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HomeMy WebLinkAbout14 TUSTIN AUTO CENTER MERCHANTS ASSOCIATION LEASE-2ND AMENDMENTAgenda Item 1 ~ AGEI~TDA ~,.EPORT Reviewed: , City Manager ~...~ <. Finance Director MEETING DATE: DECEMBER 6, 2011 TO: WILLIAM A. HUSTON, INTERIM CITY MANAGER FROM: CITY MANAGER'S OFFICE SUBJECT: SECOND AMENDMENT TO THE TUSTIN AUTO CENTER MERCHANTS ASSOCIATION LERSE SUMMARY Approval is requested to enter into a Second Amendment to the Lease ("Second Amendment") with the Tustin Auto Center Merchants Association ("Association"), extending an existing lease between the City and Tustin Auto Merchants Association for City owned real property adjacent to the Tustin Auto Center. RECOMMENDATION It is recommended the City Council approve the Second Amendment to the Lease with the Association, extending their existing Lease with the City for real property adjacent to the Tustin Auto Center, and authorize the Assistant City Manager/Assistant Executive Director to execute the document. FISCAL IMPACT The existing Lease premises is reserved for future right-of-way and is not marketable for development. Therefore, there is no lease revenue that the City relies upon. The only City incurred costs for the Second Amendment to the Lease are minor costs related to staff preparation, legal review and staff administration of the Lease to ensure compliance with terms and conditions including, but not limited to, annual insurance renewals. BACKGROUND/DISCUSSION On June 7, 2011, in accordance with Tustin City Code Section 7960 (enacted by Ordinance No. 1389), the City Council authorized staff to prepare a Second Amendment to the Lease with the Association and subsequently return to the City Council with the final amendment for Council review and approval. The Tustin Auto Merchants Association currently leases approximately 1.89 acres of City owned vacant real property that is currently reserved for future right-of-way for Myford Road. The Association will continue to use the Lease premises for storage and parking of vehicles far the Tustin Auto Center at no annual cost. The term of the original Lease Agenda Report December 6, 2011 Page 2 commenced on January 1, 2001, and was extended on January 1, 2009 for an additional three-year extension as authorized under the terms of the original Lease. The current Lease will expire on December 31, 2011. The Second Amendment to the Lease, which continues to support interim vehicle storage and parking for the Tustin Auto Center, will support City efforts to recognize that the Auto Center is a major contributor to the City's tax base. During calendar year 2010, dealerships in the Tustin Auto Center generated approximately $3.2 million dollars or over twenty percent to the City's total sales tax base. This figure does not take into account the additional contribution that the dealerships make to the City in real and personal property taxes. In addition, the na-cost Second Amendment to the Lease will also serve to recognize that auto manufacturers and dealers are just beginning to emerge from the recession while experiencing manufacturing disruption of vehicles and part supplies caused by the earthquake and tsunami in Japan earlier this year. The Second Amendment to the Lease is considered a project under the California Environmental Quality Act (CEQA). According to the California Code of Regulations, Title 14, Division 6, Chapter 3, Article 5, Section 15061, the Second Amendment to the Lease would be a "Class 1 project", categorically exempt pursuant to Section 15301 of Article 19 since it entails the leasing of existing facilities that involve negligible or no expansion of use beyond that existing at the time of the lead agency's determination, and, as a result, is categorically exempt. The proposed Second Amendment to the Lease extends the Lease for five (5) years with two five (5) year options to extend. In the event the City needs the reserved right- af-way before any future Lease termination, the Lease does contain provisions requiring the tenant to surrender the land at any time the City needs the property. Christine A. Shingleton Assistant City Manag~"r Attachments: Second Amendment to the Lease SECOND AMENDMENT TO THE GROUND LEASE BETWEEN THE CITY OF TUSTIN AND TUSTIN AUTO CENTER MERCHANTS ASSOCIATION This SECOND AMENDMENT TO GROUND LEASE (this "Second Amendment") is entered into as of January 1, 2012 (the "Effective Date") by and between the CITY OF TUSTIN, a municipal corporation of the State of California ("Landlord"), and the Tustin Auto Center Merchants Association, anon-profit California Corporation, ("Tenant"). Landlord and Tenant are sometimes referred to herein individually as a "Party" and collectively as the "Parties". RECITALS A. The Landlord and the Tenant entered into that certain Ground Lease dated as of January 1, 2001, as amended by that Amended Ground Lease ("First Amendment") dated as of January 1, 2009 (collectively, the "Original Lease"} pursuant to which, among other things, the Landlord agreed to lease and the Tenant agreed to lease certain Property (the "Premises") as defined in the Original Lease for temporary parking and vehicle storage needs. Initially capitalized terms not defined herein shall have