HomeMy WebLinkAbout03 - Amendments to Ground Lease and Local Coastal Program Amendments Related to the Lido House Hotel Site (PA2020-068)Q SEW Pp�T
CITY OF
z NEWPORT BEACH
c�<,FORN'P City Council Staff Report
November 12, 2024
Agenda Item No. 3
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Seimone Jurjis, Assistant City Manager/Community Development
Director - 949-644-3232, sjurjis@newportbeachca.gov
PREPARED BY: Benjamin M. Zdeba, AICP, Planning Manager - 949-644-3253,
bzdeba@newportbeachca.gov
Lauren Wooding Whitlinger, Real Property Administrator - 949-644-
3236, Iwooding@newportbeachca.gov.
TITLE: Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments
to Ground Lease and Local Coastal Program Amendments Related
to the Lido House Hotel Site (PA2020-068)
ABSTRACT:
At its meetings in October and November 2022, the City Council approved land use
entitlements and adopted amendments to the General Plan Land Use Element and to
Title 20 (Planning and Zoning) of the Newport Beach Municipal Code (NBMC) related to
the Lido House Hotel. Additionally, the City Council adopted a resolution authorizing the
submittal of the complementary amendments to the Coastal Land Use Plan and Title 21
(Local Coastal Program Implementation Plan) of the NBMC to the California Coastal
Commission (CCC). Collectively, the actions and amendments served to allow expansion
of the Lido House Hotel through updating the development limit to 118,573 gross square
feet.
On February 8, 2024, the CCC approved Local Coastal Program (LCP) Amendment
No. LCP-5-NPB-22-0056-1 without any modifications. For the City Council's
consideration are a resolution and an ordinance to amend the CLUP and Title 21,
consistent with the CCC's approval, as well as two amendments to the lease between the
City of Newport Beach and Lido House, LLC (Tenant).
RECOMMENDATIONS:
a) Find this action is consistent with the California Environmental Quality Act (CEQA).
Pursuant to Section 15062 of the CEQA Guidelines, the changes authorized under
the project are not substantial, as they do not involve new significant effects or a
substantial increase in the severity of previously identified significant effects, and
therefore, a subsequent Environmental Impact Report (EIR) does not need to be
prepared;
b) Adopt Resolution No. 2024-80, A Resolution of the City Council of the City of Newport
Beach, California, Adopting a Local Coastal Program Amendment to Change the
Development Limit Specified in the Coastal Land Use Plan Related to the Lido House
Hotel Located at 3300 Newport Boulevard and 475 32" d Street (PA2022-068);
3-1
Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments to Ground Lease
and Local Coastal Program Amendments Related to the Lido House Hotel Site
November 12, 2024
Page 2
c) Waive full reading, direct the City Clerk to read by title only, introduce Ordinance
No. 2024-29, An Ordinance of the City Council of the City of Newport Beach,
California, Adopting a Local Coastal Program Amendment to Change the
Development Limit Specified for the Lido House Hotel Located at 3300 Newport
Boulevard and 475 32nd Street (PA2020-068), and pass to second reading on
December 10, 2024;
d) Authorize the City Manager and City Clerk to execute the Second Amendment to
Ground Lease between the City of Newport Beach and Lido House, LLC (Tenant), to
update certain terms and conditions related to mortgage financing of the leased
premises, in a form substantially similar to the agreement prepared by the City
Attorney; and
e) Authorize the City Manager and City Clerk to execute the Option Agreement to
Ground Lease with Related Third Amendment to Ground Lease and Third
Amendment to Ground Lease between the City of Newport Beach and Lido House,
LLC (Tenant), to incorporate the property located at 475 32nd Street into the leased
premises and allow the Tenant to construct five cottages and various site and public
improvements, in a form substantially similar to the agreement prepared by the City
Attorney.
DISCUSSION:
In September 2014, the Newport Beach City Council approved the 130-room, Lido House
Hotel project to replace the former City Hall complex located at the northeast corner of
Newport Boulevard and 32nd Street. The City's approval included amendments of the
General Plan, Coastal Land Use Plan (CLUP), Title 20 (Planning and Zoning) of the
NBMC and applications for a site development review and conditional use permit for hotel
construction and operation
In October 2015, the California Coastal Commission approved the proposed CLUP
Amendment with suggested modifications and the Coastal Development Permit (CDP)
for the 130-room, Lido House Hotel. The City Council subsequently accepted the
suggested modifications and approved modified amendments of the General Plan,
Coastal Land Use Plan and Title 20.
During the final design phase and preparation of construction documents, the applicant
determined that additional floor area was necessary and desirable. As such, in April 2016,
the applicant requested to increase the development limit to a new maximum of 103,470
square feet. In February 2017, the CCC authorized the increase.
The project completed construction and opened in April 2018.
In 2020, the applicant filed a request to add 15,103 square feet to the hotel. The additional
floor area would allow for the construction of five new cottages (i.e., "rooms"), increased
storage space, enlarged pre-function/breakout meeting rooms, a new greenhouse seating
room, expansion of three existing hotel rooms, and an enclosed area on the rooftop terrace.
3-2
Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments to Ground Lease
and Local Coastal Program Amendments Related to the Lido House Hotel Site
November 12, 2024
Page 3
Also included in the applicant's project is the demolition of the former Fire Station No. 2
building to create additional public and private parking spaces. All improvements are shown
in Figure 1 below.
Figure 1, Birds -eye view of the proposed project looking northwest at the southeastern elevation.
The following legislative approvals were required to consider this project:
a. General Plan Amendment (GPA) — To amend Anomaly No. 85 to increase the
development limit to 118,573 gross square feet;
b. Zoning Code Amendment (ZCA) — To increase the development limit as described
above -land
c. Local Coastal Program Amendment (LCPA) — To increase the development limit
as described above.
Past Citv Council Action
On October 25, 2022, the City Council adopted Resolution No. 2022-76 to adopt
Addendum No. 2 to the Lido House Hotel Certified Environmental Impact Report,
Resolution No. 2022-77 to amend the General Plan Land Use Element, Resolution
No. 2022-78 to authorize submittal of the Local Coastal Program Amendment to the CCC
(Attachment C), and Resolution No. 2022-79 to amend the Major Site Development
Review and the Conditional Use Permit for the Lido House Hotel. The City Council also
introduced Ordinance No. 2022-22 to amend Title 20 (Planning and Zoning) of the NBMC,
and subsequently adopted it on November 15, 2022.
The October 25, 2022 City Council staff report is included for reference as Attachment D.
3-3
Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments to Ground Lease
and Local Coastal Program Amendments Related to the Lido House Hotel Site
November 12, 2024
Page 4
California Coastal Commission Action
On February 8, 2024, the CCC approved the LCP Amendment filed as PA2020-068 as a
major amendment with no modifications (Attachment E). As a result, and pursuant to
Coastal Act Section 3015(c), the LCP Amendment is now deemed approved and became
a certified part of the City's LCP on February 22, 2024, 10 working days after the date of
the CCC meeting; however, full implementation requires adoption of the recommended
resolution (Attachment A) and ordinance (Attachment B).
Ground Lease and Amendments
In addition to the entitlements mentioned above, the City Council previously approved a
second amendment to the Ground Lease (Lease), allowing Lido House, LLC (Tenant) to
use and develop the former Fire Station No. 2 property (Site) as part of the Lido House
Hotel project. After the City Council approved the proposed second amendment on
October 25, 2022, the Tenant informed the City that its lender had requested further
changes to the Lease terms.
The Tenant would now like to enter into a revised second amendment to the Lease
(Second Amendment) (Attachment F) to address its lender's concerns about sections of
the Lease related to mortgages. The proposed terms of the Amendment are summarized
below:
Second Amendment Terms
The Second Amendment modifies sections of the Lease related to loan
foreclosures. Specifically, the revisions allow an approved lender to assign its
interest in the Lease to an affiliate to carry out the foreclosure or deed or transfer
in lieu of foreclosure, without first obtaining the City's approval. All subsequent
assignments of the lender's interest in the Lease, however, will continue to require
the City's consent and help ensure the hotel is operated at a high standard.
2. The terms of the Lease were further clarified to ensure the loan -to -value ratio of
75% includes the fair market value of the improvements and the leasehold interest.
3. New language was incorporated into the Lease to provide that the City will enter
into a new ground lease to an approved lender if the existing agreement is
terminated during bankruptcy proceedings, assuming the lender first satisfies any
outstanding defaults by the tenant, including payment of attorneys' fees and
expenses.
4. Additionally, the Second Amendment modifies the Lease to match the City's
standard agreement terms that each party shall pay its own attorneys' fees and
costs to enforce any of the terms and conditions of the Lease.
Further, the Tenant has asked the City to modify the terms of the Lease amendment
approved on October 25, 2022, to be an Option Agreement to the Lease with Related
Third Amendment to the Lease (Option) (Attachment G), given the scope and difficulty of
the entitlements required for the proposed project and the instability of the current
commercial lending market.
3-4
Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments to Ground Lease
and Local Coastal Program Amendments Related to the Lido House Hotel Site
November 12, 2024
Page 5
The Option is structured such that the Third Amendment to the Lease (Third Amendment)
(Attachment G) will be executed upon receipt of the entitlements and when the Tenant
has secured financing for the project. Should the Tenant not be successful in securing
approvals for the project, the Option would terminate, and the City will be free to find
another use or tenant for the Site. The proposed terms of the Option and Third
Amendment are summarized below:
Option
1. Upon approval of this item, the City and Tenant will execute the Option, which shall
have a term no more than six months from the date of execution, providing time
for the Tenant to complete its due diligence and entitlement processing and
execute the Third Amendment.
a. The term may be extended by rolling three-month periods, in writing by the City
Manager, subject to the Tenant showing proof of pursuing reasonable efforts
to obtain the required entitlements.
b. The Option allows the Tenant approval and a limited time period to pursue the
necessary entitlements for the project and development of the Site, without
potentially risking default under the Lease, if entitlements cannot be obtained.
Third Amendment Terms
1. The term of the Lease remains unchanged, with the initial term of 55 years expiring
in 2071, and a 30-year option term.
2. Tenant shall have three years following execution of the Third Amendment to
complete construction of the proposed project — including the new breakout and
meeting rooms in the hotel, the site work to demolish the former fire station
building, construction of public parking stalls, and construction of five new
cottages.
3. Tenant shall pay an additional $50,000 per year in base rent for the Site, for a total
annual base rent of $300,000, which increase shall commence upon execution of
the Option.
a. The base rent shall continue to be subject to adjustment every five years by the
change in the Consumer Price Index, per the terms of the Lease.
b. Should the Tenant not obtain the necessary entitlements to develop the Site,
payment of the additional base rent shall cease upon termination of the Option.
4. Consistent with the terms of the Lease, the Tenant shall pay percentage rent of
four percent of gross room revenues and two percent of gross non -room revenues
for the Site, less base rent paid for that quarter.
3-5
Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments to Ground Lease
and Local Coastal Program Amendments Related to the Lido House Hotel Site
November 12, 2024
Page 6
5. Tenant shall pay for and complete the demolition of the existing Fire Station
No. 2, site grading, and all costs associated with design and management.
6. In addition to the hotel modifications and additions outlined in this staff report,
including the addition of five new cottages, the Tenant shall construct and be
responsible for the ongoing maintenance and repair of the public parking area
to be developed on Via Oporto. The City will install meters and manage the
public use of the parking spaces.
7. Tenant will commence construction of the improvements within 12 months of
receipt of all entitlements and shall complete construction within three years of
receipt of building permits to construct.
8. The Tenant shall submit, for the City's review and approval, evidence of
Tenant's financial capacity to develop the Site, copies of any related loan
documents, amendments (if any) to the hotel management, and hotel franchise
agreement.
9. The Lease is amended to match the City's standard agreement terms that each
party shall pay its own attorneys' fees and costs to enforce any of the terms
and conditions of the Lease.
The Second Amendment, Option, and Third Amendment have all been reviewed by the
City Attorney's Office and have been approved as to form. The Tenant has reviewed and
approved the terms of the documents as well.
Hotel Expansion Project Schedule
The Table provides an outline of the anticipated project schedule:
Anticipated Project Schedule
Project Milestone
Estimated Timeline
Entitlements Approved and Option
November 12, 2024
Agreement Executed
Execution of Third Amendment and Building
January 15, 2025
Permits for Phase I of Project (storage
spaces and break-out meeting rooms) Issued
and Construction Begins
Building Permits for Phase II of Project
January 15, 2026
(demolition of former fire station building, site
work, and public parking) Issued and
Construction Begins
Building Permits for Phase III of Project
January 15, 2027
(5 new cottages and 3 king suites) Issued
and Construction Begins
Completion of Construction of Phase III and
December 31, 2027
Rooms Open for Business
3-6
Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments to Ground Lease
and Local Coastal Program Amendments Related to the Lido House Hotel Site
November 12, 2024
Page 7
FISCAL IMPACT:
Approval of this item will result in an increase of $50,000 in annual base rent revenue
from the hotel, and an estimated $65,000 per year of additional (room and non -room)
percentage rent revenues related to the new cottages.
An estimated $165,000 in additional transient occupancy tax (TOT) per year is also
expected. Additional percentage rent, parking meter, and TOT revenues will be included
in future fiscal years' budgets, upon completion of the construction. Current and future
years' rent revenues will continue to be posted to the General Fund account in the
Community Development Department — 01050505-551130, and TOT revenues will
continue to be posted to the General Fund account for Hotel Tax revenue — 01003-
413010.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is consistent with the California
Environmental Quality Act (CEQA). Pursuant to Section 15062 of the CEQA Guidelines,
the changes authorized under the project are not substantial, as they do not involve new
significant effects or a substantial increase in the severity of previously identified
significant effects, and therefore, a subsequent Environmental Impact Report (EIR) does
not need to be prepared. The City prepared and certified a final EIR for the Lido House
Hotel (SCH#2013111022). State CEQA Guidelines allow for the updating and use of a
previously certified EIR for projects that have changed or are different from the previous
project. In cases where changes or additions occur with no new significant environmental
impacts, an addendum to the previously certified EIR may be prepared pursuant to CEQA
Guidelines Section 15164. The City prepared Addendum No. 2 to the Lido House Hotel's
final EIR for the project, which concludes there are no new environmental impacts and no
impacts of greater severity that would result from approval and implementation of the
project.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
Notice of the October 25, 2022, City Council hearing where this amendment was originally
considered and approved for submittal to the CCC was published in the Daily Pilot and
mailed to property owners of record within a 300-foot radius of the project site, excluding
any intervening public right-of-way.
Lastly, pursuant to Section 13515 of the California Code of Regulations, a review draft of
the LCP Amendment was made available, and a Notice of Availability was distributed on
July 20, 2022, to all persons and agencies on the Notice of Availability mailing list.
3-7
Ordinance No. 2024-29 and Resolution No. 2024-80: Amendments to Ground Lease
and Local Coastal Program Amendments Related to the Lido House Hotel Site
November 12, 2024
Page 8
ATTACHMENTS:
Attachment A
— Resolution No. 2024-80 (Coastal Land Use Plan Amendment)
Attachment B
— Ordinance No. 2024-29 (LCP Implementation Plan Amendment)
Attachment C
— Resolution No. 2022-78 (Authorizing LCP Amendment Submittal)
Attachment D
— October 25, 2022 City Council Staff Report
Attachment E
— Coastal Commission Approval Letter
Attachment F —
Second Amendment to the Ground Lease
Attachment G
— Option Agreement with Related Third Amendment to the Ground Lease
Attachment A
Resolution No. 2024-80 (Coastal Land Use Plan Amendment)
3-9
RESOLUTION NO. 2024- 80
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, ADOPTING A
LOCAL COASTAL PROGRAM AMENDMENT TO
CHANGE THE DEVELOPMENT LIMIT SPECIFIED IN THE
COASTAL LAND USE PLAN RELATED TO THE LIDO
HOUSE HOTEL LOCATED AT 3300 NEWPORT
BOULEVARD AND 475 32ND STREET (PA2020-068)
WHEREAS, Section 200 of the City of Newport Beach ("City") Charter vests the
City Council with the authority to make and enforce all laws, rules, and regulations with
respect to municipal affairs subject only to the restrictions and limitations contained in the
Charter and the State Constitution, and the power to exercise, or act pursuant to any and
all rights, powers and privileges, or procedures granted or prescribed by any law of the
State of California;
WHEREAS, Section 30500 of the California Public Resources Code requires
each county and city to prepare a local coastal program ("LCP") for that portion of the
coastal zone within its jurisdiction;
WHEREAS, the City adopted the City of Newport Beach Local Coastal Program
Coastal Land Use Plan ("CLUP") in 2005, which has been amended from time to time;
WHEREAS, the California Coastal Commission ("Coastal Commission")
effectively certified the City's Local Coastal Program Implementation Plan on January 13,
2017, which the City added as Title 21 (Local Coastal Program Implementation Plan)
("Title 21") to the City of Newport Beach Municipal Code ("NBMC"), whereby the City
assumed coastal development permit -issuing authority on January 30, 2017;
WHEREAS, an application was filed by R.D. Olson Development ("Applicant")
with respect to property located at 3300 Newport Boulevard and 475 32nd Street as
legally described in Exhibit "A," which is attached hereto and incorporated by reference
("Property");
WHEREAS, the City Council approved General Plan Amendment No. GP2012-
002, Coastal Land Use Plan Amendment No. LC2012-001, Zoning Code Amendment No.
CA2012-003, Site Development Review No. SD2014-001, Conditional Use Permit No.
UP2014-004, and Traffic Study No. TS2014-005 on September 9, 2014, for the
development of Lido House Hotel at 3300 Newport Boulevard;
3-10
Resolution No. 2024-
Page 2 of 6
WHEREAS, the Applicant is requesting approval of a 15,103 square -foot
expansion of the Lido House Hotel to add five cottages, 28 private valet parking spaces,
14 public parking spaces, a greenhouse, a walkway, breakout rooms, and rooftop
enclosure, and landscaping and fencing improvements along the perimeter of the
Property ("Project");
WHEREAS, the Project requires the following approvals from the City:
• General Plan Amendment ("GPA") — An amendment to the Land Use Element
of the General Plan to amend Anomaly No. 85 to increase the development
limit to 118,573 gross square feet;
• Local Coastal Program Amendment ("LCPA") — An amendment to Title 21
(Local Coastal Program Implementation Plan) of the NBMC and CLUP to
increase the development limit to 118,573 gross square feet;
• Zoning Code Amendment ("ZCA") — An amendment to Title 20 (Planning and
Zoning) of the NBMC to increase the development limit to 118,573 gross
square feet;
• Major Site Development Review Amendments ("SDR") — A SDR to ensure the
changes to the Property are developed in accordance with applicable
development standards ;
• Conditional Use Permit Amendments ("CUP") —A CUP to allow the operational
changes that result from the changed site plan and floorplan and the sale of
alcohol; and
• Addendum No. 2 to the Certified Final Environmental Impact Report for the Lido
House Hotel (SCH#2013111022) ("Addendum No 2") — Addendum No. 2
addresses reasonably foreseeable environmental impacts resulting from the
Project pursuant to the California Environmental Quality Act ("CEQA") as set
forth in Public Resources Code Section 32000 et seq.;
WHEREAS, the Property is designated Visitor Serving Commercial — Lido Village
(CV-LV) and Anomaly No. 85 by the City of Newport Beach General Plan ("General Plan")
and located within the Commercial Visitor -Serving -Lido Village (CV-LV) Zoning District;
3-11
Resolution No. 2024-
Page 3 of 6
WHEREAS, the Property is designated Visitor -Serving Commercial -Lido Village
(CV-LV) by the CLUP and located within the Commercial Visitor -Serving - Lido Village
(CV-LV) Coastal Zoning District;
WHEREAS, pursuant to Section 13515 of the California Code of Regulations Title
14, Division 5.5, Chapter 8 ("Section 13515"), drafts of the LCPA were made available
and a Notice of Availability was distributed on July 20, 2022, at least six weeks prior to
the anticipated final action date;
WHEREAS, the Planning Commission held a duly noticed public hearing on July
21, 2022, in the City Council Chambers located at 100 Civic Center Drive, Newport Beach,
California. A notice of time, place and purpose of the hearing was given in accordance
with California Government Code Section 54950 et seq. ("Ralph M. Brown Act") and
Chapters 20.62 and 21.62 (Public Hearings) of the NBMC. Evidence, both written and
oral, was presented to, and considered by, the Planning Commission at this hearing;
WHEREAS, at the hearing, the Planning Commission voted unanimously (7 ayes
— 0 nays) to adopt Planning Commission Resolution No. PC2022-020 recommending
approval of the Project to the City Council;
WHEREAS, the City Council held a duly noticed public hearing on October 25,
2022, in the City Council Chambers located at 100 Civic Center Drive, Newport Beach,
California. A notice of time, place and purpose of the public hearing was given in
accordance with the Ralph M. Brown Act, Chapters 20.62 and 21.62 (Public Hearings) of
the NBMC, and Section 13515. Evidence, both written and oral, was presented to, and
considered by, the City Council at this public hearing;
WHEREAS, at the hearing, the City Council voted unanimously (6 ayes, 0 nays,
1 recusal) to adopt Resolution No. 2022-76 adopting Addendum No. 2 to the Lido House
Hotel Certified Environmental Impact Report, Resolution No. 2022-77 approving the GPA,
Resolution No. 2022-78 authorizing submittal of the LCPA to the Coastal Commission,
and Resolution No. 2022-79 approving the SDR and CUP, and to introduce Ordinance
No. 2022-22 adopting the ZCA; and
WHEREAS, the Coastal Commission approved the LCPA (LCP-5-NPB-22-0056-1
Part B) on February 8, 2024, as a major amendment with no modifications which, as a
result, became a certified part of Title 21.
3-12
Resolution No. 2024-
Page 4 of 6
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
Section 1: The City Council hereby adopts the LCPA filed as part of PA2020-
068, amending Table 2.1.1-1 and Policy 4.4.2-1 of the Coastal Land Use Plan, as set
forth in Exhibit "B," which is attached hereto and incorporated herein by reference.
Section 2: The LCP, including the LCPA, will be carried out fully in conformity
with the California Coastal Act.
Section 3: The recitals provided in this resolution are true and correct and are
incorporated into the operative part of this resolution.
Section 4: If any section, subsection, sentence, clause or phrase of this
resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not
affect the validity or constitutionality of the remaining portions of this resolution. The City
Council hereby declares that it would have passed this resolution, and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 5: Pursuant to Section 21166 of the California Public Resources Code
and Section 15162 of the CEQA Guidelines, when an environmental impact report ("EIR")
has been certified for a project, no subsequent EIR is required unless the lead agency
determines, on the basis of substantial evidence in the light of the whole record, one or
more of the following:
a. Substantial changes are proposed in the project which will require major revisions
of the previous EIR due to the involvement of new significant environmental effects
or a substantial increase in the severity of previously identified significant effects;
b. Substantial changes occur with respect to the circumstances under which the
project is undertaken which will require major revisions of the previous EIR due to
the involvement of new significant environmental effects or a substantial increase
in the severity of previously identified significant effects; or
c. New information of substantial importance, which was not known and could not
have been known with the exercise of reasonable diligence at the time the previous
EIR was certified as complete, shows any of the following:
3-13
Resolution No. 2024-
Page 5 of 6
i) The project will have one or more significant effects not discussed in the
previous EIR;
ii) Significant effects previously examined will be substantially more severe than
shown in the previous EIR;
iii) Mitigation measures or alternatives previously found not to be feasible would
in fact be feasible and would substantially reduce one or more significant
effects of the project, but the project proponents decline to adopt the mitigation
measure or alternative; or
iv) Mitigation measures or alternatives which are considerably different from those
analyzed in the previous EIR would substantially reduce one or more significant
effects on the environment, but the project proponents decline to adopt the
mitigation measure or alternative.
On September 9, 2014, the City Council certified the adequacy and completeness of the
Lido House Hotel Final Environmental Impact Report (SCH No. 2013111022) by adopting
Resolution No 2014-80.
In accordance with Section 15164 of the CEQA Guidelines, an addendum to the
previously adopted EIR is the appropriate environmental document for the Project.
Therefore, upon receipt of the prior application for increased floor area for the Lido House
Hotel, the City prepared Addendum No. 1 to the EIR. On July 26, 2016, The City Council
adopted Resolution No. 2016-88 adopting Addendum No. 1. Upon receipt of the current
application for increased floor area for the Lido House Hotel, the City prepared Addendum
No. 2 to the EIR for the Project in accordance with Section 15164 of the CEQA Guidelines.
Addendum No. 2 which was adopted on October 25, 2022, addresses all environmental
impacts associated with the Project. The Coastal Commission's approval of the LCPA
does not result in substantial changes to the Project nor did it uncover new information
that requires additional environmental review; therefore, no additional environmental
review is necessary.
3-14
Resolution No. 2024-
Page 6 of 6
Section 6: This resolution shall take effect immediately upon its adoption by the
City Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 12th day of November, 2024.
Will O'Neill
Mayor
ATTEST:
Leilani 1. Brown
City Clerk
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
A ron C. Harp
City Attorney
Attachment(s): Exhibit A — Legal Description
Exhibit B — Amendment to the Coastal Land Use Plan
3-15
EXHIBIT A
Legal Description
LEGAL DESCRIPTION:
THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY
OF ORANGE, CITY OF NEWPORT BEACH, AND IS DESCRIBED AS FOLLOWS:
PARCEL 1:
THAT PORTION OF LOTS 3, 6 AND 7 IN SECTION 28, TOWNSHIP 6 SOUTH, RANGE 10
WEST, SAN BERNARDINO MERIDIAN, ACCORDING TO THE OFFICIAL PLAT FILED IN THE
DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE NORTHERLY LINE OF "THE HUDSON" WITH
THE NORTHERLY PROLONGATION OF THE EASTERLY LINE OF LOT 21 IN BLOCK 431 OF
"LANCASTER'S ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN
BOOK 5, PAGE 14 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY,
CALIFORNIA; THENCE NORTH 0'44'30" WEST ALONG SAID NORTHERLY PROLONGATION
400.00 FEET; THENCE WESTERLY PARALLEL WITH SAID NORTHERLY LINE AND LOT 1 IN
BLOCK "A" OF SAID LANCASTER'S ADDITION TO NEWPORT BEACH 461.53 FEET TO A
POINT IN THE EASTERLY LINE OF SAID CENTRAL AVENUE, AS SHOWN ON TRACT NO.
108, AS SHOWN ON A MAP RECORDED IN BOOK 2, PAGES 1 OF SAID MISCELLANEOUS
MAPS; THENCE SOUTHERLY ALONG THE EASTERLY LINE OF SAID CENTRAL AVENUE
401.79 FEET, MORE OR LESS, TO THE NORTHWEST CORNER OF SAID LOT 1; THENCE
EASTERLY ALONG THE NORTHERLY OF SAID LOT 1 AND SAID NORTHERLY LINE OF "THE
HUDSON" 495.33 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE LAND DESCRIBED IN THE DEED ATTACHED TO THAT
CERTAIN RESOLUTION NO. 3284 OF THE CITY COUNCIL OF NEWPORT BEACH, A
CERTIFIED COPY OF WHICH RECORDED MARCH11, 1946 IN BOOK 1404, PAGE130 OF
OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.
ALSO EXCEPTING THEREFROM THE LAND DESCRIBED AS PARCEL 2 IN DEED TO THE
GRIFFITH COMPANY RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF SAID
OFFICIAL RECORDS.
PARCEL 2-
BEGINNING AT THE SOUTHEAST CORNER OF LOT 2 IN BLOCK "A" OF "LANCASTER'S
ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN BOOK 5, PAGE
14 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA; THENCE
EASTERLY ALONG THE NORTHERLY LINE OF WASHINGTON AVENUE, NOW KNOWN AS
32ND STREET, TO THE INTERSECTION WITH THAT PORTION OF THE BULKHEAD LINE
ESTABLISHED BY THE WAR DEPARTMENT IN 1936 AND SHOWN ON THE WAR
DEPARTMENT MAP OF NEWPORT BAY SHOWING HARBOR LINE, EXTENDING BETWEEN
BULKHEAD STATION NO.124 AND BULKHEAD STATION NO.125; THENCE NORTH 27'30'00"
WEST ALONG SAID BULKHEAD LINE TO ITS INTERSECTION WITH THE NORTHERLY LINE
OF "THE HUDSON" AS SHOWN ON SAID MAP OF LANCASTER'S ADDITION; THENCE
WESTERLY ALONG THE NORTHERLY LINE OF SAID "THE HUDSON" TO THE NORTHEAST
3-16
CORNER OF LOT 1 OF SAID BLOCK"A"; THENCE SOUTHERLY ALONG THE EASTERLY
LINE OF SAID LOTS 1 AND 2 TO THE POINT OF BEGINNING.
PARCEL 3:
THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK
35, PAGES 48 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
TOGETHER WITH THAT PORTION OF THE 20.00 FOOT ALLEY AS VACATED BY
RESOLUTION NO. 3280 OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, A
CERTIFIED COPY OF WHICH RECORDED MARCH 11, 1946 IN BOOK 1400, PAGE 189 OF
OFFICIAL RECORDS OF SAID ORANGE COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT 3; THENCE NORTH 0'44'30"
WEST ALONG THE EASTERLY LINE OF SAID LOT 3, A DISTANCE OF 90.00 FEET; THENCE
NORTH 40'47'07" WEST 170.97 FEET TO A POINT IN THE WESTERLY LINE OF SAID 20.00
FOOT ALLEY; THENCE SOUTH 0'44'30" EAST ALONG THE WESTERLY LINE OF SAID ALLEY
220.89 FEET TO THE SOUTHWESTERLY CORNER OF TRACT NO. 907, AS SHOWN ON A
MAP RECORDED IN BOOK 28, PAGES 25 TO 36 INCLUSIVE OF MISCELLANEOUS MAPS,
RECORDS OF SAID ORANGE COUNTY; THENCE NORTH 89'15'30" EAST ALONG THE
SOUTHERLY LINE OF SAID TRACT NO. 907 AND SAID LOT 3, A DISTANCE OF 110.00 FEET
TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE LAND DESCRIBED AS PARCEL 1 IN DEED TO THE
GRIFFITH COMPANY RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF OFFICIAL
RECORDS OF ORANGE COUNTY, CALIFORNIA.
ALSO EXCEPTING THEREFROM THE LAND DESCRIBED IN DEED TO THE GRIFFITH
COMPANY RECORDED JUNE 15, 1953 IN BOOK 2520, PAGE 577 OF OFFICIAL RECORDS
OF ORANGE COUNTY, CALIFORNIA.
PARCEL 4:
THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK
35, PAGE 48 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT 3; THENCE NORTH 0'44'30"
WEST 74.46 FEET ALONG THE EAST LINE OF SAID LOT TO THE MOST SOUTHERLY
CORNER OF THE LAND DESCRIBED AS PARCEL 1 IN DEED TO THE GRIFFITH COMPANY
RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF OFFICIAL RECORDS OF SAID
ORANGE COUNTY, SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE NORTH
40'47'07" WEST ALONG THE SOUTHWESTERLY LINE OF SAID LAND OF GRIFFITH
COMPANY, A DISTANCE OF 69.945 FEET; THENCE NORTH 89'1530" EAST 45.00 FEET TO
THE EAST LINE OF SAID LOT 3; THENCE SOUTH 0'44'30" EAST 53.54 FEET TO THE TRUE
POINT OF BEGINNING.
PARCEL 5:
LOTS ONE (2) AND TWO (2) IN BLOCK "A" OF "LANCASTER'S ADDITION TO NEWPORT
BEACH' AS SHOWN ON A MAP RECORED IN BOOK 5, PAGE 14 OF MISCELLANEOUS
MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA
3-17
EXHIBIT B
Amendment to Coastal Land Use Plan
Section 1. Amend Table 2.1.1-1 of the Coastal Land Use Plan as follows:
TablePlan
Land Use Category
Categories
Uses
Density/Intensity
The CV-LV category is intended to allow for
a range of accommodations (e.g. hotels,
motels, hostels), goods, and services
intended to primarily serve visitors to the
CV-LV
City of Newport Beach. Limited Use
Visitor -Serving
Overnight Visitor Accommodations and
Commercial ---
residences are not allowed. Note: The CV -
118,573 gross square feet
Lido Village
LV (Visitor Serving Commercial - Lido
Village) category applies to the former City
Hall Complex that included Fire Station # 2
(3300 Newport Boulevard and 475 32nd
Street).
Section 2. Amend Policy 4.4.2-1 of the Coastal Land Use Plan as follows:
4.4.2-1. Maintain the 35-foot height limitation in the Shoreline Height Limitation
Zone, as graphically depicted on Map 4-3, except for the following sites:
A. Marina Park located at 1600 West Balboa Boulevard: A single, up to
maximum 73-foot- tall faux lighthouse architectural tower, that creates an
iconic landmark for the public to identify the site from land and water as a
boating safety feature, may be allowed. No further exceptions to the height
limit shall be allowed, including but not limited to, exceptions for
architectural features, solar equipment or flag poles. Any architectural
tower that exceeds the 35-foot height limit shall not include floor area above
the 35-foot height limit, but shall house screened communications or
emergency equipment, and shall be sited and designed to reduce adverse
visual impacts and be compatible with the character of the area by among
other things, incorporating a tapered design with a maximum diameter of
34-feet at the base of the tower. Public viewing opportunities shall be
provided above the 35-feet, as feasible. (Resolution 2013-44)
B. Former City Hall Complex at 3300 Newport Blvd and 475 32nd Street (the
site):
• At least 75% of the total area of the site shall be 35 feet in height or
lower.
3-18
• Buildings and structures up to 55 feet in height with the peaks of
sloping roofs and elevator towers up to 60 feet in height, provided it
is demonstrated that development does not adversely impact public
views.
• Architectural features such as domes, towers, cupolas, spires, and
similar structures may be up to 65 feet in height.
• Buildings and structures over 35 feet in height, including architectural
features, shall not occupy more than 25 percent of the total area of
the site.
• Buildings and structures over 45 feet in height, architectural features,
shall not occupy more than 15 percent of the total area of the site.
• All buildings and structures over 35 feet in height, including
architectural features, shall be setback a minimum of 60 feet from
the Newport Boulevard right-of-way and 70 feet from the 32nd Street
right-of-way.
• The purpose of allowing limited exceptions to the 35-foot height limit
on this site is to promote vertical clustering resulting in increased
publicly accessible on -site open space and architectural diversity
while protecting existing coastal views and providing new coastal
view opportunities. (Resolution 2016-29)
3-19
Attachment B
Ordinance No. 2024-29 (LCP Implementation Plan Amendment)
3-20
ORDINANCE NO. 2024-29
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
NEWPORT BEACH, CALIFORNIA, ADOPTING A LOCAL
COASTAL PROGRAM AMENDMENT TO CHANGE THE
DEVELOPMENT LIMIT SPECIFIED FOR THE LIDO HOUSE
HOTEL LOCATED AT 3300 NEWPORT BOULEVARD AND
475 32ND STREET (PA2020-068)
WHEREAS, Section 200 of the City of Newport Beach ("City") Charter vests the
City Council with the authority to make and enforce all laws, rules, and regulations with
respect to municipal affairs subject only to the restrictions and limitations contained in the
Charter and the State Constitution, and the power to exercise, or act pursuant to any and
all rights, powers, and privileges, or procedures granted or prescribed by any law of the
State of California;
WHEREAS, Section 30500 of the California Public Resources Code requires
each county and city to prepare a local coastal program ("LCP") for that portion of the
coastal zone within its jurisdiction;
WHEREAS, the City adopted the City of Newport Beach Local Coastal Program
Coastal Land Use Plan ("CLUP") in 2005, which has been amended from time to time;
WHEREAS, the California Coastal Commission ("Coastal Commission")
effectively certified the City's Local Coastal Program Implementation Plan on January 13,
2017, which the City added as Title 21 (Local Coastal Program Implementation Plan)
("Title 21") to the Newport Beach Municipal Code ("NBMC"), whereby the City assumed
coastal development permit -issuing authority on January 30, 2017;
WHEREAS, an application was filed by R.D. Olson Development ("Applicant")
with respect to property located at 3300 Newport Boulevard and 475 32nd Street as
legally described in Exhibit "A," which is attached hereto and incorporated by reference
("Property");
WHEREAS, the City Council approved General Plan Amendment No. GP2012-
002, Coastal Land Use Plan Amendment No. LC2012-001, Zoning Code Amendment No.
CA2012-003, Site Development Review No. SD2014-001, Conditional Use Permit No.
