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HomeMy WebLinkAbout07 TUSTIN AUTO CENTER MERCHANTS' ASSOCIATION GROUND LEASE & REIMBURSEMENT AGREEMENTAGENDA REPORT RAgenda 7 eviewed v City Manager Finance Director N/A MEETING DATE: OCTOBER 7, 2014 TO: JEFFREY C. PARKER, CITY MANAGER FROM: CITY MANAGER'S OFFICE AND PUBLIC WORKS DEPARTMENT SUBJECT: TUSTIN AUTO CENTER MERCHANTS' ASSOCIATION GROUND LEASE AND REIMBURSEMENT AGREEMENT SUMMARY Approval is requested to enter into a Ground Lease and Reimbursement Agreement ( "Ground Lease') with the Tustin Auto Center Merchants' Association ( "Association ") for storing vehicles on a vacant parcel in Tustin Legacy and appropriate $150,000 from unappropriated General Fund Reserves (Fund 100) for site preparation. RECOMMENDATION It is recommended the City Council take the following actions: 1. Deem entering into the Ground Lease with the Association is an appropriate action as outlined in Tustin City Code Section 7960(8); 2. Direct the City Attorney to negotiate and prepare a final Ground Lease with the Association, in substantially the same form as the draft Ground Lease attached, adding a temporary parking area in Tustin Legacy for the Auto Dealers to store vehicles; 3. Authorize the City Manager to- execute and approve any non - substantive changes to the Ground Lease; and 4. Authorize an appropriation of $150,000 from the unappropriated General Fund Reserves (Fund 100) for site preparation. FISCAL IMPACT Within the first six months of the Ground Lease's commencement, the Tustin Auto Center Merchants' Association will reimburse the City for the actual cost of the improvements, at an amount not to exceed $150,000. During the first year of the Ground Lease, the Association will pay the City $5,000 per month, a reduced amount to reflect the City's contribution towards site improvements. For the balance of the Ground Lease, the Association will pay the City $11,000 per month. The Ground Lease can be terminated by the City in the fourth year and it provides a formula for which the Association can receive an additional contribution against their expenses for site preparation. 1035612.1 Tustin Auto Center Merchants' Association Ground Lease and Reimbursement Agreement October 7, 2014 Page 2 CORRELATION TO THE STRATEGIC PLAN The Ground Lease contributes to the fulfillment of the City's Strategic Plan Goal A, Strategy #5 by strengthening business relationships for economic development purposes. BACKGROUND /DISCUSSION The Tustin Auto Center Merchants' Association has approached the City with a request to temporarily park 1,000 vehicles on a vacant parcel in Tustin Legacy. As noted in the Orange County Business Journal's September 23, 2014 article, Orange County auto sales have risen each month this year, for a year -to -date increase of 7.7 %. The Tustin Auto Center is benefiting from that sales growth and the Association believes that the provision of parking for an additional 1,000 vehicles will facilitate additional sales growth. Staff has identified the 9+ acre Legacy Loop Ramp Parcel adjacent to Tustin Ranch Road and Edinger Avenue that can be used to temporarily park the vehicles for five years. It is anticipated this parcel will not be needed for development until at least 2019 -2020. As such, the Ground Lease is for five years with a termination option for the City in year four. The Association understands this is a temporary solution and is working with City staff on developing a permanent vehicle storage solution within the Auto Center. Both parties are committed to resolving the dealers' parking needs prior to expiration of this five -year Ground Lease, especially since the proposed site is scheduled for future development in accordance with the vision for Tustin Legacy. Tustin City Code Section 7960 outlines the process City staff must follow for the approval, extension or modification of any existing City real property lease for less than market value. Section 7960(B) identifies three different policy directions that the City Council may direct as follows: • Preparation of a proposed lease, modification or extension; • Preparation of a request for proposal ( "RFP ") for a new leasehold from interested parties, or; • Take such other action as deemed appropriate. Staff believes there are unique and unusual circumstances related to the subject Association's Lease with the City that are different from other City real property assets, which can be marketed and developed at fair market value, for the following reasons: 1. The vacant parcels, including this parcel, in this Tustin Legacy Planning Area are not being marketed for lease. Disposition and development of these parcels could occur in the next five years, limiting the full market lease value. 2. The Ground Lease is a unique opportunity for the City Council to promote economic development by accommodating temporary vehicle storage that directly benefits the Tustin Auto Center, a major job and tax generator in the City. Temporary parking and vehicle storage will benefit all sixteen dealerships in the Tustin Auto Center. 