the respective meanings assigned to such terms in the Original Lease. B. On June 7, 2011, the City Council directed staff to prepare a Second Amendment to the Ground Lease ("Second Amendment") reflecting a rental less than fair market value prior to termination of the Original Lease pursuant to Tustin City Code Section 7960 as enacted by Ordinance No. 1389 which requires City Council direction regarding the leasing of City real property for less than market value. C. Given delays in the future construction of Myford Road south of El Camino Real, it is the desire of both parties to permit the Tenant to continue to utilize the Premises until the Premises are needed by Landlord for the Myford Road extension or until the Tenant is able to finance and construct additional permanent parking and vehicle storage facilities within the Tustin Auto Center ("Auto Center"}. The parties agree and acknowledge that Tenant's use of the Premises is only temporary and it is not the City's intent to ever convey the Premises to the Tenant; and D. Landlord is the owner of the Premises located in the City of Tustin, County of Orange, and State of California as more particularly described in Exhibit A of the Original Lease, incorporated herein and made a part of this Second Amendment as though fully set forth (the "Premises"); and E. The Landlord finds and determines that accommodating temporary parking and vehicle storage on the subject Premises is an important public purpose and will promote economic development and the permanent physical improvement of the Auto Center, attract new business, create jobs and prevent erosion of the local tax-base associated with the Auto Center; and F. The Original Ground Lease contained only one (1) Option to Renew the Lease for an additional term of three (3) years commencing at the expiration of the initial term, as exercised with the execution of the First Amendment to the Original Ground Lease, the Parties desire to amend the Original Ground Lease to extend the term of the lease for five (5} years and provide two, five (5} year Options to Renew the Lease; and 1 G. The Tenant desires to extend the term of the Lease by executing this Second Amendment to the Original Ground Lease. AGREEMENT NOVV, THEREFORE, in consideration of the foregoing Recitals and of the promises and mutual covenants incorporated within the Original Lease which are incorporated in the operative provisions of this Amendment by this reference as though set forth in their entirety, the Parties further agree as follows: 1. Modification to the Original Lease. The following sections of the Original Lease are hereby amended as follows: {a) Seetion 2.1 is hereby deleted and replaced as follows: " 2.1 Term. The term ("Term") of this Lease shall be five (S) years, commencing on January 1, 2012 ("Commencement Date") and ending on December 31, 2016 ("Expiration Date"), unless sooner terminated as provided herein. The Tenant acknowledges that notwithstanding any other provision of the Lease, the Landlord shall have the right to terminate pursuant to Sections 14.2.1 and 14.2.2 herein." (b) Section 2.3 is hereby reinstated and amended as follows: " 2.3 Option to Renew. Provided that Tenant is not in default in the performance of this Lease, and City has not exercised any termination rights as provided in Section 14.2, Tenant shall have the option to renew the Lease far two (2) additional terms of five (5) years. If exercised, the first renewal period shall commence immediately upon the Expiration Date. The second renewal period, as applicable, shall commence upon the expiration of the first renewal period, or five (5) years after the Expiration Date. A11 of the terms, covenants and conditions of this Lease shall apply during the renewal term(s). The option(s) to renew shall be exercised by written notice given to Landlord not less than 90 days prior to the Expiration Date and not less than 90 days prior to the expiration of the first renewal period as provided herein. (c) Section 11.1 of the Original Lease is hereby deleted and restated as follows: "11.1 Insurance. Tenant shall provide and maintain at their own expense during the term of this Lease, the following insurance covering operations under this Lease. Such insurance shall be provided with insurer's authorized to do insurance business in the State of California, with a rating of at least A-, VII or better (if an admitted carrier), or A-, X (if offered as a surplus line broker) according to the latest Best's Key Rating Guide, except Landlord will accept worker's compensation insurance rated B-VIII or better from the State Compensation Fund." Tenant shall require all of its members/subcontractors/ vendors to maintain current general liability, automobile, and worker's compensation insurance consistent with the limits imposed on the Tenant by the City, as specified in this Agreement. a. Commercial GeneNal and Automobile Liability insurance. A policy or policies of commercial general liability and automobile liability insurance, or equivalent 2 form, with a combined single limit of not less than $1,000,000 per occurrence with respect to personal injury or death and with respect to property damage. Such insurance shall insure, on an occurrence basis, against