Council to Discuss Rent Hikes for
City’s Commercial Holdings
• Municipal Officials May Indirectly
Impact Market Forces Throughout the Community
An agenda item on next week’s Malibu
City Council meeting opens a window on the world of the
city’s finances now that it is a landlord in the Civic
Center area, now sometimes called “the Rodeo Drive of
Malibu.”
The municipal staff wants to talk to the
council members about a lease agreement with a tenant at the
commercial property located at Webb Way and Pacific Coast
Highway.
The annual rent currently being collected
from the property leased by Coldwell Banker is $337,000. The
city took over the existing lease agreement when it
purchased the Chili Cook-off property in 2006, according to a
staff report.
The city uses the rent collected from the
three commercial properties located at the edges of Legacy
Park, the former Cook-off site, to meet the debt service for
the certificates of participation issued to purchase the 19
vacant acres and commercial buildings.
The real estate firm is currently paying
$5.83 per square foot. The building consists of 4848 square
feet, and there are about 22 marked parking spaces.
That’s contrasted with Malibu Coast
Animal Hospital for which the city will get $7.37 per square
foot in 2009. That property includes a 2711-square-foot
building with about 14 parking spaces.
Next year, the city will collect $925,000 a
year in base rent, plus an additional amount in what is called
participation rent for the 30,331-square-foot Malibu Lumber
shopping center, plus gain in the $10 million in improvements.
The staff is asking the council if it wants
to extend the lease at the current rate, plus an increase equal
to the consumer price index? Extend the lease agreement
with a 10 percent base rent increase plus CPI? Establish a base
rent amount at the same rate as the animal hospital? Seek a new
tenant? Or re-develop the site with the same square
footage, and issue a long-term lease to a new tenant?
The staff recommends extending the term of
the current lease for a one-year term with the option of
an additional year with an increase the first year of ten
percent and CPI increases. In 2009, the rent would be
$6.40 per square foot, or $371,000 annually.
City officials found out that rent amounts
vary in the Civic Center. Banks are paying from a range of
$6.30 to $9.17 per square foot, with an average amount of $7.80. The average amount
for office space is about $6.80, with a range of rates from
$5.20 to $9.35. Rent amounts for commercial retail space have
ranged recently to as high as $22 per square foot, with an
average of about $12. The city’s shopping center at the
old Malibu lumber yard site is reportedly charging $15,
and possibly higher.
As the city becomes a major player in the
commercial rental market in the Civic Center, it may force
rents upward in its zeal to realize a revenue stream for
itself, and pave the way for other commercial landlords to do
the same.
While council members lament what is
happening in the retail sector, the city may have unwittingly
become the mightiest force in shaping that market in an upward
trend.