UP2014-004, and Traffic Study No. TS2014-005 on September 9, 2014, for the
development of Lido House Hotel at 3300 Newport Boulevard;
3-21
Ordinance No. 2024-
Page 2 of 7
WHEREAS, the Applicant is requesting approval of a 15,103 square -foot
expansion of the Lido House Hotel to add five cottages, 28 private valet parking spaces,
14 public parking spaces, a greenhouse, a walkway, breakout rooms, and rooftop
enclosure, and landscaping and fencing improvements along the perimeter of the
Property ("Project");
WHEREAS, the Project requires the following approvals from the City:
• General Plan Amendment ("GPA") — An amendment to the Land Use Element
of the General Plan to amend Anomaly No. 85 to increase the development
limit to 118,573 gross square feet;
• Local Coastal Program Amendment ("LCPA") — An amendment to Title 21
(Local Coastal Program Implementation Plan) of the NBMC and CLUP tc
increase the development limit to 118,573 gross square feet.
• Zoning Code Amendment ("ZCA") — An amendment to Title 20 (Planning and
Zoning) of the NBMC to increase the development limit to 118,573 gross
square feet;
• Major Site Development Review Amendments ("SDR") — A SDR to ensure the
changes to the Property are developed in accordance with applicable
development standards,
• Conditional Use Permit Amendments ("CUP") —A CUP to allow the operational
changes that result from the changed site plan and floorplan and the sale of
alcohol; and
• Addendum No. 2 to the Certified Final Environmental Impact Report for the Lido
House Hotel (SCH#2013111022) ("Addendum No 2") — Addendum No. 2
addresses reasonably foreseeable environmental impacts resulting from the
Project pursuant to the California Environmental Quality Act ("CEQA") as set
forth in Public Resources Code Section 32000 et seq.;
WHEREAS, the Property is designated Visitor Serving Commercial — Lido Village
(CV-LV) and Anomaly No. 85 by the City of Newport Beach General Plan ("General Plan")
and located within the Commercial Visitor -Serving -Lido Village (CV-LV) Zoning District;
3-22
Ordinance No. 2024-
Page 3 of 7
WHEREAS, the Property is designated Visitor -Serving Commercial -Lido Village
(CV-LV) by the CLUP and located within the Commercial Visitor -Serving - Lido Village
(CV-LV) Coastal Zoning District;
WHEREAS, pursuant to Section 13515 of the California Code of Regulations Title
14, Division 5.5, Chapter 8 ("Section 13515"), drafts of the LCPA were made available
and a Notice of Availability was distributed on July 20, 2022, at least six weeks prior to
the anticipated final action date;
WHEREAS, the Planning Commission held a duly noticed public hearing on July
21, 2022, in the City Council Chambers located at 100 Civic Center Drive, Newport Beach,
California. A notice of time, place and purpose of the hearing was given in accordance
with California Government Code Section 54950 et seq. ("Ralph M. Brown Act") and
Chapters 20.62 and 21.62 (Public Hearings) of the Newport Beach Municipal Code
("NBMC"). Evidence, both written and oral, was presented to, and considered by, the
Planning Commission at this hearing;
WHEREAS, at the hearing, the Planning Commission voted unanimously (7 ayes
— 0 nays) to adopt Planning Commission Resolution No. PC2022-020 recommending
approval of the Project to the City Council;
WHEREAS, the City Council held a duly noticed public hearing on October 25,
2022, in the City Council Chambers located at 100 Civic Center Drive, Newport Beach,
California. A notice of time, place and purpose of the public hearing was given in
accordance with the Ralph M. Brown Act, Chapters 20.62 and 21.62 (Public Hearings) of
the NBMC, and Section 13515. Evidence, both written and oral, was presented to, and
considered by, the City Council at this public hearing;
WHEREAS, at the hearing, the City Council voted unanimously (6 ayes, 0 nays,
1 recusal) to adopt Resolution No. 2022-76 adopting Addendum No. 2 to the Lido House
Hotel Certified Environmental Impact Report, Resolution No. 2022-77 approving the GPA,
Resolution No. 2022-78 authorizing submittal of the LCPA to the Coastal Commission,
and Resolution No. 2022-79 approving the SDR and CUP, and to introduce Ordinance
No. 2022-22 adopting the ZCA; and
3-23
Ordinance No. 2024-
Page 4 of 7
WHEREAS, the Coastal Commission approved the LCPA (LCP-5-NPB-22-0056-
1 Part B) on February 8, 2024, as a major amendment with no modifications, and as a
result, is deemed approved and became a certified part of Title 21.
NOW THEREFORE, the City Council of the City of Newport Beach ordains as
follows:
Section 1: The City Council hereby adopts the LCPA filed as part of PA2020-
068, amending Title 21 (Local Coastal Program Implementation Plan), Section 21.14.010
(Coastal Zoning Map), Table 21.20-2 (Development Standards for Commercial Coastal
Zoning Districts) and its footnotes in Section 21.20.030 (Commercial Coastal Zoning
Districts General Development Standards), and Subsection (D)(15) of Section 21.30.060
(Height Limits and Exceptions) of the NBMC, as set forth in Exhibit "B," which is attached
hereto and incorporated herein by reference.
Section 2: The LCP, including the LCPA, shall be carried out in full conformance
with the California Coastal Act.
Section 3: The recitals provided in this ordinance are true and correct and are
incorporated into the substantive portion of this ordinance.
Section 4: If any section, subsection, sentence, clause or phrase of this
ordinance is for any reason held to be invalid or unconstitutional, such decision shall not
affect the validity or constitutionality of the remaining portions of this ordinance. The City
Council hereby declares that it would have passed this ordinance and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 5: Pursuant to Section 21166 of the California Public Resources Code
and Section 15162 of the CEQA Guidelines, when an environmental impact report ("EIR")
has been certified for a project, no subsequent EIR is required unless the lead agency
determines, on the basis of substantial evidence in the light of the whole record, one or
more of the following:
a. Substantial changes are proposed in the project which will require major revisions
of the previous EIR due to the involvement of new significant environmental effects
or a substantial increase in the severity of previously identified significant effects;
3-24
Ordinance No. 2024-
Page 5 of 7
b. Substantial changes occur with respect to the circumstances under which the
project is undertaken which will require major revisions of the previous EIR due to
the involvement of new significant environmental effects or a substantial increase
in the severity of previously identified significant effects; or
c. New information of substantial importance, which was not known and could not
have been known with the exercise of reasonable diligence at the time the previous
EIR was certified as complete, shows any of the following:
i) The project will have one or more significant effects not discussed in the
previous EIR;
ii) Significant effects previously examined will be substantially more severe than
shown in the previous EIR;
iii) Mitigation measures or alternatives previously found not to be feasible would
in fact be feasible and would substantially reduce one or more significant
effects of the project, but the project proponents decline to adopt the mitigation
measure or alternative; or
iv) Mitigation measures or alternatives which are considerably different from those
analyzed in the previous EIR would substantially reduce one or more significant
effects on the environment, but the project proponents decline to adopt the
mitigation measure or alternative.
On September 9, 2014, the City Council certified the adequacy and completeness of the
Lido House Hotel Final Environmental Impact Report (SCH No. 2013111022) by adopting
Resolution No 2014-80.
In accordance with Section 15164 of the CEQA Guidelines, an addendum to the
previously adopted EIR is the appropriate environmental document for the Project.
Therefore, upon receipt of the prior application for increased floor area for the Lido House
Hotel, the City prepared Addendum No. 1 to the EIR. On July 26, 2016, The City Council
adopted Resolution No. 2016-88 adopting Addendum No. 1. Upon receipt of the current
application for increased floor area for the Lido House Hotel, the City prepared Addendum
No. 2 to the El R for the Project in accordance with Section 15164 of the CEQA Guidelines.
Addendum No. 2 which was adopted on October 25, 2022, addresses all environmental
impacts associated with the Project. The Coastal Commission's approval of the LCPA
does not result in substantial changes to the Project nor did it uncover new information
3-25
Ordinance No. 2024-
Page 6 of 7
that requires additional environmental review; therefore, no additional environmental
review is necessary.
Section 6: Except as expressly modified in this ordinance, all other sections,
subsections, terms, clauses and phrases set forth in the Newport Beach Municipal Code
shall remain unchanged and shall be in full force and effect.
3-26
Ordinance No. 2024-
Page 7 of 7
Section 7: The Mayor shall sign and the City Clerk shall attest to the passage
of this ordinance. The City Clerk shall cause the ordinance, or a summary thereof, to be
published pursuant to City Charter Section 414.
This ordinance was introduced at a regular meeting of the City Council of the City
of Newport Beach held on the 12th day of November, 2024, and adopted on the 10th day
of December, 2024, by the following vote, to -wit:
AYES -
NAYS:
ABSENT:
WILL O'NEILL, MAYOR
LEILANI 1. BROWN, CITY CLERK
APPROVED AS TO FORM:
CITY AT RNEY'S OFFICE
7Dom` _ P�
AA ON C. HARP, CITY ATTORNEY
Attachment(s): Exhibit A —Legal Description
Exhibit B — Amendment to Title 21 (Local Coastal Program
Implementation Plan)
3-27
EXHIBIT A
Legal Description
LEGAL DESCRIPTION:
THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY
OF ORANGE, CITY OF NEWPORT BEACH, AND IS DESCRIBED AS FOLLOWS:
PARCEL 1:
THAT PORTION OF LOTS 3, 6 AND 7 IN SECTION 28, TOWNSHIP 6 SOUTH, RANGE 10
WEST, SAN BERNARDINO MERIDIAN, ACCORDING TO THE OFFICIAL PLAT FILED IN THE
DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE NORTHERLY LINE OF "THE HUDSON" WITH
THE NORTHERLY PROLONGATION OF THE EASTERLY LINE OF LOT 21 IN BLOCK 431 OF
"LANCASTER'S ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN
BOOK 5, PAGE 14 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY,
CALIFORNIA; THENCE NORTH 0'44'30" WEST ALONG SAID NORTHERLY PROLONGATION
400.00 FEET; THENCE WESTERLY PARALLEL WITH SAID NORTHERLY LINE AND LOT 1 IN
BLOCK "A" OF SAID LANCASTER'S ADDITION TO NEWPORT BEACH 461.53 FEET TO A
POINT IN THE EASTERLY LINE OF SAID CENTRAL AVENUE, AS SHOWN ON TRACT NO.
108, AS SHOWN ON A MAP RECORDED IN BOOK 2, PAGES 1 OF SAID MISCELLANEOUS
MAPS; THENCE SOUTHERLY ALONG THE EASTERLY LINE OF SAID CENTRAL AVENUE
401.79 FEET, MORE OR LESS, TO THE NORTHWEST CORNER OF SAID LOT 1; THENCE
EASTERLYALONG THE NORTHERLY OF SAID LOT 1 AND SAID NORTHERLY LINE OF "THE
HUDSON" 495.33 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE LAND DESCRIBED IN THE DEED ATTACHED TO THAT
CERTAIN RESOLUTION NO. 3284 OF THE CITY COUNCIL OF NEWPORT BEACH, A
CERTIFIED COPY OF WHICH RECORDED MARCH11, 1946 IN BOOK 1404, PAGE130 OF
OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.
ALSO EXCEPTING THEREFROM THE LAND DESCRIBED AS PARCEL 2 IN DEED TO THE
GRIFFITH COMPANY RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF SAID
OFFICIAL RECORDS.
PARCEL 2:
BEGINNING AT THE SOUTHEAST CORNER OF LOT 2 IN BLOCK "A" OF "LANCASTER'S
ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN BOOK 5, PAGE
14 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA; THENCE
EASTERLY ALONG THE NORTHERLY LINE OF WASHINGTON AVENUE, NOW KNOWN AS
32ND STREET, TO THE INTERSECTION WITH THAT PORTION OF THE BULKHEAD LINE
ESTABLISHED BY THE WAR DEPARTMENT IN 1936 AND SHOWN ON THE WAR
DEPARTMENT MAP OF NEWPORT BAY SHOWING HARBOR LINE, EXTENDING BETWEEN
BULKHEAD STATION NO.124 AND BULKHEAD STATION NO.125; THENCE NORTH 27'30'00"
WEST ALONG SAID BULKHEAD LINE TO ITS INTERSECTION WITH THE NORTHERLY LINE
OF "THE HUDSON" AS SHOWN ON SAID MAP OF LANCASTER'S ADDITION; THENCE
WESTERLY ALONG THE NORTHERLY LINE OF SAID "THE HUDSON" TO THE NORTHEAST
CORNER OF LOT 1 OF SAID BLOCK"A"; THENCE SOUTHERLY ALONG THE EASTERLY
LINE OF SAID LOTS 1 AND 2 TO THE POINT OF BEGINNING.
3-28
PARCEL 3:
THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK
35, PAGES 48 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
TOGETHER WITH THAT PORTION OF THE 20.00 FOOT ALLEY AS VACATED BY
RESOLUTION NO. 3280 OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, A
CERTIFIED COPY OF WHICH RECORDED MARCH 11, 1946 IN BOOK 1400, PAGE 189 OF
OFFICIAL RECORDS OF SAID ORANGE COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT 3; THENCE NORTH 0'44'30"
WEST ALONG THE EASTERLY LINE OF SAID LOT 3, A DISTANCE OF 90.00 FEET; THENCE
NORTH 40'47'07" WEST 170.97 FEET TO A POINT IN THE WESTERLY LINE OF SAID 20.00
FOOT ALLEY; THENCE SOUTH 0'44'30" EAST ALONG THE WESTERLY LINE OF SAID ALLEY
220.89 FEET TO THE SOUTHWESTERLY CORNER OF TRACT NO. 907, AS SHOWN ON A
MAP RECORDED IN BOOK 28, PAGES 25 TO 36 INCLUSIVE OF MISCELLANEOUS MAPS,
RECORDS OF SAID ORANGE COUNTY; THENCE NORTH 89'15'30" EAST ALONG THE
SOUTHERLY LINE OF SAID TRACT NO. 907 AND SAID LOT 3, A DISTANCE OF 110.00 FEET
TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE LAND DESCRIBED AS PARCEL 1 IN DEED TO THE
GRIFFITH COMPANY RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF OFFICIAL
RECORDS OF ORANGE COUNTY, CALIFORNIA.
ALSO EXCEPTING THEREFROM THE LAND DESCRIBED IN DEED TO THE GRIFFITH
COMPANY RECORDED JUNE 15, 1953 IN BOOK 2520, PAGE 577 OF OFFICIAL RECORDS
OF ORANGE COUNTY, CALIFORNIA.
PARCEL 4:
THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK
35, PAGE 48 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT 3; THENCE NORTH 0'44'30"
WEST 74.46 FEET ALONG THE EAST LINE OF SAID LOT TO THE MOST SOUTHERLY
CORNER OF THE LAND DESCRIBED AS PARCEL 1 IN DEED TO THE GRIFFITH COMPANY
RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF OFFICIAL RECORDS OF SAID
ORANGE COUNTY, SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE NORTH
40'47'07" WEST ALONG THE SOUTHWESTERLY LINE OF SAID LAND OF GRIFFITH
COMPANY, A DISTANCE OF 69.945 FEET; THENCE NORTH 89'1630" EAST 45.00 FEET TO
THE EAST LINE OF SAID LOT 3; THENCE SOUTH 0'44'30" EAST 53.54 FEET TO THE TRUE
POINT OF BEGINNING.
PARCEL 5:
LOTS ONE (2) AND TWO (2) IN BLOCK "A" OF "LANCASTER'S ADDITION TO NEWPORT
BEACH' AS SHOWN ON A MAP RECORED IN BOOK 5, PAGE 14 OF MISCELLANEOUS
MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA
3-29
EXHIBIT B
Amendment to Title 21 (Local Coastal Program Implementation Plan)
Section 1. Amend Note No. 1 in the inset table on the Coastal Zoning Map
codified in Section 21.14.010 (Coastal Zoning Map) of the NBMC to read as follows:
CV-LV: 118,573 gross square feet
Q 118,573 for a hotel.
Section 2. Amend the row entitled "Side [Setbacks] (Street Side)" in Table
21.20-2 (Development Standards for Commercial Coastal Zoning Districts) of
Section 21.20.030 (Commercial Coastal Zoning Districts General Development
Standards) of Title 21 (Local Coastal Program Implementation Plan) of the NBMC
to read as follows:
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL ZONING DISTRICTS
Development
Feature
CC
CG
CM
CN
CV
CV-LV
OG
Additional
Requirements
Side (Street
0
0
0
0
0
32nd Street:
15 ft.
side)
1 ft. for below grade structures;
1 ft. for structures up to 35 ft, in
height;
70 ft. for structures over 35 ft. in
sleight (4)
Via Oporto:
0
Section 3. Amend the row entitled "Floor Area Ratio" in Table 21.20-2
(Development Standards for Commercial Coastal Zoning Districts) of Section
21.20.030 (Commercial Coastal Zoning Districts General Development Standards)
3-30
of Title 21 (Local Coastal Program Implementation Plan) of the NBMC to read as
follows:
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL ZONING DISTRICTS
Development
Additional
Feature
CC
CG
CM
CN
CV
CV-LV
OG
Requirements
Floor Area
0.75
0.75
0.50
0.30
1.50
118,573 sf
1.30
Ratio (2)(3)(4)
Section 4. Amend the rows related to "Height" in Table 21.20-2
(Development Standards for Commercial Coastal Zoning Districts) of Section
21.20.030 (Commercial Coastal Zoning Districts General Development Standards)
of Title 21 (Local Coastal Program Implementation Plan) of the NBMC to read as
follows:
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL ZONING DISTRICTS
Development
Additional
Feature
CC
I CG
I CM
I CN
I CV
CV-LV
OG
Requirements
Height
Maximum allowable height of structures without discretionary approval. See
Section 21.30.060 (Height Limits and Exceptions) for height measurement
requirements. See Section 21.30.060(C) (Increase in Height Limit) for possible increase
in height limit.
Within Shoreline
55 ft. with flat
26 ft. with flat roof,
Height Limit
roof, less than
less than 3/12 pitch
Zone
26 ft. with flat roof; less than
3/12 roof
31 ft. with sloped
3/12 pitch
pitch;
roof; 3/12 or greater
31 ft. with sloped roof; 3/12
pitch
or greater pitch
60 ft. with
sloped roof,
Section 21.30.060
3/12 roof pitch
See CLUP Policy
or greater (5)
4.4.2-1
Not within
32 ft. with flat roof,
Shoreline Height
32 ft. with flat roof; less than
less than 3/12 pitch
Limit Zone
3/12 pitch
N/A
37 ft. with sloped
37 ft. with sloped roof; 3/12
roof; 3/12 or greater
or greater pitch
pitch
3-31
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL ZONING DISTRICTS
Development
Feature
CC
CG
CM
CN
CV
CV-LV
OG
Additional
Requirements
Within High Rise
Height Area (See
Figure H-1,
attached to the
300 ft.
N/A
300 ft.
ordinance
codified in this
Implementation
Plan).
Section 5. Amend the footnotes for Table 21.20-2 (Development Standards
for Commercial Coastal Zoning Districts) of Section 21.20.030 (Commercial Coastal
Zoning Districts General Development Standards) of Title 21 (Local Coastal
Program Implementation Plan) of the NBMC to read as follows:
Notes:
(1) All development and the subdivision of land shall comply with the requirements of
Section 21.30.025 (Coastal Zone Subdivisions).
(2) In the CG Coastal Zoning District, when 0.3/0.5 is shown on the Coastal Zoning Map, the
FAR may be increased to a maximum of 0.5 when two or more legal lots are merged to
accommodate larger commercial development projects.
(3) Portions of legal lots that are submerged lands or tidelands shall be included in the land
area of the lot for the purpose of calculating the allowable floor area for structures.
(4) The specific floor area limitations for each coastal zoning district are identified on the
Coastal Zoning Map.
(5) Architectural features such as domes, towers, cupolas, spires, and similar structures may
be up to sixty-five (65) feet in height.
Section 6. Amend Subsection (D)(15) of Section 21.30.060 (Height Limits
and Exceptions) of Title 21 (Local Coastal Program Implementation Plan) of the
NBMC to read as follows:
3-32
15. Lido House Hotel. At the former City Hall, 3300 Newport Boulevard and 475 32nd Street:
a. At least seventy-five (75) percent of the total area of the site shall be thirty-five (35) feet in
height or lower.
b. Buildings and structures up to fifty-five (55) feet in height with the peaks of sloping roofs
and elevator towers up to sixty (60) feet in height provided it is demonstrated that
development does not adversely materially impact public views.
c. Architectural features such as domes, towers, cupolas, spires, and similar structures may
be up to sixty-five (65) feet in height.
d. Buildings and structures over thirty-five (35) feet in height, including architectural features,
shall not occupy more than twenty-five (25) percent of the total area of the site.
e. Buildings and structures over forty-five (45) feet in height, including architectural features,
shall not occupy more than fifteen (15) percent of the total area of the site.
f. All buildings and structures over thirty-five (35) feet in height, including architectural
features, shall be set back a minimum of sixty (60) feet from the Newport Boulevard right-
of-way and seventy (70) feet from the 32nd Street right-of-way.
3-33
Attachment C
Resolution No. 2022-78 (Authorizing LCP Amendment Submittal)
3-34
RESOLUTION NO. 2022-78
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, AUTHORIZING
SUBMITTAL OF A LOCAL COASTAL PROGRAM
AMENDMENT TO THE CALIFORNIA COASTAL
COMMISSION TO AMEND THE CITY OF NEWPORT
BEACH COASTAL LAND USE PLAN AND TITLE 21
(LOCAL COASTAL PROGRAM IMPLEMENTATION
PLAN) OF THE NEWPORT BEACH MUNICIPAL CODE
RELATED THE LIDO HOUSE HOTEL LOCATED AT 3300
NEWPORT BOULEVARD AND 475 32ND STREET
(PA2020-068)
WHEREAS, Section 30500 of the California Public Resources Code requires
each county and city to prepare a Local Coastal Program ("LCP") for that portion of the
coastal zone within its jurisdiction;
WHEREAS, in 2005, the City adopted the City of Newport Beach Local Coastal
Program and Coastal Land Use Plan, as amended from time to time;
WHEREAS, the California Coastal Commission effectively certified the City's
Local Coastal Program Implementation Plan on January 13, 2017, and the City added
Title 21 (Local Coastal Program Implementation Plan) ("Title 21") to the City of Newport
Beach Municipal Code ("NBMC") whereby the City assumed coastal development permit -
issuing authority on January 30, 2017;
WHEREAS, an application was filed by R.D. Olson Development ("Applicant")
with respect to property located at 3300 Newport Boulevard and 475 32"d Street as legally
described in Exhibit 'A," which is attached hereto and incorporated by reference
("Property");
WHEREAS, on September 9, 2014, the City Council approved General Plan
Amendment No. GP2012-002, Coastal Land Use Plan Amendment No. LC2012-001,
Zoning Code Amendment No. CA2012-003, Site Development Review No. SD2014-001,
Conditional Use Permit No. UP2014-004, and Traffic Study No. TS2014-005 for the
development of Lido House Hotel at 3300 Newport Boulevard;
WHEREAS, the Applicant proposes a 15,103 square -foot expansion of the Lido
House Hotel to add five cottages, 28 private valet parking spaces, 14 public parking
spaces, a greenhouse, a walkway, breakout rooms, a rooftop enclosure, and landscaping
and fencing improvements along the perimeter of the Property ("Project");
3-35
Resolution No. 2022-78
Page 2 of 5
WHEREAS, the Project requires the following approvals from the City:
e General Plan Amendment ("GPA") — To amend Anomaly No. 85 to increase the
development limit to 118,573 gross square feet;
• Local Coastal Program Amendment ("LCPA") — To increase the development
limit to 118,573 gross square feet within both the Coastal Land Use Plan and
Title 21 (Local Coastal Program Implementation Plan) of the Newport Beach
Municipal Code ("NBMC");
• Zoning Code Amendment ("ZCA") — To increase the development limit to
118,573 gross square feet;
• Major Site Development Review Amendments ("SDR")— To ensure the
changes to the Property are developed in accordance with applicable
development standards;
• Conditional Use Permit Amendments ("CUP") — To allow the operational
changes that result from the changed site plan and floorplan and the sale of
alcohol; and
• Addendum No. 2 to the Certified Final Environmental Impact Report for the Lido
House Hotel — The addendum addresses reasonably foreseeable
environmental impacts resulting from the Project;
WHEREAS, the Property is designated Visitor Serving Commercial — Lido Village
(CV-LV) and Anomaly No. 85 by the City of Newport Beach General Plan ("General Plan")
and located within with the Commercial Visitor -Serving —Lido Village (CV-LV) Zoning
District;
WHEREAS, the Project includes an amendment to the Newport Beach Coastal
Land Use Plan and Title 21 to allow for the increase in the development limit to 118,573
gross square feet;
WHEREAS, pursuant to Section 13515 of the California Code of Regulations Title
14, Division 5.5, Chapter 8 ("Section 13515"), drafts of the LCPA were made available
and a Notice of Availability was distributed on July 20, 2022, at least six weeks prior to
the anticipated final action date;
3-36
Resolution No. 2022-78
Page 3 of 5
WHEREAS, the Planning Commission held a duly noticed public hearing on July
21, 2022, in the City Council Chambers located at 100 Civic Center Drive, Newport Beach,
California. A notice of time, place and purpose of the hearing was given in accordance
with California Government Code Section 54950 et seq. ("Ralph M. Brown Act") and
Chapters 20.62 and 21.62 (Public Hearings) of the NBMC. Evidence, both written and
oral, was presented to, and considered by, the Planning Commission at this hearing;
WHEREAS, at the conclusion of the public hearing, the Planning Commission
voted unanimously (7 ayes — 0 nays) to adopt Planning Commission Resolution No.
PC2020-020 recommending approval of the Project to the City Council; and
WHEREAS, the City Council held a duly noticed public hearing on October 25,
2022, in the City Council Chambers located at 100 Civic Center Drive, Newport Beach,
California. A notice of time, place, and purpose of the public hearing was provided in
accordance with the Ralph M. Brown Act, Section 13515, and Chapters 20.62 and 21.62
(Public Hearings) of the NBMC. Evidence, both written and oral, was presented to, and
considered by, the City Council at this public hearing.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
Section 1: The City Council authorizes staff to submit this Local Coastal
Program Amendment to amend portions of the Coastal Land Use Plan and Title 21, as
set forth in Exhibits "B" and "C," which are attached hereto and incorporated by reference,
to the California Coastal Commission for review and approval.
Section 2: This Local Coastal Program Amendment shall not become effective
until approval by the California Coastal Commission and adoption, including any
modifications suggested by the California Coastal Commission, by resolution and/or
ordinance of the City of Newport Beach.
Section 3: The Coastal Land Use Plan and Title 21, including this Local Coastal
Program Amendment, if approved, will be carried out fully in conformity with the California
Coastal Act.
Section 4: The recitals provided in this resolution are true and correct and are
incorporated into the operative part of this resolution.
3-37
Resolution No. 2022-78
Page 4 of 5
Section 5: If any section, subsection, sentence, clause or phrase of this
resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not
affect the validity or constitutionality of the remaining portions of this resolution. The City
Council hereby declares that it would have passed this resolution, and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 6: Pursuant to Section 15062 of the California Environmental Quality
Act ("CEQA") Guidelines, the changes authorized under the Project are not substantial,
as they do not involve new significant effects or a substantial increase in the severity of
previously identified significant effects, and therefore, a subsequent Environmental
Impact Report ("EIR") does not need to be prepared. The City prepared and certified a
final EIR for the Lido House Hotel (SCH#2013111022). State CEQA Guidelines allow for
the updating and use of a previously certified EIR for projects that have changed or are
different from the previous project. In cases where changes or additions occur with no
new significant environmental impacts, an addendum to the previously certified EIR may
be prepared pursuant to CEQA Guidelines Section 15164. The City prepared Addendum
No. 2 to the Lido House Hotel's final EIR for the Project, which concludes there are no
new environmental impacts and no impacts of greater severity that would result from
approval and implementation of the Project.
3-38
Resolution No. 2022-78
Page 5 of 5
Section 7: This resolution shall be effective upon its adoption by the City
Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 25th day of October, 2022.
ATTEST:
V�l�Wvrl, O
Leilani I. Brown
City Clerk U
APPROVED AS AS TO FORM:
CITY ATTORNEY'S OFFICE
" ,,--
Aaron C. Harp
City Attorney
Attachment: Exhibit A — Legal Description
Exhibit B — Amendment to Coastal Land Use Plan
Exhibit C — Amendment to Title 21 (Local Coastal Program Implementation
Plan)
City of Newport Beach ,.,,
EXHIBIT A
Legal Description
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY
OF ORANGE, CITY OF NEWPORT BEACH, AND IS DESCRIBED AS FOLLOWS:
PARCEL 1:
THAT PORTION OF LOTS 3, 6 AND 7 IN SECTION 28, TOWNSHIP 6 SOUTH, RANGE 10
WEST, SAN BERNARDINO MERIDIAN, ACCORDING TO THE OFFICIAL PLAT FILED IN THE
DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE NORTHERLY LINE OF "THE HUDSON" WITH
THE NORTHERLY PROLONGATION OF THE EASTERLY LINE OF LOT 21 IN BLOCK 431 OF
"LANCASTER'S ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN
BOOK 5, PAGE 14 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY,
CALIFORNIA; THENCE NORTH 0'44'30" WEST ALONG SAID NORTHERLY PROLONGATION
400.00 FEET; THENCE WESTERLY PARALLEL WITH SAID NORTHERLY LINE AND LOT 1 IN
BLOCK "A" OF SAID LANCASTER'S ADDITION TO NEWPORT BEACH 461.53 FEET TO A
POINT IN THE EASTERLY LINE OF SAID CENTRAL AVENUE, AS SHOWN ON TRACT NO.
108, AS SHOWN ON A MAP RECORDED IN BOOK 2, PAGES 1 OF SAID MISCELLANEOUS
MAPS; THENCE SOUTHERLY ALONG THE EASTERLY LINE OF SAID CENTRAL AVENUE
401.79 FEET, MORE OR LESS, TO THE NORTHWEST CORNER OF SAID LOT 1; THENCE
EASTERLY ALONG THE NORTHERLY OF SAID LOT 1 AND SAID NORTHERLY LINE OF "THE
HUDSON" 495.33 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE LAND DESCRIBED IN THE DEED ATTACHED TO THAT
CERTAIN RESOLUTION NO. 3284 OF THE CITY COUNCIL OF NEWPORT BEACH, A
CERTIFIED COPY OF WHICH RECORDED MARCH11, 1946 IN BOOK 1404, PAGE130 OF
OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.
ALSO EXCEPTING THEREFROM THE LAND DESCRIBED AS PARCEL 2 IN DEED TO THE
GRIFFITH COMPANY RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF SAID
OFFICIAL RECORDS.
PARCEL 2:
BEGINNING AT THE SOUTHEAST CORNER OF LOT 2 IN BLOCK "A" OF "LANCASTER'S
ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN BOOK 5, PAGE
14 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA; THENCE
EASTERLY ALONG THE NORTHERLY LINE OF WASHINGTON AVENUE, NOW KNOWN AS
32ND STREET, TO THE INTERSECTION WITH THAT PORTION OF THE BULKHEAD LINE
ESTABLISHED BY THE WAR DEPARTMENT IN 1936 AND SHOWN ON THE WAR
DEPARTMENT MAP OF NEWPORT BAY SHOWING HARBOR LINE, EXTENDING BETWEEN
BULKHEAD STATION NO.124 AND BULKHEAD STATION NO.125; THENCE NORTH 27'30'00"
WEST ALONG SAID BULKHEAD LINE TO ITS INTERSECTION WITH THE NORTHERLY LINE
OF "THE HUDSON" AS SHOWN ON SAID MAP OF LANCASTER'S ADDITION; THENCE
WESTERLY ALONG THE NORTHERLY LINE OF SAID "THE HUDSON" TO THE NORTHEAST
CORNER OF LOT 1 OF SAID BLOCK"A"; THENCE SOUTHERLY ALONG THE EASTERLY
LINE OF SAID LOTS 1 AND 2 TO THE POINT OF BEGINNING.
3-40
PARCEL 3:
THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK
35, PAGES 48 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
TOGETHER WITH THAT PORTION OF THE 20.00 FOOT ALLEY AS VACATED BY
RESOLUTION NO. 3280 OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, A
CERTIFIED COPY OF WHICH RECORDED MARCH 11, 1946 IN BOOK 1400, PAGE 189 OF
OFFICIAL RECORDS OF SAID ORANGE COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT 3; THENCE NORTH 0'44'30"
WEST ALONG THE EASTERLY LINE OF SAID LOT 3, A DISTANCE OF 90.00 FEET; THENCE
NORTH 40'47'07" WEST 170.97 FEET TO A POINT IN THE WESTERLY LINE OF SAID 20.00
FOOTALLEY; THENCE SOUTH 0'44'30" EASTALONG THE WESTERLY LINE OF SAID ALLEY
220.89 FEET TO THE SOUTHWESTERLY CORNER OF TRACT NO. 907, AS SHOWN ON A
MAP RECORDED IN BOOK 28, PAGES 25 TO 36 INCLUSIVE OF MISCELLANEOUS MAPS,
RECORDS OF SAID ORANGE COUNTY; THENCE NORTH 89'15'30" EAST ALONG THE
SOUTHERLY LINE OF SAID TRACT NO. 907 AND SAID LOT 3, A DISTANCE OF 110.00 FEET
TO THE POINT OF BEGINNING,
EXCEPTING THEREFROM THE LAND DESCRIBED AS PARCEL 1 IN DEED TO THE
GRIFFITH COMPANY RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF OFFICIAL
RECORDS OF ORANGE COUNTY, CALIFORNIA.
ALSO EXCEPTING THEREFROM THE LAND DESCRIBED IN DEED TO THE GRIFFITH
COMPANY RECORDED JUNE 15, 1953 IN BOOK 2520, PAGE 577 OF OFFICIAL RECORDS
OF ORANGE COUNTY, CALIFORNIA.
PARCEL 4:
THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK
35, PAGE 48 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEASTERLY CORNER OF SAID LOT 3; THENCE NORTH 0'44'30"
WEST 74.46 FEET ALONG THE EAST LINE OF SAID LOT TO THE MOST SOUTHERLY
CORNER OF THE LAND DESCRIBED AS PARCEL 1 IN DEED TO THE GRIFFITH COMPANY
RECORDED MARCH 23, 1948 IN BOOK 1741, PAGE 174 OF OFFICIAL RECORDS OF SAID
ORANGE COUNTY, SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE NORTH
40'47'07" WEST ALONG THE SOUTHWESTERLY LINE OF SAID LAND OF GRIFFITH
COMPANY, A DISTANCE OF 69.945 FEET; THENCE NORTH 89"5'30" EAST 45.00 FEET TO
THE EAST LINE OF SAID LOT 3; THENCE SOUTH 0'44'30" EAST 53.54 FEET TO THE TRUE
POINT OF BEGINNING.
PARCEL 5:
LOTS ONE (2) AND TWO (2) IN BLOCK "A" OF "LANCASTER'S ADDITION TO NEWPORT
BEACH' AS SHOWN ON A MAP RECORED IN BOOK 5, PAGE 14 OF MISCELLANEOUS
MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA
3-41
EXHIBIT B
Amendment to Coastal Land Use Plan
Section 1. Amend Table 2.1.1-1 of the Coastal Land Use Plan as follows:
Table Plan Categories
Land Use Category Uses Density/Intensity
The CV-LV category is intended to allow for
a range of accommodations (e.g. hotels,
motels, hostels), goods, and services
intended to primarily serve visitors to the 103,47
CV-LV
City of Newport Beach. A fire s+.,+�16
s
Visitor -Serving 118, 573 gross feet net .Limited Use g p
Commercial — Overnight Visitor Accommodations and
Lido Village residences are not allowed. Note: The CV-
LV (Visitor Serving Commercial - Lido than 10% of the total pro
Village) category applies to the former City s+t.
Hall Complex that includeds Fire Station # 2
(3300 Newport Boulevard and 475 32nd
Street).
Section 2. Amend Policy 4.4.2-1 of the Coastal Land Use Plan as follows:
4.4.2-1. Maintain the 35-foot height limitation in the Shoreline Height Limitation
Zone, as graphically depicted on Map 4-3, except for the following sites:
A. Marina Park located at 1600 West Balboa Boulevard: A single, up to
maximum 73-foot- tall faux lighthouse architectural tower, that creates an
iconic landmark for the public to identify the site from land and water as a
boating safety feature, may be allowed. No further exceptions to the height
limit shall be allowed, including but not limited to, exceptions for
architectural features, solar equipment or flag poles. Any architectural
tower that exceeds the 35-foot height limit shall not include floor area above
the 35-foot height limit, but shall house screened communications or
emergency equipment, and shall be sited and designed to reduce adverse
visual impacts and be compatible with the character of the area by among
other things, incorporating a tapered design with a maximum diameter of
34-feet at the base of the tower. Public viewing opportunities shall be
provided above the 35-feet, as feasible. (Resolution 2013-44)
B. Former City Hall Complex at 3300 Newport Blvd and 475 32nd Street (the
site):
3-42
• At least 75% of the total area of the site shall be 35 feet in height or
lower.