liability of Tenant, its employees and agents arising out of or in connection with Tenant's use, occupancy or maintenance of the Premises and the actual cash value against the hazards of fire, theft, burglary, vandalism and malicious mischief for any personal property on the Premises. b. Workers' Compensation Insurance. To the extent that Tenant has employees, workers' compensation insurance in an amount and form meeting all applicable requirements of the California Labor Code, covering all employees of Tenant and all risks to such persons. The insurance company shall agree to waive all rights of subrogation against the City for losses paid under the policy, which losses arose from the work performed by the named insured. c. As specified below, the required insurance shall: (1) Name the City of Tustin, its elected officials, officers, agents and employees as additional insured on the commercial general and automobile policies; (2) The insurance shall not be cancelled, except after thirty (30) days written prior notice to the City, except for ten (10} days written notice in the event of non-payment of the policy premium; (3) The commercial general and automobile liability insurance shall each be primary as respects the City, and other insurance maintained by the City shall be in excess of this insurance and not contribute to it; (4) The commercial general and automobile liability insurance shall contain standard separation of insured's provisions; and (5) the workers' compensation insurance shall contain a provision that the insurer waives any right of subrogation against the City which may arise by reason of any payments made under a policy. d. Prior to execution and the effectiveness of this Second Amendment or any subsequent renewal, Tenant shall provide to City certificates of insurance and insurer endorsements evidencing the required insurance. Insurer endorsements (or a copy of the policy binder if applicable) shall be provided as evidence of meeting the requirements of subsections (1), {3) and (5) of "Section c" above. If self-insured for workers' compensation, Tenant shall submit to City a copy of its certification of self- insurance issued by the Department of Industrial Relations. e. The Tenant shall maintain such insurance for the period covered by this Lease or any renewal, replace such certificates and endorsements for policies expiring prior to the Expiration Date andlor the expiration of any subsequent renewal period, and give to Landlord prompt and timely notice of a claim made or suit instituted arising out of Tenant's operations hereunder. f. Deductibles. All insurance limits shall be without deduction, provided that the Landlord may permit a deductible amount in those cases where, in its judgment, such deduction is justified. g. Tenant shall include all of its subcontractors doing work on the Premises as insured under its policies or shall furnish separate certificates and endorsements for insurance maintained by each subcontractor. All coverages for subcontractors shall be subject to all of the requirements of Section 11.1. 3 h. Verification of Coverage. The insurer endorsements required herein are to be signed by a person authorized by insurer to bind coverage on its behalf or to be printed on the insurer's letterhead with the applicable policy number. (Statements on the ACC?RD Certificate are not an acceptable substitute for endorsements}. Ail endorsements are to be received and approved by Landlord before Landlord's execution of this Second Amendment and/or the commencement of any subsequent renewal period. i. Tenant operations shall be subject to suspension by Landlord during any period Tenant fails to maintain required insurance in full force and effect as well as subject to provisions contained in Section 11.2. (d) Section 23 is hereby amended to read as follows: Landlord "City of Tustin"~ City Manager City of Tustin 300 Centennial Way Tustin, CA 927$0 Copy to: David Kendig, City Attorney Woodruff, Spradlin, & Smart 555 Anton Bivd., Ste. 1200 Costa Mesa, CA 92626 Christine Shingleton, Assistant City Manager/ and Assistant Executive Director 300 Centennial Way Tustin, CA 92780 Tenant ("Tustin Auto Center Merchants Association"~ Mr. Mark Parkinson, President c/o Tustin Auto Center Merchants Association 1 Auto Center Drive Tustin, CA 92782 and CTSC Law Sheldon Cohen, Attorney 2601 Main Street, Suite 800 Irvine, California 92614 4 2. Applicable Sections of the Original Ground Lease and the First Amendment to the Original Ground Lease. All sections of the Original Lease not specifically amended herein shall remain in full force and effect. IN WITNESS WHEREOF, Landlord has authorized this Second Amendment between the City of Tustin and Tustin Auto Center Merchants Association to be executed for and on behalf of the City of Tustin, and Tenant has caused the same to be executed by its duly authorized officer on the date first above written. "LANDLORD" Dated: Attest: Pamela Stoker City Clerk APPROVED AS TO FORM David E. Kendig City Attorney City of Tustin, California Christine Shingleton, Assistant City Manager/Assistant Executive Director "TENANT" Tustin Auto Center Merchants Association, a non-profit California Corporation By: Name: Title: By: Name: Title: