail
space known as Unit 1, with the proposed terms as delineated herein, be approved. Additionally,
the Administration recommends that the City Commission waive by 5/7ths vote, the competitive
bidding requirement, as required by Section 82-39 of the Miami Beach City Code.
JMG/HMF/AP/KOB
T:\AGENDA\2012\Feb 8\Regular\777 Retail Lease Memo.doc
ATTACHMENT "A"
SOUTH FLORIDA SALON GROUP, INC.
CONCEPT RENDERINGS & INITIAL COST
ESTIMATES
.z EXHIBIT A
.9l .4t .4/E 09
.4/L 9L
CIO
Li
i
D � ,
Z
7 0
� ° W
F
W ¢ d v
LLl W
-_
9L
i 1
.M OU
N
A�
W
Z
O O
m 4 w q
D w
w � w
O a In
Z N
O N
0
� 00
ws
/�
CE
---- -------L
a
0
J
LL
�- ------- J 4
a g
r----------- �y W
0
0
00 \
00 °
71
FHL DESIGN I ARRIAGA LLC
INTERIOR DESIGN&DECOR
January 10, 2012
Client: Omid Lari---Salon
Location: 765 17th street Miami Beach, FL 33139
The following estimates are for the design and construction based on the Architectural
drawings provided.
1. Designer:
20% of all construction/design costs.
2. Drawings/Shop Drawings by contracted Architect:
$6,000
3. Permit Fees:
-Master Permit includes all works to be addressed: $2,000
4. Contractual agreement for all carpentry, millwork, flooring, paint and all other works
as specified on drawings.
-Carpentry/flooring: $15,000
-Millwork/workstations: $15,000
-Paint: $6,500
-Marble Countertops: $10,000
5. Contractual agreement to do all electrical works as specified on drawings.
-Electrical and Lighting: $10,000
6. Contractual agreement to do all plumbing as specified on drawings.
-Bathrooms and working stations: $10,000
Total contractual budget agreement:
$74,500 - includes all construction layout/design as per drawings
$40,000-allocated for furnishings
$22,900-20% designer fee
$137,400 TOTAL ESTIMATED COST*
*All figures are estimates of projected costs to reflect budget and visionary
standpoint. Final figures and detailed estimates to be presented with final
contractual agreement.
m MIAMI BEACH
CITY OF MIAMI BEACH
PUBLIC HEARING
IS HEREBY GIVEN that a first and final hearing will be held by the City
I NOTICE of Miami Beach on WEDNESDAY, February 8, 2012 at
Commission of the City
10:40 A.M. or as soon thereafter as possibnvention Center DrivleSlMiamaBeach,
Third Floor, City Hall, located at 1700 Co
Florida 33139 to consider:
in on First and Final Reading,a Lease Agreement em 32 between feet olf clty�o South
Approv g
Florida Salon Group, Inc.,for use of approximately ears,with one additional term of
located at 1701 Meridian Avenue,Uniel5AltA 76517th Street),Miami Beach,
property,
Florida; said and 364 da s at the City's sole)discretion.having an initial term of
four(4} year
be directed to the Real Estate, Housing & Community Development
inquiries ma Y 6737260.
Department(305) an agent,or to
All interested parties.are invited to appear at this meeting or)epartment,represented by
express their views n writing addressed to the of the proposed amendments sConvention ae vvailable in
Drive,City Hall,Miami Beach,Florida 3313 .
the Planning Department.
n Board with respect to any matter considered at its
Pursuant to Florida Stat. 286.0105,the pity hereby advises the public that if a person decides
to appeal any decision made by the Planning is made,
and evidence upon which the appeal is to be based.
meeting or its hearing,Such person
he testimony sure that a verbatim record ct on forhadmission of otherwise
which record must inc appeals not otherwise
This notice does irretlevantlevidenceenobdoes tI authorize ncha enges or
inadmissible or
allowed by law. persons needing special
In accordance with the Americans with Disabilities Act of 1990,
edin at(305)673-7550 for assistance',it
ancering impaired,
ADa#691
accommodation to participate in the proceeding .should contact the Board' Administrator g m ai n
later than four days prior to the proc 9 or 711,for asses
telephone the Florida Relay Service numbers,(305}673-7218
LOCAL& STATE so