REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Eric G. Parra, Interim City Manager
VIA: Ashley Wysocki, Director of Community & Library Services
PREPARED BY: Chris Cole, Community & Library Services Manager
Subject:
title
Approve and authorize execution of a Lease Agreement between the City of Huntington Beach and HBSC Partners, LLC, for operation of two food concessions at the Huntington Beach Sports Complex located at 19260 Goldenwest Street and 7300 Talbert Avenue
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Statement of Issue:
The City Council is asked to approve a five-year Lease Agreement, between the City of Huntington Beach and HBSC Partners, LLC, for operation of two concession buildings located at the Huntington Beach Sports Complex, with an option to extend for up to two additional five-year terms.
Financial Impact:
Monthly, the City will receive a minimum base rent, or a percentage of gross revenues generated at the facility, whichever is greater. Commencing on the first anniversary of the lease, and each anniversary thereafter, the minimum base rent will be adjusted by an annual three percent (3%). The percentage rent will also increase from eight percent (8%) in Year 1 to fifteen percent (15%) in Years 4 and 5.
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Minimum Monthly Base Rent |
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Percentage Rent |
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Year 1 |
$2,000 |
OR |
8% of Gross Sales |
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Year 2 |
Plus 3% |
OR |
10% of Gross Sales |
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Year 3 |
Plus 3% |
OR |
12% of Gross Sales |
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Year 4 |
Plus 3% |
OR |
15% of Gross Sales |
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Year 5 |
Plus 3% |
OR |
15% of Gross Sales |
While estimated annual revenues under the new operating scenario are unknown, prior annual revenues ranged from $34,000 to $43,000.
Recommended Action:
recommendation
Approve and authorize the Mayor and City Clerk to execute the “Lease Agreement Between the City of Huntington Beach and HBSC Partners, LLC, for Operation of Food Concessions at the Huntington Beach Sports Complex.”
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Alternative Action(s):
Do not approve the recommended action, and direct staff accordingly.
Analysis:
The Lease Agreement for the previous concessionaire expired in February 2024. In January 2024, staff issued a Request for Proposal (RFP) asking interested parties to provide their vision of a business model for the two concession stands at the Huntington Beach Sports Complex (Sports Complex) to offer the community a well-rounded sports complex experience. After reviewing submitted proposals, it was determined the RFP should be rewritten to provide further detail on the City’s expectations and vision for a future concessionaire at the Sports Complex.
On May 20, 2024, the City released a new RFP with a more detailed scope of expectations and request for proposer’s methodologies. Three proposals were received. A three-person panel comprised of staff from Public Works, Finance, and Community Development reviewed the proposals. The panel determined HBSC Partners, LLC’s (HBSC) vision of a seamless integration between park operations and park hospitality to bring an upscale sports facility concession experience to the public supports the City’s strategic plan goals of economic development, infrastructure investment, and public engagement.
In today’s competitive sporting market, HBSC, as the operator of the Sports Complex has been able to grow the attendance and participation in sporting and community events at the Sports Complex. Through personal experience with their own children and visiting other sporting facilities across the nation, HBSC has a pulse on the industry and are savvy to the wants and needs of today’s sports patrons, including food concessions.
HBSC’s proposed name for the concession is “1909: Craft Beer and Concessions” (1909). 1909 will offer outdoor dining, QR code ordering/ pre-ordering, food delivery out to the ball fields, and menu items that include smash-style burgers, Detroit-style pizza, and gourmet hot dogs. Once all permits and approvals are acquired, 1909 will be able to serve a variety of local craft beers inside their enclosed patio areas. During the build-out of the concession buildings, HBSC will provide food truck service to Sports Complex attendees to ensure there is no lapse in concession offerings. It is expected to take approximately three months to build-out the concession stands, with an anticipated opening of January 2025.
The rent generated consists of a minimum rent of $2,000 per month or a percentage rent based on monthly sales, whichever is greater, beginning January 2025. Commencing on the first anniversary of the lease, and each anniversary thereafter, the minimum base rent will be adjusted by an annual three percent. The percentage rent will also increase from eight percent in Year 1 to fifteen percent in Years 4 and 5. Staff recommends monthly rent is not assessed until January 2025 when the concession stands are open for business.
The percentage rent for the first year begins at a lower percentage to help support the up-front investment HBSC will need to make in order to equip and furnish the concession buildings and their surrounding footprints. The concession buildings are leased as a shell with existing plumbing, and the concessionaire is expected to equip and furnish the facilities. HBSC also intends to conduct building improvements including new outdoor seating and permanent refrigeration systems.
A summary of some of the key terms and conditions of the proposed Agreement is provided below.
Lessee Obligations
• Operate for a minimum of 100 days during the calendar year, provided the Lessee may close for up to ten verified rain days.
• Shall have responsibility for utility charges.
• Provide custodial maintenance of restrooms during business hours, with restroom supplies provided by City.
• Equip, operate, manage, and maintain the Premises in good safe working condition at its sole cost and expense.
• Maintain all concession signage in good appearance at all times.
• Provide services in a manner that meets the needs of the visiting public with the highest customer service standards.
• Keep and maintain a point-of-sale system and accurate books and records.
• Provide City an annual statement of Gross Sales within 15 days after the end of each operational year.
• May request that City provide a temporary rent abatement to offset the cost of capital improvements to the Premises, provided that City retains unfettered discretion to deny any credit or abatement. All projects to be considered for rent abatement must have City approval prior to commencement of such projects.
City Obligations
• Reserves the right to prohibit the sale of any item which is objectionable or beyond the scope of the food and beverage necessary for proper service to the public or public safety.
• Agrees to make all structural repairs to the Premises, including but not limited to foundations, walls, and roofs.
• Shall have the right to enter the Premises at all reasonable times for the purpose of inspecting the Premises or to make any repairs City is required to make.
• To assist Lessee with tenant improvements, both the Minimum Base Rent and Percentage Rent shall be abated until December 31, 2024.
Environmental Status:
Pursuant to CEQA Guidelines Section 15378(b)(5), administrative activities of governments that will not result in direct or indirect physical changes in the environment do not constitute a project.
Strategic Plan Goal:
Non Applicable - Administrative Item
Attachment(s):
1. Lease Agreement
2. Business Proposal
3. Presentation