mini CITY OF C 1-2 SAN JOSE CAPITAL OF SILICON VALLEY TO: HONORABLE MAYOR AND CITY COUNCIL SUBJECT: SEE BELOW COUNCIL AGENDA: 04/05/16 ITEM: L* ) Memorandum FROM: Kim Walesh DATE: March 24, 2016 Approved D " 3/fo//fc COUNCIL DISTRICT: 3 SUBJECT: NEW LEASE AGREEMENT WITH ROSIES AND POSIES DOWNTOWN FLORIST AT 98 PASEO DE SAN ANTONIO, SAN JOSE RECOMMENDATION Adopt a resolution authorizing the City Manager to execute an Agreement with Leyla Naderjah, an individual dba Rosies and Posies Downtown Florist, for the lease of real property located at 98 Paseo de Antonio for the purpose of operating a retail/floral store with the following rent: December 1, 2015 to December 31, 2015 is $0. Year 1 - $25,110; Year 2 - $25,110; Year 3 - $25,675; Year 4- $26,253; Year 5 - $26,844; for a total compensation to City of approximately $128,992. OUTCOME Approval of the lease with Rosies and Posies Downtown Florist at 98 Paseo de San Antonio will allow for the continuation of the operation of a neighborhood retail/floral store in downtown San Jose and will generate a projected five-year rental revenue to the City of $128,992. BACKGROUND The subject property at 98 Paseo de San Antonio was constructed prior to 1999 and is located within the Paseo de San Antonio in downtown San Jose that includes the Hammer Theatre, Circle-A Skateboards (Circle-A), and Whispers Cafe and Creperie, and was an asset of the San Jose Redevelopment Agency, now referred to as the Successor Agency to the Redevelopment Agency. On October 1, 1999, the San Jose Redevelopment Agency (Agency) entered into a lease agreement with Malalc Naderjah and Khosrow Rakhshanifar for their operation of a full service
March 24, 2016 Page 2 florist shop in an Agency owned structure located at 98 Paseo de San Antonio. In October 2003, the Agency transferred ownership of the property covered under the lease to the City of San Jose. On November 2, 2005, Leyla Naderjah and Jon Hellesoe entered into a purchase agreement for business assets with Malak Naderjah and Khosrow Rakhshanifar for the business commonly known as Rosies and Posies Downtown Florist of which the lease was a part of the purchase. On January 11, 2006, the City as assignee of the Agency consented to the assignment of the lease to the purchasers under the lease agreement. In 2010, the partnership of Leyla Naderjah and Jon Hellesoe was dissolved and Leyla Naderjah remained as the sole proprietor of Rosie and Posies Downtown Florist. Since 2010, the property has been occupied by Leyla Naderjah, as a sole proprietorship doing business as Rosies and Posies Downtown Florist, operating as a retail store selling flowers and related accessories. The original lease agreement between the Redevelopment Agency, which was assigned to the City, and the business owners of Rosie and Posies Downtown Florist began on October 1, 1999 and expired at the end of the second option period which was September 30, 2014. The tenant has continued to own and operate the business at 98 Paseo de San Antonio on a month-to-month tenancy. The tenant desires to enter into a new 61 month lease with one five-year option. ANALYSIS A lease with Rosies and Posies Downtown would provide the City with a market-rate tenant and would ensure that the City's retail property will continue to operate, thereby bolstering the activity along the Paseo de San Antonio and surrounding businesses. Sixty one months of projected lease revenue to the City would produce approximately $128,992 for the City's General Fund, with additional revenues to the City if Rosies and Posies exercises an additional five year option to renew at the conclusion of the initial lease period. The following information highlights the basic terms of the proposed lease agreement: 1. LESSOR: The City of San Jose 2. LESSEE: Leyla Naderjah, an individual, dba as Rosies and Posies Downtown Florist 3. PREMISES: An approximately 930 square feet of retail space located at 98 Paseo de San Antonio, San Jose, CA 95113. 4. USE OF PREMISES: Retail Shop 5. TERM: Sixty one (61) months 6. LEASE COMMENCEMENT: December 1, 2015
March 24, 2016 Page 3 7. OPTIONS: One, five-year extension option at the amount equal to the fifth year monthly rent payment, plus two and one quarter (2.25) percent escalation increase. Tenant must notify landlord 180 days to prior to expiration to exercise the lease extension. 8. BASE RENT: Year Monthly Annual Rent Escalation 12/1/15 to 12/31/15 $0 0% 01/1/16 to 12/31/16 $2,092.50 0% 01/1/17 to 12/31/17 $2,092.50 0% 01/1/18 to 12/31/18 $2,139.58 2.25% 01/01/19 to 12/31/19 $2,187.72 2.25% 1/1/2020 to 12/31/20 $2,236.95 2.25% LEASE EXENSION OP1 [TON Year Monthly Annual Rent Escalation 01/1/21 to 12/31/21 $2,287.28 2.25% 01/1/22 to 12/31/22 $2,338.74 2.25% 01/1/23 to 12/31/23 $2,391.36 2.25% 01/1/24 to 12/31/24 $2,445.17 2.25% 01/1/25 to 12/31/25 $2,500.18 2.25% 9. CONTINUOUS OPERATIONS: Lessee may cease its operations at any time, provided that Lessee will continue to pay monthly rent and any additional amounts due under the Lease for the term of the Lease. 10. RENT DEPOSIT: Rent deposit to be $2,236.95 which is equal to the last month rent. 11. TAXES AND ASSESSMENTS/ POSSESSORY INTEREST TAX: Tenant acknowledges and agrees that this Lease will create a possessory interest subject to property taxation. Tenant agrees to pay and discharge, during the term of this Lease, before delinquency, all taxes (including, without limitation, possessory interest taxes associated with the Premises.) 12. UTILITIES: Tenant shall pay for all water, sewer, gas, electricity, telephone, trash collection and recycling used by Tenant during the Lease Term, all of which shall be separately metered to the Premises and paid by Tenant directly to the provider of the service.
March 24, 2016 Page 4 13. CONDITION OF PREMISES: Lessee is accepting the Premises in "As-Is" condition. 14. INSURANCE: Tenant at its sole cost and expense and for the full term of this Lease and any extensions thereof, shall obtain and maintain or shall cause to be obtained and maintained insurance against claims for injuries to persons or damages to property in or about the Premises which may arise from or in connection with the activities of Tenant and its agents, employees and contractors. 15. HOLDOVER: At the end of the Lease Term, Lessee may holdover on a month-tomonth basis at 125% of the preceding term's rental rate. EVALUATION AND FOLLOW-UP The lease of this property is expected to be effective December 1, 2015 with the first month being free of rent. The rent for the remaining 60 months is established by the terms of the lease. At the end of the original lease term the tenant has the option to extend the lease for an additional five years. PUBLIC OUTREACH This memorandum will be posted on the City's website for the April 5, 2016 Council Agenda. COORDINATION This memorandum has been coordinated with the City Manager's Budget Office and the City Attorney's Office. COST SUMMARY/IMPLICATION The estimated five-year rental revenue to the General Fund under this lease is anticipated to be $128,992.
March 24,2016 Page 5 CEOA Not a Project, File No. PP10-066(f), Agreements and Contracts for lease of existing space for the same use. /s/ KIM WALESH Deputy City Manager Director of Economic Development For questions please contact Nanci Klein, Assistant Director, at (408) 535-8184.
Exhibit A Aerial Map