HomeMy WebLinkAboutReso 67-17 New Amend 1 845 Embarcadero BoatyardLLCRESOLUTION NO. 67-17
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA, RESCINDING
A PREVIOUSLY APPROVED AMENDMENT #1 AND
APPROVING A NEW AMENDMENT #1 TO THE NEW LEASE AGREEMENT
FOR LEASE SITE 89/89W, LOCATED AT 845 EMBARCADERO
THE CITY COUNCIL
City of Morro Bay, California
WHEREAS, the City of Morro Bay ("City") is the lessor of certain properties on the Morro Bay
Waterfront described as City Tidelands leases and properties; and
WHEREAS, Boatyard LLC ("Tenant") has been the lessee of Lease Site 89/89W since 2006
and is a tenant in good standing; and
WHEREAS, on October 11, 2016, Tenant and City entered into that certain new master lease
agreement for the Lease Site (the "New Lease Agreement"); and
WHEREAS, City and Tenant wish to better resolve issues over a failing portion of the seawall
on the Lease Site and modify various provisions of the New Lease Agreement, including the
contingency provisions, by approving Amendment #1 of the New Lease Agreement for the Lease Site,
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay,
California, as follows:
1. Amendment #1 to the New Lease Agreement approved by the City Council on August
22, 2017, is hereby rescinded.
2. The attached new Amendment #1 to the New Lease Agreement is hereby approved.
3. The Mayor is hereby authorized to execute said Amendment #1.
PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular
meeting thereof held on the 12t" day of December, 2017 on the following vote:
AYES: Irons, Davis, Headding, Makowetski, McPherson
NOES: None
ABSENT: None
ABSTAIN: None
Ja ie L. Irons, Mayor
ATTEST•
ana Swanson, City Clerk
01181.0024/43 1 42 1.1
AMENDMENT #1 TO THE LEASE AGREEMENT FOR
LEASE SITE 89/89W, LOCATED AT 845 EMBARCADERO
This Amendment ("this Amendment #1") is made and entered into as of this 12�h day of December ,
2017, by and among the City of Morro Bay, a municipal corporation of the State of California,
hereinafter called "City," and Boatyard, LLC, a California limited liability company, hereinafter called
"Tenant." (Collectively, City and Tenant are sometimes referred to herein as the "Parties".)
WHEREAS, this Amendment #1 is to that certain Lease, which was signed on behalf of the Parties and
is effective as of October 11, 2016 (the "Master Lease");
WHEREAS, pursuant to the Lease Contingency set forth in Section 1.02 of the Master Lease, Tenant
may terminate the Master Lease under certain circumstances;
WHEREAS, Tenant believes at least one of the circumstances that would allow it to terminate the
Master Lease has occurred, but rather than exercise that right of termination, Tenant has proposed
changes to the Master Lease, under which that right to terminate will be modified, and Tenant will
proceed with the Rehabilitation Project (as defined in the Master Lease with the new Exhibit B as
replaced below);
WHEREAS, Tenant has already received the necessary approvals from City for a Concept Plan and
Precise Plan for the Rehabilitation Project;
WHEREAS, Tenant has timely filed (as required by the Master Lease) a complete application with the
California Coastal Commission for a revised Coastal Development Permit for the Rehabilitation Project,
as approved by the Concept Plan and Precise Plan; and
WHEREAS, the Parties desire to amend the Master Lease so the Rehabilitation Project will proceed.
NOW THEREFORE, Tenant and City agree, as follows:
1. Unless expressly stated herein, words used in this Amendment #1 shall have the same
meaning as stated in the Master Lease, except to the extent the context requires otherwise.
2. The foregoing recitals are incorporated into this Amendment #1 as true and correct.
3. The Parties acknowledge and agree the Current Lease Agreement and all of the terms and
conditions of the Current Lease Agreement are in full force and effect, including but not limited
to the tolling period to bring any claim or action until the Commencement Date of the Master
Lease.