1035612.1 Tustin Auto Center Merchants' Association Ground Lease and Reimbursement Agreement October 7, 2014 Page 3 In accordance with Section 7960(B) of the Tustin City Code, staff recommends the City Council deem entering into a Ground Lease as an appropriate action and direct the City Attorney to negotiate and prepare a Ground Lease in substantially the same form as attached. The Ground Lease will support City efforts to recognize the Auto Center is a major contributor to the City's tax base. During calendar year 2013, dealerships in the Tustin Auto Center generated approximately $5 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. The Ground 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 Ground Lease can be determined exempt from CEQA if the project is exempt pursuant to a categorical exemption identified in Section 15301 of Article 19. This project is a 'Class 1 project' as defined by Section 15301, 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. Upon City Council approval, a CEQA "Notice of Exemption" will be filed with the County Clerk. In order to prepare the site to be suitable for storage of new vehicles, it is proposed that crushed miscellaneous base material (CMB), from a nearby stockpile located in Tustin Legacy be imported, placed on the site and compacted. In addition, an access driveway on Edinger Avenue and a perimeter fence are proposed. Bids will be obtained informally and the work started as soon as possible. Staff will be available to answer any questions the City Council may have. Jerry Craig Economic I Housing Manager acK, r.t. blic Works /City Engineer Ground Lease & Reimbursement Agreement GROUND LEASE BETWEEN THE CITY OF TUSTIN AND TUSTIN AUTO CENTER MERCHANTS ASSOCIATION This Lease ( "Lease ") is made and entered into by and between the CITY OF TUSTIN, a municipal corporation of the State of California ( "Landlord "), and the Tustin Auto Center Merchants Association, a non - profit California Corporation, (hereinafter, "Tenant ") to be effective on , 2014 with respect to the following facts: RECITALS A. Landlord is the owner of certain real property located in the City of Tustin, County of Orange, and State of California as more particularly described in Exhibit "A ", annexed hereto and made a part hereof (the "`Premises "). In five to seven years, the Landlord intends to sell the real property described in Exhibit A for residential and/or commercial development. B. The Tenant is experiencing temporary parking and vehicle storage needs which is inhibiting its ability to maximize sales at the Auto Center. The Landlord desires to lease the subject Premises to Tenant until the subject Premises are needed by Landlord and/or the Tenant is able to finance and construct an additional permanent parking and vehicle storage facility within the Auto Center. The Tenant and the Landlord are discussing financing alternatives towards the development of a permanent parking and vehicle storage facility. C. The Landlord finds and determines that accommodating temporary parking and vehicle storage on the subject Premises is an important public purpose which 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. NOW, THEREFORE, in consideration of the promises and mutual covenants herein the Parties agree as follows: 1. AGREEMENT TO LEASE PREMISES Landlord hereby agrees to lease to Tenant the Premises and Tenant hereby agrees to lease the Premises from the Landlord, subject to the terms of this Lease. 2. TERM AND OPTION TO RENEW 2.1 Term. Subject to Section 2.3 below, the term ( "Term ") of this Lease shall be five (5) years, commencing on , 2014 ( "Commencement Date ") and ending on , 2019 ( "Expiration Date "), unless sooner terminated as provided herein. 1035600.1 2.2 Commencement of Possession. If Landlord is unable to give possession of the Premises on the Commencement Date because the Site Preparation (as define at Section 3.2.1 below) is not completed, the Landlord shall not be subject to any liability for the failure to give possession on said date. Under such circumstances, unless the delay is the fault of the Tenant, no such failure to give possession on the Commencement Date shall in any way affect the validity of the Lease or the obligations of Tenant hereunder (excepting that Tenant shall have no obligation to pay Rent for any period prior to completion of the Site Preparation), nor shall same be construed in any way to extend the Term. 2.3 Option to Renew. Subject to the last sentence of this Section 2.3, provided that Tenant is not in default in the performance of this Lease, Tenant shall have the option to renew the Lease for two (2) additional one year terms each commencing at the expiration of the then term. All of the terms, covenants and conditions or this Lease shall apply during the renewal term(s). Each option to renew shall be exercised by written notice given to Landlord not less than 90 days prior to the expiration of the then term provided, however, Landlord does not within sixty (60) days of Landlord's receipt of such notice give written notice to Tenant of Landlord's election to terminate the Lease effective as of the expiration date of the current term. 3. RENT AND REIMBURSEMENT 3.1 Base Rent. 3.1.1 Effective on the Commencement Date, the Tenant shall pay the Landlord Rent ( "Rent ") equal to the monthly sum of Five Thousand Dollars ($5,000) for the Premises, such rent being a reduced rental to take into account the Tenant's contribution towards the costs of preparation of the Premises per Section 3.2 below. Rent is payable in advance. 