• Buildings and structures up to 55 feet in height with the peaks of
sloping roofs and elevator towers up to 60 feet in height, provided it
is demonstrated that development does not adversely impact public
views.
• Architectural features such as domes, towers, cupolas, spires, and
similar structures may be up to 65 feet in height.
• Buildings and structures over 35 feet in height, including architectural
features, shall not occupy more than 25 percent of the total area of
the site.
• Buildings and structures over 45 feet in height, architectural features,
shall not occupy more than 15 percent of the total area of the site.
• With the eXGP+� of a fire sttiO,T-QAII buildings and structures over
35 feet in height, including architectural features, shall be setback a
minimum of 60 feet from the Newport Boulevard right-of-way and 70
feet from the 32nd Street right-of-way.
• A fore station may be IGGated in its GUrreRt IGGation and may be up to
to 45 feet in height te house and SGreen essential equipMent.
• The purpose of allowing limited exceptions to the 35-foot height limit
on this site is to promote vertical clustering resulting in increased
ublicl pubk4accessible on -site open space and architectural
diversity while protecting existing coastal views and providing new
coastal view opportunities. (Resolution 2016-29)
3-43
EXHIBIT C
Amendment to Title 21 (Local Coastal Program Implementation Plan)
Section 1. Amend the row entitled "Side [Setbacks] (Street Side)" in Table
21.20-2 (Development Standards for Commercial Coastal Zoning Districts) of
Section 21.20.030 (Commercial Coastal Zoning Districts General Development
Standards) of Title 21 (Local Coastal Program Implementation Plan) of the NBMC
to read as follows:
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL ZONING DISTRICTS
Development
Feature
CC
CG
CM
CN
CV
CV-LV
OG
Additional
Requirements
Side (Street
0
0
0
0
0
32nd Street:
15 ft.
side)
1 ft. for below grade structures;
1 ft. for structures up to 35 ft. in
height;
70 ft. for structures over 35 ft. in
height (4)(S)
Via Oporto:
0
Section 2. Amend the row entitled "Floor Area Ratio" in Table 21.20-2
(Development Standards for Commercial Coastal Zoning Districts) of Section
21.20.030 (Commercial Coastal Zoning Districts General Development Standards)
of Title 21 (Local Coastal Program Implementation Plan) of the NBMC to read as
follows:
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL zONINr; niSTRirTc
Development
Additional
Feature
CC
CG
CM
CN
CV
CV-LV
OG
Requirements
3-44
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL 70NING nicTRirrc
Development
I
Additional
Feature
CC
CG
CM
CN
CV
CV-LV
OG
Requirements
Floor Area
0.75
0.75
0.50
0.30
1.50
103,47()
1.30
Ratio (2)(3)(4)
118.573 sf (8)
Section 3. Amend the rows related to "Height" in Table 21.20-2
(Development Standards for Commercial Coastal Zoning Districts) of Section
21.20.023 (Commercial Coastal Zoning Districts General Development Standards)
of Title 21 (Local Coastal Program Implementation Plan) of the NBMC to read as
follows:
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAI 7nNiNr, nieTRirrc
Development
I
-Additional
Feature
CC
CG i
CM
CN
CV
CV-LV
OG
Requirements
Height
Maximum allowable height of structures without discretionary approval. See
Section 21.30.060 (Height Limits and Exceptions) for height measurement
requirements. See Section 21.30.060(C) (Increase in Height Limit) for possible increase
in height limit.
Within
55 ft w+tia�roof
less than 3112reef
Shoreline
55 ft. with flat
roof, less than
p4dn,
Height Limit
Zone
3/12 roof
-
26 ft. with flat roof; less than
ip tch:
60 a with sloped
3/12 pitch
roof, 3�12 roof
pitch
or grea T)
31 ft. with sloped roof, 3/12
60 ft. with
sloped roof.
or greater pitch
26 ft. with flat roof,
less than 3/12 pitch
3/12 roof pitch
or greater
M(-63
31 ft. with sloped
Section 21.30.06
0
roof: 3/12 or greater
ip'tch
Not within
Shoreline
32 ft. with flat roof; less than
NSA
32 ft. with flat roof,
See CLUP Policy
4.4.2-1
less than 3/12 pitch
Height Limit
Zone
3/12 pitch
37 ft. with sloped roof, 3/12
N/A
37 ft. with sloped
roof: 3/12 or greater
or greater pitch
ip'tch
Within High
Rise Height
Area (See Figure
300 ft.
N/A
{q
300 ft.
H-1, attached to
3-45
TABLE 21.20-2
DEVELOPMENT STANDARDS FOR COMMERCIAL COASTAL ZONING DISTRICTS
Development
I
Additional
Feature
CC
CG
CM
CN
CV
CV-LV
OG
Requirements
the ordinance
codified in this
Implementatio
n Plan).
Section 4. Amend the footnotes for Table 21.20-2 (Development Standards
for Commercial Coastal Zoning Districts) of Section 21.20.020 (Commercial Coastal
Zoning Districts General Development Standards) of Title 21 (Local Coastal
Program Implementation Plan) of the NBMC to read as follows:
Notes:
(1) All development and the subdivision of land shall comply with the requirements of
Section 21.30.025 (Coastal Zone Subdivisions).
(2) In the CG Coastal Zoning District, when 0.3/0.5 is shown on the Coastal Zoning Map, the
FAR may be increased to a maximum of 0.5 when two or more legal lots are merged to
accommodate larger commercial development projects.
(3) Portions of legal lots that are submerged lands or tidelands shall be included in the land
area of the lot for the purpose of calculating the allowable floor area for structures.
(4) The specific floor area limitations for each coastal zoning district are identified on the
Coastal Zoning Map.
L51(6) Architectural features such as domes, towers, cupolas, spires, and similar structures
may be up to sixty-five (65) feet in height.
Section 5. Amend Subsection (D)(15) of Section 21.30.060 (Height Limits
and Exceptions) of Title 21 (Local Coastal Program Implementation Plan) of the
NBMC to read as follows:
15. Lido House Hotel. At the former City Hall, 3300 Newport Boulevard and 475 32nd Street:
3-46
a. At least seventy-five (75) percent of the total area of the site shall be thirty-five (35) feet in
height or lower.
b. Buildings and structures up to fifty-five (55) feet in height with the peaks of sloping roofs
and elevator towers up to sixty (60) feet in height provided it is demonstrated that
development does not adversely materially impact public views.
c. Architectural features such as domes, towers, cupolas, spires, and similar structures may
be up to sixty-five (65) feet in height.
d. Buildings and structures over thirty-five (35) feet in height, including architectural features,
shall not occupy more than twenty-five (25) percent of the total area of the site.
e. Buildings and structures over forty-five (45) feet in height, including architectural features,
shall not occupy more than fifteen (15) percent of the total area of the site.
f. With The eXGeptian efa fire station, AII buildings and structures over thirty-five (35) feet
in height, including architectural features, shall be set back a minimum of sixty (60) feet
from the Newport Boulevard right-of-way and seventy (70) feet from the 32nd Street right-
of-way.
City of Newport Beach ,.,,
STATE OF CALIFORNIA }
COUNTY OF ORANGE } ss.
CITY OF NEWPORT BEACH }
I, Leilani I. Brown, City Clerk of the City of Newport Beach, California, do hereby certify that the
whole number of members of the City Council is seven; the foregoing resolution, being Resolution
No. 2022-78 was duly introduced before and adopted by the City Council of said City at a regular meeting
of said Council held on the 25th day of October, 2022; and the same was so passed and adopted by the
following vote, to wit:
AYES: Mayor Kevin Muldoon, Council Member Brad Avery, Council Member Joy Brenner,
Council Member Diane Dixon, Council Member Duffy Duffield, Council Member
Will O'Neill
NAYS: None
RECUSED: Mayor Pro Tern Noah Blom
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the official seal of
said City this 261h day of October, 2022.
c
Leilani I. Brown
City Clerk
Newport Beach, California
3-48
Attachment D
October 25, 2022, City Council Staff Report
(This attachment is available digitally and linked below due to size:
https://ecros. newportbeachca. gov/WEB/DocView. aspx?id=2837578&dbid=0&repo=CNB)
3-49
Attachment E
Coastal Commission Approval Letter
3-50
STATE OF CALIFORNIA— NATURAL RESOURCES AGENCY GAVIN NEWSOM, GOVERNOR
CALIFORNIA COASTAL COMMISSION
South Coast Area Office
301 East Ocean Boulevard, Suite 300
Long Beach, CA 90802-4302
(562)590-5071
March 22, 2024
City of Newport Beach
Community Development Department
Attn: Benjamin Zdeba, Principal Planner
100 Civic Center Drive
Newport Beach, CA 92660
Re: Effective Certification of Newport Beach Local Coastal Program Amendment Request
No. LCP-5-NPB-22-0056-1 (Part B)
Dear Council Persons:
We are pleased to notify you that on February 8, 2024, the Commission approved the
Newport Beach Local Coastal Program (LCP) Amendment No. LCP-5-NPB-22-0056-1 (Part
B) as submitted. Therefore, the LCP amendment will be fully effective upon filing of the
notice of the Commission's certification with the Secretary of the Resources Agency as
provided by Public Resources Code Section 21080.5(d)(2)(v).
The City of Newport Beach LCP Amendment No. LCP-5-NPB-22-0056-1 (Part B) was
submitted for Commission certification by City Council Resolution No. 2022-78.
The amendment modifies the Coastal Land Use Plan (CLUP) and the Implementation Plan
(IP) of the City's Certified Local Coastal Program (LCP) to increase the allowable
development limit for properties located at 3300 Newport Boulevard (Lido House Hotel) and
475 32nd Street (Former Fire Station #2) from 103,470 square feet to 118,572 square feet
(15,103 square foot increase), remove reference to a fire station; and correct a reference
regarding height limits.
On behalf of the Coastal Commission, I would like to congratulate the City on the completion
of this LCP amendment. Thank you for your cooperation and we look forward to working
with you and your staff in the future. If you have any questions, please contact me at our
Long Beach office (562) 590-5071 or at fernie.sy@coastal.ca.gov.
Sincerely,
Fernie Sy
Coastal Program Analyst
cc. Benjamin Zdeba, Principal Planner
3-51
Attachment F
Second Amendment to Ground Lease
3-52
SECOND AMENDMENT TO GROUND LEASE
THIS SECOND AMENDMENT TO GROUND LEASE ("Amendment") is entered into
this day of , 2024, by and between THE CITY OF NEWPORT
BEACH, a California municipal corporation and charter city ("Lessor" or "City"), and LIDO
HOUSE, LLC, a California limited liability company (`Lessee"), individually referred to as
"Party" or collectively "Parties."
A. On September 9, 2014, Lessor and Olson Real Estate Group, Inc., a California corporation
doing business as R.D. Olson Development ("R.D. Olson Development"), entered into
that certain Ground Lease ("Ground Lease") for the development of a hotel with one
hundred thirty (130) guest rooms and related facilities ("Hotel") on City owned land at
3300 Newport Boulevard in the City of Newport Beach, County of Orange, State of
California ("Premises").
B. On May 3, 2016, a First Amendment to Lease to amend and clarify the Legal Description
and the Depiction of the Premises subject of the Ground Lease was executed ("First
Amendment").
C. On May 3, 2016, an Assignment and Assumption of Lease was executed, whereby all the
rights, title and interest in the Ground Lease were transferred by R.D. Olson Development
to Lessee.
D. On May 3, 2016, in a written notice to the Lessee, the City approved the Lessor's
Conditions to Commencement of Lease subject to certain reservations which have since
been waived, and the terms of the Ground Lease commenced ("Lease Commencement
Date").
E. On March 13, 2024, Lessee, as trustor, granted to Fidelity National Title Company, a
California corporation, as trustee in favor of PNC Bank, National Association, a national
banking association, as beneficiary that certain Leasehold Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing recorded on March 14, 2024 in the Official
Records of Orange County, California as Instrument No. 2024000056314, which is a
permitted Mortgage as defined in the Ground Lease.
F. The Parties desire to enter into this Amendment to incorporate certain terms and conditions
related to the Mortgage as part of the terms and provisions of the Ground Lease.
NOW, THEREFORE, for good and valuable consideration, including the mutual promises
contained herein, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
3-53
TER
1. Interpretation. The terms used herein and not specifically defined shall have the same
meaning as in the Ground Lease. Lessor and Lessee acknowledge that there are no agreements,
understanding, restrictions, warranties, representations, or covenants between the parties relating
to the Ground Lease other than those set forth in this Amendment. Except to the extent the Ground
Lease is modified by this Amendment, the remaining terms and provisions of the Ground Lease
shall remain unmodified and in full force and effect.
2. Amendments to Lease. The Ground Lease is hereby amended as follows:
(a) The eighth sentence of Section 11.1.2, which begins on page 55 of the Ground Lease
with the language "In addition, the following Transfers shall be deemed to be permitted
Transfers..." is hereby deleted and replaced with the following:
"In addition, the following Transfers shall be deemed to be permitted Transfers and shall be
allowed as long as the transferor and Transferee execute and deliver to Lessor an assignment and
assumption agreement in a form subject to the reasonable approval of Lessor's counsel pursuant
to which the Transferee assumes and agrees in writing to perform and be subject to all of the
transferor's obligations set forth herein:
(i) the foreclosure of a permitted Mortgage or the acceptance of a deed or transfer in lieu of
foreclosure by a permitted Mortgagee or a Mortgagee designee or nominee affiliated with
Mortgagee (a "Lender Affiliate Successor"); (ii) the subsequent Transfer by a permitted
Mortgagee or Lender Affiliate Successor of an interest acquired pursuant to clause (i) or pursuant
to Section 12.11 (provided, however, that subsequent Transfers by any person or entity acquiring
its interest in the Premises and/or this Lease from a permitted Mortgagee or a Lender Affiliate
Successor in accordance with this clause (ii) shall not be deemed to be permitted Transfers and
shall require Lessor's approval); (iii) the acquisition at a foreclosure sale in connection with a
permitted Mortgage by any third party (provided, however, that subsequent Transfers by any
person or entity acquiring its interest in the Premises and/or this Lease at a foreclosure sale in
accordance with this clause (iii) shall not be deemed to be permitted Transfers and shall require
Lessor's approval); and (iv) the Transfer of this Lease to an entity (A) controlled by Lessee or
Robert D. Olson, (B) which has Lessee, Robert D. Olson, or an entity controlled by Lessee or
Robert D. Olson, as a manager, managing member or general partner, or (C) as to which Lessee
or Robert D. Olson has the power to name and/or approve a majority of the members of a
management board or committee which directs the management and policies of such entity, and
(D) in which Robert D. Olson owns, directly or indirectly, a minimum of fifty percent (50%) of
the beneficial ownership interests."
(b) Section 12.1.1(vi) is hereby deleted in its entirety and replaced with the following:
"(vi) Subsequent to completion of construction of the Hotel and opening
the Hotel for business to the general public, the total amount of all loans secured by Mortgages
recorded against the Premises shall not exceed seventy-five percent (75%) of the fair market value
of the sum of (a) the Hotel and Improvements, plus (b) Lessee's leasehold interest in the Premises
3-54
(85% if Lessee is using EB-5 financing as part of its source of funds), as determined by a licensed
California appraiser retained at Lessee's sole cost and expense who is a member of the Appraisal
Institute and who has a minimum of ten (10) years' experience appraising hotel properties
comparable to the Hotel and Improvements to be developed on the Premises, with the City
Manager or his or her designee having the right of reasonable approval or disapproval of the
appraisal; provided, however, that Lessee shall not be deemed to be in Default of this Section
12.1.1(vi) if a loan or loans secured by Mortgages recorded prior to completion of construction of
the Hotel in compliance with Section 12.1.1(v), including any amendment(s) or extension(s) of
such loan(s) that do(es) not increase the total outstanding principal balance of such loan(s) and
whether or not such amendment(s) or extension(s) occur(s) prior or subsequent to completion of
construction of the Hotel and the opening of the Hotel for business to the general public, exceed(s)
seventy-five percent of the fair market value of the sum of (a) the Hotel and Improvements, plus
(b) Lessee's leasehold interest in the Premises. In addition, it is understood and agreed that the
loan -to -value ratio constraint in this Section 12.1.1(vi) shall be made only at the time Lessor is
determining whether to approve or disapprove the proposed Mortgage and thereafter this Section
12.1.1(vi) shall not limit, restrict, invalidate, or result in the disapproval of any such Mortgage or
amendment or extension of any such Mortgage that does not increase the total outstanding
principal balance of the loan secured by such Mortgage if the fair market value of the sum of (a)
the Hotel and Improvements, plus (b) Lessee's leasehold interest in the Premises, that was relied
upon by Lessor in approving the Mortgage declines."
(c) A new Section 12.11 is hereby added to the Ground Lease as follows:
"12.11 New Lease. If this Lease is terminated for any reason, including as a result of
rejection of this Lease by a trustee in a bankruptcy proceeding involving Lessee and the Mortgagee
shall have arranged to the reasonable satisfaction of Lessor to cure all then -existing defaults of
Lessee under this Lease that are susceptible to cure by Mortgagee, then Lessor, within ninety (90)
calendar days after receiving a written request by Mortgagee or Lender Affiliate Successor therefor
which request shall be given within thirty (30) calendar days after such termination, and upon
payment to Lessor of all expenses (including reasonable attorneys' fees and expenses) incident
thereto, shall execute and deliver a new lease of the Premises, together with a deed transferring all
improvements on the Premises, to the Mortgagee or Lender Affiliated Successor which new lease
shall contain the same terms and provisions of this Lease and be for the remaining term of this
Lease."
(d) Section 15.3 is hereby deleted in its entirety and replaced with the following:
"15.3 Attorneys' Fees and Court Costs. In any action between the Parties hereto seeking
enforcement of any of the terms and provisions of this Lease, or in connection with the Premises
the prevailing Party in such action shall not be entitled to have and to recover from the other Party
its reasonable attorneys' fees and other expenses and costs in connection with such action or
proceeding."
3. Authority. Each party represents and warrants that, except as otherwise provided herein,
as of the date hereof (i) such party has not made any assignment, lease, transfer, conveyance, or
other disposition of the Ground Lease, or any interest in the Ground Lease; (ii) such party has the
3-55
full right, power and authority to enter into this Amendment without any consent(s) or approval(s)
from any third parties, provided, however, that to the extent the consent or approval of any third
party is required to enter into this Amendment, such party has obtained such approval prior to the
date such party executes this Amendment; (iii) each individual executing this Amendment on
behalf of a corporation, partnership or limited liability company is duly authorized to do so such
that this Amendment shall be binding on the applicable entity upon full execution and delivery of
the same; and (iv) such party has not dealt with any broker or finder in connection with this
Amendment such that no one is entitled to be paid a fee or commission in connection with the
amendment of the Ground Lease by such party.
4. Miscellaneous. This Amendment may be modified only in writing signed by the Lessor
and Lessee. This Amendment shall be governed by and interpreted in accordance with the laws
of the state in which the Premises are located. Any notices required hereunder shall be sent in the
same manner and upon the same terms as are required by the Ground Lease. This Amendment
shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors
and assigns of the respective parties hereto. This Amendment may be executed in several
counterparts, each of which may be deemed an original, but all of which together shall constitute
one and the same Amendment. Execution copies of this Amendment may be delivered by
facsimile or PDF, and the parties hereto agree to accept and be bound by facsimile or PDF
signatures hereto. Both Lessor and Lessee assume responsibility for the content and form of this
document. Therefore, the parties agree that the rule of judicial interpretation to the effect that
ambiguities and/or uncertainties contained in an agreement should be construed against the party
who drafted that agreement shall not be applied in the event of any dispute arising from the content
of this document.
5. Integrated Agreement. Except as expressly modified herein, all other provisions, terms,
and covenants set forth in the Ground Lease shall remain unchanged and shall be in full force and
effect.
[Signatures on the following page]
3-56
IN WITNESS WHEREOF, the parties have caused this Second Amendment to Lease to
be executed as of the day and year first above written.
LESSOR:
CITY OF NEWPORT BEACH, a California municipal
corporation and charter city
By:
Name: Grace K. Leung
Title: City Manager
Date:
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
By:
Name: Aaro C. Harp
Title: City Attorney
Date: 1 V 3.�-�--
ATTEST:
By:
Name: Leilani 1. Brown
Title: City Clerk
Date:
LESSEE:
LIDO HOUSE, LLC., a California limited liability
company
By: Olson Real Estate Group, Inc., a California
corporation, Manager
Bv:
Name: Robert D. Olson
Title: President
Date:
3934333.2
3-57
IN WITNESS WHEREOF, the parties have caused this Second Amendinent to Lease to
be executed as of the day and year first above written.
LESSOR:
CITY OF NEWPORT BEACH, a California municipal
corporation and charter city
By:
Name: Grace K. Leung
Title: City Manager
Date:
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
By: 'T19,L— �$�-
Name: Aaro C. Harp "
Title: City Attome
Date: ) 0
ATTEST:
By:
Name: Leilani 1. Brown
Title: City Clerk
Date:
LESSEE:
LIDO HOUSE, LLC., a California limited liability
company
By: Olson Real Estate Group, Inc., a California
corporation, Manager
By:
Name: Robert D. Olson
Title: President
Date: iu -7'3 -14
3934333.2
3-58
Attachment G
Option Agreement to Ground Lease
with Related Third Amendment to Ground Lease
3-59
OPTION AGREEMENT TO GROUND LEASE WITH RELATED THIRD
AMENDMENT TO GROUND LEASE
THIS OPTION AGREEMENT TO GROUND LEASE WITH RELATED THIRD
AMENDMENT TO GROUND LEASE ("Option to Lease Site") is entered into this _ day
of , 2024 ("Option Date"), by and between THE CITY OF
NEWPORT BEACH, a California municipal corporation and charter city ("Lessor" or "City"),
and LIDO HOUSE, LLC, a California limited liability company ("Lessee"), individually referred
to as "Party" or collectively "Parties."
RECITALS
A. On September 9, 2014, Lessor and Olson Real Estate Group, Inc., a California corporation
doing business as R.D. Olson Development ("R.D. Olson Development"), entered into
that certain Ground Lease ("Ground Lease") for the development of a hotel with one
hundred thirty (130) guest rooms and related facilities ("Hotel") on City owned land at
3300 Newport Boulevard in the City of Newport Beach, County of Orange, State of
California ("Premises").
B. On May 3, 2016, a First Amendment to Lease to amend and clarify the Legal Description
and the Depiction of the Premises subject of the Lease was executed ("First
Amendment").
C. On May 3, 2016, an Assignment and Assumption of Lease was executed, whereby all the
rights, title and interest in the Lease were transferred by R.D. Olson Development to
Lessee.
D. On May 3, 2016, in a written notice to the Lessee, the City approved the Lessor's
Conditions to Commencement of Lease subject to certain reservations which have since
been waived, and the terms of the Ground Lease commenced ("Ground Lease
Commencement Date").
E. On , 2024, a Second Amendment to Lease amended certain provisions related
to Lessee's refinancing of the Premises was executed ("Second Amendment").
F. Lessee desires to obtain an option to ground lease the Site (defined below) in order to
develop and construct thereon five (5) cottages, fourteen (14) public parking spaces,
public sidewalks, and public landscaping areas adjacent to the Premises at the contiguous
real property located at 475 32"d Street in Newport Beach, County of Orange, State of
California, as more particularly described below ("Site"), upon the satisfaction of certain
conditions and contingencies.
G. Lessor now desires to grant to Lessee the option to ground lease the Site and construct the
Site Improvements on the terms and conditions set forth below, and Lessee desires to
accept such option in accordance with the terms and conditions set forth herein.
H. Upon the satisfaction of certain conditions and contingencies pursuant to the terms of this
3-60
Option to Lease Site, the Parties desire to enter into a third amendment to Lease to amend
the legal description and depiction of the Premises to include the Site, and to incorporate
certain terms and provisions as part of the Lease, as more particularly set forth as
"Attachment 1" hereto ("Third Amendment").
I. Subject to Lessee providing forty-five (45) days advanced written notice to Lessor as
provided in Section 9 Article 6B.1, the Third Amendment shall commence upon execution
of the Third Amendment by the Parties and the recordation of the Third Amendment to
the Memorandum of Lease as provided for herein ("Commencement Date of the Third
Amendment"); provided, however, the Commencement Date of the Third Amendment
shall occur on or before the period of time no greater than six (6) months following the
Option Date, subject to rolling three (3) month extensions reasonably approved in writing
(at least thirty (30) calendar days before expiration) by the City Manager based upon
Lessee pursuing reasonable efforts to obtain the Additional Development Entitlements for
the Site Improvements ("Outside Commencement Date of the Third Amendment").
J. The Parties intend that as part of Lessee's performance under the Third Amendment and
upon completion of the improvements thereto, the Site shall include certain public benefits
including, but not limited to, construction and maintenance of public parking spaces to
serve residents and visitors.
NOW, THEREFORE, for good and valuable consideration, including the mutual promises
contained herein, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
1. Grant of Option to Lease Site. Lessor hereby grants to Lessee the option to lease the Site
pursuant to the terms of the Third Amendment upon the terms and conditions set forth herein.
2. Recitals; Definitions. The foregoing recitals are confirmed by the Parties as true and correct
and are incorporated herein by reference. The recitals are a substantive, contractual part of
this Option to Lease Site. Any capitalized terms used but not defined herein shall have the
meanings given them in the Lease, as amended, including as set forth in the Third
Amendment. References to section numbers shall be to the applicable section numbers in the
Lease, as amended, including as set forth in the Third Amendment.
3. Tasks To Be Performed.
A. Lessee shall perform the following tasks to the satisfaction of Lessor:
(i) Additional Development Entitlements for the Site Improvements. Within the time set
forth in the Schedule of Performance for Third Amendment which is attached hereto as
"Exhibit B" and incorporated herein by reference ("Schedule of Performance for
Third Amendment"), Lessee shall submit complete application(s) to City for issuance
of the Additional Development Entitlements for the Site Improvements (as defined
hereinbelow) and thereafter Lessee shall exercise commercially reasonable diligence in
an effort to obtain final administrative City approval of same. As used herein,
"Additional Development Entitlements for Site Improvements" shall mean all of the
land use entitlements required for the Site Improvements pursuant to Planning
3-61
Application No. PA2020-068 approved by the Newport Beach City Council on October
25, 2022 and November 15, 2022, including without limitation all of the following
(each, individually, a Development Entitlement for Site Improvements and collectively
"Additional Development Entitlements for Site Improvements"): (i) a General Plan
Amendment to amend Anomaly No. 85 to increase the development limit to 118,573
gross square feet; (ii) a Coastal Land Use Plan Amendment (LC2020-006) to increase
the development limit to 118,573 gross square feet within both the Newport Beach
Coastal Land Use Plan and Title 21 (Local Coastal Program Implementation Plan of the
Newport Beach Municipal Code; (iii) a Zoning Code Amendment to increase the
development limit to 118,573 gross square feet; (iv) a Site Development Review
amending Site Development Reviews Nos. SD2014-001 and SD2016-005 for the
construction of the Site Improvements; (v) a Conditional Use Permit amending Use
Permit Nos. 2014-004 and UP2016-015 for the operation of the Site Improvements;
and (vi) Addendum No. 2 to the Lido House Hotel Final Environmental Impact report
(SCH No. 2013111022) to address the reasonably foreseeable environmental impacts
associated with the Site Improvements.
Within the time set forth in the Schedule of Performance for Third Amendment, Lessee
shall submit a complete application to the California Coastal Commission for issuance
of Coastal Land Use Plan Amendment (LC2020-006) and other related Coastal
Commission approvals and thereafter Lessee shall exercise commercially reasonable
diligence in an effort to obtain final administrative Coastal Commission approval of
same.
(ii) Final Building Construction Plans for the Site Improvements and Satisfaction of All
Prerequisites to Issuance of Site Building Permit(s). Within the time(s) set forth in the
Schedule of Performance for Third Amendment, Lessee shall submit complete
application(s), plans, and specifications to Lessor for issuance of all of the Final
Building Plans for the Site Improvements and thereafter Lessee shall (i) exercise
commercially reasonable diligence in an effort to obtain final Lessor approval of same
(with the understanding that Lessor will not issue permits prior to the Commencement
Date of the Third Amendment meaning the complete satisfaction or waiver of all
conditions set forth in Section 3(B) of this Option to Lease Site), (ii) pay or deposit with
Lessor all applicable fees and charges owing to Lessor prior to issuance of permits, (iii)
deliver to Lessor any security instrument that is required by Lessor for construction of
the Site Improvements pursuant to applicable Governmental Requirements, and (iv)
satisfy any other applicable Governmental Requirements that may be a condition to
Lessee's right to obtain required permits and commence construction of the Site
Improvements (other than the occurrence of the Commencement Date of the Third
Amendment).
(iii) Evidence of Financial Capability for the Site Improvements; Construction Loan
Documents. Within the time set forth in the Schedule of Performance for Third
Amendment, Lessee shall submit to the City Manager or his or her designee evidence
that Lessee has the financial capability necessary to develop the Site Improvements
(herein, "Evidence of Financial Capability for the Site Improvements"). Such
Evidence of Financial Capability for the Site Improvements shall include without
limitation each of the following: (i) a detailed budget showing Lessee's estimated
3-62
Project Costs (the "Project Budget for the Site Improvements"); (ii) a copy of the
term sheet obtained by Lessee from an Institutional Lender (or such other Mortgagee as
may be approved by Lessor in its commercially reasonable discretion) to cover the costs
set forth in the Project Budget for the Site Improvements, with such term sheet certified
by Lessee to be a true and correct copy thereof, and such term sheet in form and content
reasonably acceptable to Lessor, with only those conditions which are standard or
typical for the lender involved for similar projects; (iii) if the total costs set forth in the
Project Budget for the Site Improvements exceed the amount of funds which are
contemplated to be loaned under the term sheet obtained by Lessee from an Institutional
Lender (or such other Mortgagee as may be approved by Lessor in its commercially
reasonable discretion) that will be available to Lessee pursuant to clause (ii), a financial
statement and/or other documentation reasonably satisfactory to Lessor sufficient to
cover such difference; (iv) draft construction loan documents evidencing that the
Mortgage securing the Institutional Lender's or other Lessor -approved Mortgagee's
loan (A) will cover no interest in any real property other than Lessee's leasehold interest
in the Premises and/or the Site, and (B) will be fully subordinate to Lessor's fee title in
and to the Premises and/or the Site and will state on its face that it does not in any way
encumber Lessor's fee interest in the Premises and/or the Site or Lessor's rights set forth
in the Lease, as amended (except as expressly stated herein); (v) a copy of the
construction contract or contracts between Lessee and its general contractor(s) for the
Site Improvements, certified by Lessee to be a true and correct copy thereof, covering
all of the excavation, grading, demolition, and construction work comprising the Site
Improvements, including without limitation all related utility and off- site work (the
"Project Construction Contract for the Site Improvements"); and (vi) a corporate
surety bond or bonds or other security instrument, approved as to form, content, and
company by the City Engineer and City Attorney with Lessee's contractor or contractors
as principal(s), in a penal sum not less than one hundred percent (100%) of the estimated
cost of constructing improvements in the public rights -of -way in connection with the
construction of the Site Improvements guaranteeing completion of construction and the
payment of wages for services engaged and bills contracted for materials, supplies, and
equipment used in the performance of the work, and protecting Lessee and Lessor from
any liability, losses, or damages arising therefrom (the "Project Security Instruments
for the Site Improvements"), provided, however, that the City Manager or his or her
designee shall have the discretion on behalf of Lessor to accept alternate security in his
or her sole and absolute discretion.
If the City Manager or his or her designee disapproves Lessee's Evidence of Financial
Capability for the Site Improvements, within the time set forth in the Schedule of
Performance for Third Amendment, Lessee shall resubmit its Evidence of Financial
Capability for the Site Improvements to provide the information or assurances
required to satisfy Lessor's requirements.
As soon as possible after Lessor approves Lessee's Evidence of Financial Capability
for the Site Improvements and in no event later than five (5) business days prior to the
Commencement Date of the Third Amendment, Lessee shall deliver to Lessor
complete final executed copies of all of the documents that memorialize Lessee's
construction loan for the Site Improvements with the approved Mortgagee, including
without limitation the construction loan agreement, deed of trust, and UCC-1
3-63
(collectively, the "Construction Loan Documents for the Site Improvements").
The Construction Loan Documents for the Site Improvements shall be consistent with
the foregoing Evidence of Financial Capability for the Site Improvements and other
applicable provisions of the Lease, as amended, and shall be contingent upon the
Mortgagee's approval of the Third Amendment.
(iv) Hotel Management Company and Amendment to Hotel Management Agreement.
Within the time set forth in the Schedule of Performance for Third Amendment, Lessee
shall submit to the City Manager or his or her designee evidence that Lessee has entered
into an amendment to the existing Hotel Management Agreement, if applicable, for the
management and operation of the Bungalows which amendment shall become effective
upon the Commencement Date of the Third Amendment.
If Lessor disapproves Lessee's proposed amendment to the Hotel Management
Agreement, within the time set forth in the Schedule of Performance for Third
Amendment, Lessee shall resubmit a new or revised amendment to the Hotel
Management Agreement to address and satisfy Lessor's requirements. Notwithstanding
the foregoing, if the proposed amendment to the Hotel Management Agreement sets
forth the addition of the Bungalows to the number of Guestrooms (as defined in the
Hotel Management Agreement) and does not modify any other terms of the Hotel
Management Agreement, then the proposed amendment shall be deemed approved.
As soon as possible after Lessor approves the amendment to the Hotel Management
Agreement (or same is deemed approved) and in no event later than five (5) business
days prior to the Commencement Date of the Third Amendment, Lessee shall deliver to
Lessor complete final executed copies of the amendment to the Hotel Management
Agreement, which amendment shall become effective upon the Commencement Date
of the Third Amendment, consistent with Lessor's approval; provided, that Lessee shall
have the right to redact from the amendment to the Hotel Management Agreement
submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel
Management Company as business trade information that is not a matter of public
record.
(v) Hotel Franchisor and Hotel Franchise Agreement. Within the time set forth in the
Schedule of Performance for Third Amendment, Lessee shall submit to the City
Manager or his or her designee evidence that Lessee has entered into an amendment to
the existing Hotel Franchise Agreement, if applicable, as provided in Section 3.1.5 of
the Lease for the management and operation of the Bungalows effective upon the
Commencement Date of the Third Amendment.
If Lessor disapproves of Lessee's proposed amendment to the Hotel Franchise
Agreement, within the time set forth in the Schedule of Performance for Third
Amendment, Lessee shall resubmit a new or revised amendment to the Hotel Franchise
Agreement to address and satisfy Lessor's requirements.
As soon as possible after Lessor approves the amendment to the Hotel Franchise
Agreement and in no event later than five (5) business days prior to the Commencement
Date of the Third Amendment meaning the complete satisfaction or waiver of all
3-64
conditions set forth in Section 4 hereinbelow, Lessee shall deliver to Lessor complete
final executed copies of the amendment to the Hotel Franchise Agreement, effective
upon the Commencement Date of the Third Amendment, consistent with Lessor's
approval; provided, that Lessee shall have the right to redact from the amendment to the
Hotel Franchise Agreement submitted to Lessor the amount of the fees or charges
payable by Lessee to the Hotel Franchisor as business trade information that is not a
matter of public record.
(vi) Insurance. Within the time set forth in the Schedule of Performance for Third
Amendment, Lessee shall submit evidence reasonably satisfactory to Lessor's Risk
Manager that Lessee has obtained all insurance required pursuant to Sections 13.3 and
13.4 of the Lease.
B. Lessor shall perform the following tasks to the satisfaction of Lessee:
(i) Additional Development Entitlements for Site Improvements. Within the time set
forth in the Schedule of Performance for Third Amendment, in its capacity as Lessor,
Lessor shall review Lessee's application(s) for those Additional Development
Entitlements for Site Improvements that are required to be submitted to Lessor, and
any proposed amendments or changes thereto. Lessee understands that by Lessor's
execution of the Third Amendment, the City of Newport Beach is not committing itself
or agreeing to undertake any activity requiring the subsequent exercise of discretion
by the City or any department thereof, including, but not limited to, the approval of
any CEQA documents, the approval of any Site Improvements or land use regulation
governing the Site, or any other act or approval.
(ii) Review and Approval of Final Building Construction Plans. Within the time set forth
in the Schedule of Performance for Third Amendment, in its capacity as Lessor, Lessor
shall review Lessee's application(s) for approval of the Final Building Plans for the
Site Improvements and all security instruments and other documents submitted by
Lessee in conjunction therewith, including any proposed amendments or changes
thereto.
(iii) Review and Approval of Lessee's Evidence of Financial Capability. Within the time
set forth in the Schedule of Performance for Third Amendment, the City Manager or
his or her designee shall complete his or her review of and approve or disapprove
Lessee's Evidence of Financial Capability for the Site Improvements. The City
Manager or his or her designee shall not unreasonably withhold, condition, or delay
its approval of Lessee's Evidence of Financial Capability for the Site Improvements.
