HomeMy WebLinkAboutReso 04-24 Approving Lease Amend for 3 Stacks (with Amend 1)
01181.0024/951513.1
AMENDMENT #1 TO THE BUILDING LEASE AGREEMENT
FOR LEASE SITE 69-70/69W-70W,
LOCATED AT 595 EMBARCADERO
This Amendment ("Amendment #1") is made and entered into as of this _day of ,
2024, by and among the City of Morro Bay, a municipal corporation of the State of California,
whereinafter called "Landlord," and Three Stacks and a Rock Brewing Company, LLC, a
California limited liability company, hereinafter called "Tenant." (Collectively, Landlord and Tenant
are sometimes referred to herein as the "Parties.")
WHEREAS, this Amendment #1 is to that certain Building Lease (the “Lease”), which was
approved by the City Council on April 12, 2022, and effective May 1, 2022; and
WHEREAS effective May 1, 2022, Landlord and Tenant entered into that certain Building Lease
(the “Lease”);
WHEREAS, the Landlord and Tenant, per Section 3.3 Percentage Rent of the Lease have
negotiated an equitable percent rent rate for the remainder of the lease term.
WHEREAS, Section 3.3 Percentage Rent of the Lease provides that if an agreement cannot be
reached on Percentage Rent then the Percentage Rent shall be the same as applicable in the
City’s Harbor Department Lease Management Policy (the “Policy”), which was adopted by the
Morro Bay City Council on July 14, 2020, and which provides “Bar/Lounge Beer & Wine Sales
10%” in Schedule B (Percentage Rent for Building Leases) of Exhibit E (Percent of Gross Sales
Rent Schedules A & B) to the Policy.
WHEREAS, Landlord will agree to a two year reduction starting May 1, 2023 by half in Bar/Lounge
Beer & Wine Sales from 10% to 5% upon Tenant compliance with Lease requirements to
demonstrate $120,000 of actual hard construction costs for previously agreed upon
improvements.
NOW THEREFORE, Parties agree, as follows:
1. After the second paragraph of Section 3.4.2 under Performance Standards of the Lease
will include the following paragraph:
Starting as of May 1, 2023, Tenant must furnish Landlord with a statement, to be certified by
Tenant as current, true and accurate, which must set forth the Gross Sales of each department,
sublessee, licensee and concession operating in, on or from the Premises for the previous 12
calendar months, ending June 30, just concluded, and the authorized deductions, if any,
therefrom; and with it Tenant must pay to Landlord the amount of the Percentage Rent, which is
due to Landlord as shown thereby. Tenant will be responsible for percentage rent from Tenant’s
gross sales at the following rates in addition to the annual rent.
A. May 1, 2023 through April 30, 2025:
Restaurant Sales 5%
Bar/Lounge Beer & Wine Sales 5%
Merchandize 5%
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B. May 1, 2025 through end of Lease Term:
Restaurant Sales 5%
Bar/Lounge Beer & Wine Sales 10%
Merchandize 5%
2. After the third paragraph of Section 3.4.2 under Performance Standards of the Lease will
include the following paragraph:
Tenant, must keep or cause to be kept full, complete, and accurate records, and books of account
in accordance with accepted accounting practices showing the total amount of Gross Sales, as
defined herein, made each calendar month in, on or from the Premises. Tenant must keep said
records and books of account within San Luis Obispo County and will notify Landlord in advance
of their location at all times. Furthermore, Tenant must, at the time of sale and in the presence
of the customer, cause the full selling price of each piece of merchandise, each rental received
and each service rendered in, on or from the Premises to be recorded in a cash register or cash
registers that have cumulative totals and are sealed in accordance with standard commercial
practices. Said records, books of account and cash register tapes, including any sales tax reports
or income tax returns Tenant may be required to furnish any government or governmental
agency, and income and bank statements must, at all reasonable times, be open to the inspection
of Landlord, Landlord’s auditor, or other authorized representative or agent of Landlord, if
necessary. Tenant consents to the release of sales tax information to Landlord and on demand
will furnish to Landlord a copy of the sales tax reports, quarterly reports and any audit reports of
sales for confidential internal use of the Landlord in determining Gross Sales for Tenant. Tenant
consents and authorizes Landlord to request such information directly from the State Board of
Equalization or other state agency with which sales tax information is filed.
