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Report regarding a resolution approving a lease agreement with Bar Antz, LLC (DBA Bitters & Bottles) for the commercial space, kitchen, and rear garage at 240 Grand Avenue. (Katie Donner, Management Analyst I)
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RECOMMENDATION
Recommendation
Staff recommends City Council adopt a resolution approving a lease agreement with Bar Antz, LLC, a California Limited Liability Company doing business as Bitters & Bottles, for the commercial space, kitchen, and rear garage at 240 Grand Avenue.
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BACKGROUND
In May 2024, the City acquired three properties in the Downtown: 226-230 Grand Avenue, 232-238 Grand Avenue, and 240-246 Grand Avenue. As part of these purchases, the City acquired six new commercial tenants, one of them being Bitters & Bottles.
Bitters & Bottles opened in 2013 at 240 Grand Avenue as a new kind of bottle shop, one dedicated exclusively to craft spirits and cocktail supplies. First time shopkeepers Joe & Meredith were drawn to South San Francisco’s historical downtown of small and independent businesses, its proximity to San Francisco and the Peninsula, and the concentration of people working in the area. After spending decades as a mothballed space, the interior of the commercial space at 240 Grand Avenue was demolished and rebuilt carefully, preserving the building’s original character and refreshing the interior with a modern update. Bitters & Bottles attracts customers from throughout the region to its retail shop here in South San Francisco and boasts a substantial online business, shipping throughout California.
Existing Lease
Bitters & Bottles’ lease with the property’s prior owners, Giffra Enterprises, expired on June 30, 2024 and is currently a holdover lease on a month-to-month basis with the tenant paying $4,600 per month (or $2.52 per square foot). Bitters & Bottles currently occupies 1,480 square at 240 Grand Avenue for its retail operation and 345 square feet at 244 Grand Avenue for office. The business also rents offsite storage to accommodate its shipping business.
Lease Proposal
Joe Barwin, the owner of Bitters & Bottles, sent the City a lease proposal in Fall 2024, which included vacating the 345 square feet at 244 Grand Avenue and instead expanding into the 285 square foot kitchen behind the retail space at 240 Grand Avenue and the 1,406 square foot garage at the rear of the property. Mr. Barwin proposes to use the kitchen and garage for warehousing. This would increase the total square footage leased to Bitters & Bottles from 1,825 square feet of retail space to 3,171 square feet of mixed retail and warehouse space.
Mr. Barwin is proposing a three (3) year lease at $4,000 per month (or $1.26 per square foot). He is also requesting a $45,000 tenant improvement (TI) credit to offset expenses related to electrical modernization, installation of refrigeration, interior construction and reconfiguration, and various façade improvements. The TI credit would be a credit against the rent owed each month, with one month of rent waived/credited upon Building Permit application submittal and the remaining months waived/credited once construction has commenced and until the $45,000 credit has been reached (over 11.25 months). The value of some of these improvements - electrical and façade improvements - would stay with the space and benefit any future tenant as well as the value of the building.
DISCUSSION
Staff worked with the City’s on-call commercial broker, Colliers, on determining market rate rent for Grand Avenue. The current market rate rent on Grand Avenue is roughly $2 per square foot for retail space, whereas warehouse space goes for about half as much, or $1 per square foot. Bitters & Bottles proposes to use 1,480 square feet for retail and 1,691 square feet for warehouse. At market rate, this would be $2,960 for the retail space and $1,691 for the warehouse, for a total of $4,651 total per month. While the proposed lease rate is below market, it presents a valuable opportunity to keep a flagship small business in South San Francisco. Mr. Barwin, along with many other small business owners in the Downtown, have expressed the significant reduction in foot traffic and volume of sales resulting from the pandemic and work from home arrangements that have substantially reduced the number of commercial office/life science workers patronizing the Downtown at lunchtime. Additionally, inflation has exacerbated an already difficult business climate.
Mr. Barwin is committed to keeping Bitters & Bottles in the Downtown, contributing to a vibrant retail mix and attracting destination shoppers to South San Francisco. However, replacing the lost office workers with residents and other visitors is still a work in progress and the proposed lease rate, which staff supports, reflects these trying times. Approving the proposed lease would affirm the City’s commitment to keeping the City’s newly acquired tenants in place and stable as part of this acquisition of the Giffra properties earlier this year.
FISCAL IMPACT
The City will earn $103,363.20 in rent revenue over the three-year lease period. Additionally, by vacating the 345 square foot retail store front at 244 Grand Avenue, the City will have an additional retail space to rent, providing an opportunity for additional revenue.
CONCLUSION
Approving the lease agreement with Bar Antz, LLC, doing business as Bitters and Bottles, will support a valued local business and contribute to the revitalization of Grand Avenue. The proposed lease terms generally align with market rate rents, address necessary property improvements, and reflect the economic realities facing small businesses in the area. By providing tenant improvement credits and adjusting rent rates, the City demonstrates its commitment to maintaining strong partnerships with its tenants and supporting the local economy. Staff recommends that the City Council adopt the resolution approving the lease agreement and authorize the City Manager to execute the agreement.