3.1.2 Effective one year from the Commencement Date, the Tenant shall pay the Landlord Rent equal to the monthly sum of Eleven Thousand Dollars ($11,000) for the Premises. This rental amount will remain effective through the remaining term of the Lease. 3.1.3 if the Commencement Date is other than the first day of a calendar month, the Rent payable hereunder shall be prorated by the Landlord on the basis of a thirty (30) day month. Checks should be made out to the "City of Tustin" and delivered to: The City of Tustin, Finance Department, 300 Centennial Way, Tustin, CA 92780. 3.2 Reimbursement for Site Preparation. 3.2.1 Prior to the Commencement Date, Landlord shall prepare the Premises for the storage of vehicles, which preparation shall include grading and parking surface preparation, and complete perimeter fencing with gated ingress /egress at Edinger Avenue ( "Site Preparation "). The Tenant will reimburse the Landlord for the Site Preparation, within six (6) months from the Commencement Date and at a cost not to exceed One Hundred Fifty Thousand Dollars ($150,000). In reimbursing the Landlord, the Tenant is investing in the Premises' preparation with the intention and understanding the Lease will be effective for the full initial Term of five years. Prior to the Commencement Date, Landlord shall produce an invoice documenting the total costs and expenditures incurred in connection with said work ( "Site Preparation Costs "). The Site Preparation Costs Invoice 1035600.1 will be incorporated as an addendum to this Lease and appended hereto as a part of Exhibit "B ". 3.2.2 If the Landlord terminates the Lease at the end of the fourth year of the initial Term for reasons other than Tenant's default, the Landlord will reimburse the Tenant 80% of the Site Preparation Costs, less the Seventy Two Thousand Dollars ($72,000) reduced rental afforded to Tenant under Section 3.1.1 above. If the Landlord terminates for reasons other than Tenant's default during any month of year five of the initial Term, the Landlord will reimburse the Tenant a prorated amount for each remaining month left on the Term (reference Site Preparation Costs Reimbursement Worksheet included in Exhibit "B "). The Site Preparation Costs Reimbursement Worksheet will be signed by both parties hereto, incorporated as an addendum to this Lease and appended hereto as a part of Exhibit "B ". No offset or reimbursement from Landlord to Tenant will be required if Tenant terminates the Lease during any renewal terms. 3.2.3 If the Tenant terminates the Lease prior to the Expiration Date, the Landlord will not reimburse the Tenant for any portion of their investment in preparing the Premises for the storage of vehicles. 4. SECURITY DEPOSIT [INTENTIONALLYOMITTED1 5. CONDITION OF PREMISES AND REPRESENTATIONS 5.1 Condition of Premises. Tenant has reviewed and examined the Premises and subject to Section 5.3.4 below, accepts the Premises and agrees Landlord shall not be liable for any latent or patent defect thereon. Except for Section 5.3.4 below, Tenant acknowledges and agrees that Landlord makes no representation or warranty concerning the Premises' condition and state of repair, its fitness, availability and suitability for the uses intended by tenant. 5.2 Powers of Landlord. Tenant acknowledges that Landlord is a governmental entity which, in addition to being owner of the Premises, exercises certain police powers, taxation powers, and other governmental powers, duties and authorities over the Premises and improvement thereon. This Lease shall not in any way affect the exercise of such powers, duties and authorities. There shall be no duty on the part of the governmental entity comprising Landlord or any other governmental entities (including without limitation the City of Tustin) to cooperate with Tenant in connection with the development of the Premises, or any other obligations of Tenant under this Lease. 5.3 Representations of Landlord. Landlord represents and warrants to Tenant as follows: 5.3.1 That it has the power and authority to enter into this Lease, and to lease the Premises to Tenant on the terms set forth in this Lease, and that the execution and delivery hereof and the performance by Landlord of its obligations hereunder will not violate or constitute an event of default under the terms or provisions of any agreement, document or instrument to which Landlord is a party or by which it is bound. 5.3.2 That all necessary actions and proceeding required to be taken by or on behalf of Landlord to authorize it to make, deliver and perform the terms of this Lease have been or will be duly and properly taken prior to the Commencement Date, and that this Lease is a valid and binding obligation of Landlord. 1035600.1 5.3.3 Landlord has no actual knowledge of any Hazardous materials on the Premises. 5.3.4 Landlord's improvements to the Premises including the Site Preparation shall be performed in a good and workmanlike manner and in compliance with all applicable governmental laws, ordinances and regulations. 5.4 Representations of Tenant. Tenant represents and warrants to Landlord as follows: 5.4.1 That it has the power and authority to enter into this Lease, and to lease the Premises from Landlord on the terms set forth in this Lease, and that the execution and delivery hereof and the performance by Tenant of its obligations hereunder will not violate or constitute an event of default under the terms or provisions of any agreement, document or instrument to which Tenant is a party or by which its bound. 