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Home My WebLink About05 SECOND AMENDMENT TO THE TUSTIN AUTO CENTER MERCHANTS' ASSOCIATION GROUND LEASE1'tY O Cr .r.A AGENDA REPORT kPFIF MEETING DATE: JUNE 19, 2018 TO: JEFFREY C. PARKER, CITY MANAGER FROM: ECONOMIC DEVELOPMENT DEPARTMENT Agenda Item 5 Reviewed: City Manager Finance Director SUBJECT: SECOND AMENDMENT TO THE TUSTIN AUTO CENTER MERCHANTS' ASSOCIATION GROUND LEASE SUMMARY 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 The City Council approve the Second 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 Second Amendment. FISCAL IMPACT The proposed Second Amendment will extend the Ground Lease through December 31, 2025. The Association currently pays $11,000 a month. Beginning January 1, 2020, the Association will pay $12,500 a month, $15,000 a month beginning January 1, 2023, and $20,000 a month beginning January 1, 2024. CORRELATION TO THE STRATEGIC PLAN The Second 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 commenced on December 8, 2014 and terminates December 7, 2019. Agenda Report June 19, 2018 Page 2 The terms for the original Ground Lease provides a formula for which the Association can receive partial reimbursement for their original site preparation expenses in the event the City terminates the Ground Lease between December 8, 2018 and December 7, 2019. The original site preparation did not involve paving the site. The Association is now seeking to pave the entire lot and, before they make a financial commitment, they have requested an extension to the Ground Lease through December 31, 2025. The proposed Second Amendment will extend the Ground Lease through 2025 but the City will not reimburse the Association for any new site preparation expenses in the event the City terminates the Ground Lease prior to December 31, 2025. 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(8) 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. As was originally outlined in the October 7, 2014, City Council Agenda Report, 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. The vacant parcels, including this parcel, in this Tustin Legacy Planning Area are not being marketed for lease and the Second Amendment 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 fifteen dealerships in the Tustin Auto Center. In accordance with Section 7960(8) of the Tustin City Code, staff recommends the City Council deem entering into the Second Amendment an appropriate action and approve the attached Second Amendment. Jo n Buchanan Jerry Craig ector of Economic DevelopmentDeputy�Dir Attachment: Second Amendment to the Gro nd' eC ase conomic Development SECONDAMENDMENT TO THE GROUNDLEASEBETWEEN THE CITYOFTUSTIN AND TUSTIN AUTO CENTERMERCHANTS ASSOCIATION Second This SECONDAMENDMENT TO THE GROUND LEASE (this “ AmendmentSecondAmendment Date ”)is made and entered into as of June ___, 2018(the “”) by and between the CITY OF TUSTIN, a municipal corporation of the State of California Landlord (“”),and the TUSTINAUTO CENTERMERCHANTS ASSOCIATION, a non-profit Tenant California Corporation, (hereinafter, “”). Landlord and Tenant are sometimes referred PartyParties to herein individually as a “” and collectively as the “”. RECITALS A.The Partiesentered into that certain Ground Lease dated as of October 23, 2014, and a First Amendment to the Ground Lease, dated July 7, 2015, (collectively the “Ground Lease”) pursuant to which the Landlord agreed to lease a vacant parcel in Tustin Legacy to Tenantfor storing vehicles. B.The Ground Leaseprovides for an initial term of five (5) years commencing on December 8, 2014 and ending on December 7, 2019, with an option exercisable by Tenant to renew for two (2) additional one-year terms, resulting in a maximumpossible Lease term of seven (7) years expiring on December 7, 2021. C.The Parties desire to amend the Ground Leaseto extend its term until December 31,2025 and to revise the Base Rent payable by Tenant to Landlord as set forth herein. AGREEMENT NOW, THEREFORE , in consideration of the foregoing Recitals and of the promises and mutual covenants includedwithin the Ground Lease, which are incorporated in the operative provisions of this Second Amendment by this reference as though set forth in theirentirety, the Parties agree as follows: Modification to the Ground Lease. 1.The Ground Leaseis hereby amended as follows: (a)Section 2Term and Option to Renewis hereby amended and restatedin its entirety to read as follows: 2.TERM 2.1Term.The Term (“Term”) of this Lease shall be eleven (11) years commencing on December 8, 2014 (“Commencement Date”) and ending on 1315989.2 December 31, 2025 (“Expiration Date”), unless sooner terminated as provided herein. 2.2Commencement of Possession.If Landlordis 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[Reserved]. (b)Section 3.1Base Rentis hereby amended and restated in its entirety to read as follows: 3.1Base Rent. 3.1.1Effective 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. 3.1.2Effective 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 December 31, 2019. 3.1.3Effective January 1, 2020 through December 31, 2022, the Tenant shall pay Landlord Rent equal to the monthly sum of Twelve Thousand Five Hundred Dollars ($12,500) for the Premises. 3.1.4Effective January 1, 2023 through December 31, 2024, the Tenant shall pay Landlord Rent equal to the monthly sum of Fifteen Thousand Dollars ($15,000) for the Premises. 3.1.5Effective January 1, 2025 through December 31, 2025, the Tenant shall pay Landlord Rent equal to the monthly sum of Twenty Thousand Dollars ($20,000) for the Premises. 3.1.6If 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. 1315989.2 (c)The final sentence of Subsection 3.2.2 of Section 3.2Reimbursement for Site Preparationis hereby amended and restated in its entirety to read as follows: “No offset or reimbursement from Landlord to Tenant will be required if Tenant or Landlord terminates the Lease at any time after December 7, 2019.” No Other Changes. 2.This Second Amendmentis supplemental to the Ground Lease and is by reference made part of said Ground Lease. All sections of the Ground Leasenot specifically amended herein shall remain in full force and effect. In the event of any conflict or inconsistency between the provisions of this Second Amendmentand any provisions of the Ground Lease, the provisions of this Second Amendmentshall in all respect govern and control. Unless otherwise specifically defined herein, terms used in this Second Amendmentshall have the same meaning as ascribed to them in the Ground Lease. The execution and delivery of this Second Amendmentshall 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. Counterparts. 3.This Second Amendmentmay 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 Second Amendmentby signing any such counterpart. [[1011,1529,1638,1586][12][B,I,][Times New Roman]]SIGNATURE PAGE FOLLO [[1624,1529,1719,1586][12][B,I,][Times New Roman]]WS [[472,1530,927,1587][12][,I,][Times New Roman]]<<<<<<<<<<<<< [[911,1530,1029,1587][12][,I,][Times New Roman]]<<< [[1696,1530,2253,1587][12][,I,][Times New Roman]]>>>>>>>>>>>>>>>> 1315989.2 IN WITNESS WHEREOF, City has authorized this Second Amendmentbetween the City of Tustin and Tustin Auto Center Merchants Association tobe 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 ServicesSupervisor 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:_____________________________ 1315989.2