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Home My WebLink About08 FIRST AMENDMENT TO TUSTIN AUTO CENTER MERCHANTS' ASSOCIATION GROUND LEASE--^ A AGENDA REPORT llt40-iS� ~ MEETING DATE TO: FROM: SUBJECT: SUMMARY JULY 7, 2015 JEFFREY C. PARKER, CITY MANAGER Agenda Item 8 Reviewed: City Manager Finance Director CITY MANAGER'S OFFICE — ECONOMIC DEVELOPMENT DIVISION FIRST AMENDMENT TO THE TUSTIN AUTO CENTER MERCHANTS' ASSOCIATION GROUND LEASE Approval is requested to amend the Ground Lease ("Ground Lease') between the City of Tustin and the Tustin Auto Center Merchants' Association ("Association") for storing vehicles on a vacant parcel in Tustin Legacy. RECOMMENDATION It is recommended the City Council approve the First Amendment to the Ground Lease between the City of Tustin and the Tustin Auto Center Merchants' Association and authorize the City Manager to execute the First Amendment. FISCAL IMPACT The original Ground Lease required the Association to reimburse the City for site preparation expenses within six months of the Ground Lease's commencement. The proposed First Amendment will revise the reimbursement schedule, allowing the Association to completely reimburse the City by December 31, 2015. ALIGNMENT WITH STRATEGIC PLAN The First Amendment to 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 On October 7, 2014, the City Council approved a Ground Lease between the City of Tustin and the Tustin Auto Center Merchants' Association for the purpose of storing vehicles on a vacant parcel in Tustin Legacy. The Ground Lease required the Agenda Report July 7, 2015 Page 2 Association to reimburse the City for site preparation expenses at an amount not to exceed $150,000 within six months of commencement of the Ground Lease. The Ground Lease commenced on December 8, 2014 and the actual site preparation expenses were $149,859.53. The Association has requested an amendment to the Ground Lease, allowing the Association to reimburse the City $75,000 immediately and pay the balance of $74,859.53 by December 31, 2015. The First Amendment provides the Tustin Auto Center, a key economic development driver in the City, with the flexibility necessary to fulfill their contractual obligations while strengthening the business relationship between the two parties. Staff will be available to answer any questions the City Council may have. Jerry Craig Economic D loprr) n & H using Manager First Amendment to the Ground Lease FIRST AMENDMENT TO THE GROUND LEASE BETWEEN THE CITY OF TUSTIN AND TUSTIN AUTO CENTER MERCHANTS ASSOCIATION This FIRST AMENDMENT TO THE GROUND LEASE (this "First Amendment') is made and entered into as of July 7, 2015 (the "First Amendment Date") 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'). Landlord and Tenant are sometimes referred to herein individually as a "Party" and collectively as the "Parties". RECITALS A. The Parties entered into that certain Ground Lease dated as of October 23, 2014, (the "Original Ground Lease") pursuant to which the Landlord agreed to lease a vacant parcel in Tustin Legacy from Landlord for storing vehicles. B. The Original Ground Lease required the Tenant to reimburse the Landlord for Site Preparation expenses within six (6) months from the Commencement Date and at a cost not to exceed One Hundred Fifty Thousand Dollars ($150,000). C. The actual Site Preparation expenses were One Hundred Forty -Nine Thousand Eight Hundred and Fifty -Nine Dollars and Fifty -Three Cents ($149,859.53). D. The Parties desire to amend the reimbursement schedule for Site Preparation expenses by requiring Tenant to reimburse Landlord for approximately one-half of such expenses by July 1, 2015, with the remainder of such expenses owing and due by December 31, 2015. E. The Parties desire to amend and restate Exhibit "B" of the Original Ground Lease to reflect the actual Site Preparation expenses. AGREEMENT NOW, THEREFORE, in consideration of the foregoing Recitals and of the promises and mutual covenants included within the Original Ground Lease, which are incorporated in the operative provisions of this Amendment by this reference as though set forth in their entirety, the Parties agree as follows: 1. Modification to the Original Ground Lease. The Ground Lease is hereby amended as follows: (a) Subsection 3.2.1 of Section 3.2 Reimbursement for Site Preparation is hereby deleted in its entirety and replaced as follows: 1098106.1 "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 Seventy -Five Thousand Dollars ($75,000) for the Site Preparation by July 1, 2015 and reimburse the remaining balance, Seventy -Four Thousand Eight Hundred and Fifty -Nine Dollars and Fifty -Three Cents ($74,859.53), by December 31, 2015. 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 Tenn of five years." (b) Subsection 3.2.2 of Section 3.2 Reimbursement for Site Preparation is hereby deleted in its entirety and replaced as follows: "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 of One Hundred Forty -Nine Thousand Eight Hundred and Fifty -Nine Dollars and Fifty -Three Cents ($149,859.53), 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 Exhibit `B" — Site Preparation Costs Reimbursement Worksheet). No offset or reimbursement from Landlord to Tenant will be required if Tenant terminates the Lease during any renewal terms." (c) Exhibit "B" (Site Preparation Costs and Reimbursement Worksheet), attached hereto and incorporated herein by reference, is added to the Original Ground Lease and shall replace the Exhibit "B" appended to the Original Ground Lease. 2. No Other Changes. This First Amendment is supplemental to the Original Ground Lease and is by reference made part of said Original Ground Lease. All sections of the Original Ground Lease not specifically amended herein shall remain in full force and effect. In the event of any conflict or inconsistency between the provisions of this First Amendment and any provisions of the Original Ground Lease, the provisions of this First Amendment shall in all respect govern and control. Unless otherwise specifically defined herein, terms used in this First Amendment shall have the same meaning as ascribed to them in the Original Ground Lease. The execution and delivery of this First Amendment shall not operate as a waiver of or, except as expressly set forth herein, an amendment of any right, power or remedy of either party in effect prior to the date hereof. 3. Counterparts. This First Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the Parties hereto may execute this First Amendment by signing any such counterpart. ««««««««SIGNATURE PAGE FOLLOWS»»»»»»»» 1098106.1 IN WITNESS WHEREOF, City has authorized this First 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" 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: 1098106.1 EXHIBIT B SITE PREPARATION COSTS AND 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 $149,859.53 (Site Preparation Costs) _ $119,887.62 (b) Total from 1(a) above [ - ] $72,000 (Rent Credit) _ $47,887.62 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 months = $3,990.64/month (b) Total from 2(a) above [ x ] _ (number of months remaining in Term) _ 1098106.1 Reimbursement