CC MEETING: December 6, 2022
DATE: November 16, 2022
TO: Erin Rinehart, City Manager
FROM: Josh Giles, Development Program Manager
Ravi Shah, Director of Development Services
Marc Guy, Assistant City Manager
Title
Consider A Resolution Authorizing The City Manager To Execute A Lease With The MAD Concepts Group For The Use Of City-Owned Property For A Restaurant At 1309 South Broadway.
Body
BACKGROUND:
On January 6, 2015, the City Council authorized the purchase of 1309 South Broadway, which is located at the northeast corner of Broadway and Vandergriff Drive. At the time of the City’s purchase, the property was being used as an automobile repair facility and was considerably blighted. The City rehabilitated the property for conversion into a restaurant space. Since then, the property has been occupied by Monkey King Noodle Company and Cow Tipping Creamery. The building is currently vacant. The MAD Concepts Group has proposed opening a ‘Tacos and Avocados’ concept restaurant. The prospective tenant currently operates a variety of franchise restaurants and retailers, including Jakes’ Burgers and Floyd’s Barbershops.
The TOD Committee has recommended favorably for the prospective tenant and proposed restaurant concept.
The terms of the proposed lease are:
1309 South Broadway: 1,508 sf restaurant
Term: 5-year initial lease term
Extensions Three 5-year extensions available
Base Rental Rate: 0-12 months $0 per month
13-60 months $3,393 per month ($27/sf)
Year 6-10, $3,732 per month ($29.70/sf)
Year 11-15, $4,105 per month ($32.67/sf)
Year 16-20, $4,521 per month ($35.98/sf)
Monthly Property Expenses: Tenant pays 100% (Triple Net Lease)
Tennant Improvements: City Contribution: $0
Tenant Contribution: Estimated at $800,000+
The tenant contribution amount includes interior and exterior building improvements, patio improvements, furniture, fixtures, and equipment. All non-branded improvements that are permanently attached to the property will remain with the property, even if the tenant vacates the property in the future.
The prospective tenant has committed to pursuing an accelerated timeline for opening in the third quarter 2023.
FINANCIAL IMPLICATIONS:
The last lease rate for the property before it became vacant was $1,633.33/mo ($13/sf). The new lease rate ($27/sf with escalations) would more than double the previous lease rate, beginning in year two, with a projected revenue of $162,864 over the first five years of the lease. The City would benefit from the tenant paying for expenses related to property maintenance, insurance and the leasehold tax value. If all extensions are exercised by the tenant, the total projected revenue would be $904,344, plus the value of the property maintenance, insurance and leasehold tax value amounts.
IMPACT ON COMMUNITY SUSTAINABILITY:
The ‘Tacos and Avocados’ restaurant would bring an energetic dining concept to the Downtown area. It would provide a robust menu offering of food and beverage options, and activate the patio space with improvements that would enhance the property. With more locations planned, this ‘Tacos and Avocados’ location will have regional brand recognition and could serve as a destination for patrons throughout DFW.
STAFF RECOMMENDATION/ACTION DESIRED:
Staff recommends City Council approval of a resolution authorizing the City Manager to enter into a lease with the MAD Concepts Group on the City-owned property at 1309 South Broadway.