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  11.B.       
Meeting Date: 09/16/2020  
From: Haroon Noori

RECOMMENDATION
Hold first reading of an ordinance to approve a concession lease agreement with La Crème Hospitality, Inc., and authorize publication of a summary approved by the City Attorney.
DISCUSSION
This item was continued from the September 2, 2020 City Council meeting. This staff report and the proposed lease agreement includes updated price terms based on further negotiations with the proposer.

The City owns property commonly known as the Point Pinos Grill. The property is operated through a concessionaire and lease agreement for food and beverage services. This facility was previously leased and operated by Aqua Terra Culinary until January 30, 2020 when the tenant provided a notice to terminate operations at the Point Pinos Grill. During the same week of the final notice by Aqua Terra, the City was contacted by Ardent Culinaire, Inc. who expressed interest in taking over operations of the Point Pinos Grill. In order to maintain business continuity, staff negotiated and entered into a temporary month-to-month rental agreement with Ardent Culinaire, Inc. effective February 1, 2020. Meanwhile, staff prepared and published a comprehensive request for proposal (RFP) for the Point Pinos Grill food and beverage concession services on March 9, 2020.

The Point Pinos Grill food and beverage concession services RFP was prominently posted on the City website, advertised in the Monterey County Weekly and shared with the Chamber of Commerce. Staff also reached out to regional Golf Courses to ensure broader awareness about the RFP. The RFP was also forwarded to the Golf Links Advisory Committee (GLAC) and management staff of the Pacific Grove Golf, LLC. Due to COVID-19 and Shelter-in-Place orders, the pre-bid walkthrough and initial RFP closing dates were extended to May 29, 2020. All RFP schedule changes and answers to questions that arose during the walk-through were communicated through addendums which were prominently posted on the City website.

On May 29, 2020, the City received three sealed proposals responding to the RFP. A panel of staff reviewed the proposals and interviewed each proposer. As a result of the selection process, the proposal submitted by La Crème Hospitality, Inc. was selected as the highest rated proposal based on its unique qualifications and vision statement.  Following selection, staff entered into negotiations with La Crème Hospitality, Inc. Staff recommends Council approve a concession lease agreement with La Crème Hospitality, Inc. for provision of food, beverage and related services at the Point Pinos Grill located at 79 Asilomar Blvd at the Pacific Grove Municipal Golf Links.

Key lease terms, proposed improvements and ongoing maintenance, and operator’s qualifications and unique propositions are as follows:

QUALIFICATIONS OF OPERATOR:
La Crème Hospitality, Inc. was established in 2012 by Tamie Aceves with the following successful ventures including Crema (a popular and award-winning Espresso Bar and Brunch Restaurant), La Crème Monterey (a luxury catering company specializing in weddings, corporate and social events in the Monterey County), and Lucy’s on Lighthouse surf shack is her most recent enterprise, featuring gourmet hot dogs named after local surf spots and Marianne’s ice cream. 

OPERATOR’S GOALS WILL INCLUDE MAKING:
  • The Grill at Point Pinos the jewel of the Peninsula.
  • Enhanced golfers’ experience with quick and healthy meal options.
  • Edible Monterey Cover within 6 months.
  • The SF Chronicle Travel section feature within the next 12 months.
  • $2 million annual sales within the first 5 years.
  • $2.5 million annual sales within the first 7 years.
  • Sunset Magazine Cover within 5 years.
  • The Grill at Point Pinos the go-to spot for hip, cool, go-to spot for golf branding launches.
INITIAL DÉCOR AND IMPROVEMENTS
La Crème Hospitality plans to invest approximately $103,500 in initial improvements and decor, and approximately $43,500 in kitchen furnishings and office equipment. Initial improvements and decor (Exhibit E – Lease Agreement) will include new flooring, new interior paint, improved bar counter area, new patio furniture, several big screen TVs, and improved indoor and outdoor lighting and sound systems. Operator intends to complete all initial décor and Improvements within the first four months of the lease agreement. Operator anticipates that none of these improvements and refurbishments will halt restaurant operations.

ONGOING REFURBISHMENT, IMPROVEMENTS AND MAINTENANCE
Operator, at their own cost, will be responsible for ongoing refurbishment, improvements and maintenance as outlined in Exhibit C of the Lease Agreement. 

KEY LEASE TERMS
Rent Year 1 – 4% of monthly gross sales (effective commencement of the lease)
Year 2 – 5% of monthly gross sales
Year 3 – 6% of monthly gross sales
Year 4 – 7% of monthly gross sales
Year 5 – 7% of monthly gross sales
Term Five years with two five year renewal options
Utilities Tenant responsible for payment of all utilities
Deposit $10,000 payable to the City upon execution of the lease
OPTIONS
1. Approve ordinance
2. Provide alternate direction
FINANCIAL IMPACT:
Financial terms are based upon the operator’s proposal made during the Request for Proposal process with some negotiated changes.  Assuming non-COVID environment and based on the operator’s pro forma as well as past tenant’s actual annual sales data, staff projects the City will receive approximately $75,000 on average per year in net rent income from the Point Pinos Grill. The total revenue to the Golf Course Fund over the initial term of the lease is anticipated to be $375,000.
  
GOAL ALIGNMENT: Financial Stability: Develop a strategic plan to better address current and future City expenditure and revenue, provide high quality muni services.
Attachments
Draft Ordinance
Concession Lease Agreement
PPT


    

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