Although public opponents to the deal voiced their displeasure loudly, the city council OK’d a rent deferral that would allow Malibu Lumber Yard mall owners to defer up to $1.5 million in rent, which must be paid back by 2025, with no interest.
By Jonathan Friedman / Special to The Malibu Times
Some are calling it a “bailout.” Councilmember Jefferson Wagner called it “forbearance.” And most city officials are calling it a “rent deferral.” On Tuesday night, the city council voted unanimously to allow Malibu Lumber LLC, the owner of the Malibu Lumber Yard mall, to pay less rent money to the city than the original lease agreement called for.
The 54-year lease agreement signed in 2008 calls for Malibu Lumber to pay an annual base rent of $925,000, with the rent increasing every five years by 5 percent. An added feature to the agreement is that Malibu Lumber pays additional money to the city based on the amount of income it receives from mall tenants. The council action on Tuesday will allow Malibu Lumber to defer some of that excess payment.
Malibu Lumber can defer up to $1.5 million in total and the money must be paid back by 2025, with no interest. Malibu Lumber officials did not attend the meeting. The city staff report stated that Malibu Lumber LLC heads Richard Weintraub and Richard Sperber have requested this deferral because of “significant expenses and unexpected delays in the completion of the [mall],” that the operation and maintenance of the site’s wastewater treatment system has cost five times more than expected, and the “downturn of the economy has also slowed the leasing of the site.”
“It is a deferral,” said Reva Feldman, city’s administrative services director. “It is not a loan. We aren’t giving money away.”
Mayor Pro Tem Sharon Barovsky defended the council decision by saying, “We’re partners with this guy [Weintraub] … whether you like to hear this or not, we are partners.”
Several people in the audience booed when Barovsky made her comment. The council heard from those rowdy attendees during the public comment portion of the meeting.
“What this comes down to, it is a gift of public funds,” Michael Sidley said. “You are basically being asked by a businessperson who negotiated an arm’s lengths transaction. He made a decision. He had the full [help] of every consultant he could have hired. And he made a bad one [decision]. And it is not our fault. It is not our responsibility. And he is asking us to make it our responsibility.”
Realtor Paul Spiegel asked why the city had any obligation to help Malibu Lumber LLC.
“I know the city made a good deal, apparently, in negotiating this lease. But I don’t understand why the city is better off. I understand why the lessee is better off. But I don’t understand why I am better off.”
Barovsky referred the question to Alan D. Kotin, a business consultant for the city. He said, “This lessee went well beyond the requirements of the transaction by staying in there in the face of significant delay and much higher costs and as a consequence of that, his position has been eroded and he needs some short term relief. It seems to be appropriate to be reciprocal.”
Mayor Andy Stern said he was OK with the city receiving less money, because the city was receiving more money from Malibu Lumber than he ever expected it would receive anyway. And, he said, many landlords throughout the country are having to reduce leases for their tenants.
“Sorry that there’s a deferral of rent for awhile,” Stern said. “But it’s like, I don’t want to say found money because it’s hard-negotiated money, but it’s far more than we ever anticipated when we purchased the property … We’re far better off even if we do this.”
Councilmember Wagner, who asked a Thousand Oaks real estate company to examine the deal, said the company told him that not giving Malibu Lumber the relief could lead to a worse situation.
“Their idea was that if Weintraub and Sperber don’t get some kind of bailout [from] the city … that Weintraub and Sperber will still decide to keep the property because they’ve put $20 million of their capital into it, and what they’ll have to end up doing is squeezing the tenants,” Wagner said.
The council members asked that it be included in the final deal for the rent deferral that Malibu Lumber cannot ask for any more changes to the lease agreement.
Wagner said, “This is it. You get one chance at a bailout.”