The Los Angeles County Small Craft Harbor Commission elected commission officers and county staff gave a presentation on Marina del Rey lease rent adjustment clauses at the commission’s Feb. 8 meeting in Marina del Rey.

David Lumian and Dennis Alfieri were again appointed as commission chair and vice chair, respectively.

Beverly Moore, executive director of the Marina del Rey Convention and Visitors Bureau, presented the commission and staff members with a new brochure featuring a walking guide with six self-guided “micro-tours.” She noted that navigation by foot in the Marina is highly popular and is a more intimate way to learn about the community. She said that a mobile version of the bureau’s website is being developed for use on mobile devices.

Moore stated that the visitor information center at Admiralty Way and Mindanao Way is open seven days a week, and is the first point of contact for visitors and new residents, with 25,000 annual inquiries being made.

Gary Jones, deputy director of asset management and planning for the Department of Beaches and Harbors, presented a report regarding Marina del Rey lease rent adjustment clauses to provide an overview of the ground lease mechanism. In some original leases from years ago, the lease allowed for the minimum rent to decrease, but current leases are being changed to an upward adjustment, said Jones.

He noted that that costs involved in the adjustment would be considered for their actual benefit, and if it wasn’t worth it financially for the county, that would also be factored in. He said the county gets revenue from sources such as apartment rentals, hotel rooms, boat slips, retail and restaurants, and office rents.

Jones said that on the periodic adjustments of minimum rent, in almost all leases in the Marina, the minimum rent is adjusted every three years. The formula for making the adjustment is 75 percent of the average rent (minimum and percentage rents combined) for the three years prior to the date of adjustment. In many of the leases, the adjustment is limited on the downside to the minimum rent for the prior three years. In other leases, the minimum rent “floats” and may decrease if 75 percent of the average of the past three years of rent is less than the current minimum rent, he explained.

On re-evaluaton of the method of paying minimum rent, Jones said that in the decennial rent adjustments, staff or an appraiser will look at marina leases in Marina del Rey and other marina developments in Southern California and determine what the standard method of adjusting minimum rent is. In the last decennial appraisal that was commissioned, the appraiser reviewed leases in Marina del Rey and throughout other marinas in Southern California and found that the data reviewed supported rent adjustments every three years at 75 percent of the prior three years minimum rent, he said.

Regarding percentage rents, the comparison of individual percentage rent for retail and miscellaneous categories, Jones said that in determining the individual percentage rate categories for the retail and miscellaneous categories, a comparative methodology is used. Either staff or an appraiser will contact different marina developments in Southern California to determine the range of percentage rents used in the various categories.

The range is then compared with the current percentage rents on the subject project to determine whether they are consistent with the data and sensitive to the particular nature of the subject property, he said.

Regarding determination of percentage rent for office or apartment use, staff will initially perform a comparative analysis with the percentage rents in marina developments in Southern California. If the staff determines that changes in the percentage rent appear appropriate for the county to obtain fair market value for the land, the county will hire an appraiser.

Although the appraiser will also perform a comparative analysis similar to the one performed by the staff, an appraiser will typically perform an economic or residual analysis with similarly situated projects and try to determine the land residual values of the project, said Jones.

The value of the land on a per square foot basis is derived from the total value of the project minus the value per square foot of the building area. Since most properties are not exactly alike in configuration, location, or quality of improvements, the appraiser will have to reconcile differences and make a final determination of the appropriate percentage rent, Jones said.

The most important factor in determining whether to request an appraisal is the potential gross revenues that may be generated from the increase in the percentage rent versus the cost (appraiser, arbitration) of justifying such an increase, according to Jones.

During public comment, resident Nancy Vernon Marino said it was ironic that rent can go down, and that it was an indication of a giveaway at taxpayers’ expense to the lessees.

Resident Jon Nahhas said there was no mechanism operating, and pointed to vacant businesses such as the former Edie’s Diner, Moose McGillicuddy’s, and Benihana. He said in the cases of the last two restaurants, they had been standing empty for years, and that the county could have leased them out.

Santos Kreimann, director of the Department of Beaches and Harbors, said that in the last four years that he has been in charge of the department, leases such as the original 1960s leases with the minimum rent decreasing are no longer in play. He added that when an adjustment comes up for a lease, it is reviewed and appropriate action is taken.

Asked about the high vacancy rate of boat slips in certain marinas, Kreimann said that those are the marinas that will be renovated because of deterioration of the docks.

Share