Staff Report.Los Gatos Theatre Lease Agreement 10-4-22
PREPARED BY: Arn Andrews
Assistant Town Manager
Reviewed by: Town Attorney and Interim 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: 10/04/2022 ITEM NO: 13
DATE: September 28, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Adopt Final Lease Agreement with CineLux Theatres Co. LLC for the Operation
and Program Management of the Los Gatos Theatre
RECOMMENDATION:
Adopt final Lease Agreement with CineLux Theatres Co. LLC for the operation and program
management of the Los Gatos Theatre.
BACKGROUND:
On June 28, 2022, the Town Council authorized 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 (Attachment 1). Since then, the
Town and CineLux (“Parties”) have been finalizing the Lease Agreement and have reached
consensus on a final draft agreement. Staff believes Council should be apprised of one element
of the final draft which differs from the agreement presented to Council in June.
DISCUSSION:
Staff believes maintaining stable management of the Theatre will be an important element of
the Theatre’s long-term financial sustainability and success. As such, the Parties acknowledge
that some form of minimum profitability needs to be achieved by CineLux. In order to address
minimum profitability, Section 6.9 has been added to SECTION 6, “Rent and Monetary
Obligations.”
6.9 Minimum Profitability of Commercial Theatre Operations. Both CineLux and
Town recognize that the long-term financial stability and profitability is required for the
success of Theatre operations. CineLux requires minimum annual net income of One
PAGE 2 OF 2 SUBJECT: Final Draft Theatre Lease Agreement DATE: September 28, 2022
DISCUSSION (continued):
Hundred Thousand Dollars ($100,000) (“Minimum Net Income”) of Theatre for the
contractual Rent and Monetary Obligations to be fully obligated and payable.
Therefore, the parties may agree to modify the annual Rent and Monetary Obligations
to ensure a Minimum Net Income of $100,000 annually. Failure of CineLux to achieve
this dollar amount of Minimum Net Income shall constitute adequate grounds for
Termination of this Lease under Section 15.
The $100,000 Minimum Net Income was derived from a review of proforma financial
statements utilizing historic attendance levels. In the event the Minimum Net Income isn’t
achieved the parties agree to review the established annual rent at the time and the Town’s 5%
Gross Revenue share.
CONCLUSION:
Adopt final Lease Agreement with CineLux Theatres Co. LLC for the operation and program
management of the Los Gatos Theatre.
COORDINATION:
This staff report has been coordinated with the Town Manager and Town Attorney.
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. June 28 2022 Staff Report
2. Final Draft Theatre Lease Agreement