Loading...
HomeMy WebLinkAboutExhibit 12Exhibit No. 12 NO r 'r Sejour, LLC 3400 Via Lido Newport Bench, California 92663 (949) 310 -7698 May 10, 2007 Mr. Patrick Alford Mr. Jay Garcia Mr. Charles Spence City ofNewportSeach 3300 Newport Boulevard Newport Be" California 92663 Gentlemen: The purpose of this letter is to (i) summarize Sejour's current status regarding the Use Permit at 3400 Via Lida, (H7 request direction and relief to create a feasible, to rrWrary operating structure to prevent Sejour's demise while various issues in the permit are being addressed, and (iii) explore a permanent solution to permit Sejour to operate as a unique venue that it is contributing positively to the community. SS'our's Principals Scjour is owned and operated by Arthur and Carolyn Stockton, Arthur Stockton practiced law as a corporate finance and securities attorney. Carolyn. Stockton also practiced corporate law. Both are inactive members of the Arizona. bar. We co- founded Stockton Trust in the late 19801x, which eventually became the largest independent trust company in Arizona, and Valley Bank of Arizona in the late 1990's. We semi - retired in 1997 and moved to California, where we have maintained a residence since 1996. Our permanent residence is in Newport Beach on the Peninsula. Two of our children have attended Newport Harbor High School. Our daughter, Allison, is currently a senior at Newport Harbor High. She is the spokes model for Squeeze OC and OC Post magazines and is one of the stars of MTV's new Newport Beach series. The series films every weekend at our home and has filmed at Sejour as well. The series paints Newport Beach in a very positive light and as a desirable destination. Sejour is a family business started in September 2901. Both of our children work there. It has been our goal to make Sejour a unique, Newport Beach landmark. Sejour has donated its facilities and services to a number of charitable causes over the past 19 months, including Orangewood PALS and most recently the Newport Beach Film Festival. Our family has a strong interest and desire in promoting and maintaining the quality of life in Newport. Beach and on the Peninsula. i45 Sciour's Concert Sejour is the French word for "living room." Sejour is not a restaurant. We don't have traditional restaurant dining tables or kitchen facilities. Instead there are overstuffed safes in small living rooms with coffee tables. We believe that Sejour is in a category by itself, in the tradition of Europe. It is not a restaurant, bar or lounge but has characteristics of all three. It is meant to be a gathering place where people can essentially enter our "living roam" and enjoy good food, a glass of wine, a cordial or a Martini. It is a place to enjoy good conversation and great music. As the use permit is currently written, Sejour cannot successfully operate this business. Sejour has invested more than $600,000 over the past 19 months to find an operating structure that is both profitable and consistent with the spirit of the permit. Sejour believes that it has found that operating structure. However, while the operating structure maintains the spirit of the permit, the structure does not technically comply with the permit as it is currently written. These technical — issues could be addressed in the short term through a special use modification at the administrative level, or through securing special events permits while an amendment to the Use Permit is prepared. It should be noted that Sejour was provided with City Council minutes at the inception of its lease at 3400 Via Lido and knew some of the permit requirements. Sejour also met with one of the City Planners in 2006. However, the first time Sejour saw the itemized list of pmmt limitations was in connection with the administrative citation received on May 2°d. There were a significaut number of surprises on the list. It should also be noted that we are embarrassed about the misdirection of Sejour over the past few months. For the first 17 months of operation, Sejour (to the best of our knowledge) newer had any patron, police or neighbor complaints or problems. Unfortunately, that situation changed recently, Regrettably, Sejour hired two outside marketing firms to gain greater exposure in the marketplace. We were assured by these firms that they would bring a very high -end clientele consistent with our themes and with the goal to increase the popularity of our venue. While the program seemed successful initially, Sejour's popularity ballooned and we began to attract the wrong kind of business. Our early evening business began to fade and we were 14 with high -risk, late night patrons. Our revenues and profitability plummeted. Our relations with these marketing firms became turbulent. The first firm was fired in early March. The second firm was fired in late April. Know that we too were concerned about our direction, not to mention our own personal liability and our net worth. We sincerely and profusely apologize for the situation. We stumbled due to our inexperience. In the trailing 12 months ending 5/30/07, Sejour's total sales were approuimaWy $730,$71. The sales components break down as follows: 41% food, 36% `6k I wine%}mmpagne,17% cordials/liquor and 6% beer. Onsite sales are 78% of die total and retail males are 22% of the total. The offsite sales ratios as to food, wine, liquor and beer are 48% food, 52% winelchempagne. We do.not currently sell liquor or beer for ofisite consumption or events. Most of this business currently is generated by our event catering which canters around wine. Such events tend toward the same consumption ratios whether they occur on or off site While these ratios do not meet the technical requirements of the Use Permit for the period specified, we believe that they do meet the spirit of the guidelines. BOB Business at 3449 Via Lido The greatest challenge to the Use Permit as currently structured is retail sales. It has been explained to us that the Use Permit at 3400 Via Lido was originally crafted to create a wine store with a high class winehnartim bar for Dennis Overstreet, a prominent wine master with a similar operation in Beverly Hills. Notably, after three years of operations, the Overstreet venture was not successful at the location. What we have learned through experience is that it is virtually impossible to retail from 3400 Via Lido. A retail purchase Of the nature contemplated is typically consummated by a consumer who can conveniently drive up, shop for what is needed and complete a transaction in a relatively short period of time. This is not currently possible at 3400 Via Lido. Street parking is typically occupied. Consumers who try to park at the grocery store, even if they are willing to shop at the Fritz Duda shopping center, are accosted by the parking guard who threatens to tow their car if they cross Via Lido to the Village. While thm is plentiful parking available in our parking garage, and we validate, the distance becomes an obstacle for the shopping consumer. Accordingly, the consumer chooses other venues for their purchase, including Vans across the street, with easy parking and a very nice wine selection. Further, the Village has deteriorated as a retail destination in and of itself. There is virtually no foot traffic. The Village is run down. Most of the foot traffic is associated with the boat cruises. We benefit from the boat cruises in other ways, but it does not help our retail sates. In short, after 19 months of operations, our walk -in consumer retail Purchases total less than $ 10,000. We have more theft from the wine shelves than we have walk-up retail sales. Our effort to achieve retail sales has come from three primary sources. First, we achieve retail sales through onsite events. People will take the time to park in the garage if we are a destination for an event such as a wine dinner or wine tasting. These events are multiple and varied. We generate some of these internally. Many, however, are corporate events or events associated with the boats, such as rehearsal dinners or corporate receptions. Regardless of the source or type of event, these events are the primary way we display our wares and achieve offilte, sates. Second, we have a retail website called Winesaavy.com. This website is fairly new and we are on the learning curve. However, we believe that the website will grow to be an �p important part of our retail strategy going forward. incorporated into the website will be a local wine basket/gift service with cowity -wide delivery . Again, we believe that this can contribute greatly to our retail sales. Finally, our offsite planning and events service contributes significantly to our retail component. It is the largest component to date. We have done a number of offsite events, including corporate parties and residential wine events. We have a now residential Mansion facility coming online in August for corporate events, wine dinners, etc that also will be serviced through Sejour. 3400 Via LL &o Site Plan and Ug= The nature and direction of our retail component, and the functional obsolescence of a meaningful retail store in the Via Lido facility, renders more than one -half of the facility at 3400 Via Lido useless as the permit is currently structured Wine events, receptions, etc. are best suited to the Wine Salon component at 3400 Via Lido marked as Unit A-1 on the Site Plan. We found out for the first time last week that alcohol consumption and seating beyond three persons is prohibited in this area. This seems illogical as it is the only area in the facility suitable for wine tastings, foal pairings and similar events. To the best of our knowledge, the facility has always been utilized in this manner. It seems such events were at least contemplated in the portion of the Use Permit which contemplates special use permits. In short, prohibition of alcohol consumption and seating in the area marked A -1 on the site plan would literally cause Sejour to close its doors, as the remaining business would be insufficient to support the overhead. We must find an immediate solution to this problem R While Sejour has made a good faith effort to comply with the various ratios in the use Permit, it will continue to take time for it to achieve 80% in offsite males. Offsite sales are the fastest growing component of sales and onsite sales are stagnant as they are limited by the size of the facility. So we believe this ratio will be achieved eventually but we need more time. COWlgsion We have now addressed every issue involve} in the Administrative Citation dated May 5, 2007. Sejour is at least initially requesting the following immediate relief to continue operations: 1.) We need to explore some method of immediate relief to be able to utilize the remainder of our facility with more than 29 persons occupancy ongoing and for scheduled events, many of which are already scheduled throughout the remainder of the year. We cannot feasibly operate under current conditions. 2.) We need to work with won a timetable to meet the other ratios set forth in the Use Permit, which ratios do not directly address the time periods for measurement. Alternatively, we need to explore ratios that more reasonably reflect the reality of the operation and the severe limitations associated with retailing from 3400 Via Lido. 3.) We would like clarification that it is permissible to will close our doors and stop serving at 11:00 pm and 12:00 pm on the applicable days, but that patrons will have sufficient time to finish their food and drinks without being rushed out the door, and 4.) We would like to explore appropriate amendments to the Use Permit where needed to bring sejour's concept into complete compliance with the City's needs and requirements while permitting Sejour to operate profitably. Carolyn and I sincerely appreciate your collective efforts on our behalf. lO