5.4.2 That all necessary actions and proceeding required to be taken by or on behalf of Tenant to authorize it to make, deliver and perform the terms or this Lease have been or will be duly and properly taken prior to the Commencement Date, and that this Lease is valid and binding obligation of Tenant. 6. USE OF PREMISES 6.1 Use and Occupancy. Tenant covenants and agrees for itself, its successors, assigns, and every successor in interest that Tenant shall devote the Premises for parking and vehicle storage for the benefit of members of the Tustin Auto Center Merchants Association only and for no other use whatsoever. The covenants expressed in this Section are covenants running with the land for the term of this Lease. 6.2 Compliance with Law. Tenant agrees to comply with all .applicable governmental laws, ordinances, and regulations in connection with its use of the Premises, and that it shall neither use or occupy the Premises or any part thereof, nor knowingly permit, the Premises or any part thereof to be used or occupied, for any hazardous, unlawful, or illegal business, use or purpose, nor in any manner as to constitute nuisance of any kind, nor in any manner inconsistent with or in violation of this Lease or any other present or future legal requirement of this Lease. 6.3 Access to Premises. Tenant agrees that vehicle access to the Premises shall be limited to right -in and right -out only on eastbound Edinger Avenue. 6.4 Operating Standards. The Tenant shall operate the Premises in accordance with the Lease. Failure to operate in accordance with this Lease may result in termination of this Lease in accordance with the default provisions of this Lease. 1035600.1 7. SUBLETTING AND ASSIGNMENT Tenant shall not cause, or permit, by operation of law or otherwise, any assignment, encumbrance or transfer of this Lease or any estate or interest therein without the prior written consent of the Landlord, which shall be at the complete discretion of Landlord. Tenant shall not sublet the Premises or any part thereof without the prior written consent of the Landlord. An assignment or subletting shall not relieve Tenant of any of its obligations or liabilities for the term of this Lease, both Tenant and any subsequent assignees and sublessees will be deemed to be bound hereunder. The Landlord's consent to any such assignment, transfer or subletting shall not constitute consent to any further assignment or subletting. 8. PROTECTION AND MAINTENANCE Tenant at no expense to the Landlord, shall at all times protect, preserve, maintain, and repair the Premises, in good order and condition, and exercise due diligence in protecting the Premises against damage or destruction by fire and other causes, subject to the applicable provisions of this Lease. The Tenant shall promptly make all necessary repairs, ordinary as well as extraordinary, and foreseen as well as unforeseen. All repairs, alterations, replacements or additions to the Premises and its improvements shall be at least equal to the original work in class and quality of materials and workmanship. When used in this paragraph, the term "repairs" shall include replacements or renews when necessary. 9. INDEMNITY 9.1 Tenant Indemnification. Tenant shall indemnify, defend and hold harmless Landlord and the Landlord's employees and agents from and against any and all claims arising from Tenant's use of the Premises, or from the conduct of Tenant's business or from any activity, work or things done, permitted or suffered by Tenant's in or about the Premises and shall further indemnify and hold harmless the Landlord and the Landlord's employees and agents from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terns of this Lease, arising from any negligent or wrongful act or omission of Tenant, or Tenant's agents, contractors, employees or invitees, and from and against all cost, attorney fees, expenses and liabilities incurred in the defense of any such claim or any action or proceedings brought thereon. 9.2 Landlord's Indemnification. The Landlord shall indemnify, defend and hold harmless Tenant, and Tenant's employees and agents from and against any and all claims arising from the Landlord's use of the Premises, or from the conduct of the Landlord's business or from any activity, work or things done, permitted or suffered by the Landlord in or about the Premises and shall further indemnify and hold harmless Tenant and Tenant's employees and agents from and against any and all claims arising from any breach or default in the performance of any obligation on Landlord's part to be performed under the terms of this Lease, arising from any negligent or wrongful act or omission of Landlord, or Landlord's agents, contractors, employees or invitees, and from and against all costs, attorney fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon. 1035600.1 10. INSURANCE 10.1 Insurance. Tenant shall procure and maintain at its 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. 10.1.1 Commercial General Liability Insurance. A policy or policies of commercial general liability insurance, or equivalent 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. 10.1.2 Worker's 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. 10.1.3 Evidence of all required insurance in the form of properly executed certificates and insurer endorsements shall be delivered to Landlord as a precondition to Landlord's execution of this Lease or any renewal including providing annual updates which shall clearly evidence all coverage required above. Such insurance shall: (1) name the City of Tustin, its elected officials, officers, agents and employees as additional insured; (2) be primary and not contributing with any other insurance maintained by Landlord in coverage; (3) provide that losses shall be payable notwithstanding any act or failure to act or negligence of Landlord or any other person; (4) shall not have its required limits reduced or the policy terminated except on thirty (30) days prior written notice to Landlord, except for ten (10) days written notice in the event of non - payment of the policy premium; (5) contain a provision that the insurer waives any right of subrogation against the Landlord which may arise by reason of any payments made under a policy; and; (6) contain standard separation of insured's provisions. 10.1.4 The Tenant shall maintain such insurance for the term of this Lease or any renewals, replace such certificates and endorsements for policies expiring prior to the expiration of this Lease and give to Landlord prompt and timely notice of any claim made or suit instituted arising out of Tenant's operations hereunder. 10.1.5 Deductibles. The deductible under the insurance policy described in Section 10.1.1 shall not exceed Dollars ($�. 10.1.6 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 10.1. 1035600.1 10.1.7 Verification of Coveraee. The insurer endorsements required herein are to be signed by a person authorized by insurer to bind coverage on its behalf. All endorsements are to be received and approved by Landlord before Landlord execution of the Lease. 10.1'.8 Tenant operations shall be subject to suspension by Landlord during any period Tenant fails to maintain required insurance in full force and effect. 11. DEFAULT, CERTAIN REMEDIES, TERMINATION 11.1 Default Notices. If the Tenant fails to observe or perform any term, covenant or condition of this Lease at any time during the term of this Lease and the Landlord concludes that the Tenant has not complied in good faith with the provisions of this Lease, Landlord may issue a written "Notice of Default" by certified mail, return receipt requested, specifying the grounds thereof and all facts demonstrating such non - compliance. Tenant shall have thirty (30) days after receipt by Tenant of such notice to respond in writing to said notice by either specifying how its non - compliance has been cured or the grounds upon which it believes that it is complying with this Lease. The time to respond to the Notice of Default may be extended by mutual agreement of the Parties. If the response to the Notice of Default has not been received by the Landlord within the prescribed thirty (30) days, or within such other period of time as mutually agreed, the Notice of Default shall be conclusively presumed to be valid and the Landlord may commence proceedings on the termination of the Lease pursuant to Section 11.2 herein. 11.2 Termination by Landlord. 11.2.1 Notwithstanding any other provisions of this Lease, at any time after the fourth year of the Term, the Landlord shall have the right to terminate this Lease for any reason upon sixty (60) days written notice by certified mail, returned receipt requested by Landlord to Tenant. 11.2.2 Notwithstanding any other provision of this Lease, the Landlord, upon the occurrence of an event of default, then in addition to any other remedies available to Landlord at law or in equity, shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice by certified mail, return receipt, of such intention to terminate in manner specified in Section 19. Such written notice of termination shall be effective as of the date specified therein which shall be at least thirty (30) days after receipt of such notice by Tenant. 11.2.3 Tenant hereby releases any and all claims it might have under the U.S. and State Constitutions or State law for goodwill, the value of improvement and relocation assistance in the event of termination by Landlord. 11.3 Termination by Tenant. The Tenant shall have the right to terminate this Lease for any reason, at any time after the fourth year of the Term, upon sixty (60) days written notice by certified mail, return receipt request by Tenant to the Landlord. 11.4 Damage or Destruction of Premises. If, during the term of this Lease, the Property shall be damaged by fire or other cause, so as to render the Property untenable, the Landlord shall elect whether to repair the Premises or to cancel this Lease. It shall notify Tenant in writing of its election within seven (7) days after such damage. In the event the Landlord elects to repair the Premises, the 1035600.1 work or repair shall begin promptly and shall be carried on without unnecessary delay, and the rental payable by Tenant for the period required for the repair shall be abated in proportion to the degree to which Tenant's use of the Premises is impaired. In the event the Landlord elects not to repair the Premises, the Lease shall be deemed canceled as of the date of damage. Such damage shall not extend the lease term. In the event the Landlord elects to cancel this Lease, no offset or reimbursement shall be required under Section 3.2. 12. SURRENDER OF LAND On the last day of the term, or upon any earlier termination of this Lease pursuant to the terms hereof, or upon any reentry by Landlord upon the Premises pursuant to Section 11 hereof, Tenant shall surrender to Landlord the Premises in good order, condition and repair (except for reasonable wear and tear, and takings by eminent domain) and free and clear of all liens and encumbrances (other than those, if any, permitted hereby or otherwise created or consented to by Landlord) and if requested to do so, shall execute, acknowledge and deliver to Landlord instruments of further assurance as in the opinion of Landlord are necessary or desirable to confirm or perfect Landlord's right, title and interest in and to the Premises. 13. RESTORATION Before the expiration or prior to termination of this Lease, Tenant shall restore the Premises together with related personal property, and each item thereof, to the condition in which it was first received and used by the Tenant, or to such improved condition as may have resulted from any improvement made therein by the Tenant, subject however to ordinary wear and tear and loss or damage for which the Tenant is not liable hereunder. 14. LIENS The Tenant shall promptly discharge or cause to be discharged any valid lien, right in rem, claim or demand of any kind, except one in favor of the United States, which at any time may arise or exist with respect to the Premises or the Tenant's improvements or materials or equipment furnished, or any part thereof, which arises as a result of Tenant's activities under this Lease, and if the same shall not be promptly discharged by the Tenant, the Landlord may discharge, or cause to be discharged, the same at the expense of the Tenant. 15. TAXES The Tenant shall pay all applicable real property taxes, and /or all possessory interest taxes applicable to the Premises prior to the delinquency date thereof. Tenant shall also pay and discharge punctually, as and when due, any and all taxes upon its personal property, equipment and trade fixtures installed in or about the Property. 16. UTILITIES, PUBLIC IMPROVEMENTS AND SERVICES 16.1 Utilities. Landlord shall have no responsibility pursuant to this Lease for utility lines, whether located on or off the Premises, serving the Premises or other public improvements serving the Premises. Tenant shall pay promptly all assessments, deposits, rents, costs, connection and tap -in fees 1035600.1 and other charges for the connection of utilities or installation of public improvements (where required), including any fees or charges imposed by any utility company or governmental entity or agency for making such connections. Tenant agrees to pay or cause to be paid all charges for gas, water, sewer, electricity, light, heat, power, telephone or other communications services or cable television and all other utility or service of every nature and kind used, rendered or supplied to, upon or in connection with the Premises throughout the Term and shall indemnify Landlord from and defend and hold Landlord harmless against any claim, liability, damage, loss, costs or expense in connection with such charges. Landlord may, after giving Tenant at least ten (10) days' notice of its intention to do so, pay any item or items of such charges which are delinquent or past due, unless Tenant is in good faith contesting the same with diligence and continuity. If Landlord makes any such payment, Tenant shall on demand pay and reimburse Landlord therefor, with interest at the default rate from the date of payment by Landlord until Landlord is repaid in full by Tenant. 16.1.1 Except for Site Preparation, Tenant expressly agrees that Landlord is not, nor shall it be, required to furnish to Tenant or any other occupant of the Premises during the term any public improvements, gas, water, sewer, electricity, light, heat, power, telephone or other communications service, or other facilities, equipment, labor, materials, utilities or any services of any kind whatsoever, whether similar or dissimilar; provided, however, the foregoing shall not limit any obligation of Landlord in its governmental capacity or under this Lease. 16.2 Easements. Landlord and Tenant each agree, at the request of the other party, to join in the grant or relocation of any easements or entry permits over the Premises that are necessary to obtain any utility service, to the extent the same does not interfere with Tenant's operation and maintenance of the Premises, and subject to such reasonable terms and conditions as the non - requesting party may impose. 17. RIGHT OF ENTRY 17.1 Should Landlord determine Tenant to be deficient in its performance of its obligations under this Lease, in addition to all other available remedies, Landlord may, after giving Tenant at least ten (10) days' notice of its intention to do so, enter upon the Premises and correct Tenant's deficiencies using Landlord's forces, equipment and materials suitable for such purposes, or by employing and independent contractor. Landlord's cost so incurred, including direct and indirect overhead costs as determined by Landlord, shall be reimbursed to Landlord by Tenant and/or its sureties within thirty (30) days of demand thereof. 17.2 Any officers and /or authorized employees of Landlord may enter upon the Premises at any and all reasonable times for the purpose of determining whether or not Tenant is in compliance with the terms and conditions of this Lease, or for any other purpose incidental to the rights of Landlord within the Premises. 17.3 Entry by the officers, employees, agents, or independent contractors of Landlord upon the Premises for the purpose described in this Section 17 shall be without prejudice to the exercise of any other rights provided herein or by law to remedy a breach of this Lease. 18. NON - DISCRIMINATION AND CIVIL RIGHTS COMPLIANCE 1035600.1 18.1 Tenant hereby certifies and agrees that, in all matters affecting this Lease, it will comply with all applicable federal and state laws and regulations prohibiting discrimination. 18.2 Tenant certifies and agrees that all persons employed by Tenant are and shall be treated equally without regard to or because of race, creed, color, national origin, political affiliation, marital status, sex, gender, sexual orientation, age or handicap and in compliance with all federal and state laws prohibiting discrimination in employment, including but not limited to, the Federal Civil Rights Act of 1964; the Unruh Civil Rights Act; and Cartwright Act; the State Fair Employment Practices Act and Americans with Disabilities Act. 18.3 Tenant certifies and agrees that subcontractors, bidders and vendors engaged by Tenant are and shall be selected without regard to or because of race, creed, color, national origin, political affiliation, marital status, sex, age, or handicap. 18.4 All employment records of Tenant shall be open for inspection and re- inspection at any reasonable time during the term of this Lease for the purpose of verifying the practice of non - discrimination by Tenant in the areas heretofore described. 18.5 If Landlord finds that any of the above provisions have been violated, the same shall constitute a material breach of contract upon which Landlord may determine to cancel, terminate, or suspend this Lease while Landlord reserves the right to determine independently that the non- discrimination provisions of this Lease have been violated, in addition, a determination by the California Fair Employment and Housing Department or the Federal Equal Employment Opportunity Commission that Tenant has violated State or Federal non - discrimination laws or regulations shall constitute a finding by Landlord that Tenant has violated the non- discrimination provisions of this Lease. 18.6 Tenant shall include the non - discrimination and compliance provisions herein above in all subcontracts to perform work under this Lease. 19. NOTICES Any notice required to be given under the terms of this Lease or any law applicable thereto must be in writing and either personally delivered or placed in a sealed envelope, postage prepaid, addressed to the person on whom it is to be served and deposited in the United States mail. All written notices pursuant to this Lease shall be addressed as set forth below or as either party may hereafter designate by written notice and shall be personally delivered or sent through the United State mail. Landlord : Jeffrey C. Parker, City Manager City of Tustin 300 Centennial Way Tustin, CA 92680 with a copy to: David E. Kendig, City Attorney Woodruff, Spradlin & Smart 555 Anton Blvd., Ste. 12000 Costa Mesa, CA 92626 1035600.1 Tenant: Mr. John Patterson c/o Tustin Auto Center Merchants Association 23 Auto Center Drive Tustin, CA 92782 with a copy to: Gordon D. Scholte Ferruzzo & Ferruzzo LLP 3737 Birch Street, 4" Floor Newport Beach, CA 92660 20. WAIVER OF TRIAL BY JURY It is'mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceedings or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease and/or Tenant's use or occupancy of the Premises. 21. ESTOPPEL CERTIFICATES Tenant shall, upon demand from the Landlord, execute and deliver to the Landlord, an estoppel certificate in such form and content as requested by the Landlord, attesting to the compliance to date of the Landlord with the terms and conditions of this Lease and such other matters as requested by the Landlord concerning the tenancy of Tenant. In the event Tenant asserts any default by the Landlord which would prevent Tenant from attesting to such a certificate, Tenant shall set forth such alleged default or defaults upon the certificates in detail or attest to the fact that those listed defaults are to Tenant' knowledge the only defaults by the Landlord hereunder. 22. MISCELLANEOUS PROVISIONS 22.1 Rules of Construction. The singular includes the plural; the masculine gender includes the feminine; "shall" is mandatory, "should" and "may" are permissive. 22.2 Entire Aereement, Waivers and Amendments. This Lease constitutes the entire understanding and agreement of the Parties with respect to the matters set forth in this Lease. This Lease supersedes all negotiation or previous agreements between the Parties respecting this Lease. All waivers or modifications of the provisions of this Lease must be in writing and signed by the appropriate authorities of the Tenant and the Landlord. 22.3 Incorporation of Recitals. The Recitals set forth in this Lease are part of this Lease. 