Staff Report.LG Theatre Agreement
PREPARED BY: Arn Andrews
Assistant Town Manager
Reviewed by: Town Manager, Town Attorney, Economic Vitality Manager, and Finance Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 06/28/2022 ITEM NO: 3
DATE: June 21, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Authorize the Town Manager to Negotiate and Execute a Lease Agreement
with CineLux Theatres Co. LLC for the Operation and Program Management
of the Los Gatos Theatre in Substantially the Form Presented
RECOMMENDATION:
Authorize the Town Manager to negotiate and execute a Lease Agreement with CineLux
Theatres Co. LLC for the operation and program management of the Los Gatos Theatre in
substantially the form presented.
BACKGROUND:
On November 16, 2021, the Town Council authorized the Town Manager to negotiate and
execute a Donation Agreement for the Los Gatos Theatre Donation Property and issue a
Request for Proposals (RFP) for the management and programming of the theatre. On
December 30, 2021, the Town completed the transfer of the Los Gatos Theatre property to the
Town’s ownership.
On February 4, 2022, staff released a RFP for the Operation and Program Management of the
Los Gatos Theatre (Attachment 1). The RFP sought qualified individuals or firms to operate and
manage the Los Gatos Theatre (Theatre) on behalf of the Town. The RFP stressed that
respondents should advance the theatre’s long-term financial viability while advancing the
following goals:
1. Preservation of the Theatre as one of the most significant historical, cultural and
architectural resources in the Town of Los Gatos;
2. Enrichment of the community through the promotion and presentation of high-
quality entertainment, cultural events, and community education programs of
interest to all segments of the community;
PAGE 2 OF 4 SUBJECT: Los Gatos Theatre Lease Agreement DATE: June 21, 2022
BACKGROUND (continued):
3. Identification of the Theatre as a central destination point for cinematic and
performing arts which drives economic activity in downtown Los Gatos and the
broader region; and
4. Long-term financial sustainability.
By the March 4, 2022 RFP submission deadline, staff received proposals from the following
three respondents:
• Guggenheim Entertainment
• Pruneyard Cinemas LLC
• CineLux Theatres Co. LLC
The RFP review panel consisted of the Assistant Town Manager, Economic Vitality Manger, and
Director of Parks and Public Works. After careful consideration of the RFP responses, the
review panel selected CineLux Theatres Co. LLC as the best option for the management and
operation of the Theatre. CineLux has over 55 years of theatre experience and is the largest
independent regional theatre operator in the South Bay. CineLux currently operates seven
locations with 53 screens. In addition, CineLux has demonstrated the successful acquisition and
operation of seven previously closed or failed motion picture theatres.
DISCUSSION:
Provided below are the salient elements of the draft Lease Agreement (Agreement) staff is
utilizing as the basis of agreement between the Town of Los Gatos and CineLux Theatres Co. LLC
(Attachment 2).
Agreement Elements Comments
Term Five (5) year initial agreement with two (2) five-year
options.
Theatre Management CineLux would operate and manage the Theatre
independently of Town in compliance with agreed upon
performance expectations and Town, state, and federal
rules, regulations, and laws. The nature of this
relationship is that of an independent contractor.
Theatre Programming Professional film programming shall be a prioritized use
in the Theatre.
Profit Sharing Town shall receive 5% of the Theatre’s gross revenue
annually.
PAGE 3 OF 4 SUBJECT: Los Gatos Theatre Lease Agreement DATE: June 21, 2022
DISCUSSION (continued):
Agreement Elements Comments
Monthly Rent - For the first (1) year after the Delivery Date, Cinelux
shall pay no Rent for the Premises. The Delivery Date is
the date that CineLux assumes responsibility for the
Theatre under the Agreement.
- For the second (2) year after the Delivery Date, Cinelux
will pay base rent of $5,000 per month.
- In year three (3) after the Delivery Date, Cinelux will
pay monthly rent of $10,000 per month.
Annual Reporting - An annual financial report for Cinelux’s previous fiscal
year.
- An annual narrative report on the operations of the
Theatre for the previous fiscal year.
- A report assessing the status of physical condition of
the Theatre, preventive maintenance activities
completed, and any needed Capital Replacements.
- Cinelux’s proposed budget for the Theatre operations
and maintenance for the current fiscal year.
Town, Non-profit, and Community-
Based Organization Theatre Use
- Not less than 6 times per year, Cinelux
shall make the Theatre available for rental to Los Gatos
community-based organizations and non-profit
organizations at no cost.
- Cinelux shall maintain a tiered fee structure that
includes discounted rates with specified eligibility criteria
for Los Gatos community-based organizations and non-
profit organizations.
- Not less than 2 times per year, Cinelux shall make the
Theatre available to the Town at no cost.
Maintenance & Repairs - Cinelux shall be responsible for all routine daily
maintenance of the interior shell of Theatre Facility.
- Cinelux shall be responsible for the routine and
preventive maintenance services of all building systems.
- As stated in Exhibit D, Maintenance Matrix, to the Draft
Agreement (Attachment 2), Town shall be responsible for
the structural foundation, bearing and exterior walls, and
subflooring among other items
PAGE 4 OF 4 SUBJECT: Los Gatos Theatre Lease Agreement DATE: June 21, 2022
CONCLUSION:
Staff recommends that the Council authorize the Town Manager to negotiate and execute a
Lease Agreement with CineLux Theatres Co. LLC for the operation and program management of
the Los Gatos Theatre.
COORDINATION:
This staff report was coordinated with the Town Manager, Town Attorney, Economic Vitality
Manager, Director of Parks and Public Works, and Finance Director.
FISCAL IMPACT:
Income derived from this agreement will be deposited to a Special Revenue Fund and would be
utilized for the ongoing capital needs of the Theatre.
ENVIRONMENTAL ASSESSMENT:
In accordance with CEQA Guidelines Section 15301, this lease is categorically exempt from
CEQA because it is a lease of an existing structure and will involve negligible expansion of an
existing structure.
Attachments:
1. Los Gatos Theatre RFP
2. Draft Lease Agreement