4. Exhibit B to the Master Agreement is replaced, in its entirety, by the Exhibit B, attached hereto
and made a part hereof by this reference. Each reference to Exhibit B in the Master Lease shall
be deemed to be a reference to the Exhibit B attached hereto. Furthermore, the parties agree
that all references in the Master Lease to the Rehabilitation Project shall be deemed to be a
reference to the new Exhibit B attached hereto.
01181.0024/415133.14 Page 1 of 6
5. Section 1.02 of the Master Lease is hereby amended in its entirety to read as follows:
Section 1.02 Lease Contingency.
TENANT shall have the right to give CITY written notice of termination of this Lease, if, (i)
all Permits (as defined in Subdivision 13.03 A.) cannot be obtained without any
material design and/or structural change required to the Rehabilitation Project on or
before October 31, 2018; and/or (ii) the seawall/revetment on Lease Site 89/89W has
collapsed prior to TENANT'S contractor's commencement of the Rehabilitation Project for
the repair of the seawall/revetment to the extent a material design and/or structural change
is then required to repair the seawall/revetment; and/or (iii) TENANT does not close the
escrow for the purchase of the Otter Rock Cafe with the current subtenant on Lease Site
90/90W. Upon the occurrence of any of those contingencies, TENANT may deliver
written notice to CITY of termination of this Lease, and neither Party shall have any further
obligation to the other Party and this Lease shall be null and void, and the Current
Lease Agreement shall continue in full force and effect. The parties agree, prior to the
effective date of this Amendment a timely application has been filed with City and with
the California Coastal Commission.
The parties acknowledge and agree nothing in this section shall obligate TENANT to file
any appeal or resubmit any application to any applicable governmental agency after such
governmental agency makes a finding, provides a notice, or issues a Permit with some
item that would require any material design or structural change to the Rehabilitation
Project.
Notwithstanding anything contained in the Lease, including this section above, prior to the
commencement of the Rehabilitation Project, TENANT shall cause TENANT'S contractors
to make a one-time maintenance on the temporary repairs TENANT and TENANT'S
contractors deem necessary to the previously installed temporary seawall repairs
performed by Associated Pacific Contractors. CITY acknowledges and agrees all
maintenance to the temporary repairs of the seawall on the Premises shall not: (i)
constitute commencement of the Rehabilitation Project; (ii) create any legal obligation of
TENANT to construct the Rehabilitation Project, except as expressly set forth in the Lease;
(iii) constitute any guarantee or representation by TENANT and/or TENANT'S contractors,
whatsoever, including, but not limited to, for how long the maintenance and/or the
temporary repairs will be adequate and sufficient; (iv) obligate TENANT or TENANT'S
contractors to perform any additional maintenance, repairs, or other work; or (v) void or
limit, in any manner, TENANT'S right to exercise TENANT'S contingencies to terminate
the Lease set forth in this section above.
6 . Section 1.03 of the Master Lease is hereby amended in its entirety to read as follows:
Section 1.03 Effective Date and Term.
The effective date of this Lease Agreement shall be the date it has been signed on behalf of
CITY, as long as it has also been signed on behalf of TENANT. The term of this Lease
shall be a period of 47 years (the "Term"), commencing on the first day of the complete
calendar month one hundred eighty (180) days following TENANT'S receipt of all of the
"Permits," as defined in Section 13.03 A. (the "Commencement Date"). Notwithstanding the
foregoing, TENANT shall have the right to terminate this Lease beginning on the thirtieth
(30`h) year of the Lease by delivering written notice of termination to CITY at least 12
01181.0024/415133.14 Page 2 of 6
ry
7.
E:
D
months prior to the termination date in TENANT'S written notice. Unless sooner terminated
as herein provided, the Term shall terminate without notice on the forty seventh (47th)
annual anniversary after the Commencement Date. Within 5 days after the
Commencement Date, the parties agree to sign a Commencement/Termination Date
Memo, substantially similar to Exhibit C, attached hereto.
The first sentence of Section 2.01 of the Master Lease is hereby amended to read as follows:
TENANT agrees to pay to City a minimum guaranteed annual rental for the use and
occupancy of the Premises, in an initial amount of $45,000 per year (the "Minimum Rent"),
payable in advance in equal semiannual installments on January 1 and July 1 each
year during the term of the lease.
Section 2.01 is amended by adding a last sentence thereto to read as follows:
Notwithstanding the foregoing and in partial consideration of completion of the
Rehabilitation Project and Release, established by Section 7.11 and changes made to
Section 1.02 and Subdivision 13.03 A. by that certain Amendment #1 to this Lease,
effective December 12, 2017, CITY agrees TENANT shall not be required to pay any
Minimum Rent or Percentage Rent (defined below) for the 180 -day period commencing on
the Commencement Date.
Section 2.02 of the Master Lease is hereby amended in its entirety to read as follows:
Section 2.02 CPI Adjustment to Annual Minimum Rent.
The Parties agree, as of every July 1 following the Commencement Date (each,
a "CPI Adjustment Date"), except as outlined in Section 2.03 hereof, the annual Minimum
Rent shall be adjusted in direct proportion to any upward or downward movement in the
then current Consumer Price Index from the Consumer Price Index applicable on the
Commencement Date (Base Index), but, in consideration of the reasons set forth in Section
1.02, above, that increase or decrease shall not exceed 1.0% in any one year; provided,
that the parties agree, if:
(1) the CPI increases or decreases over 6%, then the maximum CPI
increase a decrease shall be 1.0%, plus half of the increase or decrease over 6%. As an
illustration only, if the CPI increase is 8%, then the new CPI rent calculation would be one
half of the difference between 6% and 8%, or 1%, added to the maximum 1.0% for a new
2.0% CPI. The percentage adjustment for any given year shall be based on the monthly
average Index for the calendar year immediately preceding the CPI Adjustment Date as
compared with the Base Index. The Consumer Price Index referred to herein is the
Consumer Price Index (all items indexes, all urban consumers) for Los Angeles - Anaheim -
Riverside, California, compiled and published by the United States Department of Labor,
Bureau of Labor Statistics, 1982-84 Base Year = 100 (the "Index"); and
(2) the United States Department of Labor, Bureau of Labor Statistics, shall
cease to compile and make public the Index as now constituted and issued, but shall
substitute another index in its place, then said substituted index shall be used for the
purpose of adjusting the Minimum Rent for the Premises. If the Index is changed so that
the base year differs from that in effect on the Lease Commencement Date, then the Index
shall be converted in accordance with the conversion factor published by the United States
Department of Labor, Bureau of Labor Statistics.
01181.0024/415133.14
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10. Subdivision 2.03 D. is amended and restated in its entirety to read as follows:
In partial consideration of completion of the Rehabilitation Project and Release, established
by Section 7.11 and changes made to Section 1.02 and Subdivision 13.03 A. by that certain
Amendment #1 to this Lease, effective December 12, 2017, the new Minimum Rent for
the five-year period commencing on each Appraisal Adjustment Date shall be the greater
amount of sixty-five percent (65%) of the average of the total yearly Rent payable during
the previous five-year (5 -year) period (as set out in paragraph C. above) or four percent
(4.0%) of the fair market value of the Premises (as established in paragraph A. above) for
the twenty (20) years following the Commencement Date, and then that will increase to the
greater amount of sixty-five percent (65%) of the average of the total yearly Rent payable
during the previous five-year (5 -year) period (as set out in Paragraph C. above), or six
percent (6.0%) of the fair market value of the Premises (as established in Paragraph A.
above) for the remainder of the Term. The new Minimum Rent shall be divided by two to
determine the semiannual payments and shall be paid by TENANT to CITY on the first of
each January and July thereafter. That new Minimum Rent shall be adjusted each following
year in proportion to any increase in the Consumer Price Index as set out in Section 2.02 of
this Lease. The base index shall be adjusted upon each Calculation of new Minimum Rent
as set out in this section so that the Base index for CPI adjustment shall be the Consumer
Price Index for January 1 of the year of the calculation of new Minimum Rent.
11. Section 2.04 is amended to add the following new paragraph after the end of the first
paragraph:
For an illustration only, if we assume the Minimum Rent payable by TENANT is $48,000 and
TENANT'S total yearly Gross Sales are $1,800,000, then the Percentage Rent payable by
TENANT to CITY would be $6,000 calculated as follows: $54,000 (3% of $1,800,000) less
$48,000 (Minimum Rent already payable by TENANT).
12. The following new Section 2.07 is added to the Master Lease to read as follows:
Section 2.07 Semi -Annual Credit
In partial consideration of completion of the Rehabilitation Project and Release, established by
Section 7.11 and changes made to Section a" Subdivision 13.03 A. by that certain
Amendment #1 to this Lease, effective December 12, 2017, CITY agrees to credit against
each semi-annual payment due to CITY pursuant to this Lease $19,800 for twenty
consecutive semi-annual payments due to CITY, commencing with the first f u I I semi-
annual payment due after the Commencement Date; provided, that if the semi-annual
Minimum Rent payable is less than an applicable semi-annual credit. that excess credit shall not
be refunded or carried over as a credit for any subsequent semi-annual payment.
13. Section 3.01 of the Master Lease is hereby amended in its entirety to read as follows:
Section 3.01 Permitted Uses.
The Premises shall, during the Term, be used for the purpose of operating and conducting
thereon and therein the uses permitted by, and in compliance with (i) Conditianal Use
Permit (CUP) 30-99, A00-045 to CUP 30-99, CUP 15-99, CUP 16-01, CUP 28-02, Coastal
Development Permits (CDP) CDP 3-99-064, CDP 3-93-017-A2, and CDP 3-17-0564
when issued), and (ii), if issued, any new CUP or CDP number(s) or Minor Use Permits
or amendment to any or all of those approvals, after a request from TENANT for the
new CUPs, CDPs, Minor Use Permits or amendments, and for no other purpose �J 4�1
01181.0024/415133.14 Page 4 of 6 xi ��
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(collectively, the "Entitlements"). The Parties agree and acknowledge all the terms and
conditions contained in this Lease shall be deemed to be materially consistent with the
Conditions of Approval as set forth in the Entitlements. On the Commencement Date, the
Entitlements include the following permitted uses: retail sales and service, coffee shop,
wine tasting room, beer and wine sales, boat excursion ticket sales, passenger for hire
operations, boat rental and berthing, kayak rentals and launches, and public and private
restrooms. In addition, the following uses are allowed, pursuant to issuance of one or
more Minor Use Permits, as applicable: the existing office space for the business
located on Lease Site 90/90W and one live -aboard unit on the Premises; provided, that
as to the live -aboard, only to the extent permitted by Morro Bay Municipal Code
("MBMC") section 15.40. Upon receipt of a complete application and payment of
processing fees for necessary Minor Use Permit(s), CITY'S Community Development
Director shall, in good faith, review the application with the goal of finding a way, within the
provisions of the applicable law, to approve the Minor Use Permit(s). Notwithstanding the
foregoing, it is acknowledged and agreed by the Parties, TENANT has had under the
Current Lease Agreement one live -aboard permit issued by the CITY and TENANT'S
right to a live -aboard permit from the CITY shall be "grandfathered" and continue even
in the event the CITY amends the MBMC. The Parties also agree nothing in this Lease
limits TENANT'S legal ability to seek a revision to any land use entitlement to add or delete
any uses to be allowed on the Premises.