22.4 Captions. The captions of this Lease are for convenience and reference only and shall not define, explain, modify, construe, limit, amplify or aid in the interpretation, construction or meaning of any of the provisions of this Lease. 22.5 Consent. Where the consent or approval of a party is required or necessary under this 1035600.1 Lease, the consent or approval shall not be unreasonably withheld. 22.6 Covenant of Cooperation. The Parties shall cooperate with, deal with each other in good faith, and assist each other in the performance of the provisions of this Lease. In the event of any legal action instituted by a third party or other governmental entity or official challenging the validity of any provision of this Lease, the Parties hereby agree to cooperate in defending said action, to the extent authorized by law. 22.7 Force Majeure. If either party shall be delayed or prevented from the performance of any act required by this Lease by reason of acts of God, strikes, lockouts, labor troubles, inability to procure materials, restrictive governmental laws or regulations or other cause, without fault and beyond the reasonable control of the party obligated (financial inability excepted), performance of such act shall be excused for the period of the delay; and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay; provided, however, nothing in this Section 22.7 shall excuse Tenant from the prompt payment of any rental or other charge required of Tenant except as may be expressly provided elsewhere in this Lease. 22.8 No Joint Venture. The Parties intend by this Lease to establish the relationship of Landlord and Tenant only, and do not intend to create a partnership, joint venture, joint enterprise or any business relationship other than that of Landlord and Tenant. 22.9 No Waiver. The failure of Landlord to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease shall not be deemed a waiver by Landlord of its rights to such redress for a prior, concurrent or subsequent violation of the same or any other covenant or condition of this Lease. The receipt by Landlord of any rental or other charge required of Tenant with knowledge of any preceding breach by Tenant of any covenant, term or condition of this Lease (other than the failure of Tenant to pay the particular rental so accepted) shall not be deemed to have been waived by Landlord. 22.10 Binding Effect. Subject to the provisions hereof, this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns, and wherever a reference in this Lease is made to either of the parties hereto such reference shall be deemed to include, wherever applicable, also a reference to the successors and permitted assigns of such party, as if in every case so expressed. 22.11 Attorneys' Fees. Should either party hereto institute any action or proceeding in court to enforce any provision hereof or for damages by reason of an alleged breach of any provision of this Lease, the prevailing party shall be entitled to receive from the losing party such amount as the court may adjudge to be reasonable attorneys' fees for the services rendered to the prevailing party in such action or proceeding. 22.12 Invalidity of Particular Provisions. If any term or provision of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent peml itted by law. 1035600.1 23. ATTACHMENTS This Lease includes the following, which are attached hereto and made a part hereof: Exhibit "A" — Description of the Premises Exhibit `B" — Site Preparation Costs and Reimbursement Worksheet [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 1035600.1 24. CONCLUSION IN WITNESS WHEREOF, the Landlord has by action of the City Council of the City of Tustin authorized this lease to be executed for and on behalf of the City of Tustin by the City Manager, and Tenant has caused the same to be executed by its duly authorized officer on the date first above written. "LANDLORD" City of Tustin, California Dated: Jeffrey C. Parker, City Manager ATTEST Erica Rabe City Clerk Services Supervisor APPROVED AS TO FORM David E. Kendig City Attorney "TENANT" Tustin Auto Center Merchants Association, a non - profit California Corporation By: Name: Title: By: Name: Title: 1035600.1 EXHIBIT A DESCRIPTION OF THE PREMISES 1035600.1 EXHIBIT B SITE PREPARATION COSTS AND REIMBURSEMENT WORKSHEET 1035600.1 Site Preparation Costs Invoice [To be inserted prior to Commencement Date] 1035600.1 Site Preparation Costs Reimbursement Worksheet 1. If the Landlord terminates the Lease Agreement at the end of the fourth year for reasons other than Tenant's default, the Landlord will reimburse the Tenant based on the following calculation: (a) 80% of $ (Site Preparation Costs) _ $ (b) Total from 1(a) above [ - ] $72,000 (Rent Credit) _ $ Reimbursement 2. If the Landlord terminates for reasons other than Tenant's default during any month between year four and five, the Landlord will reimburse the Tenant based on the following calculation: (a) Reimbursement total from 1(b) above = 12 = $ (b) Total from 2(a) above [ x ] _ (number of months remaining in Term) _ Reimbursement Dated: 1035600.1 "LANDLORD" City of Tustin, California Jeffrey C. Parker, City Manager "TENANT" Tustin Auto Center Merchants Association, a non - profit California Corporation By: Name: Title: By: Name: Title: