C7N - Approve 3-year Lease Renewal for Cafe

Resolutions - C7 N

COMMISSION MEMORANDUM

RECOMMENDATION

The Administration recommends that the Mayor and City Commission adopt the Resolution approving Amendment No. 2 to the Lease Agreement with Colony Theater Café, Inc. d/b/a Segafredo Zanetti Espresso, for continued use of approximately 1,092 square feet of City-owned property at 1040 Lincoln Road, plus additional storage and dumpster space.

BACKGROUND/HISTORY

The City of Miami Beach holds fee simple ownership of the Colony Theatre Condominium, located at 1040 Lincoln Road. This property consists of approximately 820 square feet of ground-floor restaurant space (“Restaurant Space” or “Unit 1”) and 272 square feet of concession and storage area (“Concession Area” or “Unit 2”), totaling roughly 1,092 square feet (collectively, the “Demised”). Complementing this asset, the City also owns a nearby surface parking lot at 1100 Lincoln Road, which includes a 348 square foot area allocated for storage and dumpster use (the “Dumpster/Storage Area”). Both the Demised Premises and the Dumpster/Storage Area fall within the scope of the Lease Agreement.

On May 25, 2018, pursuant to Resolution No. 2017-29834, the City executed a new Lease Agreement (“Lease”) with the Colony Theater Café, Inc., a Florida Corporation d/b/a Segafredo Zanetti Expresso (“Tenant”). The Lease included an initial term of three years commencing on March 1, 2018 and expiring on February 28, 2021 and two (2) three year renewal options. The first renewal (March 1, 2021 to February 28, 2024) was exercised and finalized by Amendment No. 1 pursuant to Resolution No. 2021-81800, which shifted rent to a percentage-of-gross- receipts model and abated certain operating expenses and real estate taxes in response to the significant and sustained reduction in tenant revenues resulting from the COVID-19 pandemic.

As the first renewal term neared expiration, both parties sought to build on their longstanding relationship and began negotiations for a second renewal. To ensure uninterrupted operations

while negotiations continued, the City and Tenant agreed to a month-to-month lease extension from March 1, 2024 through July 31, 2024, as set forth in a Letter Agreement dated January 17, 2024.

During the extension period, the City and Tenant participated in several rounds of discussions and proposal exchanges regarding the terms of a further renewal. Although a final amendment was not executed before the expiration of the month-to-month extension, the Tenant formally notified the City of its intention to continue its tenancy and exercise the second renewal option (see Exhibit “A”).

The proposed Second Amendment to the Lease Agreement reflects this mutual intent and incorporates updated terms to address current economic conditions, as described below.

Key terms of Amendment No. 2 include:

• · Premises and Parking Lot Use: The Lease covers continued Tenant use and operation of the restaurant, concession, and storage spaces at 1040 Lincoln Road, as well as use of the Dumpster/Storage Area and associated parking lot at 1100 Lincoln Road.

• · Term: Second and final three (3) year renewal term, commencing retroactively on March 1, 2024 and expiring February 28, 2027.

• · Financial Terms: o (February 28, 2024 – July 31, 2025): Rent equal to eight percent (8%) of gross receipts, with all prior fixed base rent, insurance, real estate taxes, and Dumpster/Storage Area fees abated. o (August 1, 2025 – February 28, 2027): Rent equal to six percent (6%) of gross receipts. o No separate payments due to the City for insurance, real estate taxes, or Dumpster/Storage Area during the Second renewal term.

• · Reporting: Tenant continues to provide annual audited statements of gross receipts, as defined in the Lease, to assure transparency in rent calculations.

• · Security: Tenant’s existing Irrevocable Letter of Credit in the amount of $50,187.51 will remain in place as security for performance.

• · Termination for Convenience: Either party may terminate the Lease without cause upon sixty (60) days’ written notice to the other.

ANALYSIS

The proposed Second Amendment supports the City’s goal of maintaining an active, long-term tenant at this important municipal property, while responding to evolving economic conditions. By moving to a percentage of gross receipts rent structure with an eight percent (8%) in year one and six percent (6%) for most of years two and all of year three, the City’s rental income is directly aligned with the café’s actual business performance. This arrangement provides needed relief to the Tenant in light of recent revenue challenges, while annual audited statements maintain transparency.

In addition to these financial terms, the mutual sixty-day termination provision adds important flexibility for both parties should market conditions change. With the Letter of Credit remaining in place, the City’s financial interests continue to be protected. Collectively, these terms help ensure

continued activation of Lincoln Road and support the City’s cultural and fiscal objectives.

FISCAL IMPACT STATEMENT

The Second Amendment ensures the City does not incur financial losses, as rental income remains directly tied to the café’s actual sales, and there is no obligation for the City to subsidize the tenant. Importantly, the Tenant remains fully responsible for all ongoing charges, including utilities, maintenance, and any other costs of occupancy. The existing requirement for an annual audited statement of gross receipts strengthens rent compliance, while the existing Letter of Credit continues to secure City interests. This structure maintains a dependable revenue stream for the City while limiting financial exposure.

Does this Ordinance require a Business Impact Estimate? (FOR ORDINANCES ONLY)

If applicable, the Business Impact Estimate (BIE) was published on: See BIE at: https://www.miamibeachfl.gov/city-hall/city-clerk/meeting-notices/

FINANCIAL INFORMATION

CONCLUSION

The Administration recommends that the Mayor and City Commission adopt the Resolution approving Amendment No. 2 to the Lease Agreement with Colony Theater Café, Inc. d/b/a Segafredo Zanetti Espresso, for continued use of approximately 1,092 square feet of City-owned property at 1040 Lincoln Road, plus additional storage and dumpster space. This Amendment will (i) approve the second and final three-year renewal term of the Lease, retroactive to March 1, 2024 and expiring February 28, 2027; (ii) update the financial terms during the renewal term, with rent set at eight percent (8%) of gross receipts in the first year and six percent (6%) for most of year two (2) and all of year three (3); (iii) include a mutual sixty-day termination right; and further, authorizing the City Manager to finalize and execute the Amendment.

Applicable Area

South Beach

Was this Agenda Item initially requested by a lobbyist which, as defined in Code Sec. 2-481, includes a principal engaged in lobbying? No

If so, specify the name of lobbyist(s) and principal(s):

Department

Facilities and Fleet Management

Sponsor(s)

Co-sponsor(s)

Condensed Title

Amendment 2 w/ Colony Theater Cafe (aka Segafredo), 1040 Lincoln Road. FF

Previous Action (For City Clerk Use Only)