14. The first sentence in Section 3.03 is replaced in its entirety with the following:
TENANT'S failure, in good faith, to actively and diligently conduct, or TENANT'S failure, in
good faith, to actively and diligently pursue TENANT'S subtenants to actively and diligently
conduct, the business authorized herein, constitutes a breach of this Lease and shall, at the
option of CITY, terminate this Lease after all applicable notice periods and cure periods have
expired pursuant to this Lease.
15. The first sentence of Section 3.07 of the Master Lease is hereby amended to read as follows:
TENANT shall, at no cost to CITY, comply with all of the requirements of all local, municipal,
county, state and federal authorities now in force, or which may hereafter be in force,
pertaining to the Premises, and shall faithfully observe in the use of the Premises all local,
municipal, county, state and federal statutes, laws, rules, regulations and orders now in force
or which may hereafter be in force, including, but not limited to, payment of prevailing wages
as required by law (collectively, "Legal Requirements"); provided, that TENANT shall not be
required to comply with any Legal Requirement imposed by CITY that would substantially
deprive TENANT of a material benefit under this Lease, unless the Legal Requirements have
been imposed or required by a county, state or federal authority or to preserve public health
and safety and the latter are applied to similar businesses within CITY'S jurisdiction.
16. Subdivision 13.03 A. of the Master Lease is hereby amended in its entirety to read as
follows:
A. Unless TENANT has delivered to CITY notice of termination of this Master Lease
pursuant to Section 1.02, within sixty days after TENANT'S receipt of all approvals of the
Rehabilitation Project from the California Coastal Commission, as evidenced by a "Notice of
Intent Issue a Permit" and a final Coastal Development Permit, TENANT shall file complete
applications for all necessary permits, permissions and certifications for the Rehabilitation
01181.0024/415133.14 Page 5 of 6 d��,,
Project, as then currently approved by CITY and the California Coastal Commission, from all
other applicable governmental agencies, including, but not limited to, the Army Corps of
Engineers and the Central Coast Regional Water Quality Control Board, where required.
Unless TENANT has delivered to CITY notice of termination of this Master Lease
pursuant to Section 1.02, within forty-five days after receipt of all necessary land use
approvals from (i) CITY, including any changes to the Concept Plan and Precise Plan that
may be required due to any other governmental agencies' approval, and (ii) all the
governmental agencies listed above, TENANT shall file with CITY'S Community
Development Department all necessary complete construction plans for CITY to issue valid
building and other construction related permits for the Rehabilitation Project, as then
currently approved by all applicable governmental agencies. All necessary building and
other land use permits and approvals from CITY and all other applicable governmental
agencies, including, but not limited to, the California Coastal Commission, the Army Corps
of Engineers and the Central Coast Regional Water Quality Control Board, are hereinafter
referred to collectively as the "Permits." For purposes of this Lease, "complete application"
shall mean submission to the applicable governmental agency a satisfactory completed
application form for the Rehabilitation Project, as then currently approved by all applicable
governmental agencies, as required by that governmental agency, along with the payment of
the fees required by that governmental agency.
17. The second sentence of Section 13.04 is replaced in its entirety with the following:
CITY shall process and grant, if legally possible, a request from TENANT to waive any
requirement TENANT comply with Sections 1803.2 through 1803.6, J 104.3 and J 104.4 of
the 2016 California Building Code.
18. Except as expressly stated herein, all provisions of the Master Lease shall remain in full
force and effect.
19. The effective date of this Amendment #1 is the date first written above.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment #1 as of the date written
above.
CITY OF MORRO BAY
By:
YARD;
amie L. Irons, Mayor
AS
ORM:
h W. Pannone, City Attorney
ATTEST:
VJNV�rtVAAA� C9
na Swanson, City Clerk
BOAT, LLC
By:
Page 6 of 6
Cliff Manager
01181.0024/415133.14
Branch,