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Home My WebLink About05 - Basin Marine Shipyard Periodic Rent Adjustment and Lease AmendmentCITY OF NEWPOI T November 10, 1997 NOV 1 01997 City Council Agenda Item No. 5 TO: Mayor and Members of the City Council FROM: Tim Riley, Fire and Marine Chief SUBJECT: Basin Marine Shipyard Periodic Rent Adjustment and Lease Amendment RECOMMENDATION: Increase the minimum rental and percentage rents due under the Basin Marine Shipyard lease based upon the appraisal by George Hamilton Jones, Inc. The City's Finance Committee unanimously approved the proposed increases at their meeting on October 20, 1997. BACKGROUND: The City entered into a lease with Basin Marine Shipyard in 1985 for the shipyard property at the Balboa Yacht Basin, 829 Harbor Island Drive. The subject property consists of approximately 32,792 square feet of uplands and 9,074 square feet of water area, currently used for a marine hardware store and boat repair yard. The lease is for a 25 -year term, and the minimum rent is $45,000 a year with percentage rental in the following categories: 4% lessee's gross receipts from labor, services and materials 10% lessee's net income from outside labor 5% lessee's gross in hardware sales, exclusive of internal sales The lease also provides that after 10 years, the City has the right to increase the minimum guaranteed rental and/or percentages in the event that such increases are, in the opinion of a qualified appraiser, necessary to ensure that rents due under the lease actually reflect the fair market value of the lease premises. George Hamilton Jones, Inc., an appraisal firm, has been retained by the City to make the above determination and it is their recommendation that the minimum guaranteed rental be increased to $51,200 per year and that the percentage rental be as follows: 4% lessee's gross of shipyard boat repairs 10% lessee's net income from outside labor 5% lessee's gross equipment and hardware sales, exclusive of internal sales to the boat repair business Attachment: George Hamilton Jones, Inc. market rent appraisal dated August 20, 1997 GEORGE I71AMILTON .TONES, INC_. APPRAISAL CONSULTANTS GEORGE HAMILTON )ONES, MAI 717 LIDO PARK DRIVE, SUITE D STUART D. D.VALL. MAI NEWPORT BEACH. CALIFORNIA 92663 KENT HARVEY. MAI August 20, 1997 Mr. Tony Melum Deputy Chief Marine Environmental Division Newport Beach Fire and Marine Department City of Newport Beach P. O. Box 1768 Newport Beach, CA 92658-8915 Re: Basin Marine, Inc. Market Rent Appraisal Dear Mr. Melum: TELEPHONE (714) 673-6Tai FAX (714) 673-6-24 In accordance with your request and authorization dated July 11, 1997, we have examined Basin Marine Boat Yard, located at 829 Harbor Island Drive East, Newport Beach, and considered the terms and conditions of the land and water lease which currently applies to the property, for the purpose of formulating and expressing our opinion of the fair market rental value of the site (land and water only) as described in the existing lease. In addition, we have also estimated the fair market rental value of the site if enlarged by 9,100 square feet, as proposed. Our opinion is premised on the representation that adequate offsite parking will be provided. Fair market rental value is comprised of a combination of guaranteed minimum rent and percentage rent. After investigation of the property and matters pertinent to its valuation, we have formed the opinion that fair market rental value for the land and water, is as follows: Fair Market Rental Value Conclusion: Guaranteed Minimum Rental: Existing Site (37,432 s.f, effective): $51,200 per year Proposed Enlarged Site (46,442 s.f, effective): $71,600 per year Mr. Tony Melum Aubust 20, 1997 Page -2- Percentage Rental: 1) Shipyard/boat repair (labor, service and materials): 4% of gross 2) Outside labor: 10% of net income 3) Equipment and hardware sales, exclusive of internal sales to boat repair business: 5% of gross It is assumed that future adjustments in the minimum rent will be made as specified in Section 3(b) of the subject lease, which is every four years based on changes in the consumer price index (CPI). Your attention is directed to the following report which sets forth premises and limiting conditions, descriptions, exhibits, factual data, discussions, computations, and analyses which form, in part, the basis of our value conclusions. Respectfully submitted, org&1Ja#9W Jones, MAI (State Ce General Real Estate Appraiser No. AG005632) sate Certifies General &d1 Estate ppraiser No. AG006753)