By July 31 of each year, Tenant must furnish Landlord with a statement, to be certified by Tenant
as current, true and accurate, which must set forth the Gross Sales of each department,
sublessee, licensee and concession operating in, on or from the Premises for the previous 12
calendar months, ending June 30, just concluded, and the authorized deductions, if any,
therefrom; and with it Tenant must pay to Landlord the amount of the Percentage Rent, which is
due to Landlord as shown thereby. If Tenant, at any time, causes an audit of sales of Tenant’s
business to be made by a public accountant, then Tenant must furnish Landlord with a copy of
said audit without cost or expense to Landlord. Landlord may, once in any twelve-month period,
cause an audit of the business of Tenant to be made by a certified public accountant or Landlord
personnel of Landlord’s own selection. Tenant must, upon receiving written notice of Landlord’s
desire for such an audit, deliver and make available all such books, records and cash register
tapes to the certified public accountant or Landlord personnel selected by Landlord. Furthermore,
Tenant must promptly, on demand, reimburse Landlord for the full cost and expense of said audit,
if the audit discloses the questioned statement or statements understated Gross Sales by 5
percent or more but less than ten percent. In the event an audit performed at Landlord’s request
discloses Tenant understated Gross Sales by less than 5 percent, the cost of such audit will be
paid by Landlord. In the event any audit or other review of records discloses the amounts reported
as Gross Sales were understated by Tenant by 10 percent or more, Landlord will not only be
entitled to recover from Tenant all costs of audit and review but will also be entitled to recover
from Tenant a penalty equal to two times the Percentage Rent due pursuant to this Lease on such
unreported amounts. Whenever any audit discloses that Gross Sales were understated by any
01181.0024/951513.1
amount, Tenant must immediately pay the additional Percentage Rent therein shown to be
payable by Tenant to Landlord, together with interest at the Default Rate thereon, from the date
the Percentage Rent was payable until the date paid.
Landlord will be entitled at any time within five years after the receipt of any such Percentage
Rent payment, to question the sufficiency of the amount thereof or the accuracy of the statement
or statements furnished by Tenant to justify the same. For the purpose of enabling Landlord to
check the accuracy of any such statement or statements, Tenant must, for said period of five
years after submission to Landlord of any such statement, keep all of Tenant’s records, including
sales tax returns, all cash register tapes, income tax returns and income and bank statements
and other data which in any way bear upon or are required to establish in detail Tenant’s Gross
Sales and any authorized deductions therefrom as shown by any such statements and must, upon
request, make the same available to Landlord for examination.
3. After the end of Section 3.4 under Performance Standards of the Lease will include the
following paragraph:
Tenant will provide documentation to Landlord, within thirty (30) days of execution by Parties
of this Amendment #1, that in Harbor Director’s reasonable determination demonstrates at
least $120,000 was expended on hard construction costs for improvements required by
Section 3.4 of the Lease. If Tenant is unable to timely provide within the thirty (30) days such
documentation, then the reduced Percentage Rates in Section 1(A) of this Amendment #1 are
inapplicable, and instead the default Percentage Rates in Section 1(B) of this Amendment #1
will apply from May 1, 2023 through end of Lease Term.
4. Except as expressly stated herein, all provisions of the Lease shall remain in full force and
effect.
5. 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 Three Stacks and a Rock Brewing
Brewing Company, LLC
A California limited liability company
By: ______________________ By: ________________________
Carla Wixom, Mayor Charles Nettnin, Managing Member
01181.0024/951513.1
APPROVED AS TO FORM: By:
Ananda Nettnin, Managing Member
____________________________
Chris F. Neumeyer, City Attorney
ATTEST:
_____________________________
Dana Swanson, City Clerk