If the City Manager or his or her designee disapproves Lessee's Evidence of Financial
Capability for the Site Improvements, he or she shall do so by written notice to Lessee
stating the reasons for such disapproval.
(iv) Review and Approval of Construction Loan Documents. Within the time set forth in
the Schedule of Performance for Third Amendment, the City Manager or his or her
designee shall complete his or her review of and approve or disapprove Lessee's
Construction Loan Documents for the Site Improvements. The City Manager or his
3-65
or her designee shall not unreasonably withhold, condition, or delay Lessor's approval
of Lessee's Construction Loan Documents for the Site Improvements. If the City
Manager or his or her designee disapproves Lessee's Construction Loan Documents
for the Site Improvements, he or she shall do so by written notice to Lessee stating the
reasons for such disapproval.
(v) Review and Approval of Hotel Management Agreement Amendment. Within the time
set forth in the Schedule of Performance for Third Amendment, the City Manager or
his or her designee shall reasonably approve or disapprove the amendment to the
existing Hotel Management Agreement, in accordance with the criteria and procedures
set forth in Section 3(A)(iv) hereof.
(vi) Review and Approval of Hotel Franchise Agreement Amendment. Within the time
set forth in the Schedule of Performance for Third Amendment, the City Manager or
his or her designee shall approve or disapprove the amendment to the existing Hotel
Franchise Agreement, in accordance with the criteria and procedures set forth in
Section 3(A)(v) hereof.
(vii) Government Code Section 65864 et seq. Not Applicable. Notwithstanding the
foregoing, Lessee understands and agrees that the Lease, as amended, does not
constitute a statutory development agreement (California Government Code Section
65864 et seq.). If Lessee disputes Lessor's exercise of its police power authority with
respect to any of the Additional Development Entitlements for Site Improvements,
including any proposed amendments or changes thereto, nothing in the Lease, or any
amendment thereof, is intended or shall be interpreted to grant to Lessee a right to sue
Lessor or any official, officer, employee, or agent of Lessor for breach of contract or
any other contractual right or remedy and Lessee's rights and remedies shall be limited
to only those rights and remedies which Lessee would have as a private property
owner in the absence of the Lease, as amended.
4. Satisfaction (or Waiver) of Conditions to the execution of the Third Amendment, Third
Amendment to the Memorandum of Lease and the Commencement Date of the Third
Amendment.
(A) Lessor's Conditions to execute the Third Amendment, Third Amendment to the
Memorandum of Lease and the Commencement of Third Amendment. Lessor's
obligation to execute and deliver the Third Amendment, Third Amendment to the
Memorandum of Lease and the Commencement Date of the Third Amendment shall all
be conditional and contingent upon the satisfaction (or written waiver by Lessor) of the
tasks set forth in Section 3(A) above ("Lessor's Conditions to Commencement of
Third Amendment").
(B) Lessee's Conditions to execute the Third Amendment, Third Amendment to the
Memorandum of Lease and the Commencement of Third Amendment to the Lease.
Lessee's obligation to execute and deliver the Third Amendment, Third Amendment to
the Memorandum of Lease and the Commencement Date of the Third Amendment shall
all be conditional and contingent upon the satisfaction (or written waiver by Lessee) of
the tasks set forth in Section 3(B) above and the receipt by Lessee of the Additional
3-66
Development Entitlements for Site Improvements ("Lessee's Conditions to
Commencement of Third Amendment") (Lessor's Conditions to Commencement of
Third Amendment and Lessee's Conditions to Commencement of Third Amendment
are collectively referred to herein as the "Conditions to Commencement of Third
Amendment").
(C) Challenges. All statute of limitations has expired for any and all claims, actions,
challenges, notices of violation, or enforcement actions that the Third Amendment
violates federal or state law including, but not limited to, California Government Code
Section 54220 et seq. to Lessor's sole satisfaction, and further, that Lessor is released
or discharged of any further liability or legal claims that the Third Amendment violates
federal or state law.
(D) No Default. Neither Lessor nor Lessee is in Default of any of its obligations set forth in
the Lease as of the Commencement Date of the Third Amendment and no event shall
have occurred that, with the passage of time or the giving of notice, or both, would
constitute a Default by Lessee hereunder.
(E) Automatic Termination. In the event one or more of the Conditions to Commencement
of the Third Amendment are not satisfied or otherwise waived by the applicable Party
by the Outside Commencement Date of the Third Amendment, this Option to Lease Site
shall terminate automatically without further action by either Party. Termination of this
Option to Lease Site, as provided herein, shall be without prejudice to whatever legal
rights Lessor or Lessee may have against each other arising from this Option to Lease
Site.
5. Additional Conditions, Acknowledgements, Agreements, and Covenants.
(A) Lessee's Investigation of Title, Lessor Covenant to Not Further Encumber Title. Lessee
shall have forty-five (45) days following the Option Date to review the condition of title
to the Site ("Site Preliminary Report"), to prepare an ALTA survey with respect to
the Site, and to conduct any investigations and inspections (to be coordinated in advance
with Lessor) that Lessee may deem appropriate with respect thereto and the condition
of title to the Site. Lessor makes no representation or warranty to Lessee regarding the
accuracy or completeness of the Site Preliminary Report, or whether there are any
unrecorded non -monetary liens or encumbrances that are not identified or reflected in
the Site Preliminary Report. Lessor covenants, however, that from the Option Date
through the Commencement Date of the Third Amendment, Lessor shall not take any
affirmative action that will cause title to the Site to become inconsistent with the
Approved Title Condition (defined below) as of the Commencement Date of the Third
Amendment. As used herein, "Approved Title Condition" shall mean that, as of the
Commencement Date of the Third Amendment, Lessor's fee title to the Site is free and
clear of the following: (i) all monetary liens and encumbrances excepting only (A) the
lien of any non -delinquent property taxes and assessments, including without limitation
supplemental taxes, that accrue from and after the Commencement Date of the Third
Amendment, as applicable, (B) the lien of any Mortgage placed on Lessee's leasehold
interest in the Site (but not Lessor's leased fee interest, which shall be senior in priority
and not subordinated to the Lease, this Option to Lease Site, or the Third Amendment)
3-67
that satisfies the requirements set forth in Sections 3.A. I (iii), 3.13.1(iii), and 3.B.2(iv) of
this Option to Lease Site and is approved by Lessor, as provided therein; and (C) such
other monetary liens that are caused by or placed on Lessee's leasehold interest by the
acts or omissions of Lessee; and (ii) all non -monetary encumbrances, excepting only
(A) those encumbrances that are listed as exceptions to title in the Site Preliminary
Report and not objected to by Lessee within the forty-five (45) day period described
herein, (B) any easement, license, access, or similar right that is reserved by Lessor or
dedicated, granted, or conveyed to Lessor or any other governmental agency or utility
company consistent with the Development Entitlements for the Site Improvements, and
(C) such other non -monetary liens that are caused by or placed on Lessee's leasehold
interest by the acts or omissions of Lessee.
(B) Physical/Environmental Condition of the Site; Lessor Covenant to Not Alter Existing
Physical/Environmental Condition of the Site. Lessee shall have forty-five (45) days
following the Option Date to review the physical and environmental condition of the
Site and to conduct any investigations and inspections Lessee deemed appropriate with
respect thereto. Any studies, surveys, investigations and tests shall be done, if at all, at
Lessee's sole cost and expense. Lessee shall (a) notify Lessor prior to each entry of the
date and purpose of intended entry and provide to Lessor the names and affiliations of
the persons entering the Site; (b) conduct all studies in a diligent, expeditious and safe
manner and not allow any dangerous or hazardous conditions to occur on the Site as a
result of such studies during or after such investigation, as a result of that investigation;
(c) comply with all applicable laws and governmental regulations in connection with
entering and performing such investigations on the Site; (d) keep the Site free and clear
of all mechanics' and materialmen's liens, lis pendens and other liens arising out of the
entry and work performed under this paragraph; (e) maintain or assure maintenance of
workers' compensation insurance (or state approved self-insurance) covering all
persons entering the Site in the amounts required by the State of California; (f) provide
to Lessor prior to initial entry a certificate of insurance evidencing that Lessee has
procured and paid premiums for an all-risk public liability insurance policy written on
a per occurrence and not claims made basis in a combined single limit of not less than
TWO MILLION DOLLARS and 00/100 ($2,000,000.00) which insurance names
Lessor as additional insured entitled to not less than thirty (30) days cancellation notice
and is primary and non-contributing with insurance carried by Lessor; and (g) return the
Site to its original condition following Lessee's entry. Lessee agrees to indemnify,
defend, protect and hold Lessor free and harmless from any and all loss, liability,
claims, damages, causes of action and expenses (including but not limited to reasonable
attorneys' fees and costs) (collectively, "Claims") arising from the exercise of said
license, or from Lessee's failure to comply with the conditions to Lessee's entry onto
the Site provided herein; provided, that such indemnity shall not extend or apply to
discovery of pre-existing conditions or matters relating to the Site, or any impact on the
Site or its valuation resulting therefrom or to any Claims to the extent arising from or
caused by the negligence or wrongful conduct of the Lessor or any of its agents or
representatives. Such undertaking of indemnity shall survive the termination of the
Third Amendment for any reason. The limited license herein granted shall be co-
extensive with the term of this Option to Lease Site and the Third Amendment and any
extension hereof.
3-68
(C) Condition of the Site. All portions of the Site, and any improvements thereon, which
are the subject of this Option to Lease Site, and, upon its execution, shall be the subject
of the Third Amendment, shall be leased in an "as is" physical and environmental
condition, with no warranty, express or implied, by Lessor as to the condition of the
soil, its geology, the presence of known or unknown earthquake faults, the presence of
any Hazardous Substances, the water table and/or groundwater conditions, or any other
similar matters and it shall be the sole responsibility of Lessee, at its sole cost and
expense, to investigate and determine the physical/environmental conditions of the Site,
its geology, susceptibility to seismic events, the presence of any Hazardous Substances,
the water table and/or groundwater conditions, and the physical and environmental
suitability of the Site for development, operation, and maintenance of the Site
Improvements and, if the physical or environmental conditions of the Site, or any part
thereof, are not in all respects entirely suitable for the use or uses to which the Site will
be put, then it will be the sole responsibility and obligation of Lessee, after the
Commencement Date of the Third Amendment, to take such actions as may be
necessary to place the Site in all respects in a condition entirely suitable for
development, operation, and maintenance of the Site Improvements, which may include
demolition and clearance of above -ground and below -ground structures or other
improvements, removal of Hazardous Substances, compaction or re -compaction of
soils, de -watering of soils, replacement of unsuitable soils, extraordinary foundation
systems, and the like. Not by way of limitation of the foregoing, Lessee acknowledges
that the existing improvements on the Site may deteriorate prior to the Commencement
Date of the Third Amendment and Lessor shall have no liability or responsibility
therefor.
(D) Cooperation; Execution of the Third Amendment; Recordation of Amendment to
Memorandum of Lease; Commencement Date of the Third Amendment. Each Party
shall perform all of its obligations that are required to be performed in order to satisfy
the Lessor's Conditions to Commencement of Third Amendment and the Lessee's
Conditions to Commencement of Third Amendment to the execution of the Third
Amendment, as applicable, and each Party shall cooperate in good faith with the other
Party in an effort to cause the Lessor's Conditions to Commencement of the Third
Amendment and Lessee's Conditions to Commencement of Third Amendment to be
satisfied as soon as possible and within the times set forth in the Schedule of
Performance for Third Amendment; provided, however, that (i) neither Party shall have
any obligation to perform or cooperate in such regard if such Party is not in Default
hereunder and, after and despite its performance of its obligations set forth in the Lease
that it is required to perform (and subject to any excuses for its failure to perform) any
of the Conditions to Commencement of Third Amendment for its benefit are not
satisfied prior to the Outside Commencement Date of the Third Amendment (as the
same may have been extended as provided herein) and (ii) nothing in this Section 5(D)
is intended or shall be interpreted as a covenant by either Party to (A) compromise any
of its rights or remedies set forth herein, including without limitation the right to demand
strict and timely performance from the other Party, or (B) agree to any modifications,
waivers, or extensions hereunder. Upon the satisfaction (or written waiver by the
benefited Party) of all of the Conditions to the Commencement of the Third
Amendment, and within the time set forth in the Schedule of Performance for Third
Amendment, the Parties shall each (i) execute and deliver the Third Amendment to
3-69
Ground Lease, (ii) execute in recordable form and deliver an Amendment to the
Memorandum of Lease which is attached hereto as Exhibit "C" to "Exhibit A" and
incorporated herein by reference, and (iii) cooperate in causing the Amendment to the
Memorandum of Lease to be recorded in the Official Records of the Orange County
Recorder's office. The date the Amendment to the Memorandum of Lease is recorded
shall be the Commencement Date of the Third Amendment to the Lease.
6. Option Payments. The Option to Lease Site is granted in consideration of additional Base
Rent in the amount of fifty thousand dollars ($50,000.00) annually ("Option
Consideration"), being added to the Base Rent due under the Lease, subject to all terms,
conditions, adjustments and payment terms set forth under Article 5 of the Lease, as amended.
Notwithstanding the foregoing, in the event the Conditions for Commencement of the Third
Amendment set forth in this Option to Lease Site are not satisfied, this Option to Lease Site
and the Option Consideration shall terminate as provided herein.
7. Approvals. Except to the extent that this Option to Lease Site authorizes a Party to
withhold its approval or consent to a specified request by the other Party in its sole and
absolute discretion, approvals and consents required of Lessor and Lessee shall not be
unreasonably withheld, conditioned, or delayed.
The City Manager or his or her designee shall have the authority to implement and
enforce this Option to Lease Site on behalf of Lessor; provided, however, that (i) in no
event shall the City Manager (or designee) have the authority, without City Council
approval or express delegation of authority, to approve substantive amendments to this
Option to Lease Site that materially increase Lessor's obligations or materially impair
or jeopardize its rights hereunder; (ii) in no event shall the City Manager (or designee)
have the authority, without City Council approval or express delegation of authority,
to approve waivers that materially impair or jeopardize Lessor's rights hereunder; (iii)
the City Manager (or designee) shall have the right, even if he or she has the authority
to act hereunder without seeking City Council approval, to seek such approval, and in such
event Lessor shall not be deemed to be in Default hereunder; and (iv) the City Attorney's
approval shall also be required with respect to (A) the form and content of any agreement,
estoppel certificate, or other document approved by the City Manager or his or her designee,
(B) whether the City Manager's and/or his/her designee's approval is consistent with the
terms and conditions set forth in this Option to Lease Site, including without limitation the
provisions of clauses (i) and (ii) above, and (C) whether the City Manager and/or his/her
designee has the authority under this Option to Lease Site and applicable law to grant or
provide such approval.
In the event that Lessee requests Lessor approval of any matter pertaining to this Option to
Lease Site, including without limitation approval of Lessee's Evidence of Financial
Capability for the Site Improvements, any of Lessee's development or building plans or
permits for the Site Improvements, Transfer of Lessee's interest, Transfer to a Mortgagee,
and execution of an estoppel certificate, as a condition to Lessor's taking such action, and
without regard to whether Lessor's final action is to approve, conditionally approve, or deny
such request, Lessee shall pay or reimburse Lessor for all of Lessor's actual and reasonable
costs and expenses in conjunction therewith, including without limitation the payroll costs
3-70
of Lessor's in-house staff and reasonable consultant fees incurred with respect thereto.
This obligation of Lessee shall survive the termination or expiration of this Option to Lease
Site.
Lessee's Representations and Warranties. As a material inducement to Lessor to enter into
this Option to Lease Site, Lessee represents and warrants the following: (i) Lessee is a
limited liability company organized, validly existing, and in good standing under the laws
of the State of California; (ii) Lessee has all necessary power and authority to enter into this
Option to Lease Site and to carry out the transactions and obligations contemplated herein;
(iii) the execution and delivery of this Option to Lease Site and the performance by Lessee
of its obligations hereunder will not violate or constitute an event of default under the terms
and provisions of any agreement, ordinance, regulation, law, or court order to which Lessee
is a party or by which Lessee is bound; (iv) all actions required to be taken by or on behalf
of Lessee to authorize it to execute, deliver, and perform its obligations set forth in this
Option to Lease Site have been taken; (v) the person(s) executing this Option to Lease Site
on behalf of Lessee have full power and authority to bind Lessee to the terms hereof; and
(vi) this Option to Lease Site is a valid and binding obligation of Lessee enforceable in
accordance with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium, or similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
9. Lessor's Representations and Warranties. As a material inducement to Lessee to enter into
this Option to Lease Site, Lessor represents and warrants the following: (i) Lessor is a
municipal corporation duly organized, validly existing, and in good standing under the laws
of the State of California; (ii) the execution and delivery of this Option to Lease Site and the
performance by Lessor of its obligations hereunder will not violate or constitute an event of
default under the terms and provisions of any agreement to which Lessor is a party or by
which Lessor is bound; (iii) all actions required to be taken by or on behalf of Lessor to
authorize it to execute and deliver this Option to Lease Site have been taken; and (iv) the
person(s) executing this Option to Lease Site on behalf of Lessor have full power and
authority to do so.
10. No Liability for Broker's Commissions or Finder's Fees. Each Party represents and warrants
to the other Party that it has not entered into any agreement or incurred any obligation which
might result in the obligation to pay a brokerage commission or finder's fee with respect to
this transaction. Each Party agrees to indemnify, defend, and hold harmless the other Party
from and against any and all claims, liabilities, and losses, including attorney's fees, which
the other Party may incur as the result of any claim made by any person or entity to a right
to a brokerage commission or finder's fee in connection with this transaction to the extent
such claim is based, or purportedly based, on the acts or omissions of the indemnifying
Party.
11. Counterparts. This Option to Lease Site may be executed in counterparts and when so
executed, each such counterpart will constitute an original document and such counterparts
will constitute one and the same agreement.
12. Estoppel Certificates. Within fifteen (15) days after each request therefor by either Party,
the other Party agrees to deliver a certificate to any person designated by the requesting
3-71
Party (including a proposed Mortgagee or purchaser), or to the requesting Party, certifying
(if such be the case) that this Option to Lease Site is in full force and effect, that to the best
of such Party's knowledge at that time, there are no defaults by either Party hereunder and
that no events have occurred which, with the giving of notice or the passage of time or both,
would constitute a default by either Party, or stating those claimed by the responding Party,
and that to the best of such Party's knowledge, there are no defenses or off -sets in favor of
either Party hereto, or stating those claimed by the responding Party, and/or certifying
whether any consent or approval required under this Option to Lease Site has been denied
or granted by the responding Party and whether any specified rights have been waived or
deemed waived or expired. Any such certificate shall also contain a warranty that the
person signing has the authority to execute the certificate on behalf of such Party. Nothing
in this Section 12 shall be construed as reducing the period of time that either Party has
under the terms of this Option to Lease Site to respond to a request by the other Party for a
consent or an approval.
13. No Attorney,. In any action between the Parties hereto seeking enforcement of any
of the terms and provisions of this Option to Lease Site, or in connection with the Site, the
prevailing Party in such action shall not be entitled to have and to recover from the other
Party its reasonable attorneys' fees and other expenses and costs in connection with such
action or proceeding.
14. Integrated ted Agreement. Except as expressly modified herein, all other provisions, terms, and
covenants set forth in the Lease shall remain unchanged and shall be in full force and effect.
[Signatures on the following page]
3-72
IN WITNESS WHEREOF, the parties have caused this Option Agreement to Ground
Lease with Related Third Amendment to Ground Lease to be executed as of the day and year
first above written.
LESSOR:
CITY OF NEWPORT BEACH, a California municipal
corporation and charter city
BY:
Name: Grace K. Leung
Title: City Manager
Date:
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
By: J2== 4��=z — —
Name: on C. Harp
Title: CiVy Attorne
Date: IU) Lia, �a--a-f'
ATTEST:
By:
Name: Leilani I. Brown
Title. City Clerk
Date:
LESSEE:
LIDO HOUSE, LLC., a California limited liability
company,
By: Olson Real Estate Group, Inc., a California
corporation, Manager
By:
Name: Robert D. Olson
Title. President
Date:
Attachment 1 THIRD AMENDMENT TO GROUND LEASE
3-73
IN WITNESS WHEREOF, the parties Have caused this Option Agreement to Ground
Lease with Related Third Amendment to Ground Lease to be executed as of the day and year
first above written.
LESSOR:
CITY OF NEWPORT BEACH, a California municipal
corporation and charter city
BY:
Natne: Grace K. Leung
Title: City Manager
Date:
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
By: _
Naine: A,a on C. Harp
Title: 04 Attor ey �-f'
Date: Icy 1
ATTEST:
By:
Name: Leilani 1. Brown
Title: City Cleric
Date:
LESSEE:
LIDO HOUSE, LLC., a California limited liability
company,
By: Olson Real Estate Group, Inc., a California
corporation, Man r
By:
Name: Robert D. Olson
Title: President
Date: J�j 'L5 - L4
Attachment] THIRD AMENDMENT TO GROUND LEASE
3-74
ATTACHMENT I
THIRD AMENDMENT TO GROUND LEASE
THIS THIRD AMENDMENT TO GROUND LEASE ("Third Amendment") is entered
into this day of , 20_, by and between THE CITY OF
NEWPORT BEACH, a California municipal corporation and charter city ("Lessor" or "city" ),
and LIDO HOUSE, LLC, a California limited liability company ("Lessee"), individually referred
to as "Party" or collectively "Parties."
A. On September 9, 2014, Lessor and Olson Real Estate Group, Inc., a California corporation
doing business as R.D. Olson Development ("R.D. Olson Development"), entered into
that certain Ground Lease ("Ground Lease") for the development of a hotel with one
hundred thirty (130) guest rooms and related facilities ("Hotel") on City owned land at
3300 Newport Boulevard in the City of Newport Beach, County of Orange, State of
California ("Premises").
B. On May 3, 2016, a First Amendment to Lease to amend and clarify the Legal Description
and the Depiction of the Premises subject of the Lease was executed ("First
Amendment").
C. On May 3, 2016, an Assignment and Assumption of Lease was executed, whereby all the
rights, title and interest in the Lease were transferred by R.D. Olson Development to
Lessee.
D. On May 3, 2016, in a written notice to the Lessee, the City approved the Lessor's
Conditions to Commencement of Lease subject to certain reservations which have since
been waived, and the terms of the Ground Lease commenced ("Lease Commencement
Date").
E. On , 2024, an Option Agreement To Ground Lease With Related Third
Amendment To Ground Lease was executed ("Option to Lease Site").
F. Lessee proposes to construct five (5) cottages, fourteen (14) public parking spaces, public
sidewalks, and public landscaping areas adjacent to the Premises at the contiguous real
property located at 475 32"d Street in Newport Beach, County of Orange, State of
California, as more particularly described below ("Site").
G. The Site shall include certain public benefits including, but not limited to, construction
and maintenance of public parking spaces to serve residents and visitors.
H. The Parties desire to enter into this Third Amendment to amend the legal description and
depiction of the Premises to include the Site, and to incorporate certain terms and
3-75
conditions as part of the terms and provisions of the Lease.
NOW, THEREFORE, for good and valuable consideration, including the mutual promises
contained herein, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:
TERMS
1. Interpretation. The terms used herein and not specifically defined shall have the same
meaning as in the Lease. Lessor and Lessee acknowledge that there are no agreements,
understanding, restrictions, warranties, representations, or covenants between the parties relating
to the Lease other than those set forth in this Third Amendment. Except to the extent the Lease is
modified by this Third Amendment, the remaining terms and provisions of the Lease shall remain
unmodified and in full force and effect.
2. Legal Description of the Premises and Site. The Legal Description of the Premises
attached to the Lease as Exhibit A-1 is amended in its entirety and hereby replaced with the
Exhibit A-1 attached hereto to include the Legal Description of the Premises and the Site, which
Exhibit A-1 shall be amended, if necessary, after receipt by the parties of an ALTA survey
reflecting the Legal Description.
3. Depiction of the Premises and Site. The Depiction of the Premises attached to the Lease
as Exhibit A-2 is amended in its entirety and replaced with the Exhibit A-2 attached hereto, to
include the depiction of the Premises and the Site.
4. Exhibits. To the extent that the Exhibit A-1 and the Exhibit A-2 attached hereto conflict
with any provision or exhibit attached to the existing Lease, the Exhibit A-1 and the Exhibit A-2
attached to this Amendment and made a part hereof shall control.
5. Purpose. Section 1.1 (Purpose) shall be amended to read as follows:
The purpose of this Lease is to provide for the lease by Lessor to Lessee of the former Newport
Beach City Hall premises located at 3300 Newport Boulevard in the City of Newport Beach,
County of Orange, State of California (as more specifically defined herein, the "Premises") and
475 32nd Street in Newport Beach, County of Orange, State of California (as more specifically
defined herein, the "Site") for the construction and operation by Lessee on the Premises of a
boutique hotel (the "Hotel") with one hundred thirty (130) guest rooms and related facilities and
the construction and operation by Lessee on the Site of five (5) cottages and related facilities,
fourteen (14) public parking spaces, public sidewalks, and public landscaping areas. The lease
of the Premises and the Site along with the development, construction and operation of the Hotel
and Site Improvements thereon pursuant to this Lease as amended, and the fulfillment generally
of this Lease as amended, are in the vital and best interests of the City of Newport Beach and the
health, safety, morals, and welfare of its residents, and in accord with the public purposes and
provisions of applicable federal, state, and local laws and requirements.
6. Definitions. Certain definitions under Article 2 (DEFINITIONS) of the Lease shall be amended
or added as follows:
3-76
"Additional Development Entitlements for Site Improvements" shall mean individually
and collectively, all of the land use entitlements required for the Site Improvements
pursuant to Planning Application No. PA2020-068 approved by the Newport Beach City
Council on October 25, 2022 and November 15, 2022, including without limitation all of
the following: (i) a General Plan Amendment to amend Anomaly No. 85 to increase the
development limit to 118,573 gross square feet; (ii) a Coastal Land Use Plan Amendment
(LC2020-006) to increase the development limit to 118,573 gross square feet within both
the Newport Beach Coastal Land Use Plan and Title 21 (Local Coastal Program
Implementation Plan of the Newport Beach Municipal Code; (iii) a Zoning Code
Amendment to increase the development limit to 118,573 gross square feet; (iv) a Site
Development Review amending Site Development Reviews Nos. SD2014-001 and
SD2016-005 for the construction of the Site Improvements; (v) a Conditional Use Permit
amending Use Permit Nos. 2014-004 and UP2016-015 for the operation of the Site
Improvements; and (vi) Addendum No. 2 to the Lido House Hotel Final Environmental
Impact report (SCH No. 2013111022) to address the reasonably foreseeable
environmental impacts associated with the Site Improvements.
"Agreement Date of Third Amendment" shall mean the date first written into the
introductory paragraph to the Third Amendment to Lease Agreement.
"Approved Title Condition for the Site" shall mean that, as of the Commencement Date
of the Third Amendment, Lessor's fee title to the Site is free and clear of the following:
(i) all monetary liens and encumbrances excepting only (A) the lien of any non -delinquent
property taxes and assessments, including without limitation supplemental taxes, that
accrue from and after the Commencement Date of the Third Amendment, (B) the lien of
any Mortgage placed on Lessee's leasehold interest in the Site (but not Lessor's leased fee
interest, which shall be senior in priority and not subordinated to this Lease) that satisfies
the requirements set forth in Sections 3.A.1(iii), 3.B.1(iii), and 3.B.2(iv) of the Option to
Lease Site and is approved by Lessor, as provided therein; and (C) such other monetary
liens that are caused by or placed on Lessee's leasehold interest by the acts or omissions
of Lessee; and (ii) all non -monetary encumbrances, excepting only (A) those
encumbrances that are listed as exceptions to title in the Site Preliminary Report and not
objected to by Lessee within the forty-five (45) day period described in the Option to
Lease Site, (B) any easement, license, access, or similar right that is reserved by Lessor or
dedicated, granted, or conveyed to Lessor or any other governmental agency or utility
company consistent with the Development Entitlements for the Hotel, and (C) such other
non -monetary liens that are caused by or placed on Lessee's leasehold interest by the acts
or omissions of Lessee.
"Bungalows" shall mean the five (5) guest room cottages and related facilities proposed
as part of the Site Improvements at the Site to be operated by Lessee pursuant to the Lease.
"Construction Period for Site" shall mean the period commencing with the
Commencement Date of the Third Amendment and ending on the first day of the
commencement of operations of the Bungalows on the Site.
"Governmental Requirement" shall mean all laws, rules, and regulations of all federal,
state, and local government agencies with jurisdiction over the Premises, Site, Site
Improvements and the Improvements at any time from the Lease Effective Date through
3-77
the expiration or termination of the Lease Term, including without limitation all applicable
federal and state labor standards and requirements.
"Gross Non -Room Revenues" as used herein means all Gross Revenues derived by any of
the Lessee Parties from the operation of the Hotel and Bungalows, excluding Gross Room
Revenues. Gross Non -Room Revenues include, without limitation, revenue received from
the following operations on the Premises and Site during the Lease Term: rental of meeting
rooms, revenue from banquet sales/events in the Hotel and/or Bungalows, cover charges,
service charges, and miscellaneous banquet revenues, revenues from food and beverage
services, whether provided on or off the Premises and/or Site, revenues generated from
mini -bar, health club, spa, hair and beauty salon, parking, and telephone, cable or video
television, and telecommunications services or operations charged separately or in
addition to room rates, vending machine revenues, rentals for equipment not customarily
provided guests of similar hotels, revenues generated from sales from gift, sundries, and
other shops, all rentals or other payments from sublessees, licensees, or concessionaires
who are not Affiliates of Lessee, the portion of any Net Awards and Payments that is fairly
allocated to any of the foregoing categories of Gross Non -Room Revenues, and the portion
of Net Insurance Proceeds from the proceeds of business interruption or rental loss
insurance that is fairly allocated to any of the foregoing categories of Gross Non -Room
Revenues. In the event that Lessee provides food and beverage service to persons or
groups using a meeting room or rooms in the Hotel and/or Bungalows, Lessee shall fairly
allocate the portion of the total charges/revenues between Gross Room Revenues and
Gross Non -Room Revenues in accordance with industry custom and practice for hotels
that are not subject to ground leases with differing percentage rental rates applicable to
use of the meeting room(s) (part of Gross Room Revenues hereunder) and
sale/consumption of food and beverages (part of Gross Non -Room Revenues hereunder).
In addition, in the event that a group occupying the Hotel or Bungalows arranges a banquet
or similar group cocktail party or meal(s), Lessee shall fairly allocate the portion of the
total charges/revenues between Gross Room Revenues and Gross Non -Room Revenues
in accordance with industry custom and practice for hotels that are not subject to ground
leases with differing percentage rental rates applicable to use/occupancy of hotel rooms
or Bungalows (part of Gross Room Revenues hereunder) and sale/consumption of food
and beverages (part of Gross Non -Room Revenues hereunder).
"Gross Room Revenues" as used herein means all Gross Revenues derived by any of the
Lessee Parties from the operation of the Hotel and Bungalows for the rental of Hotel and/or
Bungalows' guest rooms. Gross Room Revenues include, without limitation: (i) all Hotel
guest room and Bungalows' rental payments, Hotel room and Bungalows' deposits
forfeited,- and Hotel room and Bungalows' cancellation fees; (ii) proceeds of business
interruption and similar insurance payable as a result of loss of Hotel room and
Bungalows' revenues; (iii) so-called "resort fees" (by whatever name called) and any fees
for use of any facilities which are customarily included by comparable hotels in the guest
room rental rate, excluding, however, food, beverage, mini -bar, health club, parking,
telephone, and rentals for equipment not customarily provided guests of similar hotels;
(iv) the portion of any Net Awards and Payments that is fairly allocated to any of the
foregoing categories of Gross Room Revenues; and (v) the portion of Net Insurance
Proceeds from the proceeds of business interruption or rental loss insurance that is fairly
allocated to any of the foregoing categories of Gross Non -Room Revenues. In the event
that Lessee provides food and beverage service to persons or groups using a meeting room
3-78
or rooms in the Hotel and/or Bungalows, Lessee shall fairly allocate the portion of the
total charges/revenues between Gross Room Revenues and Gross Non -Room Revenues
in accordance with industry custom and practice for hotels that are not subject to ground
leases with differing percentage rental rates applicable to use of the meeting room(s) (part
of Gross Room Revenues hereunder) and sale/consumption of food and beverages (part
of Gross Non -Room Revenues hereunder). In addition, in the event that a group occupying
the Hotel and/or Bungalows arranges a banquet or similar group cocktail party or meal(s),
Lessee shall fairly allocate the portion of the total charges/revenues between Gross Room
Revenues and Gross Non -Room Revenues in accordance with industry custom and
practice for hotels that are not subject to ground leases with differing percentage rental
rates applicable to use/occupancy of hotel rooms (part of Gross Room Revenues
hereunder) and sale/consumption of food and beverages (part of Gross Non -Room
Revenues hereunder).
"Gross Revenues" shall mean all gross receipts of every kind and nature, whether for cash,
credit, or barter, from any business, use, or occupation, or any combination thereof,
transacted, arranged, or performed, in whole or in part, on, from, or for services from the
Premises and/or Site, whether operated by Lessee or by a sublessee, licensee, or
concessionaire if such sublessee, licensee, or concessionaire is an Affiliate of Lessee, for
Gross Room Revenues or Gross Non -Room Revenues. In the computation of Gross
Revenues there shall be excluded the following amounts: (i) rebates, refunds, and
discounts (exclusive of credit card discounts or commissions paid to a credit card system)
to customers given in the ordinary course of obtaining such revenues; (ii) transient
occupancy, excise, sales, and use taxes collected directly from patrons or guests or as a
part of the sales price of any goods or services, such as gross receipts, admission, cabaret,
or similar taxes, which are accounted for by Lessee to any governmental agency; (iii)
income or interest derived from cash, securities, and other property acquired and held for
investment by Lessee (including income or interest earned on any amounts held in
operating or replacement reserves for the Hotel and Bungalows); (iv) proceeds of
insurance other than business interruption or rental loss insurance; (v) up to five percent
(5%) of Lessee's advertising, promotional, or charitable billings not actually charged or
paid; (vi) security deposits paid by a sublessee, licensee, or concessionaire of Lessee as
security for such third party's obligations under its sublease, license, or concession
agreement, except to the extent Lessee allocates or applies any portion of such security
deposit to unpaid rent or other amounts owed by such third party, in which event the sum
so allocated or applied shall be included in Gross Revenues as of the date of such
allocation or application; (vii) bad or uncollectible debts; (viii) goods returned to suppliers
or which are delivered for resale (as distinguished from delivery) to another retail location
or to a warehouse or to any retailers without profit to Lessee, where such returns or
deliveries are made solely for the convenient operation of the business of Lessee or a
sublessee, licensee, or concessionaire operating from the Premises and/or Site and not for
the purpose of consummating a sale made in, about, or from the Premises and/or Site; (ix)
the value of gratis meals furnished to Lessee's employees as an incident of their
employment; (x) gratuities paid to employees; and (xi) the value of meals provided in
connection with charitable events when no Lessee Parties receive payment therefor other
than by reason of a charitable contribution. Sales upon credit shall be considered cash sales
and shall be included in the gross receipts for the period during which the goods or services
are delivered or performed. All Gross Revenues shall be computed without deduction or
3-79
allowance for costs, charges, or expenses for the purchase, sale, transportation, or delivery
of merchandise or services, or for labor and materials in connection with the rendering of
services or the sale of goods. Subsequent collection of bad or uncollectible debts
previously not reported as Gross Receipts shall be included in Gross Receipts at the time
they are collected. Interest, service fees, and late charges collected in conjunction with a
transaction, sale, or activity of Lessee and any sublessee, licensee, or concessionaire of
Lessee shall be reported in the same percentage category (either "Gross Room Revenues"
or "Gross Non -Room Revenues") as the transaction, sale, or activity is reported.
"Ground Rent" shall mean rent paid by Lessee to Lessor for the Premises and Site. Ground
Rent consists of the greater of Base Rent or Percentage Rent for the applicable period, plus
all other payments, fees, and charges that Lessee is required to make to or on behalf of
Lessor, as provided herein.
"Hotel" shall mean the one hundred thirty (130) guest rooms and related facilities
constructed and operated by Lessee on the Premises pursuant to the Lease.
"Lease" shall mean this Ground Lease, including the First Amendment, Second
Amendment, and Third Amendment, as the same may be amended from time to time in
accordance with the terms and conditions set forth herein. and
"Project Costs" shall mean all of Lessee's actual costs realized for the Hotel or the
Bungalows, as applicable, beginning from the initial request for qualifications and request
for proposal process up to the Lease Commencement Date or the Commencement Date of
the Third Amendment, as applicable, and Lessee's anticipated and reasonably estimated
costs and expenses to be incurred after the Lease Commencement Date or the
Commencement Date of the Third Amendment, as applicable (including, if applicable,
any such costs and expenses incurred prior to the Lease Commencement Date or the
Commencement Date of the Third Amendment that have not been funded and paid in cash
or out of Lessee's equity as of that date) to plan, design, engineer, finance, and construct
the Hotel on the Premises and/or the Bungalows on the Site through the date of the initial
opening of the Hotel or the Bungalows, as applicable, for business to the general public,
including without limitation all such costs and expenses incurred with respect to any of
the following: (i) demolition and clearance of existing improvements situated on the
Premises or the Site, as applicable; (ii) land development work, including excavation,
grading, compacting and re -compacting of soils, and removal/remediation of any
Hazardous Substances; (iii) construction of all improvements comprising the Hotel or the
Bungalows, as applicable, and any public improvements, utilities, or other improvements
in the public rights -of -way on or adjacent to the Premises or the Site, as applicable; (iv)
installation of all fixtures, equipment, furnishings, and personal property in, on, or about
the Hotel and Premises or the Bungalows and Site, as applicable, that are needed upon the
initial opening of the Hotel or the Bungalows, as applicable, and for the full operation
thereof; (v) all permit, entitlement, and inspection fees required to be paid to Lessor and
other governmental agencies with jurisdiction over the Hotel and the Premises, as
applicable, or the Bungalows and the Site, as applicable; (vi) premiums for fire, public
liability, and property damage insurance during construction and on bonds securing work
against liens for labor and materials; (vii) real estate taxes (including possessory interest
taxes) and assessments upon the Premises and Site, as applicable, and improvements
during the period of construction; (viii) interest on construction loans prior to the opening
3-80
of the Hotel or the Bungalows, as applicable; (ix) fees for architects, engineers,
accountants, attorneys, and similar professionals; (x) purchasing fees paid to third parties
not affiliated with Lessee in connection with the purchase of furniture, fixtures, and
equipment; (xi) costs incurred by Lessee in connection with construction financing,
including, without limitation, commitment fees, mortgage broker fees, standby fees and
fees of a like nature, printing and duplicating expenses, documentary transfer tax stamps,
mortgage taxes, and recording charges; (xii) customary and reasonable pre -opening
expenses for the Hotel or the Bungalows, as applicable; (xiii) costs of any required studies,
reports, and inspections; (xiv) reasonable fees for management and construction services
through opening of the Hotel or the Bungalows, as applicable; (xv) any other anticipated
costs to be incurred by Lessee to satisfy its obligations set forth in this Lease; and (xvi) a
reasonable contingency for the categories of costs identified above.
"Public Parking Area" shall mean the area depicted in Exhibit "A-3."
"Public Parking" shall mean the fourteen (14) parking spaces made available to the public
excluding Lessee's guests, invitees, employees, contractors and subcontractors who shall
solely utilize Lessee's parking.
"Site" shall mean that certain real property located at 475 32"d Street in the City of
Newport Beach, County of Orange, State of California as legally described as the "Site"
on Exhibit A-1 hereto and depicted as the "Site" on Exhibit A-2 hereto. The Site shall
include all appurtenant rights and easements created by this Lease, provided, however,
that Lessor reserves to itself and its successors and assignees, together with the right to
grant and transfer all or a portion of the same, all of the following:
(i) any and all oil, oil rights, petroleum, minerals, mineral rights, natural gas rights,
and other hydrocarbon substances, by whatsoever name known, geothermal resources, and all
products derived from any of the foregoing, that may be within or under the land, together
with the perpetual right of drilling, mining, exploring, prospecting, and operating therefor and
storing in and removing the same from the Site or any other land, including the right to
whipstock or directionally drill and mine from lands other than those leased hereby, oil or gas
wells, tunnels, and shafts into, through, or across the subsurface of the Site, and to bottom
such whipstocked or directionally drilled wells, tunnels, and shafts under and beneath or
beyond the exterior limits thereof, and to redrill, retunnel, equip, maintain, repair, deepen, and
operate any such wells or mines, without, however, the right to enter, drill, mine, store,
explore, or operate on or through the surface or the upper 500 feet of the subsurface of the
Site; provided, however, that the exercise of any such rights by Lessor shall not result in any
damage or injury to the improvements constructed on the Site by Lessee, including without
limitation any subsidence of all or any part of such improvements; and
(ii) any and all water, water rights, or interests therein, no matter how acquired by
Lessor, together with the right and power to explore, drill, redrill, remove, and store the same
from the Site or to divert or otherwise utilize such water, water rights, or interests on any other
property owned or leased by Lessor, whether such water rights shall be riparian, overlying,
appropriative, percolating, littoral, prescriptive, adjudicated, statutory, or contractual; but
without, however, any right to enter upon the surface of the Site in the exercise of such rights
and, provided further, that the exercise of any such rights by Lessor shall not result in any
damage or injury to the improvements constructed on the Site by Lessee, including without
limitation any subsidence of all or any part of such improvements.
3-81
"Site Improvements" shall mean the five (5) Bungalows, fourteen (14) public parking
spaces, public sidewalks, and public landscaping areas located on the Site.
"Taking" shall mean any acquisition of or damage to all or any portion of the Premises or
Site, or any interest therein or right accruing thereto, pursuant to or in anticipation of the
exercise of the power of condemnation or eminent domain, or by reason of the temporary
requisition of the use or occupancy of the Premises or Site, or any part thereof, by any
governmental or quasi- governmental authority, civil or military, or any other agency
empowered by law to take property in the State of California under the power of eminent
domain.
7. Article 4. Sections 4.2, 4.3, 4.6, 4.7, 4.8 and 4.9 of Article 4 (Lease of Premises and Site;
Possession; Condition of Leasehold Title; Physical and Environmental Condition of Premises and
Site; Lease Term) shall be amended to read as follows with all other sections in Article 4 to remain
unchanged, provided, however, that in each instance that "Premises" appears in the otherwise
unchanged sections of Article 4, each such instance shall be amended to "Premises and/or Site" :
ARTICLE 4
LEASE OF PREMISES AND SITE; POSSESSION; CONDITION OF LEASEHOLD
TITLE; PHYSICAL AND ENVIRONMENTAL CONDITION OF PREMISES AND
SITE; LEASE TERM
4.2 Possession. Lessor shall deliver possession of the Premises to Lessee on the
Commencement Date. With respect to the Site, Lessor shall deliver possession of the Site to
Lessee on the Commencement Date of the Third Amendment. Subject to the limitations on the
condition of title as referred to in Section 4.3 of this Lease, the Parties hereto mutually covenant
and agree that from and after the Lease Commencement Date as to the Premises and the
Commencement Date of the Third Amendment as to the Site, and during the remainder of the
Lease Term, Lessee, by keeping and performing the covenants contained in this Lease, shall at all
times peaceably and quietly have, hold, and enjoy the Premises and Site.
4.3 Condition of Leasehold Title: Reserved Rights of Lessor. Lessor shall convey
leasehold title to Lessee subject to the following limitations, exceptions, and reservations:
(i) Lessee shall accept leasehold title subject to the limitations and exceptions
that are consistent with the Approved Title Condition and Approved Title Condition for the Site,
as applicable.
(ii) Lessor reserves all oil, oils rights, gas, minerals, mineral rights, natural gas
rights, and other hydrocarbon substances in and under the Premises and the Site and the right to
grant and transfer the same, together with all necessary and convenient rights to explore for,
develop, produce, and extract, and take the same, subject to the express limitation that any and all
operations for the exploration, development, production, extraction, and taking of any such
substance shall be carried on at levels below the depth of five hundred feet (500') from the surface
of the land by means of wells, derricks, and other equipment from surface locations on adjoining
or neighboring land so long as such activities do not interfere with or impair the operation,
business, or aesthetics of the Hotel and the Bungalows, and provided that the exercise of any such
rights by Lessor shall not result in any damage or injury to the improvements constructed on the
3-82
Premises or the Site by Lessee, including without limitation any subsidence of all or any part of
such improvements; and subject further to all restrictions and regulations concerning the drilling
for, and production of, oil, gas, minerals, petroleum, and other hydrocarbon substances specified
in the Newport Beach City Charter and the Newport Beach Municipal Code.
(iii) Lessor reserves and shall have the right to enter the Premises and the Site
during periods of construction, as set forth in Section 6.4 of this Lease.
(iv) Lessor reserves and shall have the right at all reasonable times during the
entire Lease Term to enter the Premises and the Site for the purpose of viewing and ascertaining
the condition of the same, to protect its interests in the Premises and the Site, and to inspect the
operations conducted thereon. Except in the case of emergency, any such entry into areas not
generally open to the public shall be made only after reasonable notice to Lessee. Nothing in this
Lease is intended or shall be interpreted to limit any right that Lessor, as a municipal corporation,
has to enter onto private property when acting in its governmental capacity in lieu of its
proprietary capacity of the owner and landlord of real property.
(v) Lessor further reserves and shall have the right to enter the Premises and
the Site in order to cure or correct a Default by Lessee as provided in Sections 8.6 and 15.6 of this
Lease.
(vi) Nothing in this Lease is intended or shall be interpreted as a waiver by
Lessor of its power of eminent domain.
4.6 Liens and Encumbrances Created by Lessee. Lessee shall not, directly or
indirectly, create or permit to be created or to remain, and Lessee shall promptly discharge, at its
expense, any mortgage, lien, encumbrance, or charge on or pledge of the Premises or Site or the
Improvements or Site Improvements, or fixtures and furnishings, or any part thereof, or Lessee's
interest therein, or the Ground Rent or other sums payable by Lessee under this Lease, other than
(i) such Mortgages as are permitted pursuant to Article 12, and (ii) as necessary in connection
with the financing of furniture, fixtures and equipment for the Improvements or Site
Improvements. Lessee shall notify Lessor promptly of any lien or encumbrance which has been
created on or attached to the Premises, the Site, the Site Improvements or the Improvements, or
to Lessee's leasehold estate therein, whether by act of Lessee or otherwise. The existence of any
mechanic's, laborer's, materialmen's, supplier's, or vendor's lien, or any right in respect thereof,
shall not constitute a violation of this Lease if payment is not yet due upon the contract or for the
goods or services in respect of which any such lien has arisen, or if such lien is being discharged
by the posting of bonds or other lien -release security as is provided for such discharge by law.
4.7 Lessee's Surrender of Premises and Site and Execution of Quitclaim Upon
Expiration or Termination. Upon the expiration or earlier termination of the Lease Term pursuant
to the terms hereof, it shall be lawful for Lessor to reenter and repossess the Premises and
Improvements and the Site and Site Improvements without process of law and Lessee, in such
event, does hereby waive any demand for possession thereof, and agrees to surrender and deliver
the Premises and Improvements peaceably to Lessor immediately upon such expiration or
termination in the physical condition required hereunder and otherwise in good order, condition,
and repair, except for reasonable wear and tear. At such time, all fixtures to the Premises and the
Site that cannot be removed without causing damage to the Hotel and the Bungalows shall
3-83
automatically revert to and become the property of Lessor without compensation or payment to,
or requirement of consent or act of, Lessee, and Lessee shall thereafter have no further rights
thereto or interest therein, including any rights to depreciation deductions or tax credits. Following
the expiration or earlier termination of the Lease Term, Lessee shall retain its ownership in all
items of personal property located on the Premises and the Site; provided, however, if Lessee fails
to remove the same within ninety (90) calendar days following the expiration or earlier
termination of this Lease, any such property remaining on the Premises and the Site after that date
shall become the sole property of Lessor without compensation or payment to Lessee, or any
requirement of consent or act of Lessee, and Lessee shall thereafter have no further rights thereto
or therein. At the expiration or earlier termination of this Lease, and upon Lessor's written request,
Lessee shall promptly execute, acknowledge, and deliver to Lessor a valid and recordable
quitclaim deed covering the Premises and the Improvements and the Site and Site Improvements,
free and clear of all liens and encumbrances. In addition, upon the expiration or earlier termination
of this Lease for any reason, Lessee shall surrender to Lessor all keys to any and all Improvements
and Site Improvements and fixtures on the Premises and the Site and shall inform Lessor of all
combinations of locks, safes, and vaults, if any, on the Premises and the Site. Lessee's obligations
and Lessor's rights set forth in this Section 4.7 shall survive the expiration or earlier termination
of this Lease.
4.8 Holdover Tenancy. In the event that for any reason Lessee remains in possession
of the Premises and the Site after the expiration or earlier termination of the Lease Term, Lessee
shall be deemed to be a holdover tenant and this Lease shall be deemed to have been renewed on
a month -to -month basis only. In such event, Lessee shall be required to comply with all of the
terms and conditions set forth herein, including without limitation with respect to the obligation
to pay Ground Rent, to the same extent that Lessee was so obligated to comply with such
provisions during the Lease Term. Nothing in this Section 4.8 shall be deemed to constitute a
waiver of Lessor's rights to evict Lessee or as a limitation or restriction on Lessor's rights and
remedies in the event of Lessee's wrongful holding over.
4.9 No Right To Relocation Expenses. Lessee acknowledges that it is (or will become)
a "post -acquisition tenant" within the meaning of Title 25, California Code of Regulations,
Sections 6008(f)(3)(B) and 6034(b), that it is not (and will not become) a "displaced person"
within the meaning of Title 25, California Code of Regulations, Section 6008(f), and that in no
event will Lessee be entitled to any relocation benefits or assistance as a result of its having to
move from or vacate the Premises and the Site pursuant to otherwise applicable Governmental
Requirements, including without limitation California Government Code Sections 7260 et seq.
and Title 25, California Code of Regulations, Sections 6000 et seq. Not by way of limitation of
the foregoing, Lessee voluntarily waives and releases any claim it might otherwise have to any
such relocation benefits or assistance.
8. Article 5. Section 5.1.1, the first sentence of Section 5.2 (but not 5.2.1, 5.2.2, 5.2.3, 5.2.4,
5.2.5 or 5.2.6, which shall remain unchanged), Section 5.3, and Section 5.8 of Article 5 (Rent)
shall be amended to read as follows with all other sections in Article 5 (Rent) to remain
unchanged; provided, however, that (i) in each instance that "Premises" appears in the otherwise
unchanged sections of Article 5, each such instance shall be amended to "Premises and/or Site";
and (ii) in each instance that "Premises and Improvements" appears in the otherwise unchanged
sections of Article 5, each such instance shall be amended to "Premises, Site, Improvements and
Site Improvements:
d
ARTICLE 5
RENT
5.1.1 Construction Period and Additional Base Rent for Site during Construction Period
for the Site. During the Construction Period of the initial construction of the Hotel, Lessee had
no obligation to pay Base Rent to Lessor. As of the date of the Third Amendment, Lessee shall
pay to Lessor the Base Rent amounts listed in Section 5.1.4, plus an additional amount of fifty
thousand dollars ($50,000.00) annually, subject to all terms, conditions, adjustments and payment
terms set forth under Article 5 of the Lease. Additional Base Rent for the Site may be prorated
the first year, based upon the actual number of calendar days remaining in the year commencing
on the Commencement Date of the Third Amendment.
5.2 Percentage. Lessee shall pay rent to Lessor based upon the amount of Gross
Room Revenues and Gross Non -Room Revenues generated by the operation of the Hotel and
Bungalows from time to time in the amounts set forth in this Section 5.2 (the "Percentage Rent").
5.3 Adjustments to Base Rent and Base Rent CPI Adjustment During Option Tenn.
If Lessee exercises its option to extend the Initial Term of this Lease, as provided in Section 4.5,
the Base Rent (but not the Percentage Rent) during the Option Term shall be adjusted to an
amount equal to the "Fair Rental Value of the Premises and Site" as of the first day of the
Option Period, as the same is determined and subject to the terms and conditions set forth in this
Section 5.3; provided, however, that (i) in no event shall either the Base Rent in effect immediately
prior to the first day of the Option Period be reduced, (ii) in the event the determination of the
Fair Rental Value of the Premises and Site would result in the Base Rent then in effect being
reduced then no adjustment shall be made to the Base Rent figure/amount then in effect and the
Base Rent shall continue to be adjusted at 5-year intervals during the Option Term in the manner
and subject to the limitations set forth in Section 4.1.4 (i.e., at the commencement of the 581h,
63nd, 68`h, 73", 78`", and 83'd Operating Year), and (iii) the Percentage Rent shall not be increased
or decreased during the Option Period.
The Fair Rental Value of the Premises and Site shall be determined based upon the
following being assumed to be true as of the first day of the Option Term as defined in Section
4.5 (or as of the date prior to the first day of the Option Term when the elements comprising the
Fair Rental Value of the Premises and Site are agreed upon or determined as provided herein): (i)
that the Improvements and Site Improvements exist in the physical condition required by this
Lease, the Hotel and Bungalows are open for business, the Premises and Site are in all respects
in the physical and environmental condition required pursuant to this Lease, and the Premises and
Site are available for lease on the open market to the highest bidder; (ii) that the hypothetical new
lessee would be entitled to assume Lessee's obligations and succeed to its rights under the Hotel
Management Agreement and Hotel Franchise Agreement then in effect; (iii) that the terms of the
Lease that would apply are the terms set forth in this Lease, including the Percentage Rent that is
payable, with the exception of the Base Rent amount which is to be adjusted and the
understanding that the assumed remaining Lease Term is thirty (30) years; and (iv) that the highest
and best use of the Premises and Site is the actual use required and permitted pursuant to this
Lease. The Fair Rental Value of the Premises and Site shall be expressed in terms of a new
proposed Annual Base Rent, and a new proposed method for adjusting the Annual Base Rent
3-85
based on changes in the Consumer Price Index (not more often than every five (5) years, as
provided herein), both of which are to apply to the Option Term.
For a period of ninety (90) days after Lessee delivers written notice to Lessor of the
exercise of Lessee's option to extend the Initial Term in accordance with Section 4.5(i) of this
Lease, the Parties shall meet and endeavor to agree upon the Fair Rental Value of the Premises
and Site consistent with the foregoing. If for any reason the Parties fail to agree upon the Fair
Rental Value of the Premises and Site within said ninety (90) day period, then the Fair Rental
Value of the Premises and Site shall be determined by arbitration conducted within the times, and
in the manner, set forth below:
(i) For a period of thirty (30) additional days (i.e., until the date that is one
hundred twenty (120) days after Lessee delivers written notice to Lessor of the exercise of
Lessee's option to extend the Initial Term of this Lease), the Parties shall jointly attempt to agree
on the appointment of a single arbitrator to determine the Fair Rental Value of the Premises and
Site consistent with the foregoing. The single arbitrator jointly appointed by the Parties shall
determine the Fair Rental Value of the Premises and Site within sixty (60) days after his/her
appointment or as soon thereafter as possible and shall be instructed to notify the Parties in writing
of his/her determination. The Parties shall each pay fifty percent (50%) of the single arbitrator's
costs.
(ii) If the Parties fail to timely agree on the appointment of a single arbitrator
to determine the Fair Rental Value of the Premises and Site, as set forth in subparagraph (i) above,
each Party, within an additional fifteen (15) days (i.e., by the date that is one hundred thirty-five
(135) days after Lessee delivers written notice to Lessor of the exercise of Lessee's option to
extend the Initial Term of this Lease), shall separately designate its own arbitrator to determine
the Fair Rental Value of the Premises and Site consistent with the foregoing within sixty (60) days
after each such arbitrator's appointment or as soon thereafter as possible and, upon both
arbitrators' determination of the Fair Rental Value of the Premises and Site, the Parties shall
concurrently exchange such determinations. If the difference between either of the two elements
of the respective arbitrators' determinations (Base Rent and the new proposed method/formula
for adjusting the Annual Base Rent based on changes in the Consumer Price Index) is an amount
less than ten percent (10%) of the higher determination, the mean average of the two
determinations shall be used in making the adjustment(s). If the difference between either of the
two elements of the respective arbitrators' determinations is ten percent (10%) or more of the
higher determination, the two arbitrators shall jointly select a third arbitrator who shall review the
data, analysis, findings, and conclusions of the Parties' respective arbitrators and such third
arbitrator shall determine which of the two arbitrators' determinations is/are the most reasonable
under the criteria set forth above, which determination shall be used in making the adjustment(s)
used to determine the Fair Rental Value of the Premises and Site during the Option Term. The
third arbitrator shall not be permitted to make an independent determination of any of the still -
disputed elements of the Fair Rental Value of the Premises and Site.
(iii) Each arbitrator selected to make a determination with respect to the Fair
Rental Value of the Premises and Site (or either of the elements comprising the Fair Rental Value
of the Premises and Site) shall be a licensed real estate appraiser in the State of California and a
member of the Appraisal Institute or successor appraisal society or organization (or, in the event
real estate appraisers are not licensed or the Appraisal Institute or successor appraisal society or
organization does not exist at the time the Fair Rental Value of the Premises and Site are
determined, each such arbitrator shall have equivalent qualifications). Each such arbitrator shall
also have a minimum of ten (10) years professional experience in Southern California
appraising commercial hotel properties. Each arbitrator selected shall be impartial and unrelated,
directly or indirectly, so far as employment of services is concerned, to either of the Parties.
(iv) Each Party shall be responsible for payment of its selected arbitrator and,
if a third arbitrator is selected to determine any matters, the Parties shall each pay fifty percent
(50%) of said third arbitrator's costs.
(v) In the event either Party Defaults hereunder by failing to timely select an
arbitrator pursuant to clause (ii) above, the Fair Rental Value of the Premises and Site shall be
determined by the arbitrator selected by the other Party. In the event that the arbitrators selected
by the Parties pursuant to clause (ii) do not finally determine the Fair Rental Value of the Premises
and Site and they fail to timely appoint a third arbitrator to hear and determine the dispute, either
Party not in Default shall have the right to apply to the Orange County Superior Court to appoint
the third arbitrator.
(vi) In the event that for any reason the Fair Rental Value of the Premises and
Site has not been finally determined as of the first day of the Option Term Lessee shall continue
to pay Ground Rent in the amounts and at the times that were in effect immediately prior to the
Option Term, a retroactive adjustment shall be made (effective as of the first date of the Option
Term) when the new Base Rent figure has been established and, within fifteen (15) days after
such date Lessee shall make any additional payment of Ground Rent that may be owing to Lessor
as a result of said determination.
(vii) BY INITIALING IN THE SPACE BELOW, EACH PARTY TO
THIS LEASE ACKNOWLEDGES THAT IT IS AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE DETERMINATION OF THE FAIR RENTAL VALUE OF THE
PREMISES AND SITE AND THE ELEMENTS THEREOF DETERMINED BY
NEUTRAL AND BINDING ARBITRATION AS PROVIDED BY CALIFORNIA LAW
AND IT IS GIVING UP ANY RIGHTS IT MIGHT OTHERWISE POSSESS TO HAVE
THE DISPUTE LITIGATED IN A COURT OR DETERMINED IN A JURY TRIAL. BY
INITIALING IN THE SPACE BELOW, EACH PARTY ACKNOWLEDGES THAT IT
VOLUNTARILY AGREES TO THIS MEANS OF RESOLVING ANY SUCH DISPUTE
AND THAT IT IS GIVING UP ITS JUDICIAL RIGHTS TO DISCOVERY, JURY TRIAL,
AND APPEAL.
Lessor's Initials Lessee's Initials
Subject to the provisions set forth above that the Base Rent, the Percentage Rent based on
Gross Room Revenues, and the Percentage Rent based on Gross Non -Room Revenues shall not
be reduced during the Option Term, the determination of the Fair Rental Value of the Premises
and Site determined in accordance with this Section 5.3 shall be final, binding, and conclusive on
both Parties during the Option Term. Upon the written request of either Party or any existing or
3-87
prospective Mortgagee, the Parties shall cooperate in executing an addendum to this Lease
memorializing any adjustments to the Ground Rent provisions set forth herein that will apply
during the Option Term.
5.8 Lessee's Maintenance of Books and Records Relating to Calculation of Ground
Rent: Lessor's Right to Inspect and Audit Records. Lessee shall keep full and accurate books and
accounts, records, cash receipts, and other pertinent data showing its financial operations
pertaining to this Lease, the Premises, the Site, the Hotel and the Bungalows at a location in
Orange County, California. Such books and records shall be organized in a manner that separately
itemizes each of the separate components of Gross Room Revenues and Gross Non -Room
Revenues identified in the definitions of those terms and in Section 5.2.4. All retail sales and
charges shall be recorded by means of cash registers, point -of -sale computers, or other
comparable devices which display to the Hotel and/or Bungalows guest or customer the amount
of the transaction and automatically issue a sales receipt. Such devices shall be equipped with
technology that customarily lock in sales totals and other transaction records, or with counters
that cannot be reset and that record transaction numbers and sales details. Totals registered shall
be read and recorded at least once per day. Back-up copies of all such data, records, and reports
must be made at least weekly in a computer -readable medium and stored off -site. Lessee shall
retain such books of account, records, cash receipts, and other pertinent data for a minimum
period of five (5) years after the end of the Operating Year to which such items pertain. Lessor
shall be entitled during such five (5) years to inspect, examine, and copy at Lessor's expense
Lessee's books of account, records, cash receipts, and other pertinent data as necessary or
appropriate for the purpose of this Lease. Lessee shall cooperate fully with Lessor in making the
inspection. Except in the event of litigation or arbitration between the Parties arising out of a
dispute and otherwise except as required by applicable law, including without limitation the
California Public Records Act (Government Code Sections 6250 et seq.), Lessee's books and
records shall remain confidential and not public.
9. Article 613. Article 6B (Development of the Site Improvements and Related Improvements On
and About the Site) shall be added to read as follows:
ARTICLE 613
DEVELOPMENT OF THE SITE IMPROVEMENTS AND RELATED
IMPROVEMENTS ON AND ABOUT THE SITE
6B.1 Commencement and Completion of Site Improvements. Lessee shall provide
forty-five (45) days advanced written notice of its intent to take possession of the Site to start
construction. Within the times set forth in the Schedule of Performance for Third Amendment,
Lessee shall commence and complete construction of the Site Improvements on and about the
Site in accordance with the Additional Development Entitlements for Site Improvements, the
Final Building Plans for Site Improvements, and all applicable Governmental Requirements and
Lessee shall cause the Site Improvements to be opened to the general public. Not by way of
limitation of the foregoing, prior to commencing work in any public rights -of -way, Lessee shall
obtain any required encroachment permit(s) and deliver any required security instrument(s) in
accordance with Lessor's normal practices. Once construction is commenced, it shall be
diligently pursued to completion and, subject to Events of Force Majeure, shall not be interrupted,
halted, or abandoned for more than twenty (20) consecutive days.
3-88
613.2 No Construction Before Notice: Notice(s) of Non -Responsibility. At no time
during the Lease Term shall Lessee commence or allow to be commenced any excavation,
grading, site preparation, utility relocation/installation, street or other public improvement work
in the right(s)-of-way adjacent to the Site, or any construction work of any kind on the Site, nor
shall Lessee deliver or allow to be delivered any equipment or materials to the Site for any of
such purposes, until Lessee has first provided at least twenty (20) days prior written notice to
Lessor of the intended commencement of such work or the delivery of such equipment or
materials. At any and all times during the Lease Term, Lessor shall have the right to post and
maintain on the Site and to record as required by law any notice or notices of non -responsibility
provided for by the mechanics' lien laws of the State of California.
613.3 Mechanic's, Materialmen's, Contractor's and Subcontractor's Liens. Subject to
Lessee's right to contest as hereinafter provided, at all times during the Lease Tenn, Lessee shall
keep the Site, including all buildings and improvements now or hereafter located on the Site, free
and clear of all liens and claims of liens for labor, services, materials, supplies, or equipment
performed on or furnished to the Site. Lessee shall notify Lessor in writing of any and all liens
and claims of lien made or filed against the Site within thirty (30) calendar days after Lessee
becomes aware of the filing thereof. Thereafter, Lessee shall promptly (i) pay and discharge, or
cause the Site to be released from, any such lien or claim of lien, or (ii) contest such lien and
furnish Lessor such bond as may be required by law to free the Site from the effect of such lien
and to secure Lessor against payment of such lien and against any and all loss or damage
whatsoever in any way arising from Lessee's failure to pay or discharge such lien. In the event
Lessee provides a bond in lieu of paying or discharging a lien as set forth herein, and Lessor is
unable despite reasonably diligent effort to obtain an endorsement to any existing title policy in
favor of Lessor insuring Lessor's interest in the Site free and clear of any such liens that have not
been paid or discharged, Lessee shall, at Lessee's sole cost and expense, within thirty (30) days
of Lessor's written request therefor, provide the Lessor with such endorsement.
Should Lessee fail to pay and discharge, or cause the Site to be released from, any such
lien or claim of lien or to provide a bond as permitted hereunder within thirty (30) days after
service on Lessee by Lessor of a written request to do so, Lessor may pay, adjust, compromise,
and discharge any such lien or claim of lien on such terms and in such manner as Lessor may
reasonably deem appropriate. In such event, Lessee shall, on or before the first day of the next
calendar month following any such payment by Lessor, reimburse Lessor for the full amount so
paid by Lessor, including any actual and reasonable attorneys' fees or other costs expended by
Lessor, together with interest thereon at the annual rate of interest equal to three percent (3%)
over the prime rate of the largest bank operating in the State of California as of the close of
business on the date of payment by the Lessor, or the highest lawful rate, whichever is less, from
the date of payment by Lessor to the date of Lessee's reimbursement of Lessor.
Promptly after substantial completion of any work of improvement during the Lease Term,
Lessee shall record or cause to be recorded in the Official Records of Orange County a notice of
completion. Lessee hereby appoints Lessor as Lessee's attorney -in -fact to record the notice of
completion, which appointment shall only become effective on ten (10) days' notice upon Lessee's
failure to record such a notice of completion after the work of improvement has been substantially
completed; provided, that Lessor shall not be obligated to record such a notice of completion and
3-89
the failure of Lessor to record said notice shall not excuse the failure of Lessee to discharge its
obligation to record said notice of completion.
6BA Lessor's Rights of Access. Representatives of Lessor shall have the reasonable
right of access to the Site without charges or fees, at normal construction hours during all periods
of construction for the purposes of this Lease, including, but not limited to, the inspection of the
work being performed in constructing, reconstructing, repairing, and replacing all or any portion
of the Site and/or Site Improvements. Such representatives of Lessor shall be those who are so
identified in writing by the City Manager or Public Works Director of Lessor or their authorized
designee(s). Lessor shall provide reasonable prior notice to Lessee of any such entry, and shall
use its best efforts to minimize interference with Lessee's use of the Site, Site Improvements, and
Improvements as much as is reasonably feasible. Such entry shall be in compliance with all
applicable safety rules and regulations provided by Lessee (or its general contractor) to Lessor's
representative(s) at the time of entry.
613.5 Local, State and Federal Laws. Lessee shall carry out the construction and
installation of the Site Improvements on and about the Site in conformity with all applicable
Governmental Requirements. Lessee shall comply with California's prevailing wage laws, such
that Lessee's construction and installation of the Site Improvements and its performance of other
related development/construction activities pursuant to this Lease constitutes construction or
installation of a "public work" for which prevailing wages must be paid or for which Lessee is
required to comply with any other Governmental Requirements applicable to "public works."
613.6 As -Built Drawings for the Site Improvements. Upon completion of any
construction work on the Site, Lessee shall as soon as practicable furnish Lessor with a set of
drawings and specifications for all completed construction which accurately reflects the nature
and extent of all work done on or to the Site and marked to show such construction "as built."
613.7 Costs of Construction for Site Improvements. Lessee shall bear all costs and
expenses associated with the planning, design, construction, maintenance, furnishing, equipping,
and supplying of the Site Improvements and other Improvements on the Site, which costs and
expenses include without limitation: (i) utility hook-up and connection fees and all distribution
facilities, conduits, pipelines, and cables required in connection with construction of the Site
Improvements; (ii) all design, engineering, financing, and construction costs; and (iii) all
necessary permit fees, charges, assessments, taxes, and exactions.
10. Article 7. Article 7 (Use and Operation of Hotel; Changes in Hotel Management
Company/Hotel Management Agreement and/or Hotel Franchisor/Hotel Franchise Agreement)
shall be amended to read as follows:
ARTICLE 7
USE AND OPERATION OF HOTEL; CHANGES IN HOTEL MANAGEMENT
COMPANY/HOTEL MANAGEMENT AGREEMENT AND/OR HOTEL
FRANCHISOR/HOTEL FRANCHISE AGREEMENT
7.1 General: Use and Operation of the Premises, Site, Hotel, Site Improvements and
3-90
all other Improvements. Lessee covenants and agrees that during construction and thereafter
through the remainder of the Lease Term, Lessee shall comply with all of the following use and
operational requirements, restrictions, and prohibitions:
(i) Lessee shall operate and maintain the Hotel and Bungalows in full
compliance with the Required Hotel Standard, all applicable Governmental Requirements,
and the express provisions set forth in this Lease, as the same may be amended from time to
time. Uses normally incidental to a hotel use, including without limitation a restaurant,
cocktail lounge, cleaning and laundry service, banquet and catering facilities, meeting rooms,
gift shop, spa, resort retail, magazine stand, barber or beauty shop, travel agency, airline
ticket office, automobile rental operation, and recreational facilities, shall also be permitted,
subject to whatever special permits for such uses may be required therefor from time to time
in accordance with Governmental Requirements. The business conducted by each
sublessee, licensee, and concessionaire on the Premises and Site similarly shall be
consistent with the Required Hotel Standard and the high quality required for the Hotel,
Bungalows and Site Improvements generally.
If the AAA four diamond hotel standards change, the Required Hotel Standard
automatically shall be deemed to change accordingly, subject to the provisions in this Section
7.1(i) set forth hereinbelow.
If the AAA ceases to publish hotel rating guidelines, then for purposes of this
Lease the "Required Hotel Standard" shall mean a standard of operation that meets all criteria
for the most substantially equivalent standard to a AAA four diamond hotel standard under
such other rating system that is then generally recognized by the hotel industry. If in
connection with any change in, or choice of a replacement rating system Lessor and Lessee
are unable to agree upon such changed or replacement rating system, then the City Manager
or his or her designee shall have the authority to select the replacement rating system to be
used.
In addition to the foregoing, the Parties acknowledge that the Lease Term
provided for herein is lengthy, that the hotel marketplace in general and hotel standards
in particular change over time, and that flexibility needs to be built into the definition of
"Required Hotel Standard" to accommodate such changes. Accordingly, the Parties agree
that the Required Hotel Standard is intended to keep the Hotel and Bungalows on a par (or
better) than the prevailing standard in comparable quality hotels in the Orange County
marketplace within a ten (10) mile radius of the Premises, as currently represented by the
AAA four diamond standard, but subject to deviations from such standard as the market
dictates, and that if either Party believes at any time during the Lease Term that changes in
said hotel marketplace have occurred that warrant changes to the then -applicable Required
Hotel Standard, that Party shall have the right to notify the other Party in writing of such
position and the basis for such position, in which event the Parties agree thereafter to
meet and confer in good faith to consider whether to mutually approve a modification
in the Required Hotel Standard hereunder. If the Parties agree to a modification to the
Required Hotel Standard, they shall cooperate by approving and executing an appropriate
amendment to this Lease memorializing the agreed -upon change(s). If Lessee requests in
writing that Lessor approve one or more deviations from the AAA four diamond (or
substitute) standard, Lessor's approval of such deviation shall not be unreasonably delayed,
3-91
conditioned, or denied. If the Parties do not mutually agree to modify the Required Hotel
Standard, either Party shall have the right to have the dispute concerning changes to the
Required Hotel Standard determined by binding arbitration, which arbitration shall be
conducted in accordance with the commercial arbitration rules of the American Arbitration
Association (with no right to discovery) or such other method and procedure of arbitration
to which the Parties may agree at the time. Each Party shall bear its own costs with respect
to any such arbitration and the Parties shall each pay fifty percent (50%) of the cost of the
arbitrator(s). The final determination of the arbitrator shall be memorialized in an
appropriate amendment to this Lease, which shall be executed by both Parties.
(ii) Lessee shall not allow the Premises and/or Site to be used for any of the
following purposes, which are expressly prohibited: (i) Timeshare use; (ii) long-term residential
use, which for purposes of this Lease shall mean continuous occupancy of more than twenty-
five percent (25%) of the 130 guest rooms in the Hotel (the Bungalows on the Site may not be
used for long-term residential use, as defined by this Section, and are excluded from the twenty-
five percent allowance) at any one time by the same occupants for periods in excess of twenty-
eight (28) consecutive days (and with the understanding that for purposes of this clause (ii)
a Hotel guest shall be deemed to be continuously occupying a guest room for a period in
excess of twenty-eight (28) consecutive days if he or she continuously occupies any room in
the Hotel for a period in excess of twenty-eight (28) consecutive days, even if he or she moves
from one guest room to another guest room one or more times during or after the twenty-
eight (28) day period); and (iii) any adult entertainment purpose, as defined from time to time in
the City of Newport Beach Municipal Code (provided that this prohibition is not intended and
shall not be interpreted to regulate in violation of applicable Governmental Requirements the
private non -business activity of an individual that is confined to such individual's individual hotel
room).
(iii) Subject to Sections 10.4-10.6 and 14.3-14.4 of this Lease and periods of
renovation, from the initial opening of the Hotel and Bungalows through the entire Lease Term,
Lessee shall cause the Hotel to be open for business to the general public every day of the year
and Lessee shall operate the Hotel in substantially complete fashion in accordance with the
standards set forth in this Lease. Lessee shall stock and maintain adequate working capital and
adequate inventories of food, beverages, operating equipment, and supplies consistent with the
business(es) conducted on the Premises and Site.
(iv) Lessee shall not place or permit to be placed on any portion of the
Premises and/or Site, in locations that are visible from any location off of the Premises and/or
Site, any art, displays, monuments, signs, logos, or advertising unless such art, displays,
monuments, signs, logos, or advertising, including without limitation the size, design, subject,
wording, composition, color, and lighting thereof, are consistent with the City's Municipal Code
and any other applicable Governmental Requirements.
(v) To the maximum extent permitted consistent with applicable
Governmental Requirements, without the prior written approval of the City Manager or his or
her designee, which approval may be withheld in his/her sole and absolute discretion, Lessee shall
not erect or maintain or allow to be erected or maintained any antennae or other device for the
transmission or reception of television signals or any other form of electromagnetic radiation
3-92
outdoors above ground on any portion of the Premises and/or Site, whether attached to an
Improvement or otherwise.
7.2 Management by pproved Hotel Management Company; Changes in Hotel
Management Company and New or Amended Hotel Management Agreement:
Removal/Replacement of Hotel Management. At all times from the date the Hotel and/or
Bungalows open for business to the general public through the remainder of the Lease Term
Lessee shall cause the day-to-day operation of the Hotel and/or Bungalows to be managed by a
Hotel Management Company approved by Lessor and, in this regard, Lessee shall cause the Hotel
Management Company to continuously (24 hours per day during all days that the Hotel and/or
Bungalows are open for business) maintain competent and professional staff on the Premises.
The following Hotel Management Companies shall be deemed approved by Lessor and
shall require no further approval by Lessor hereunder: (i) Ace Hotels; (ii) Ascend Collection
offered by Choice Brands; (iii) the following Denihan Hospitality brands: The James, The
Benjamin and Affinia; (iv) Dolce Hotels; (v) Fairmont Hotels; (vi) Four Seasons Hotels; (vii) the
following Hilton Brands: Curio, Conrad and Waldorf-Astoria; (viii) the following Hyatt brands:
Andaz, Alila, Thompson Hotels, Hyatt Centric, Miraval, Hyatt Unbound, Destination by Hyatt,
JDV by Hyatt, Grand Hyatt, Hyatt Regency, and Park Hyatt; (ix) Kimpton or the following
Kimpton Hotels brands: Argonaut, Monaco, and Palomar; (x) Loews Hotels;; (xi) Mandarin
Oriental; (xii) the following Marriott brands: Autograph Collection, AC, Bulgari, JW Marriott,
Marriott, Renaissance Hotels, Ritz -Carlton Hotels, Le Meridien, Luxury Collection, Sheraton
Resorts, St. Regis, Westin Hotels & Resorts, and W Hotel; (xiii) Morgan Hotels (all brands); (xiv)
the following Montage Hotels & Resorts brands: Montage Hotels and Pendry Hotels; (xv) Omni
Hotels; (xvii) Orient Express Hotels; (xviii) Public Chicago Hotel; (xviiix) Radisson Blu offered
by Carlson; (xiv) Raffles Hotels and Resorts; (xx) Standard International Hotels -all brands; the
following Starwood Capital Group brands: I Hotel, Baccarat Hotel, Treehouse Hotels, and SH
Collection; (xxi) Rosewood; (xxii) Auberge.
As to any Hotel Management Company that is not deemed approved pursuant to the
preceding paragraph, Lessee shall submit to the City Manager or his or her designee for his or
her review and approval the identity of the Hotel Management Company Lessee desires to have
manage the Hotel and/or Bungalows. The City Manager or his or her designee shall not
unreasonably withhold, condition, or delay approval of the Hotel Management Company and
shall grant such approval if Lessee provides evidence reasonably satisfactory to the City Manager
or his or her designee that (i) the executive management of the Hotel Management Company who
will be responsible for the management of the Hotel and/or Bungalows shall have a minimum of
ten (10) years' experience in the successful operation of hotels in Southern California on a par
(or better) than the prevailing standard in comparable quality to the Hotel and/or Bungalows; (ii)
the Hotel Management Company, its principals, and all of the individuals who will be responsible
for managing the Hotel on the Premises and Site are of good moral character and none of them
ever has been convicted of a felony involving moral turpitude, including without limitation any
crime involving dishonesty, theft, embezzlement, forgery, violence, or physical force against
another person or persons; and (iii) the Hotel Management Company has or will be in a position
to participate in a nationwide reservation system. Concurrently with submitting its request for
approval of the Hotel Management Company, Lessee shall submit to the City Manager or his or
her designee all information needed to demonstrate compliance with the foregoing criteria and
thereafter, upon Lessor's request, Lessee shall cooperate with Lessor and provide such additional
3-93
information as Lessor may reasonably request relating to such criteria or other factors bearing
upon Lessor's approval of the Hotel Management Company. If the City Manager or his or her
designee disapproves the Hotel Management Company, he or she shall do so by written notice to
Lessee stating the reasons for such disapproval.
In addition to the foregoing, at the time set forth in the Schedule of Performance (as to
the first Hotel Management Company to be approved or deemed approved prior to the Lease
Commencement Date pursuant to Sections 3.1.4 and 3.2.5 of the Lease) or prior to the time that
any new or different Hotel Management Company commences to manage and operate the Hotel
and/or Bungalows on the Premises and Site, and whether or not such Hotel Management
Company is deemed approved by Lessor as provided herein, Lessee shall submit to the City
Manager of Lessor or his or her designee for his or her approval the form of the hotel management
agreement that Lessee proposes to enter into with the Hotel Management Company ("Hotel
Management Agreement"); provided, that Lessee shall have the right to redact from the Hotel
Management Agreement submitted to Lessor the amount of the fees or charges payable by Lessee
to the Hotel Management Company. In addition, upon Lessor's request, Lessee shall cooperate
with Lessor and provide such additional information as Lessor may reasonably request relating
to such criteria or other factors bearing upon Lessor's approval of the Hotel Management
Agreement. The City Manager or his or her designee shall not unreasonably withhold, condition,
or delay approval of the Hotel Management Agreement and shall grant such approval if Lessee
provides evidence reasonably satisfactory to the City Manager or his or her designee that
the Hotel Management Agreement incorporates the applicable obligations of Lessee set forth in
this Lease, including without limitation Section 7.4 hereof, and is consistent in all respects with
this Lease. If the City Manager or his or her designee disapproves the Hotel Management
Agreement, he or she shall do so by written notice to Lessee stating the reasons for such
disapproval. Within five (5) days after Lessee and the Hotel Management Company execute and
deliver the Hotel Management Agreement, Lessee shall deliver to Lessor a complete final
executed copy consistent with Lessor's approval; provided, that Lessee shall have the right to
redact from the Hotel Management Agreement submitted to Lessor the amount of the fees or
charges payable by Lessee to the Hotel Management Company as business trade information that
is not a matter of public record.
If after Lessor's approval of the Hotel Management Company and the Hotel Management
Agreement, as provided herein, Lessee desires either to (i) change the Hotel Management
Company or (ii) enter into a new Hotel Management Agreement (provided that a mere
amendment for an extension of the term of the previously approved Hotel Management
Agreement shall not be deemed to constitute a new Hotel Management Agreement for purposes
of this Section 7.2), Lessee shall be required to submit such matter(s) to the City Manager or his
or her designee, who shall have the authority on behalf of Lessor to approve or disapprove the
same. The City Manager or his or her designee shall not unreasonably withhold, condition, or
delay approval of a change in the Hotel Management Company and/or a new Hotel Management
Agreement and shall grant such approval(s) consistent with the criteria and procedures set forth
above. In no event shall Lessee change the Hotel Management Company or amend or enter into
a new Hotel Management Agreement requiring Lessor's approval hereunder without first
obtaining Lessor's approval. Within five (5) days after Lessee enters into any new or amended
Hotel Management Agreement, Lessee shall deliver to Lessor a complete final executed copy
consistent with Lessor's approval; provided, that Lessee shall have the right to redact from any
3-94
such new or amended Hotel Management Agreement submitted to Lessor the amount of the fees
or charges payable by Lessee to the Hotel Management Company as business trade information
that is not a matter of public record.
In addition to the foregoing, Lessor shall have the right, but not the obligation, upon
delivery of ninety (90) days written notice to Lessee, to require Lessee to remove the Hotel
Management Company and replace the Hotel Management Company with another Hotel
Management Company meeting the requirements set forth in 1 his Section 7.2 if Lessor reasonably
determines that the Hotel Management Company on the Premises or Site is guilty of "Gross
Mismanagement." For purposes of this Lease, "Gross Mismanagement" shall include, but is
not limited to, any of the following: (i) the Hotel Management Company's intentional
underreporting of Gross Room Revenues or Gross Non -Room Revenues; (ii) the Hotel
Management Company's failure to timely cure a Default under Section 7.1 of this Lease after
and despite Lessor's delivery of written notice; and (iii) the Hotel Management Company's failure
to timely cure more than three (3) separate Defaults under Article 8 ("Maintenance and Repairs")
of this Lease that occur during any continuous one (1) year period during the Lease Term, after
and despite Lessor's delivery of written notice of Default.
7.3 Hotel Franchisor and Hotel Franchise Agreement. Lessee shall have the right but
not the obligation from time to time to operate the Hotel and/or Bungalows as a franchise of a
hotel company.
The following Hotel Franchisors shall be deemed approved by Lessor and shall require
no further approval by Lessor hereunder: (i) Ace Hotels; (ii) Ascend Collection offered by Choice
Brands; (iii) the following Denihan Hospitality brands: The James, The Benjamin and Affinia;
(iv) Dolce Hotels; (v) Fairmont Hotels; (vi) Four Seasons Hotels; (vii) the following Hilton
Brands: Curio, Conrad and Waldorf-Astoria; (viii) the following Hyatt brands: Andaz, Alila,
Thompson Hotels, Hyatt Centric, Miraval, Hyatt Unbound, Destination by Hyatt, JDV by Hyatt,
Grand Hyatt, Hyatt Regency, and Park Hyatt; (ix) Kimpton or the following Kimpton Hotels
brands: Argonaut, Monaco, and Palomar; (x) Loews Hotels;; (xi) Mandarin Oriental; (xii) the
following Marriott brands: Autograph Collection, AC, Bulgari, JW Marriott, Marriott,
Renaissance Hotels, Ritz -Carlton Hotels, Le Meridien, Luxury Collection, Sheraton Resorts, St.
Regis, Westin Hotels & Resorts, and W Hotel; (xiii) Morgan Hotels (all brands); (xiv) the
following Montage Hotels & Resorts brands: Montage Hotels and Pendry Hotels; (xv) Omni
Hotels; (xvii) Orient Express Hotels; (xviii) Public Chicago Hotel; (xviiix) Radisson Blu offered
by Carlson; (xiv) Raffles Hotels and Resorts; (xx) Standard International Hotels -all brands;
the following Starwood Capital Group brands: I Hotel, Baccarat Hotel, Treehouse Hotels, and SH
Collection; (xxi) Rosewood; (xxii) Auberge.
As to any Hotel Franchisor that is not deemed approved pursuant to the preceding
paragraph, Lessee shall submit to the City Manager or his or her designee for his or her review
and approval the identity of the Hotel Franchisor with which Lessee desires to affiliate. The City
Manager or his or her designee shall not unreasonably withhold, condition, or delay approval of
the Hotel Franchisor is a nationally recognized hotel chain of comparable quality to the list of
pre -approved Hotel Franchisors listed in the preceding paragraph with a minimum of ten (10)
years' experience in the successful franchising of hotels in Southern California comparable in
quality to the Hotel and the Bungalows to be operated and maintained on the Premises and Site.
3-95
Concurrently with submitting its request for approval of the Hotel Franchisor, Lessee shall submit
to the City Manager or his or her designee all information needed to demonstrate compliance with
the foregoing criteria and thereafter, upon Lessor's request, Lessee shall cooperate with Lessor
and provide such additional information as Lessor may reasonably request relating to such criteria
or other factors bearing upon Lessor's approval of the Hotel Franchisor. If the City Manager or
his or her designee disapproves the Hotel Franchisor, he or she shall do so by written notice to
Lessee stating the reasons for such disapproval.
In addition to the foregoing, at the time set forth in the Schedule of Performance (as to the
first Hotel Franchisor to be approved or deemed approved prior to the Lease Commencement
Date pursuant to Sections 3.1.5 and 3.2.6 of the Lease) or prior to the time that Lessee enters into
an agreement with any new or different Hotel Franchisor with respect to the Hotel on the
Premises, and whether or not such Hotel Franchisor is deemed approved by Lessor as provided
herein, Lessee shall submit to the City Manager of Lessor or his or her designee for his or her
approval the form of the franchise agreement that Lessee proposes to enter into with the Hotel
Franchisor ("Hotel Franchise Agreement"); provided, that Lessee shall have the right to redact
from the Hotel Franchise Agreement submitted to Lessor the amount of the fees or charges
payable by Lessee to the Hotel Franchisor. In addition, Lessee shall provide an amendment to
the Hotel Franchise Agreement that incorporates the Bungalows subject to the same terms. Upon
Lessor's request, Lessee shall cooperate with Lessor and provide such additional information as
Lessor may reasonably request relating to such criteria or other factors bearing upon Lessor's
approval of the Hotel Franchise Agreement or amendment to the Hotel Franchise Agreement to
include the Bungalows. The City Manager or his or her designee shall not unreasonably withhold,
condition, or delay approval of the Hotel Franchise Agreement, and/or amendment to the Hotel
Franchise Agreement to include the Bungalows, and shall grant such approval if Lessee
provides evidence reasonably satisfactory to the City Manager or his or her designee that the
Hotel Franchise Agreement and/or amendment to the Hotel Franchise Agreement to include the
Bungalows, is consistent in all respects with this Lease. If the City Manager or his or her
designee disapproves the Hotel Franchise Agreement and/or amendment to the Hotel Franchise
Agreement to include the Bungalows, he or she shall do so by written notice to Lessee stating
the reasons for such disapproval. Within five (5) days after Lessee and the Hotel Franchisor
execute and deliver the Hotel Franchise Agreement or amendment to the Hotel Franchise
Agreement to include the Bungalows, Lessee shall deliver to Lessor a complete final
executed copy consistent with Lessor's approval; provided, that Lessee shall have the right
to redact from the Hotel Franchise Agreement, or the amendment, submitted to Lessor the
amount of the fees or charges payable by Lessee to the Hotel Franchisor as business trade
information that is not a matter of public record.
If after Lessor's approval of the Hotel Franchisor and the Hotel Franchise Agreement, as
provided herein, Lessee desires either to (i) change the Hotel Franchisor or (ii) enter into a new
Hotel Franchise Agreement (provided that a mere amendment for an extension of the term of the
previously approved Hotel Franchise Agreement shall not be deemed to constitute a new Hotel
Franchise Agreement for purposes of this Section 7.3), Lessee shall be required to submit such
matter(s) to the City Manager or his or her designee, who shall have the authority on behalf of
Lessor to approve or disapprove the same. The City Manager or his or her designee shall not
unreasonably withhold, condition, or delay approval of a change in the Hotel Franchisor and/or a
new Hotel Franchise Agreement and shall grant such approval(s) consistent with the criteria and
procedures set forth above. In no event shall Lessee change the Hotel Franchisor or amend or
3-96
enter into a new Hotel Franchise Agreement requiring Lessor's approval hereunder without first
obtaining Lessor's approval. Within five (5) days after Lessee enters into any new or amended
Hotel Franchise Agreement, Lessee shall deliver to Lessor a complete final executed copy
consistent with Lessor's approval; provided, that Lessee shall have the right to redact from any
such new or amended Hotel Franchise Agreement submitted to Lessor the amount of the fees or
charges payable by Lessee to the Hotel Franchisor as business trade information that is not a
matter of public record.
7.4 Prohibition on Lessee's, Hotel Management Company's, and Subcontractors'
Employment or Retention of Certain Persons: Lessor's Right to Require Removal. To the
maximum extent permitted by law, during the entire Lease Term Lessee shall not knowingly
employ or retain and shall not permit the Hotel Management Company or any other independent
contractor, subcontractor, or firm operating on or from the Premises or Site to employ or retain
any person who works at or from the Premises or Site and who is not of good moral character,
which for purposes of this Lease shall mean that such person (i) is registered or is required to be
registered as a sex offender in California or any other state; (ii) has been convicted of a crime in
another country or state that would require such person to register as a sex offender in California
if such crime were committed in California; (iii) has been convicted in any country or state at
any time of a felony involving moral turpitude, including without limitation any crime involving
dishonesty, theft, embezzlement, forgery, extortion, or intimidation, violence, or physical force,
or the threat of violence or physical force against any other person or persons; or (iv) has a
criminal charge then pending based on the alleged commission of a felony meeting the
requirements of clause (iii) (provided, that as to persons who meet the disqualification of this
clause (iv) only, such persons shall not be considered to meet the disqualification of this clause
(iv) if the criminal charge is dropped, the person is acquitted of the alleged criminal offense, or
the criminal case is finally disposed of on a basis that does not result in the person meeting any
of the disqualifications in clauses (i)-(iii), inclusive). Lessee shall institute appropriate
employment screening procedures to verify that all of Lessee's employees who work at or from
the Premises are of good moral character and through the Hotel Management Agreement and any
other contracts with independent contractors, subcontractors, and other firms operating on or from
the Premises or Site Lessee shall require that those other firms and entities institute similar
appropriate employment screening procedures as well. The requirements of this Section 7.4 shall
be included in the Hotel Management Agreement approved by Lessor in accordance with Section
3.2.5 of this Lease (prior to the Lease Commencement Date and, with respect to the amendment
of such Hotel Management Agreement pursuant to the terms and conditions of the Third
Amendment, prior to the Commencement Date of the Third Amendment) and Section 7.2 (with
respect to any new or amended Hotel Management Agreement submitted to Lessor from and after
the Lease Commencement Date, or after the Commencement Date of the Third Amendment. The
requirements of this Section 7.4 shall be included in each contract entered into by Lessee, the
Hotel Management Company, or any other authorized agent of Lessee with any other person,
firm, or entity that occupies space or provides services on the Premises or Site during the Lease
Term.
In addition to Lessor's rights under Section 7.2 to require removal/replacement of the
Hotel Management Company for Gross Mismanagement, to the maximum extent permitted
by law Lessor shall have the right, but not the obligation, to require Lessee, the Hotel
3-97
Management Company, and any other person, firm, or entity that occupies space or provides
services on the Premises or Site during the Lease Term, as applicable, to immediately remove
or cause the removal from the Premises or Site and to immediately terminate or cause
termination of the employment or retention of any person who is not of good moral character,
as provided herein.
7.5 Name of Hotel and Bungalows; Promotions and Advertising. At all times the
Hotel and Bungalows shall be operated under the trade name of Lido House, Lido House Hotel,
or such other trade name that is approved by Lessor in its reasonable discretion; provided that
Lessee shall at all times have the right to add or include in the name of the Hotel and/or Bungalows
either or both of the following without Lessor's written consent: (i) "Newport" or "Newport
Beach"; and (ii) the trade name of the Hotel Franchisor. All of Lessee's promotions and
advertising for the Hotel and/or Bungalows shall refer to and use said name and, if the word
"Newport" or "Newport Beach" is not part of the name of the Hotel itself all such promotions and
advertising shall prominently include reference to the Hotel's location in the City of Newport
Beach.
11. Article 8. Article 8 (Maintenance and Repairs) shall be amended to renumber Section 8.1
as 8.1.1, add Section 8.1.2 and amend Sections 8.2 through 8.6 to read as follows:
ARTICLE 8
MAINTENANCE AND REPAIRS
8.1.1 Maintenance and Repairs; General. At Lessee's sole cost and expense, at all
times during the Lease Term, Lessee shall be responsible for maintaining, repairing, and
operating the Premises, Improvements, Site, Site Improvements, all other Improvements
constructed or to be constructed thereon (including landscaping, lighting, and signage), and
all equipment and personal property placed from time to time on the Premises in a quality
and condition consistent with the Required Hotel Standard and similar quality hotel
properties in the Southern California marketplace, in compliance with the terms of the City
of Newport Beach Municipal Code, other applicable Governmental Requirements, and the
following:
(i) All Improvements on the Premises and all Site Improvements on the Site shall
be maintained in appropriate condition in accordance with the practices prevailing in the
operations of similar developments, and in conformance m 1 d substantial compliance with all
plans, drawings, and related documents approved by Lessor pursuant to this Lease and all
conditions of approval of land use entitlements adopted by Lessor in its governmental or
regulatory capacity, including without limitation the interiors and exteriors of all buildings
and structures and all grounds to the curbline, the entrances, windows, partitions, doors,
lighting and plumbing fixtures, heating, ventilation and air conditioning systems, benches,
shelters, planters, kiosks, trash containers, signs, sculptures, fountains, play areas, swimming
pools, jacuzzis, spas, exercise rooms, platforms, stages, lateral water and sanitary sewer lines,
drainage facilities, sidewalks, driveways, parking areas and facilities, landscaping and irrigation
facilities, exterior lighting systems, and pedestrian walkways.
KI .;
(ii) All furnishings and fixtures on the Premises and Site shall be kept at all times in a
neat, clean, and appropriate condition in accordance with the practices prevailing in the operations
of similar developments and shall be periodically repaired and replaced in accordance with the
practices prevailing in the operations of similar developments.
(iii) All exterior and interior painted surfaces shall be kept clean, shall be periodically
repainted, and shall not be allowed to show unreasonable peeling or worn surfaces.
(iv) All wallpapered or other treated surfaces shall be kept clean and shall be
periodically repaired or replaced in accordance with the practices prevailing in the operations of
similar developments.
(v) Landscape maintenance shall include, without limitation, periodic
watering/irrigation, fertilization, mowing, edging, trimming of grass, tree and shrub pruning,
trimming, and shaping of trees and shrubs to maintain a natural and healthy appearance, road
visibility, and irrigation coverage, and replacement, as needed, of all dead or diseased plant
materials, control of weeds in all planters, shrubs, lawns, ground covers, and other planted areas;
and staking for support of trees.
(vi) Clean-up maintenance shall include, without limitation, maintenance of all
sidewalks, paths, and other paved areas to keep the same in a clean and weed -free condition,
maintenance of all such areas to keep the same clear of dirt, mud, trash, debris, and other matter
which is unsafe or unsightly, removal of all trash, litter, and other debris from improvements and
landscaping, and clearance and cleaning of all areas maintained prior to the end of each day on
which maintenance operations are performed to ensure that all cuttings, weeds, leaves, and other
debris are properly disposed of by maintenance workers.
(vii) Maintenance of appropriate entrance, exit, and directional signage, markers, and
lights shall be provided as reasonably required and in accordance with the practices prevailing in
the operation of similar developments.
(viii) Lighting fixtures shall be cleaned and lamps/bulbs shall be promptly replaced if
not operating.
(ix) Pavement striping, markers, directional signs, and similar improvements shall be
periodically repainted or replaced as necessary to maintain the same in appropriate condition in
accordance with the practices prevailing in the operations of similar developments.
(x) Adequate security personnel and security measures shall be instituted and
maintained in a commercially reasonable manner to provide a safe and secure environment in all
interior and exterior areas of the Premises or Site and for all activities and events occurring on the
Premises or Site.
8.1.2 Maintenance and Repairs Specific to Public Parking Area. Lessee, at its sole cost
and expense, shall be responsible for the ongoing maintenance and repair of the Public Parking
Area depicted in Exhibit "A-3" attached hereto and incorporated herein by this reference.
Maintenance shall include, but not be limited to, routine cleaning, and repair of the concrete
sidewalks, curb and gutter, asphalt, parking space lines, trash and graffiti removal, as well as
proper landscape maintenance and restoration, cultivation, mowing, trimming, weed and pest
control, and proper soil amendments (mulch, fertilizer, etc.) as applicable and specified; but shall
specifically exclude the maintenance and repair of public utilities located in the right-of-way or
not serving the Site or Premises, replacement or capital expenditures beyond the installation and
regular and routine maintenance and repair of the improvements to the Public Parking Area set
forth in subsection (ii) herein below, and metering of the Public Parking Area.
(i) Use of Public Parkin. Lessee shall act in good faith to monitor and ensure
the Public Parking Spaces are strictly available to the public and not utilized by guests, employees,
contractors, or invitees of Lessee. If the use of the Public Parking are frequently misused, as
determined by the City's parking enforcement personnel, then Lessor may require Lessee to place
signs, circulate flyers, and/or post other forms of communication within the Premises or Site to
inform and remind guests, employees, contractors or invitees of Lessee that parking shall be
limited within the Site and Premises. Notwithstanding the foregoing, if the Public Parking Spaces
are metered by Lessor for a maximum of six (6) hours within a 24-hour period, such metering
shall satisfy the obligations of Lessee pursuant to this subsection (i).
(ii) Improvements. Lessee shall, at its sole cost and expense, install and maintain the
improvements associated with the Public Parking Area as set forth in the Final Building
Construction Plans, whether or not specified under this Section 8.1.2, to maintain safe and good
working conditions of the Public Parking Area.
(iii) Standard of Work. All maintenance performed by Lessee to the Public Parking
Area shall be performed in a good and workmanlike manner to the satisfaction of Lessor, and in
compliance with all applicable ordinances, regulations or law. As necessary, Lessee shall also
obtain all applicable approvals and permits from the City and other governmental entities prior to
any asphalt or landscaping replacements or redesign.
(iv) An annual report summarizing details of repairs and maintenance completed by
Lessee for the prior calendar year, and a projected list of repairs and maintenance to be completed
during the upcoming year shall be submitted by Lessee to Lessor on a form approved by Lessor
and shall be due in writing to Lessor by January 3 1 " of each year following the year being
reported.
8.2 Waste. Lessee shall not commit or suffer to be committed any waste or
impairment of the Premises, Site, Site Improvements or the other Improvements, or any part
thereof.
8.3 Hazardous Substances. Lessee covenants each and all of the following:
(i) Following the Lease Commencement Date as to the Premises and the
Commencement Date of the Third Amendment as to the Site, and within commercially reasonable
time periods, Lessee shall remove all existing Hazardous Substances from the Premises and Site,
as applicable, in the manner prescribed by law.
(ii) Upon completion of construction of the Hotel and prior to opening the Hotel for
business to the general public, the Premises shall be free and clear of any Hazardous Substances
3-100
to the extent required by applicable law. Likewise, upon completion of construction of the Site
Improvements and prior to opening the Bungalows for business to the general public, the Site
shall be free and clear of any Hazardous Substances to the extent required by applicable law.
(iii) The development, construction, and uses of the Premises required and permitted
under this Lease do not require the presence of any Hazardous Substance on, in, or under the
Premises, except for those customarily used in the ordinary course of business for such
development, construction, and use consistent with applicable law. Likewise, the development,
construction, and use of the Site Improvements required and permitted under this Lease do not
require the presence of any Hazardous Substance on, in, or under the Site, except for those
customarily used in the ordinary course of business for such development, construction, and use
consistent with applicable law.
(iv) If at any time during the Lease Term any Hazardous Substance is present on, in,
or under the Premises or Site (including, without limitation, the soil and groundwater) in violation
of applicable law, Lessee, at no expense to Lessor, and at the earliest practicable date, shall
remove such Hazardous Substances from the Premises and/or Site (including without limitation
any Hazardous Substances in the soil or groundwater) and any surrounding areas to which such
Hazardous Substances may have migrated from the Premises and/or Site in accordance with and
to the extent required by any and all applicable legal requirements. The parties intend to require
Lessee to remove all Hazardous Substances from the Premises and/or Site and surrounding areas
to which such Hazardous Substances may have migrated to the extent required by applicable law,
if such Hazardous Substances are present at levels of concentration which require removal under
applicable law. If, at any time during the Lease Term, Lessor has reasonable cause to believe one
or more Hazardous Substances may be present on, in, or under the Premises and/or Site in
violation of applicable law, Lessor may by written notice inform Lessee of the basis for Lessor's
concern and require Lessee to cause the Premises and/or Site to be tested for such Hazardous
Substance(s) at Lessee's sole expense in accordance with a testing plan and schedule first
approved in writing by Lessor. Lessee shall exercise reasonable diligence to submit a testing plan
to Lessor within 30 days after the date of the Lessor's notice, endeavor to obtain Lessor's approval
of the testing plan as soon as practicable thereafter, and cause the testing to begin within 30 days
Lessor's approval of the testing plan. Notwithstanding the foregoing, nothing in this Section
8.3(iv) is intended to limit, restrict, or modify Lessor's obligations and responsibilities set forth in
Section 3.5.2 of the Lease or Section 5(C) of the Option to Lease Site.
(v) Lessee shall not bring or allow to be brought onto the Premises or Site or use or
store on the Premises or Site any Hazardous Substances without the prior express written consent
of Lessor, except for those Hazardous Substances (including without limitation fuel stored in
motor vehicles) customarily used in the ordinary course of business in the use and operation of
the Premises, Site, Site Improvements and the Improvements.
(vi) The following covenants pertain to Lessee's occupancy and use of the Premises,
Site, Site Improvements and Improvements:
(a) No underground storage tanks for Hazardous Substances shall be installed on or
under the Premises and/or Site.
(b) Lessor and its officers, employees, contractors and agents shall at all times have
3-101
the right to go upon and inspect the Premises, Site, Site Improvements and Improvements and
the operations conducted thereon to assure compliance with the requirements herein stated.
Lessor shall provide reasonable prior notice to Lessee of such entry, and shall seek to minimize
interference with and interruption to Lessee's use of the Premises, Site, Site Improvements and
Improvements as much as is reasonably feasible. Such entry shall be in compliance with all
applicable safety rules and regulations. This inspection may include taking samples for testing of
substances and materials present and/or testing soils on the Premises, Site, Site Improvements
and Improvements. Lessor shall indemnify, defend, and hold harmless Lessee from and against
any claims, liabilities, losses, and damage caused by Lessor during any such inspections
(excepting that this indemnity obligation shall not apply to claims, liabilities, losses, and damage
not created by Lessor and resulting only from Lessor's discovery of Hazardous Substances on the
Premises), and Lessor shall be responsible for the prompt repair and/or restoration of any such
damage caused by Lessor during any such inspection.
(c) Lessee shall be responsible for posting on the Premises, Site, Site Improvements
and Improvements any signs required by Section 25249.6 of the California Health and Safety
Code and regulations promulgated pursuant thereto. Lessee shall also complete and file any
business response plans or inventories required by Chapter 6.95. of the California Health and
Safety Code and regulations promulgated pursuant thereto. Lessee shall concurrently file a copy
of any such business response plan or inventory with Lessor.
(d) Lessee shall immediately notify Lessor in writing of the release of any Hazardous
Substance on the Premises, Site, Site Improvements and Improvements in violation of applicable
law.
(e) Lessee shall to the extent required by applicable law immediately remove any
Hazardous Substances located on the Premises, Site, Site Improvements and Improvements and
shall dispose of such Hazardous Substances in a safe and legal manner. Lessee shall immediately
disclose to Lessor its disposal of any Hazardous Substance located on the Premises, Site, Site
Improvements and Improvements and upon Lessor's written request shall provide written
documentation of its safe and legal disposal. Notwithstanding the foregoing, nothing in this
Section 8.3(vi)(e) is intended to limit, restrict, or modify Lessor's obligations and responsibilities
set forth in Section 3.5.2 of the Lease or Section 5(C) of the Option to Lease Site.
(f) Lessee shall be responsible for and bear the entire cost of removal and disposal of
Hazardous Substances. Lessor may also pass through to Lessee any and all clean-up costs
incurred by Lessor as a result of Lessee's activities on the Premises, Site, Site Improvements and
Improvements or the presence of any Hazardous Substance(s) on, in, or under the Premises, Site,
Site Improvements and Improvements. Upon termination of this Lease, Lessee is required, in
accordance with all applicable laws, to remove from the Premises, Site, Site Improvements and
Improvements any equipment or improvement to the Premises or Site that is contaminated by
Hazardous Substances. Notwithstanding the foregoing, nothing in this Section 8.3(vi)(f) is
intended to limit, restrict, or modify Lessor's obligations and responsibilities set forth in Section
3.5.2 of the Lease or Section 5(C) of the Option to Lease Site.
(vii) From and after the Lease Commencement Date as to the Premises and the
Commencement Date of the Third Amendment as to the Site, Lessee shall indemnify, defend, and
hold harmless City and its officials, officers, employees, agents, contractors, and consultants from
3-102
and against any claims, actions, suits, legal and administrative proceedings, liability, injury,
deficiency, damages, fines, penalties, punitive damages, costs, and expenses (including, without
limitation, the cost of any cleanup, remediation, removal, mitigation, monitoring or testing of
Hazardous Substances, and reasonable attorneys' fees) resulting from, arising out of, or based
upon (a) the presence, release, use, generation, discharge, storage, or disposal of any Hazardous
Substances on, under, in, or about, or the transportation of any Hazardous Substances to or from,
the Premises or Site; and (b) the violation, or alleged violation, of any statute, ordinance, order,
rule, regulation, permit, judgment, or license relating to the use, generation, release, discharge,
storage, disposal, or transportation or Hazardous Substances on, under, in, about, to, or from the
Premises or Site. Notwithstanding the foregoing, nothing in this Section 8.3(vii) is intended to
limit, restrict, or modify Lessor's obligations and responsibilities set forth in Section 3.5.2 of
the Lease or Section 5(C) of the Option to Lease Site and Lessee's indemnity obligations set forth
herein shall not apply if Lessor is obligated and responsible thereunder for remediation and/or
removal of the Hazardous Substances.
(viii) From and after the Lease Commencement Date as to the Premises and the
Commencement Date of the Third Amendment as to the Site, Lessee waives, releases, and
discharges Lessor and its officials, officers, employees, agents, contractors, and consultants from
any and all present and future claims, demands, suits, legal and administrative proceedings, and
from all liability for damages, losses, costs, liabilities, fees, and expenses (including, without
limitation, attorneys' fees) arising out of or in any way connected with Lessor's or Lessee's use,
maintenance, ownership, or operation of the Premises and/or Site, any Hazardous Substances on
the Premises and/or Site, and the existence of Hazardous Substances contamination in any state
on the Premises and/or Site, however the Hazardous Substances came to be placed there, except
that arising out of the intentional misconduct of Lessor or its officials, officers, employees, agents,
contractors, or consultants. Lessee acknowledges that it is aware of and familiar with the
provisions of Section 1542 of the California Civil Code which provides as follows:
"A general release does not extend to claims which the creditor does not know or suspect
to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
As such relates to this Section 8.3, Lessee hereby waives and relinquishes all rights and
benefits which it may have under Section 1542 of the California Civil Code.
Notwithstanding the foregoing, nothing in this Section 8.3(viii) is intended to limit,
restrict, or modify Lessor's obligations and responsibilities set forth in Section 3.5.2 of the Lease
or Section 5(C) of the Option to Lease Site and Lessee's waiver of rights and release of claims
set forth herein shall not apply if Lessor is obligated and responsible thereunder for remediation
and/or removal of the Hazardous Substances.
8.4 Lessor Not Responsible for Maintenance or Repairs. Lessor shall have no
responsibility for and shall not be required to perform any maintenance, repairs, or services or to
assume any expense in connection with the Premises, the Site, the Site Improvements including
the Public Parking Area and the Improvements, or any furnishings, fixtures, and equipment.
Notwithstanding the foregoing, Lessor shall be responsible for any capital expenditures for the
Public Parking Area beyond the installation and routine maintenance and repair of the
improvements to the Public Parking Area set forth in Section 8.1.2 (ii) hereinabove or for the
3-103
parking meters.
8.5 Capital Replacement Reserve Fund. Commencing no later than the Operating
Commencement Date for purposes of the Hotel and related facilities constructed and operated by
Lessee on the Premises, and/or the issuance of the certificate of occupancy by the City for the
Site Improvements and related facilities constructed and operated by Lessee on the Site, and
continuing thereafter through the balance of the Lease Term, Lessee shall establish and maintain
a capital replacement reserve fund with a reputable financial institution reasonably acceptable
to the City Manager or his or her designee (the "Capital Replacement Reserve Fund") and shall
deposit into said fund a minimum of the following amounts: (i) for the first Operating Year, two
percent (2%) of the sum of Gross Room Revenues and Gross Non -Room Revenues for said year;
(ii) for the second Operating Year, three percent (3%) of the sum of Gross Room Revenues and
Gross Non -Room Revenues for said year; and (iii) for the third and each subsequent Operating
Year through the balance of the Initial Term, four and one-half percent (4-1/2%) of the sum of
Gross Room Revenues and Gross Non -Room Revenues for each said year; and (iv) for each year
during the Option Term, if applicable, four percent (4%) of the sum of Gross Room Revenues
and Gross Non -Room Revenues for each said year (collectively, the "Capital Replacement
Reserve"). All interest and earnings on funds deposited into the Capital Replacement Reserve
Fund shall be kept in said fund but shall not be credited against the minimum deposits required
hereunder. Within thirty (30) days after the close of each Operating Year during the Initial Term,
Lessee shall submit to Lessor (i) evidence that Lessee has deposited the required minimum
amount in the Capital Replacement Reserve Fund for the previous Operating Year (based upon
Lessee's accounting for Gross Room Revenues and Gross Non -Room Revenues that is due at that
time), (ii) an itemization of all withdrawals from and expenditures of funds deposited into the
Capital Replacement Reserve Fund in the preceding Operating Year and the purpose thereof, and
(iii) the balance remaining in the Capital Replacement Reserve Fund at the time the annual report
is prepared. The Capital Replacement Reserve Fund shall not be pledged or encumbered, except
to a permitted Mortgagee, and shall be used only for capital expenditures for additions,
replacements, renovations, or significant upgrades of or to the Site Improvements or
Improvements, including fixtures and equipment, that have a useful life of not less than five (5)
years which benefit the Premises and/or Site and which are approved in advance by the City
Manager of City or his or her designee, which approval(s) shall not be unreasonably withheld,
conditioned, or delayed. Notwithstanding the foregoing, Lessee acknowledges that its
responsibility to maintain, repair, and replace the Hotel and Bungalows as required hereunder
shall not be limited or restricted based on the amount of funds held from time to time in the Capital
Replacement Reserve Fund. Upon the expiration or earlier termination of this Lease, all funds in
the Capital Replacement Reserve Fund shall be allocated first to any repairs, maintenance,
replacements, and renewals necessary to place the Hotel and Bungalows in the physical condition
required by this Lease, as reasonably determined by Lessor, and any excess shall be the sole
property of Lessee.
8.6 Lessor's Rights/Remedies for Deficient Maintenance and Repairs. In addition to
Lessor's rights and remedies for Lessee's Default hereunder, as set forth in Article 16 of this Lease,
Lessor shall have the rights and remedies set forth in this Section 8.6. If Lessor delivers written
notice to Lessee that the maintenm 1 ce or condition of the Premises or Site or any portion thereof
or any Improvements or Site Improvements thereon does not comply with this Lease or that
Lessee has committed waste and such notice describes the deficiencies/conditions that need to be
3-104
corrected, remedied, or cured, Lessee shall correct, remedy, or cure the deficiencies (i) within two
(2) business days after receipt of Lessor's written notice if the deficiencies relate to dirt, mud,
trash, debris, waste, litter, graffiti, broken or inoperative irrigation systems, or other landscape
maintenance deficiencies or (ii) within thirty (30) days after receipt of Lessor's written notice if
the deficiencies relate to any other maintenance or repair requirements unless (as to deficiencies
otherwise subject to this clause (ii)) Lessor's notice states that the deficiencies are an urgent matter
relating to public health and safety, in which case Lessee shall correct, remedy, or cure the
deficiencies with all due diligence and shall complete the correction, remedy, or cure at the
earliest possible time but in no event more than two (2) business days after receipt of Lessor's
written notice, subject only to extensions of time if Lessee's inability to correct, remedy, or cure
the deficiency(ies) within said two (2) day period is excusable due to an Event or Events of Force
Majeure. Notwithstanding the foregoing, in the event such deficiencies are of a nature which
takes longer than thirty (30) days or two (2) business days to cure, correct or remedy, then such
time frames shall be extended so long as Lessee commences to cure, correct, or remedy such
deficiencies, and diligently prosecutes same to completion. In the event Lessee fails to maintain
or repair the Premises or Site or any portion thereof or any Improvements or Site Improvements
thereon in accordance with this Lease and fails to cure any deficiencies within the applicable
correction, remedy, or cure period described above, Lessor, in addition to any other rights and
remedies hereunder, shall have the right to enter onto the Premises or Site or to contract with a
third party or parties for the correction, remedy, and cure of any such deficiencies, and Lessee
shall be responsible for payment of all such costs actually and reasonably incurred by Lessor.
12. Article 9. Sections 9.1 through 9.5 of Article 9 (Taxes, Assessments, Utilities, and Other
Charges) shall be amended to read as follows:
ARTICLE 9
TAXES. ASSESSMENTS. UTILITIES, AND OTHER CHARGES
9.1 Lessee's Obligation to Pay Impositions. In accordance with California Revenue
and Taxation Code Section 107.6(a), the Parties acknowledge that from and after the Lease
Commencement Date as to the Premises and the Commencement Date of the Third Amendment
as to the Site, and for the balance of the Lease Term, Lessee will have a possessory interest in the
Premises and Site that will be subject to the obligation to pay possessory interest taxes.
Lessee agrees to pay or cause to be paid, as and when they become due and payable, and
before any fine, penalty, interest, or cost may be added thereto, or become due or be imposed by
operation of law for the nonpayment thereof, all taxes, assessments, franchises, excises, license
and pelmit fees, and other governmental levies and charges, general and special, ordinary and
extraordinary, unforeseen and foreseen, of any kind and nature whatsoever which at any time
during the Lease Term may be assessed, levied, confirmed, imposed upon, or grow or become
due and payable out of or in respect of, or become a lien on: (i) the Premises, Site, Site
Improvements and Improvements or any part thereof or any appurtenance thereto; (ii) the rent
and income received by Lessee from subtenants, guests, or others for the use or occupation of the
Premises, Site and the Improvements and Site Improvements thereon; or (iii) this transaction or
any document to which Lessee is a party, creating or transferring an interest or estate in the
Premises, Site, Improvements and Site Improvements. All such taxes, franchises, excises, license
and permit fees, and other governmental levies and charges shall hereinafter be referred to as
3-105
"Impositions," and any of the same shall hereinafter be referred to as an "Imposition".
Notwithstanding the foregoing or any other provision of this Lease, an Imposition shall not
include nor shall Lessor be responsible to pay any so-called "business license tax" or "gross
receipts tax" (or the like) imposed upon landlords generally in connection with the operation of
their business, even if such tax is calculated based upon rents payable under a lease. Any
Imposition relating to a fiscal period of the taxing authority, a part of which period is included
within the Lease Term and a part of which is included in a period of time either (i) before the
commencement of the Lease Term or (ii) after the expiration of the Lease Term, shall (whether
or not such Imposition shall be assessed, levied, confirmed, imposed upon, become a lien upon
the Premises, Site, Improvements and/or Site Improvements, or shall become payable, during the
Lease Term) be adjusted between Lessor and Lessee as of the commencement, expiration or
termination of the Lease Term, as applicable, so that Lessee shall pay that portion of such
Imposition which is applicable to the Lease Term, and Lessor shall pay the remainder thereof.
The failure of Lessee to pay an Imposition that cannot under any circumstances give rise
to a lien against the Premises, Site, Site Improvements and Improvements shall not be a breach
of the second paragraph of this Section 9.1. Lessee hereby agrees to defend, indemnify, and hold
harmless Lessor and Lessor's officials, officers, employees, and agents from and against all
claims, liability, loss, damage, costs, or expenses (including reasonable attorney's fees and court
costs) arising from or as a result of Lessee's failure to pay any Imposition to the extent that such
Imposition relates to a fiscal period included within the Lease Term.
If, by law, any Imposition may at the option of the payer be paid in installments (whether
or not interest shall accrue on the unpaid balance of such Imposition), Lessee may exercise the
option to pay the same (and any accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the Lease Term as the same
respectively become due and before any fine, penalty, or further interest or cost may be added
thereto; provided, however, that the amount of all installments of any such Imposition which will
be the responsibility of Lessee pursuant to this Section 9.1, and which are to become due and
payable after the expiration or termination of the Lease Term, shall be deposited with Lessor for
such payment on the date which shall be ninety (90) days immediately prior to the date of such
expiration or termination.
Lessee shall furnish to Lessor, within thirty (30) days after the date when any real property
taxes, assessments, or any other Imposition which could have any effect on Lessor's title to the
Premises or Site would become delinquent, official receipts of the appropriate taxing authority or
other evidence, satisfactory to Lessor, evidencing payment thereof
Nothing in this Section 9.1 shall alter, modify or limit in any way the rights and obligations
of Lessee to contest property tax assessments as set forth and as limited in Section 9.2 of this
Lease.
9.2 Contesting Impositions. Notwithstanding Section 9.1, Lessee shall have the right
to appeal or contest any Imposition subject to the limitations set forth in this Section 9.2. If Lessee
desires to appeal or contest any Imposition, the appeal, contest, opposition, or objection shall be
filed before the tax, assessment, or other Imposition at which it is directed becomes delinquent,
written notice of the appeal, contest, opposition, or objection shall be given to Lessor before the
date the tax, assessment, or other Imposition becomes delinquent, and Lessee shall prosecute such
3-106
proceeding to final adjudication with reasonable dispatch. No such appeal, contest, opposition, or
objection shall be continued or maintained after the date the tax, assessment, or other Imposition
at which it is directed becomes delinquent unless Lessee has met one of the following conditions:
(i) paid such tax, assessment, or other charge under protest prior to its
becoming delinquent; or
(ii) obtained and maintained a stay of all proceedings for enforcement and
collection of the tax, assessment, or other Imposition by posting such bond or other matter
required by law for such a stay; or
(iii) delivered to Lessor a good and sufficient bond in a form reasonably
acceptable to Lessor's City Manager or designee, in an amount equal to one hundred twenty-five
percent (125%) of the amount in controversy (inclusive of fines, interests, penalties, costs, and
other expenses that may have accrued or been imposed thereon) and issued by a surety company
authorized to issue undertakings in California, conditioned on the payment by Lessee of the tax,
assessment, or other Imposition, together with any fines, interest, penalties, costs, and expenses
that may have accrued or been imposed thereon within thirty (30) days after final determination
of Lessee's appeal, contest, opposition, or objection to such tax, assessment, or other Imposition.
Lessee may only exercise its right to contest an Imposition hereunder if the subject
legal proceedings shall operate to prevent the collection of the Imposition so contested, or the sale
of the Premises, Site, Site Improvements and Improvements, or any part thereof, to satisfy the
same, and only if Lessee shall, prior to the date such Imposition is due and payable, have given
such reasonable security as may be required in order to insure the payment of such Imposition
and prevent any sale, foreclosure, or forfeiture of the Premises, Site, Site Improvements and
Improvements or any part thereof, by reason of such nonpayment. In the event of any such contest
and the final determination thereof adversely to Lessee, Lessee shall, before any fine, interest,
penalty, or cost may be added thereto for nonpayment thereof, pay fully and discharge the
amounts involved in or affected by such contest, together with any penalties, fines, interest, costs,
and expenses that may have accrued thereon or that may result from any such contest by Lessee
and, after such payment and discharge by Lessee, Lessor shall promptly return to Lessee such
security as Lessor shall have received in connection with such contest.
Lessor shall not be required to join in any appeal, contest, opposition, or objection
brought by Lessee unless the provisions of any law requires that the proceeding be brought by or
in the name of Lessor or any owner of the Premises or the Site. In that case, Lessor shall join in
the proceeding or permit it to be brought in Lessor's name but such action shall be without cost
or other liability to Lessor, and in this regard Lessee agrees to pay to Lessor all costs incurred by
Lessor in connection therewith and Lessee further agrees to indemnify, defend, and save harmless
Lessor from and against any and all loss, cost, or expense of any kind, including, but not limited
to, reasonable attorneys' fees and expenses, which may be imposed upon or incurred by Lessor in
connection therewith.
9.3 Utilities. Lessee agrees to pay or cause to be paid, as and when they become due,
all hook-up and connection fees and all charges for water, sewer, electricity, gas, light, heat, air
conditioning, telephone, internet, cable television, solid waste/trash/refuse collection disposal,
recycling, and other utility and communication services furnished to or rendered or used on or
3-107
about the Premises, Site, Site Improvements and Improvements at all times during the Lease
Term. Upon Lessee's written request, Lessor agrees to join in the grant of such easements and
licenses upon the Premises or Site to any supplier of utilities to the Premises or Site as necessary
to construct, install, operate, and maintain any facilities, conduits, transmission lines, and
pipelines for the provision of utility services to the Premises or Site; provided, however, that the
locations of all such facilities, conduits, transmission lines, and pipelines associated with utility
services located upon the Premises or Site shall be consistent with the Development Entitlements,
Additional Development Entitlements for Improvements and Final Building Plans and shall be
located below grade in subterranean easements.
9.4 Lessor's Right to Cure. If Lessee, in violation of the provisions of this Lease, shall
fail to pay and to discharge any Impositions or any utilities furnished to or rendered or used on or
about the Premises and/or the Site, Lessor shall have the right, but not the obligation, to pay or
discharge such obligation(s), and in such event the amount paid by Lessor plus all of related
Lessor's costs and expenses, including attorney fees, together with interest at the maximum legal
rate or the rate of three percent (3%) over the prime rate of the largest bank operating in the State
of California on the date payment is made by Lessor, whichever is lower shall be deemed to be
and shall be payable by Lessee as additional Ground Rent and shall be reimbursed by Lessee to
Lessor immediately upon demand.
9.5 Limits of Tax Liability. The provisions of this Lease shall not be deemed to require
Lessee to pay municipal, county, state, or federal income or gross receipts or excess profits taxes
assessed against Lessor, or municipal, county, state, or federal capital levy, estate, succession,
inheritance, gift, or transfer taxes of Lessor, or corporation franchise taxes imposed upon any
corporate owner of the fee of the Premises or the Site; provided, however, that in the event the
State of California or any taxing authority thereunder changes or modifies the system of taxing
real estate so as to tax the rental income from real estate in lieu of or in substitution (in whole or
in part) for the real estate taxes and so as to impose a liability upon Lessor for the amount of such
tax, then Lessee shall be liable under this Lease for the payment of the taxes so imposed during
the Lease Term, or any renewal thereof, to the same extent as though the alternative tax was a tax
upon the value of the Premises, Site, Site Improvements and Improvements. In order to determine
the amount of such alternative tax for which Lessee shall be liable, the Premises, Site, Site
Improvements and Improvements shall be considered as if it was the only asset of Lessor, and the
rent paid hereunder shall be considered as if it were the only income of Lessor.
13. Article 10. Article 10 (Ownership of and Responsibility for Improvements) shall be
amended to read as follows:
ARTICLE 10
OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS
10.1 Ownership of Improvements During Lease Term. All Improvements on the
Premises and Site Improvements on the Site constructed or installed by Lessee as permitted or
required by this Lease, shall, during the Lease Term, be and remain the property of Lessee. All
Improvements located on the Premises and Site Improvements located on the Site, whether
existing thereon at the Lease Commencement Date or the Commencement Date of the Third
Amendment or constructed or installed thereon by Lessee as permitted or required by this Lease,
shall, at the expiration or sooner termination of the Lease Term, be and remain the property of
3-108
Lessor. Subject to Lessee's rights and obligations set forth in this Lease relating to alterations and
additions, Lessee shall have no right at any time to waste, destroy, demolish, or remove any of
the Improvements or Site Improvements. Lessee's rights and powers with respect to the
Improvements and Site Improvements are subject to the terms and limitations of this Lease.
Lessor and Lessee covenant for themselves and all persons claiming under or through them that
the Improvements are real property.
10.2 Reversion of Improvements: Duty to Remove Personal Property. Upon the
expiration or earlier termination of the Lease Term, whether by cancellation, forfeiture, or
otherwise, all Improvements and Site Improvements located on, in, or under the Premises and
Site (including all fixtures and equipment affixed thereto) shall remain upon and be surrendered
with the Premises and the Site as part thereof, and title to such Improvements and Site
Improvements shall vest in Lessor without any compensation to Lessee. Northing contained
herein is intended or shall be construed to deny or abrogate Lessee's right, prior to the expiration
or earlier termination of the Lease Term, to (i) receive any and all proceeds which are attributable
to a Taking of Improvements or a Taking of Site Improvements belonging to Lessee immediately
prior to the Date of Taking, to the extent provided in Article 14 of this Lease, or (ii) remove any
furniture or equipment that is neither permanently affixed to, or reasonably necessary for the
operation of the Premises and/or Site, any signage identifying Lessee (as distinguished from other
signage used in the operation of the Premises, Site, Improvements and Site Improvements), or
any personal property, upon the expiration or earlier termination of the Lease term or at any time
during the Lease Term, subject to Lessee's obligations under this Lease and use the Premises
and/or the Site for the uses described in Section 7.1.
No later than the expiration or earlier termination of the Lease Term, Lessee shall remove,
at its sole cost and expense, all furniture, equipment, and other personal property that is not affixed
to the Improvements or Site Improvements or reasonably necessary for the orderly operation of
the Premises, Site, Site Improvements or Improvements. Should Lessee fail to remove such
furniture, equipment, and other personal property within said period, and said failure continues
for ten (10) days after written notice from Lessor to Lessee, Lessee shall waive and lose all right,
title, and interest therein, and Lessor may elect to keep the same upon the Premises or Site or to
sell, remove, or demolish and destroy the same, in which event Lessee shall reimburse Lessor for
all of Lessor's actual and reasonable costs for all of Lessor's actual and reasonable costs (including
without limitation employee costs at the full payroll rate) incurred in connection with any such
sale, removal, or demolition/destruction in excess of any consideration received by Lessor as a
result thereof.
As between Lessor and Lessee, title to all utility lines, transformer vaults, and all other
utility facilities constructed or installed by Lessee upon the Premises or Site shall vest in Lessor
upon construction or installation to the extent that they are not owned by a utility company or
other third -party provider. Notwithstanding the foregoing, such utility lines, transformer vaults,
and all other utility facilities (other than any sewer, storm drain, or other utility systems that have
been dedicated to and accepted by Lessor pursuant to a dedication separate from this Lease) shall
be maintained, repaired, and replaced, if and as needed, by Lessee during the Lease Term.
10.4 Damage to or Destruction of Hotel, Site Improvements and Improvements.
10.4. 1 Lessee to Give Notice. In case of any damage to or destruction of the Hotel, the
3-109
Bungalows, the Site Improvements or the Improvements, or any part thereof, in excess of an
amount equal to Two Hundred and Fifty Thousand Dollars ($250,000.00) escalated from the
Lease Commencement Date of this Lease in accordance with increases in the Consumer Price
Index, Lessee shall within ten (10) days after Lessee becomes aware of such damage or
destruction give written notice thereof to Lessor generally describing the nature and extent of
such damage or destruction.
10.4.2 Restoration. Lessee shall be responsible for the restoration of the Hotel,
Bungalows, Site Improvements or other Improvements in accordance with the damage and
destruction clauses of this Lease.
In case of any damage to or destruction of the Hotel, Bungalows, the Site Improvements
or other Improvements, or any part thereof, Lessee shall commence the restoration, replacement,
or rebuilding of the Improvements and/or Site Improvements with such alterations and additions
as may be approved by Lessor (such restoration, replacement, rebuilding, alterations, and
additions, together with any temporary repairs and property protection pending completion of the
work being herein called "Restoration") within thirty (30) days of such damage or destruction,
plus any additional period reasonably required to obtain any Net Insurance Proceeds to be used
to pay all or a portion of the cost of such Restoration, and Lessee shall complete such Restoration
within a reasonable period of time thereafter.
As used herein, the term "Net Insurance Proceeds" means the gross insurance proceeds
paid by an insurer to Lessee for loss or damage to the Improvements on the Premises or Site
Improvements on the Site, less any and all costs and expenses (including, but not limited to
reasonable attorneys' fees) incurred to recover said proceeds. Lessee agrees to promptly
commence and prosecute to completion the settlement of insurance proceeds with respect to any
event of damage or destruction of the Improvements on the Premises or Site Improvements on
the Site.
Lessee agrees that, notwithstanding any other provision of this Lease, upon any event of
damage or destruction to the Improvements and/or Site Improvements, Lessee shall at its sole
cost and expense (whether or not Lessee terminates or intends to terminate this Lease pursuant to
Section 10.6 below) immediately take or cause such work to be taken as is necessary to assure
the safe condition of the damaged Improvements and/or Site Improvements pending the ultimate
disposition of the Improvements and/or Site Improvements. In any instance in which Lessee may
elect to terminate this Lease rather than restore the Improvements and/or Site Improvements
pursuant to 10.6 below, if Lessee does not terminate this Lease, Lessee shall restore the
Improvements and/or Site Improvements.
10.5 Application of Insurance Proceeds. Net Insurance Proceeds shall be applied as
follows:
(i) Within a reasonable time and in any event within 180 days after the damage to or
destruction of the Hotel, Bungalows, the Site Improvements or other Improvements, Lessee shall
furnish or cause to be furnished to Lessor and any Mortgagee evidence satisfactory to Lessor and
the Mortgagee (a) of the total cost of Restoration of the damaged or destroyed Hotel,
Bungalows, the Site Improvements, or other Improvements pursuant to Section 10.4.2 and (b)
that the total amount of money available will, when added to the insurance proceeds received and
3-110
available to pay for the Restoration pursuant to the terms of this Section 10.5, be sufficient to pay
the cost of such Restoration.
(ii) Net insurance proceeds received on account of any damage to or destruction of the
Improvements, or any part thereof, shall be paid to Lessee or as Lessee may direct (except that,
during the term of any Mortgage, such net insurance proceeds shall be paid to the Mortgagee
which holds the highest priority Mortgage, if required by such Mortgagee) from time to time as
Restoration progresses, solely to pay (or reimburse Lessee for) the cost of, Restoration. Upon
receipt by Lessor and any Mortgagee of evidence that Restoration has been completed and the
cost thereof paid in full or has been adequately provided for, and that there are no mechanic's or
similar liens for labor or materials supplied in connection therewith which have not been
adequately provided for, the balance, if any, of such proceeds shall be paid to Lessee.
(iii) Any insurance proceeds held by the recipient on any termination of this Lease and
not required to be paid to Lessor pursuant to the provisions of this Lease shall be paid first to the
expenses of clearing the Premises and the Site of any rubble, and next to the Mortgagee as its
interests may appear, and next to Lessee.
10.6 Damage or Destruction During Final Years of Lease Term. Notwithstanding
Sections 10.4 and 10.5 to the contrary, in the event of major damage or destruction to the
Improvements on the Premises or the Site Improvements on the Site during the last ten (10) years
of the Lease Term, Lessor shall not unreasonably withhold its approval if Lessee requests that
this Lease be terminated on thirty (30) days' notice, provided Lessee first complies with all of the
following conditions:
(i) Lessee shall give Lessor notice of the damage or destruction within ten (10)
business days after the event causing such damage and destruction.
(ii) Lessee shall give Lessor notice requesting that this Lease be terminated as a result
of such damage or destruction within forty-five (45) days after settlement of insurance proceeds,
but in any event within one hundred eighty (180) days after the event causing such damage or
destruction.
(iii) Lessee shall pay to Lessor all applicable Ground Rent and other charges that are
Lessee's responsibility prorated to the date of such tenmination.
(iv) Lessee shall clear and remove all debris from the Premises and/or the Site, restore
the Premises and/or Site to a safe and neat condition, deliver possession of the Premises and/or
the Site to Lessor, and shall quitclaim all of Lessee's right, title, and interest in the Premises and/or
the Site to Lessor.
(v) Lessee shall transfer to Lessor all insurance proceeds (except that, during the term
of any Mortgage, such insurance proceeds shall be paid to the Mortgagee which holds the highest
priority Mortgage, if required by such Mortgagee) resulting from the casualty to be retained by
Lessor without limitation as to use.
Major damage or destruction to the Improvements or Site Improvements as used in this
Section 10.6 means such damage or destruction that the cost of Restoration will exceed fifty
3-111
percent (50%) of the cost to replace the Improvements on the Premises or the Site Improvements
on the Site, as applicable, in their entirety.
10.7 Faithful Performance and Labor and Material (Payment) Bonds: Indemnification•
Non -responsibility Notices. Lessee agrees to indemnify, defend, and hold harmless Lessor from
and against all claims, liabilities, costs, and expenses for labor and materials in connection with
all construction, repairs, or alterations on the Premises or the Site and Improvements and the Site
Improvements, including reasonable attorney's fees.
Lessee agrees to procure, or cause the procurement of, contractor's bonds covering labor,
materials, and faithful performance for all construction work on the public right of ways in
accordance with the following requirements:
(i) As to the initial construction work on any public right of ways required by this
Lease, such bonds shall be in an amount equal to one hundred percent (100%) of the cost of the
Improvements on such public right of ways, as the same may be amended from time to time.
(ii) As to subsequent work involving repair, alteration, or replacement of the work on
any public right of way in an aggregate amount exceeding $250,000 plus escalations to such
amount after the Lease Effective Date in accordance with the Consumer Price Index, such bonds
shall be in the amount equal to one hundred percent (100%) of the construction price in the
contract entered into by Lessee and its general contractor. Subsequent work in an aggregate
amount of $250,000 (plus escalations to such amount after the Lease Effective Date in accordance
with the Consumer Price Index) or less shall not be subject to bonding requirements.
Said bonds and the construction contract must first be approved in writing as to content
and form by Lessor. Lessee shall, prior to commencement of construction, deliver to Lessor a
certificate or certificates from the bonding company or companies issuing the aforesaid bonds,
naming Lessor as additional insureds under said bonds.
Lessor shall have the right to post and maintain on the Premises, the Site and the
Improvements any notices of non -responsibility provided for under applicable law.
14. Article 11. Sections 11.1.1, 11.4, 11.6 and 11.7 of Article 11 (Assignment, Subletting,
Transfer) shall be amended to read as follows:
ARTICLE 11
ASSIGNMENT. SUBLETTING. TRANSFER
1 l .1 Restrictions on Lessee's Right to Transfer.
11.1.1 Lessee represents and warrants that this Lease, the construction of the
Improvements, and Lessee's other undertakings pursuant hereto are and will be used for the
purpose of redevelopment of the Premises and the Site and not for speculation in land holding.
Lessee further recognizes that (i) the qualifications and identity of Lessee and its principals are of
particular concern to the community and Lessor; (ii) it is because of such qualifications and
identity that Lessor is entering into this Lease with Lessee; (iii) the timely redevelopment of the
Premises and the Site is important to the general welfare of the community; (iv) the anticipated
3-112
tax and Ground Rent income to be generated by this Lease and the reduction and elimination of
Lessor's holding costs for the Premises and the Site are important financial/economic reasons for
Lessor wishing to ensure the timely redevelopment of the Premises and the Site; (v) Lessor does
not intend to allow Lessee to acquire leasehold rights in the Premises and the Site and then simply
hold such rights or the Premises and the Site for purposes of speculation; and (vi) a change in
ownership or Control of Lessee, or any other act or transaction involving or resulting in a direct
or indirect change in the ownership or Control of Lessee is for practical purposes a transfer or
disposition of Lessee's leasehold rights and interest hereunder. Accordingly, from the Agreement
Date of the Third Amendment through the entire Lease Term, Lessee shall be subject to the
restrictions on its Transfer rights set forth herein.
11.4 No Encumbrance of Lessor's Leased Fee Interest. No provision hereof authorizing
a Transfer or encumbrance of Lessee's interest herein shall be construed to authorize encumbrance
of Lessor's fee title to the Premises and the Site or Lessor's interest under this Lease, and Lessee
shall not by any act or deed cloud Lessor's fee title or Lessor's interest under this Lease.
11.6 Transfer by Lessor; Attornment by Lessee. Lessor shall at all times have the right
to assign, encumber, and/or convey all or a portion of its leased fee interest in the Premises and/or
the Site and/or in the Lease to any other person or entity. In the event of any assignment of all or
a part of Lessor's interest in either the Premises, the Site or the Lease to any other person or entity,
Lessee shall attorn to such other person or entity and recognize such other person or entity as the
landlord under this Lease, and such other person or entity shall not disturb Lessee's right to
possess the Premises and Improvements, and the Site and Site Improvements, subject to the
provisions of this Lease.
11.7 Right of First Opportunity. Subject to the last sentence of this Section 11.7, if at
any time from the Agreement Date through the end of the Lease Term Lessor desires to consider
selling its leased fee interest in the Premises, before Lessor may enter into a purchase/sale
agreement with a third party to do so Lessor shall first obtain an appraisal of Lessor's leased fee
interest in the Premises. Said appraisal shall be prepared by a qualified MAI appraiser who (i)
has no history of being employed or retained by Lessor or Lessee or any persons or entities
affiliated with Lessor or Lessee and (ii) has a minimum of ten (10) years experience appraising
hotel properties in Southern California. Lessor and Lessee shall cooperate and act reasonably in
an effort to mutually agree upon the identity of the appraiser. If the Parties are unable to agree
on the identity of the appraiser to conduct the appraisal within thirty (30) days after Lessor
notifies Lessee in writing of Lessor's desire to consider selling its lease fee interest in the
Premises, the appraiser (meeting the same qualifications) shall be appointed by the Orange
County Superior Court upon the petition or request of either Party. After receiving the appraisal,
Lessor may elect to proceed with its efforts to sell its leased fee interest in the Premises or it may
abandon that effort in Lessor's sole and absolute discretion; provided, however, that if Lessor
abandons the effort to sell Lessor's leased fee interest in the Premises it shall not be entitled to
initiate the process provided for in this Section 11.7 for a minimum of one (1) year. The appraiser
shall be instructed that in appraising the value of Lessor's leased fee interest in the Premises, the
appraiser shall assume that this Lease is valid, binding, and enforceable on the Parties, the Hotel
and Improvements are or shall be consistent with the provisions of this Lease, and the permitted
uses provided for in this Lease constitute the highest and best use of the Premises. If, after
receiving the appraisal, Lessor still desires to sell its leased fee interest in the Premises, Lessor
shall first offer to sell its leased fee interest in the Premises to Lessee at the amount set forth in
3-113
the appraisal. Lessee shall have thirty (30) days after receipt of Lessor's offer within which to
accept said offer and to negotiate with Lessor concerning other terms and conditions of an
agreement to purchase Lessor's leased fee interest in the Premises. In so doing, both Lessor and
Lessee covenant to negotiate in good faith. If Lessee does not accept said offer or if an agreement
to purchase Lessor's leased fee interest in the Premises is not agreed upon between Lessor and
Lessee within said thirty (30) day period, Lessor shall be free to market and sell the Premises to
a third party for a purchase price that is not less than the purchase price offered to Lessee and
subject to terms and conditions that are not less favorable than the terms and conditions offered
to Lessee. Thereafter, if Lessor does not enter into a binding written agreement with a third party
to sell Lessor's leased fee interest in the Premises to such third party consistent with the
foregoing parameters within one hundred eighty (180) days (measured from the end of the thirty
(30) day period referred to above), the procedure described in this Section shall again be
applicable. Notwithstanding the foregoing, any sale by Lessor of its leased fee interest in the
Premises and/or Site pursuant to this Section 11.7 shall FIRST comply with all applicable
Governmental Requirements, including without limitation the Surplus Lands Act (Cal. Govt.
Code Section 54220, et seq.) as same may be amended and/or interpreted by relevant authority,
including opinions by the California Department of Housing and Community Development and
the California Attorney General whether the sale of the Site and/or Premises to Lessee violates
the Surplus Land Act.
15. Article 12. Sections 12.1, 12.2, 12.4, 12.6, 12.7, 12.8 and 12.10 of Article 12 (Mortgages)
shall be amended to read as follows:
ARTICLE 12
MORTGAGES
12.1 Leasehold Mortgages.
12.1.1 From time to time during the Lease Term of this Lease, Lessee shall have the right
to mortgage, pledge, deed in trust, assign rents, issues and profits (for purposes of security if
required by any lender), enter into capitalized leases or other financing mechanisms in connection
with the acquisition of furniture, fixtures and equipment for the Hotel, the Bungalows, the Site
Improvements and other Improvements, or otherwise encumber the interest of Lessee under this
Lease, in whole or in part, and any interests or rights appurtenant to this Lease, and to assign or
pledge the same as security for any debt (the holder of any such mortgage, pledge or other
encumbrance, and the beneficiary of any such deed of trust being hereafter referred to as
"Mortgagee" and the mortgage, pledge, deed of trust or other instrument hereafter referred to as
"Mortgage"), upon and subject to each and all of the following terms and conditions:
(i) Lessee shall not make or enter into an agreement to make any Mortgage without
the prior written approval of Lessor's City Manager or his or her designee. Upon Lessee's request
for approval of a proposed Mortgage and Lessee's submission to Lessor of such information
concerning the proposed Mortgage as Lessor may reasonably request, Lessor's City Manager or
designee shall not unreasonably delay its approval or disapproval of the proposed Mortgage and,
in any event, shall approve or disapprove the proposed Mortgage within ten (10) business days.
The City Manager or his or her designee shall be authorized to approve minor non -substantive
changes to this Article 12 that do not materially jeopardize or impair Lessor's rights hereunder
as reasonably requested by a proposed Mortgagee; provided, that the City Manager or designee
3-114
shall be entitled to withhold consent to any such proposed changes in his or her reasonable
discretion.
(ii) The Mortgagee shall be an Institutional Lender or, if not, such other lender that
Lessor may approve in its reasonable discretion.
(iii) The Mortgage shall cover no interest in any real property other than Lessee's
interest in the Premises, the Site, the Hotel, the Bungalows, the Site Improvements and other
Improvements or some portion thereof, and the leasehold estate of Lessee under this Lease. The
Mortgage shall be fully subordinate to Lessor's fee title in and to the Premises and/or the Site and
all of Lessor's rights set forth in this Lease and shall state on its face that it does not encumber in
any way Lessor's fee interest in the Premises or Site or Lessor's rights set forth in this Lease.
(iv) Mortgages may be made on the Premises and/or the Site only for the purposes of
financing necessary and appropriate to pay Project Costs for construction of the Hotel, the
Bungalows, the Site Improvements and the other Improvements. Additionally, prior to
completion of construction of the Site Improvements and the opening of the Bungalows for
business to the general public, Mortgages may be made for the purposes of financing necessary
and appropriate for the Hotel and to pay Project Costs for the Bungalows and Site Improvements.
Notwithstanding the foregoing, prior to completion of construction of the Site Improvements and
opening of the Bungalows, the total amount of all loans secured by Mortgages recorded against
the Premises and Site shall not exceed seventy-five percent (75%) of the fair market value of the
Hotel, as said value is determined as of the date of the financing thereof.
(v) Subsequent to completion of construction of the Hotel and/or Bungalows and
opening the Hotel for business to the general public, the total amount of all loans secured by
Mortgages recorded against the Premises shall not exceed seventy-five percent (75%) of the fair
market value of the sum of (a) the completed Improvements, plus (b) Lessee's leasehold interest
in the Premises, as determined by a licensed California appraiser retained at Lessee's sole cost
and expense who is a member of the Appraisal Institute and who has a minimum of ten (10) years'
experience appraising hotel properties comparable to the Hotel and Improvements to be
developed on the Premises, with the City Manager or his or her designee having the right of
reasonable approval or disapproval of the appraisal; provided, however, that Lessee shall not be
deemed to be in Default of this Section 12.1.1(vi) if a loan or loans secured by Mortgages recorded
prior to completion of construction of the Hotel in compliance with Section 12.1.1(v), including
any amendment(s) or extension(s) of such loan(s) that do(es) not increase the total outstanding
principal balance of such loan(s) and whether or not such amendment(s) or extension(s) occur(s)
prior or subsequent to completion of construction of the Hotel and the opening of the Hotel for
business to the general public, exceed(s) seventy-five percent of the fair market value of Lessee's
leasehold interest in the Premises. In addition, it is understood and agreed that the loan -to -value
ratio constraint in this Section 12.1.1(vi) shall be made only at the time Lessor is determining
whether to approve or disapprove the proposed Mortgage and thereafter this Section 12.1.1(vi)
shall not limit, restrict, invalidate, or result in the disapproval of any such Mortgage or any
amendment or extension of any such Mortgage that does not increase the total outstanding
principal balance of the loan secured by such Mortgage if the fair market value of Lessee's
leasehold interest in the Premises that was relied upon by Lessor in approving the Mortgage
declines.
3-115
12.1.2 All rights acquired by a Mortgagee under a Mortgage shall be subject to each and
all of the covenants, conditions, and restrictions set forth in this Lease, and to all rights of Lessor
hereunder, none of which covenants, conditions, and restrictions is or shall be waived by Lessor
by reason of the giving of such Mortgage, except as expressly provided in this Article 12.
Notwithstanding the foreclosure of any such Mortgage, Lessee shall remain liable for the payment
of the accrued but unpaid rent reserved in this Lease while Lessee remains in possession of the
Premises, the Site, Site Improvements and Improvements.
12.2 Rights and Obligations of Leasehold Mortgagees. If Lessee, or Lessee's successors
or assigns, shall mortgage the leasehold interest herein demised, then, as long as any such
Mortgage shall remain unsatisfied of record, the following provisions shall apply:
(i) If the holder of any Mortgage on the leasehold interest herein demised shall
register with Lessor its name and address in writing, no notice of default by Lessor to Lessee shall
be deemed to have been duly given unless and until a copy thereof has been mailed to the
Mortgagee in accordance with the notice provisions set forth in this Lease at the address registered
with Lessor.
(ii) In the event Lessee shall be in Default hereunder, the Mortgagee shall, at any time
prior to the termination of this Lease (which termination can occur only after notice to the
Mortgagee and an opportunity to cure in accordance with this Article 12) and without payment
of any penalty, have the right, but not the obligation, to pay all of the rents due hereunder, to
effect any insurance, to pay any taxes and assessments (subject to Lessor's right to cure under
Section 9.4 of this Lease), to make any repairs and improvements, to do any other act or thing
required or permitted of Lessee hereunder, and to do any other thing which may be necessary and
proper to be done in the performance and observation of the agreements, covenants, and
conditions hereof to prevent termination of this Lease. All payments so made and all things so
done and perfom 1 ed by such Mortgagee shall be accepted by Lessor and shall be effective to
prevent a termination of this Lease as the same would have been if made, done, and performed
by Lessee instead of such Mortgagee. Lessee hereby constitutes and appoints the Mortgagee as
Lessee's agent and attorney in fact with full power coupled with an interest, in Lessee's name,
place, and stead, and at Lessee's cost and expense, to enter upon the Premises, the Site, Site
Improvements, and Improvements and the Improvements, and perform all acts required to be
performed herein. No Mortgagee shall have the right to take or perform any action hereunder,
under its leasehold Mortgage, or otherwise which might result in any detriment to the rights of a
prior leasehold Mortgagee with respect to the same lease or leasehold Premises.
(iii) While any such Mortgage remains unsatisfied of record, and an event or events
shall occur which shall entitle Lessor to terminate this Lease, Lessor shall forbear from
terminating this Lease if and to the extent that such forbearance is required under Section 12.4 of
this Lease or Mortgage documents.
(iv) If the holder of a Mortgage obtained in accordance with Section 12.1 of this Lease
acquires the leasehold estate created hereunder or otherwise acquires possession of the Premises,
the Site, Site Improvements or Improvements pursuant to available legal remedies, Lessor will
look to such holder to perform the obligations of Lessee only from and after the date of foreclosure
or possession and will not hold such holder responsible for the past actions or inactions of the
prior Lessee. Notwithstanding the foregoing, (a) on and after the date of such foreclosure or
3-116
possession, such holder shall be required to perform and abide by each and all of the obligations
of Lessee under this Lease and (b) on and after the date of such foreclosure or possession, Lessor
shall have the right to enforce each and all of the provisions of this Lease against such holder.
Nothing herein is intended or shall be construed to limit or restrict Lessor's rights and remedies
against any prior Lessee, provided that Lessor's pursuit of such remedies shall not affect the rights
of the holder of any Mortgage obtained in accordance with Section 12.1 of this Lease to the use,
enjoyment, or operation of the Premises, the Site, Site Improvements and Improvements
(v) The foreclosure of a Mortgage obtained in accordance with Section 12.1 of this
Lease, or any sale thereunder, whether by judicial proceedings or by virtue of any power of sale
contained in such Mortgage, or any conveyance of the leasehold estate created hereby from
Lessee to the holder of any such Mortgage through, or in lieu of, foreclosure or other appropriate
proceedings in the nature thereof shall not require the consent or approval of Lessor or constitute
a Default under this Lease, and upon such foreclosure, sale, or conveyance Lessor shall recognize
the Mortgagee, or any other foreclosure sale purchaser, as the new Lessee hereunder. In the event
that such Mortgagee becomes the Lessee hereunder, or in the event that the leasehold estate
created hereunder is purchased by any other party at a foreclosure sale or by any other lawful
means, such Mortgagee, or such other foreclosure sale purchaser, shall be responsible for
performance of the obligations of Lessee under this Lease only for the period of time that the
Mortgagee or such other foreclosure sale purchaser remains Lessee hereunder, and such
Mortgagee or foreclosure sale purchaser shall thereafter have the right to assign this Lease without
need to obtain the approval of Lessor; provided, however, that any subsequent assignment of this
Lease shall be subject to the provisions of Article 11 of this Lease, including, to the extent set
forth therein, Lessor's right of approval of a Transfer. Notwithstanding anything to the contrary
herein: (a) as a precondition to any Mortgagee, foreclosure sale purchaser, or other person
obtaining the rights of Lessee hereunder, such person shall first be required to expressly assume
each and all of the obligations of Lessee under this Lease pursuant to a written document in form
and substance reasonably satisfactory to Lessor; (b) such new Lessee shall have no right to
construct any Improvements on the Premises or Site Improvements on the Site unless and until
such new Lessee has submitted evidence reasonably satisfactory to Lessor that such new Lessee
has the financial capability and overall competence to perform the obligations of Lessee
hereunder, provided that this clause (b) shall not require submission of such evidence if such new
Lessee is the holder of a Mortgage obtained in accordance with Section 12.1 of this Lease but
shall require submission of such evidence if such new Lessee is the successor of such a holder;
and (c) Lessor shall have the right of prior written approval over any prospective operator or
manager (including but not limited to such new Lessee) of the Hotel uses on the Premises
and Improvements and the Bungalow uses on the Site and any prospective hotel franchisor,
in accordance with Sections 7.2-7.4 of this Lease.
(vi) In the event that the holder of any Mortgage obtained in accordance with
Section 12.1 of this Lease remedies or causes to be remedied, within the times specified
herein, all monetary Defaults of Lessee and all nonmonetary Defaults of Lessee which by
their nature are capable of being remedied by such Mortgagee, such Mortgagee shall have
the right within thirty (30) days after all such Defaults are remedied to request that Lessor
promptly execute and deliver to such Mortgagee a new lease of the Premises and/or the Site
(naming such Mortgagee as Lessee) for the remainder of the Lease Term with the same
agreements, covenants, and conditions (except for any requirements which have been
fulfilled prior to execution of the Lease) as are contained herein and with priority equal to
3-117
that hereof, along with a Quitclaim Deed first approved in writing by Lessor as to form and
substance; provided, however, that if more than one Mortgagee requests such a new lease,
the Mortgagee holding the most senior Mortgage shall prevail; and provided, further, that
Lessor shall not be required to execute such new lease earlier than concurrently with the
execution of such new lease by such Mortgagee. Lessor shall prepare such new lease at the
expense of such Mortgagee, and all costs incurred by Lessor in preparing such new lease
(including attorneys' fees) shall be paid to Lessor by such Mortgagee prior to the execution
by Lessor of such new lease. The execution of a new lease by Lessor pursuant to this
subparagraph (vi) shall automatically and immediately terminate this Lease. Although not
necessary to effect the termination of this Lease, the former Lessee shall, upon Lessor's
execution of such new lease, execute any documents and perform any acts which may be
reasonably necessary to evidence the termination of this Lease. Upon Lessor's execution and
delivery of such new lease, Lessor, at the expense of the new Lessee, shall take such action
as shall be necessary to remove the former Lessee from the Premises and Improvements
and/or the Site and Site Improvements, as applicable. Notwithstanding any provision herein,
Lessor shall not be required to forbear from terminating this Lease except to the extent
required by Section 12.4 hereof and the Mortgage documents and Lessor shall not be required
to execute a new lease after the termination of this Lease in accordance with the provisions
hereof.
(vii) Anything herein contained to the contrary notwithstanding, the provisions of
this Section 12.2 shall inure only to the benefit of the holders of Mortgages and such other
persons that acquire the leasehold interest created hereunder pursuant to a foreclosure, sale,
or conveyance of the type described in this Section 12.2.
12.4 Forbearance by Lessor. During the continuance of any Mortgage obtained in
accordance with Section 13.1 of this Lease and until such time as the lien of such Mortgage has
been extinguished:
(i) Lessor shall not agree to any mutual termination nor accept any surrender of this
Lease, nor shall Lessor consent to any amendment or modification of this Lease, without the prior
written consent of the Mortgagee.
(ii) Notwithstanding any Default by Lessee in the performance or observance of any
agreement, covenant, or condition of this Lease on the part of Lessee to be performed or observed,
Lessor shall have no right to terminate this Lease unless an event of Default shall have occurred
and be continuing, Lessor shall have given such Mortgagee written notice of such event of
Default, and such Mortgagee shall have failed to remedy such Default, or caused such Default to
be deemed remedied, within the times specified in (iii) and (iv) below.
(iii) Should any event of Default under this Lease occur, any Mortgagee shall have
sixty (60) days after receipt of written notice from Lessor setting forth the nature of such event of
Default, and, if the Default is such that possession of the Premises and/or the Site is reasonably
necessary to remedy the Default, a reasonable time after the expiration of such sixty (60) day
period, within which to remedy such Default; provided, however that Lessor shall not be required
to forbear beyond such initial sixty (60) day period unless (a) the Mortgagee shall have fully cured
any Default in the payment of any monetary obligations of Lessee under this Lease within such
sixty (60) day period and shall continue to pay currently such monetary obligations as and when
the same are due, and (b) such Mortgagee shall have acquired Lessee's leasehold estate created
3-118
hereby or commenced foreclosure or other appropriate proceedings in the nature thereof within
such sixty (60) day period, or prior thereto, and shall be diligently prosecuting any such
proceeding. Lessor agrees that all payments so made and all things so done and performed by
such Mortgagee shall be accepted by Lessor and shall be effective to prevent a termination of this
Lease as the same would have been if made, done, and performed by Lessee instead of such
Mortgagee.
(iv) Any event of Default under this Lease which in the nature thereof cannot be
remedied by a Mortgagee shall be deemed to be remedied if the Mortgagee does all of the
following: (a) within sixty (60) days after receiving written notice from Lessor setting forth the
nature of an event of Default, or prior thereto, the Mortgagee shall have acquired Lessee's
leasehold estate created hereby or shall have commenced foreclosure or other appropriate
proceedings, (b) Mortgagee shall diligently prosecute any such proceedings to completion, (c)
within the sixty (60) day period referred to in (a) above, Mortgagee shall have fully cured any
Default in the payment of all monetary obligations of Lessee hereunder and any non -monetary
obligations which do not require possession of the Premises and Improvements and/or the Site
and the Site Improvements, and (d) after gaining possession of the Premises and/or the Site,
Mortgagee shall perform and abide by each and all of the obligations of Lessee under this Lease
as and when the same are due; provided, however, that Mortgagee shall not be required to cure
any Default which occurs prior to the date on which Mortgagee obtains possession of the Premises
and/or the Site and which by its nature cannot be cured by such Mortgagee.
(v) In the event that Mortgagee is prohibited by any process or injunction issued by
any court of competent jurisdiction or by reason of any action by any court having jurisdiction of
any bankruptcy or insolvency proceeding involving Lessee from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, the times specified in
subparagraphs (iii) and (iv) immediately above for commencing and prosecuting such foreclosure
or other proceedings shall be extended for the period of such prohibition. Notwithstanding
anything to the contrary herein, Lessor shall in no event be required to forbear hereunder unless
Mortgagee shall within sixty (60) days after the giving of notice by Lessor pay all moneys due
and in respect of which there exists a monetary event of Default.
12.6 Performance on Behalf of Lessee. In the event that Lessee shall fail to make
any payment or perform any act required hereunder to be made or performed by Lessee, then
Lessor or Mortgagee may, but shall be under no obligation to, after such notice to Lessee, if
any, as may be reasonable under the circumstances, make such payment or perform such act
with the same effect as if made or performed by Lessee. Nothing herein shall limit the right of
Mortgagee to take action or make a payment if permitted under its Mortgage. Entry by Lessor
or Mortgagee upon the Premises and Improvements and/or the Site and Site Improvements for
such purpose shall not waive or release Lessee from any obligation or Default hereunder
(except in the case of any obligation or Default which shall have been fully performed or cured
by Mortgagee). Lessee shall reimburse Lessor (with interest at the rate of three percent (3%)
over the prime rate of the largest bank operating in the State of California or the maximum
legal rate of interest, whichever is less) or Mortgagee (with interest as provided in the
Mortgage) for all sums so paid by Lessor or Mortgagee and all costs and expenses incurred by
Lessor and Mortgagee in connection with the performance of any such act.
12.7 Non -Merger. There shall be no merger of this Lease, or of the leasehold estate
3-119
created thereby, with the fee estate in and to the Premises and Improvements and/or Site and
Site Improvements by reason of the fact that this Lease, or the leasehold estate created thereby,
or any interest in either thereof, may be held directly or indirectly by or for the account of any
person who shall own the fee estate in and to the Premises and Improvements, and/or Site and
Site Improvements, or any portion thereof, and no such merger shall occur unless and until all
persons at the time having any interest in this Lease or the leasehold estate, including the
Mortgagee and the holder of any mortgage upon the fee estate in and to the Premises and
Improvements and/or Site and Site Improvements, shall join in a written instrument effecting
such merger.
12.8 Lessor's Cooperation; Estoppels. Lessor covenants and agrees that it will act
and cooperate with Lessee in connection with Lessee's right to grant a Mortgage or Mortgages,
subject to the reserved rights of Lessor as set forth herein. At the request of Lessee or any
proposed or existing Mortgagee, Lessor shall within a reasonable time execute and deliver (i)
any documents or instruments reasonably requested to evidence, acknowledge, and/or perfect
the rights of a Mortgagee as herein provided; and (ii) an estoppel certificate certifying the status
of this Lease and Lessee's interest herein and such matters as are reasonably requested by
Lessee or such Mortgagee. Such estoppel certificate shall include, but not be limited to,
certification, if true, by Lessor that (i) this Lease is unmodified and in full force and effect (or,
if modified, a statement as to the nature of such modification and certification that this Lease,
as so modified, is in full force and effect), (ii) all rents currently due under the Lease have been
paid or the status and amount of rent payments then owing, (iii) there are not, to Lessor's
knowledge, any uncured Defaults on the part of Lessee under this Lease or facts, acts, or
omissions which with the giving of notice or passage of time, or both, would constitute a
Default, (iv) the requirements under Section 12.1 of the Lease have been satisfied and Lessor
consents to the execution and delivery by Lessee to Mortgagee of a deed of trust encumbering
Lessee's leasehold interest in the Premises and/or the Site; (v) Lessee's use and operation of
the Premises complies with any use covenants or operating requirements contained in the
Lease; (vi) Lessor has not received any notice of any assignment, transfer, or encumbrance of
the interest of Lessee in the Lease or any rights of Lessee thereunder, except in favor of
Mortgagee; and (vii) Lessor has received and/or by virtue of this estoppel certificate
acknowledges Mortgagee has registered its name and address with Lessor in accordance with
Section 12.1.4 of the Lease. Any such estoppel certificate may be conclusively relied upon by
any Mortgagee or permitted successor or assignee of Lessee's interest in this Lease.
Lessee shall be responsible to pay or reimburse Lessor for the costs incurred by Lessor
in investigating the facts relating to Lessor's execution of an estoppel certificate, including
without limitation in-house administrative costs at the full payroll rate of the City employees
performing services with respect to same and, to the extent Lessor retains outside attorneys or
consultants for said purpose, the costs incurred by said attorneys or consultants. Lessor may
withhold issuance of an estoppel certificate until Lessee concurrently pays to Lessor the costs
owing to Lessor hereunder.
12.10 Equipment Financing. Lessor understands that Lessee, Hotel Manager or Hotel
Franchisor may lease and/or purchase with purchase money financing certain of the equipment
and furnishings which may be installed in or used in connection with the Hotel and the
Bungalows from time to time during the Lease Term. Lessor hereby agrees, upon Lessee's
written request, to release, waive, or subordinate its landlord's lien to such equipment leases,
3-120
retained title contracts, security interest, or other forms of purchase money financing and to
execute documents, in form and substance reasonably satisfactory to Lessor, that permit the
equipment lessors, title and lien holders, as applicable, the right to enter the Premises and/or
the Site for the sole purpose of exercising their rights to remove such equipment and
furnishings subject to such leases, retained title contracts, security interests, or other forms of
purchase money financing, and provided that the same obligate the equipment lessors, title and
lien holders, as applicable, to repair and restore any damage caused to the Premises and the
Improvements and/or the Site and the Site Improvements resulting from such removal.
16. Article 13. Sections 13.1, 13.2, 13.3, 13.4, and 13.6 of Article 13 (Indemnification and
Insurance) shall be amended to read as follows:
ARTICLE 13
INDEMNIFICATION AND INSURANCE
13.1 Indemnification. To the maximum extent permitted by law and except as
hereinafter expressly limited, from and after the Agreement Date of the Third Amendment Lessee
agrees to and shall defend, indemnify, and hold harmless Lessor and Lessor's officials, officers,
employees, agents, contractors, and consultants from and against all claims, liability, loss,
damage, costs, and expenses (including investigation costs, reasonable attorneys' fees, and court
costs) arising from or as a result of the death or injury of any person, property damage, economic
loss, penalties, fines, and other damages of any kind whatever which is directly or indirectly
caused by or based on (or alleged to be caused by or based on) Lessor's ownership of or interest
in the Premises or Site or any portion thereof or any improvements thereon, the condition of the
Premises or Site or any portion thereof or any Improvements or Site Improvements thereon,
Lessee's entry onto or occupancy of the Premises or Site, Lessee's acts or omissions with respect
to the development, construction, use, maintenance, operation, and repair of the Premises, Site or
any portion thereof or any Improvements or Site Improvements thereon, and any of Lessee's
activities under this Lease, First Amendment, or Third Amendment, whether such actions or
inactions be prior to or after the Lease Commencement Date as to the Premises and Improvements
or Commencement Date of the Third Amendment as to the Site and Site Improvements, whether
such actions or inactions be by Lessee or anyone directly or indirectly employed or contracted
with by Lessee, and whether such damage or injury shall accrue or be discovered before or after
the termination of this Lease. Notwithstanding the foregoing, Lessee shall not be responsible for
(and such indemnity shall not apply to) property damage or bodily injury caused by Lessor's entry
onto the Premises, Site, Site Improvements and Improvements pursuant to various provisions of
this Lease, and/or to the extent such damage or injury is caused by the willful misconduct or
active negligence of Lessor or its designated employees or agents. Each Party shall promptly
provide notice to the other Party of any actual or threatened claim that gives rise or may give rise
to the indemnity obligations set forth herein and thereafter the Parties agree to cooperate in the
defense of any such claim.
13.2 Indemnification From Third Party Challenges to Lease and/or Development
Entitlements. In addition to the provisions set forth in Section 13.1, in the event of any legal or
administrative action or proceeding instituted by a third party including, but not limited to, any
federal or state agency (not a Party to this Lease) alleging that there has been a violation of state
or federal law or that challenges the validity or enforceability of (i) this Lease including the First
Amendment and Third Amendment, or any provision of this Lease including the First
Amendment and Third Amendment, (ii) any action by either Lessor or Lessee pursuant to this
3-121
Lease, the First Amendment, or the Third Amendment, including without limitation any consent
or approval issued by Lessor pursuant hereto, or (iii) any Development Entitlement, Additional
Development Entitlements for Site Improvements, or other permit or approval approved or issued
by Lessor (in its regulatory capacity) or any other governmental agency with jurisdiction over the
Premises, Site, the Hotel and the Bungalows, the Parties hereby agree to cooperate in defending
said action; provided, however, Lessee shall indemnify, defend (by counsel reasonably acceptable
to Lessor), and hold harmless Lessor and Lessor's officials, officers, employees, agents,
contractors, and consultants from and against all claims, liabilities, and losses, including without
limitation all litigation expenses (including investigation costs, reasonable attorneys' fees, and
court costs), as well as any fines, and penalties arising therefrom. In the event that such action
involves mediation, arbitration, or any other means of alternative dispute resolution, the
provisions of this Section 13.2 shall apply equally thereto. Lessor shall have the right to appoint
and designate independent counsel to represent Lessor and/or any of Lessor's officials, officers,
employees, agents, contractors, and consultants named as parties in any such third party action,
as reasonably determined to be necessary and appropriate by Lessor, at Lessee's expense;
provided, that in such event Lessor shall instruct its independent counsel to cooperate with
counsel retained by Lessee to defend the same persons and entities in order to avoid unnecessary
duplication of expense. Upon being served with process in any such legal action, the Party so
served shall promptly notify the other Party to this Lease. Lessee shall have the right to settle or
compromise any such action; provided, however, that no such settlement or compromise shall
terminate, modify, alter, or amend any of Lessor's rights or obligations set forth in this Lease or
with respect to any of the Development Entitlements, Additional Development Entitlements for
Site Improvements, or permits or approvals issued or approved by any governmental agency with
respect to the Premises without compliance with any applicable legal procedures and
requirements and without Lessor's prior written consent, which consent Lessor may withhold in
its sole and absolute discretion.
13.3 Required Insurance. During the entire Lease Term, Lessee, at its sole cost and
expense, shall maintain or cause to be maintained insurance policies protecting against all of the
following types of risk and loss:
(i) Insurance against loss or damage to the Improvements on the Premises or the Site
Improvements on the Site, resulting from fire, earthquake (to the extent commercially available
at commercially reasonable rates), windstorm, hail, lightning, vandalism, malicious mischief, riot
and civil commotion, and such other perils ordinarily included in extended coverage fire insurance
policies. Such insurance shall be maintained in an amount not less than one hundred percent
(100%) of the full insurable value of the Improvements, Site Improvements, all furnishings,
fixtures, and equipment on the Premises or the Site from time to time, and the estimated cost of
any architectural and engineering fees, inspection and supervision costs, and other costs that
would be incurred to replace the Improvements on the Premises or the Site Improvements on the
Site to their pre-existing condition. As used herein, the term "full insurable value" shall mean the
actual replacement cost (excluding the cost of excavation, foundations, and footings below the
ground level and without deduction for depreciation) of the Improvements and Site
Improvements, including without limitation the cost of construction of the Improvements, Site
Improvements, architectural and engineering fees, inspection and supervision, and applicable
governmental permit fees. To ascertain the amount of coverage required, Lessee shall cause the
full insurable value to be determined from time to time by the insurer or by a qualified expert
3-122
mutually acceptable to Lessor and Lessee, not less often than once every three years. Lessor shall
be included as a loss payee under the commercial property insurance.
(ii) Use and occupancy or business interruption or rental income insurance against the
perils of fire, windstorm, hail, lightning, vandalism and malicious mischief, riot and civil
commotion, and such other perils ordinarily included in extended coverage fire insurance policies,
in an amount equal to not less than two times the sum of the highest Participation Rent paid to
Lessor in any year under this Lease and twelve (12) months fixed operating expenses of Lessee,
except to the extent such insurance is not commercially available at commercially reasonable rates
due to reasons other than the wrongful acts or omissions or dangerous or hazardous activities of
Lessee.
(iii) Commercial general liability insurance, to protect against loss from liability
imposed by law for damages on account of personal injury, including death therefrom, suffered
or alleged to be suffered by any person or persons whomsoever, resulting directly or indirectly
from any act or activities of Lessee or under Lessee's control or direction, and also to protect
against loss from liability imposed by law for damages to any property of any person caused
directly or indirectly by or from the acts or activities in connection with the Premises and
Improvements and the Site and Site Improvements of Lessee or its invitees and sublessees, or any
person acting for Lessee, or under its control or direction. Any such property damage and personal
injury insurance maintained by Lessee at any time during the term of this Lease shall name Lessor
and its officials, officers, employees, agents, volunteers, and consultants as additional insureds
and shall also provide for and protect Lessor against incurring any legal cost in defending claims
for alleged loss. Coverage shall be at least as broad as that provided by Insurance Services Office
form CG 00 01 and may be arranged through any combination of primary and excess insurance
as required to achieve the limits specified, provided that any excess liability policy does not
restrict coverage provided in the primary policy. Such personal injury and property damage
insurance shall be maintained in full force and effect during the entire term of this Lease in an
amount not less than Ten Million Dollars ($10,000,000.00) combined single limit, Twenty Million
Dollars ($20,000,000) in the aggregate, as of the Effective Date of Lease, which minimum amount
of coverage shall escalate on the January 1st next following the fifth anniversary of the
Commencement Date and once every five years thereafter in proportion to the escalation, if any,
during such period in the Consumer Price Index. Lessee agrees that the provisions of this Section
13.3(iii) as to maintenance of insurance shall not be construed as limiting in any way the extent
to which Lessee may be held responsible for the payment of damages to persons or property
resulting from Lessee's activities, the activities of its invitees and sublessees, or the activities of
any other person or persons for which Lessee is otherwise responsible.
(iv) Business automobile coverage for bodily injury and property damage liability for
all activities of Lessee arising out of or in connection with the activities and services to be
perfonned and provided pursuant to this Lease, including coverage for any owned, hired, non -
owned, or rented vehicles, in an amount not less than Five Million Dollars ($5,000,000.00)
combined single limit for each occurrence, which minimum amount of coverage shall escalate on
the January 1 st next following the fifth anniversary of the Commencement Date and once every
five years thereafter in proportion to the escalation, if any, during such period in the Consumer
Price Index.
3-123
(v) Builder's risk insurance during all periods of construction, reconstruction, or
alteration of any Improvements on the Premises and Site Improvements on the Site against "all
risk" of physical loss, including without limitation the perils of flood, collapse, and transit, with
deductibles acceptable to Lessor, covering the total cost of work performed, equipment, supplies,
and material furnished on a replacement cost basis with no co-insurance penalty.
(vi) Contractor's pollution liability insurance for contractors or subcontractors
performing construction work written on a form acceptable to Lessor providing coverage for
liability arising out of sudden, accidental, and gradual pollution. The policy limit shall be not less
than One Million Dollars ($1,000,000.00) per claim and Two Million Dollars ($2,000,000.00) in
the aggregate, which minimum amount of coverage shall escalate on the January 1st next
following the fifth anniversary of the Commencement Date and once every five years thereafter
in proportion to the escalation, if any, during such period in the Consumer Price Index. When this
insurance is required, all activities comprising the work shall be specifically scheduled on the
policy as "covered operations." The policy shall provide coverage for the hauling of waste from
the Premises and/or the Site to the final disposal location, including non -owned disposal sites.
Products/completed operations coverage must be maintained and evidence of insurance must be
provided for at least five (5) years after completion of the work.
(vii) Liquor liability coverage in the amount of not less than Ten Million Dollars
($10,000,000) per occurrence and in the aggregate, which minimum amount of coverage shall
escalate on the January 1 st next following the fifth anniversary of the Commencement Date and
once every five years thereafter in proportion to the escalation, if any, during such period in the
Consumer Price Index.
(viii) Workers compensation insurance, statutory limits, and employer's liability
insurance with limits of at least One Million Dollars ($1,000,000) each accident for bodily injury
by accident and each employee for bodily injury by disease in accordance with the laws of the
State of California, Section 3700 of the Labor Code. Such workers compensation insurance shall
cover all persons employed by Lessee in connection with the Premises and Improvements and the
Site and Site Improvements, and shall cover full liability for compensation under any such act
aforesaid, based upon death or bodily injury claims made by, for or on behalf of, any person
incurring or suffering injury or death in connection with the Premises and Improvements, the Site
and Site Improvements, or the operation thereof by Lessee. In addition, Lessee shall require each
subtenant and subcontractor to similarly maintain workers compensation insurance and
employer's liability insurance meeting the requirements of this Section 13.1(iv) for all of said
subtenant's and subcontractor's employees.
(ix) Lessee hereby agrees to waive rights of subrogation which any insurer of Lessee
may acquire from Lessee by virtue of payment of any loss. Lessee agrees to obtain any
endorsements that may be necessary to effectuate this waiver of subrogation. The workers
compensation policy shall be endorsed with a waiver of subrogation in favor of Lessor for all
work performed by Lessee, its employees, agents, and contractors and subcontractors.
(x) In the event that the holder of a Mortgage obtained in accordance with Section 12.1
of this Lease which has registered its name and address with Lessor acquires the leasehold interest
created by this Lease, such Mortgagee shall have the right to self -insure with respect to the risks
specified in this Section 13.3 if such Mortgagee is an Institutional Lender.
3-124
13.4 General Insurance Provisions and Requirements. Lessee shall provide copies of
all insurance policies or certificates of insurance, with original endorsements, to Lessor as
evidence of the insurance coverage required herein. Insurance certificates must be approved by
Lessor prior to the Commencement Date and prior to commencement of performance by Lessee
or issuance of any permit. Current certification of insurance shall be kept on file with Lessor at
all times during the Lease Term. Lessee shall also deliver to Lessor appropriate evidence of
payment of the premiums for all required insurance prior to the Commencement Date and
thereafter, during the entire Lease Term, at least thirty (30) days prior to expiration of coverage.
All insurance provided under Section 13.3 of this Lease shall be primary insurance for the
benefit of Lessee and Lessor and not contributory with any other insurance that may be maintained
from time to time by Lessor in its sole and absolute discretion. Each insurer shall waive all rights
of subrogation against Lessor, its elected and appointed officers, officials, employees, agents, and
volunteers. Lessor and its elected and appointed officers, officials, employees, agents, and
volunteers are to be covered as additional insureds under all general, liquor, and pollution liability
policies with respect to liability arising out of Lessee's activities related to this Lease and with
respect to Lessee's use and occupancy of the Premises and the Site. Said insurance shall also be
for the benefit of the Mortgagee, if any.
Lessor shall be listed as payee on property and builder's risk policies.
Lessee covenants not to keep on the Premises or the Site or permit to be kept, used, or sold
thereon, anything prohibited by any fire or other insurance policy covering the Premises and/or
the Site.
All insurance shall be written on an occurrence -made form except pollution liability
insurance.
Lessee shall require and verify that all contractors and subcontractors maintain insurance
meeting all the requirements stated herein and Lessee shall ensure that Lessor is an additional
insured on the insurance required from contractors and subcontractors. For CGL coverage,
contractors and subcontractors shall provide coverage with a form at least as broad as
CG20380413.
Any failure to comply with reporting provisions of the policies shall not affect coverage
provided to Lessor, its elected and appointed officers, officials, employees, agents, and volunteers.
The insurance required by this Lease shall not be suspended, voided, canceled, or reduced
in coverage or limits except after thirty (30) calendar days (ten (10) calendar days written notice
of non-payment of premium) written notice has been received by Lessor. It shall be Lessee's
obligation to ensure that provisions for such notice have been established.
All insurance provided under Section 13.3 shall be periodically reviewed by the Parties
for the purpose of adjusting the minimum limits of such insurance to amounts which may be
reasonable and customary for similar facilities of like size and operation; provided, however, that
in no event shall Lessor be required to consent to or approve a reduction in the amount of insurance
to be provided pursuant to Section 13.3(iii).
3-125
The insurance to be provided by Lessee may provide for a deductible or self -insured
retention of not more than Ten Thousand Dollars ($10,000.00), with such amount to increase at
such times as Lessor may require increases in the policy limits as set forth above; provided that
the percentage increase in the deductible or self -insured retention shall not exceed the percentage
increase in the Consumer Price Index since the last requested adjustment; and further provided
that Lessee may maintain such higher deductibles or self -insured retention as may be approved in
writing by the City Manager or his or her designee. In the event such insurance does provide for
deductibles or a self -insured retention, Lessee agrees that it will fully protect Lessor, its boards,
officials, officers, employees, and consultants in the same manner as these interests would have
been protected had the policy or policies not contained the deductible or retention provisions.
All insurance herein provided for under Section 13.3 shall be effected under policies
issued by insurers of recognized responsibility licensed or permitted to do business in the State of
California with an assigned policyholders' Rating of A- (or higher) and Financial Size Category
Class VII (or larger), in accordance with the latest edition of Best's Key Rating Guide, unless
otherwise approved by the City Manager of Lessor or his or her designee.
Any insurance required to be maintained by Lessee pursuant to Section 13.3 may be taken
out under a blanket insurance policy or policies covering other premises or properties, and other
insureds in addition to the Parties hereto; provided, however, that any such policy or policies of
blanket insurance shall specify therein, or supplemental written certification from the insurers
under such policies shall specify, the amount of insurance irrevocably allocated to the coverage
to be provided under Section 13.3 and provided further, that in all other respects, any such blanket
policy shall comply with the other provisions of Section 13.3.
Lessee hereby waives any claim against Lessor for any loss that is required to be covered
by insurance of the type specified in Section 13.3.
By requiring insurance herein, Lessor does not represent that coverage and limits will
necessarily be adequate to protect Lessee, and such coverage and limits shall not be deemed as a
limitation on Lessee's liability under the covenants set forth in this Lease, including without
limitation the indemnity provisions herein.
Lessee shall give Lessor prompt and timely notice of any claim made or suit instituted
arising out of or resulting from Lessee's performance under this Lease and confirmation, if such
be the fact, that the claim or suit has been tendered to Lessee's insurer and the insurer has accepted
said tender.
13.6 Disposition of Insurance Proceeds Resulting from Loss or Damage to
Improvements.
13.6.1 Subject to the provisions of Section 13.6.2 below, proceeds of insurance with
respect to loss or damage to the Improvements and Site Improvements to be maintained and
repaired by Lessee during the Lease Term shall be payable, under the provisions of the policy of
insurance, to Lessee or, if such loss or damage involves the need for Lessee to obtain any
governmental approvals or permits, jointly to Lessee and Lessor, and said proceeds shall
constitute a trust fund to be used for the repair, restoration, or reconstruction of the Improvements
and Site Improvements in accordance with plans and specifications approved in writing by Lessor.
3-126
13.6.2 In the event this Lease is terminated by mutual agreement of Lessor and Lessee
and the Improvements and Site Improvements are not repaired, restored, or reconstructed, the
insurance proceeds shall be applied first to any payments due under this Lease from Lessee to
Lessor, second to restore the Premises and the Site to a neat and clean condition, and finally any
excess shall be paid to Lessee; provided, however, that during any period when there is an
outstanding Mortgage upon the Improvements and the Site Improvements, such proceeds shall be
applied first to discharge the debt secured by the Mortgage and then for the purposes and in the
order set forth above in this paragraph.
17. Article 14. Article 14 (Eminent Domain) shall be amended to read as follows:
ARTICLE 14
EMINENT DOMAIN
14.1 Lessee to Give Notice. In case of a Taking of all or any part of the Premises or the
Site or the commencement of any proceedings or negotiations which might result in a Taking,
Lessee shall promptly give written notice thereof to Lessor generally describing the nature and
extent of the Taking or the nature of such proceedings or negotiations and the nature and extent
of the Taking which might result therefrom, as the case may be.
14.2 Total Taking. In case of a Taking of the fee of the entire Premises and
Improvements and Site and Site Improvements or in case of the taking of only a part of the
Premises and Improvements or Site and Site Improvements that leaves the remainder of the
Premises and Improvements and Site and Site Improvements in such location, or in such form,
shape, or reduced size or condition as to render the same not effectively and practicably usable
for the conduct thereon of the Hotel, Bungalows and ancillary uses required hereunder, this Lease
shall terminate as of the date title vests in the condemning authority or the date the condemning
authority is entitled to possession, whichever first occurs (the "Date of Taking"). Any Taking of
the Premises and Improvements and Site and Site Improvements of the character referred to in
this Section 14.2 which results in the termination of this Lease is referred to herein as a "Total
Taking." Lessee shall continue to pay all Ground Rent due hereunder and, in all respects, keep,
observe, and perform all of the terms, covenants, and conditions of this Lease to be kept, observed,
and performed by Lessee until the Date of Taking.
14.3 Partial Taking. In case of a Taking of a portion of the Premises and Improvements
and Site and Site Improvements that does not constitute a Total Taking (a "Partial Taking") (i)
this Lease shall remain in full force and effect as to the portion of the Premises and Improvements
and Site and Site Improvements remaining immediately after such Partial Taking, and a fair and
equitable proportion of the Ground Rent or other sum payable hereunder shall be abated according
to the nature and extent of the Partial Taking and the duration and extent of the interruption of
Lessee's operations due to such taking and restoration of the Premises, and (ii) Lessee, to the
extent the awards or payments, if any, on account of such Partial Taking shall be sufficient for the
purpose, at its expense, but first subject to Section 14.4, shall within a reasonable period of time
commence and complete, or cause to be commenced and completed, restoration of the Premises
and Improvements and Site and Site Improvements as nearly as possible to their value, condition,
and character immediately prior to such Partial Taking, except for any reduction in area caused
3-127
thereby; provided, however, that in case of a Partial Taking for temporary use Lessee shall not be
required to effect such restoration until such Partial Taking is terminated.
14.4 Application of Awards and Other Pam. Awards and other payments on
account of a Taking, less costs, fees, and expenses incurred in the collection thereof ("Net Awards
and Payments") shall be applied as follows:
(i) In the event of a Partial Taking, Lessee shall furnish to Lessor and any
Mortgagee evidence satisfactory to Lessor and the Mortgagee of the total cost of the restoration
required by Section 14.3.
(ii) In the event of a Partial Taking, Net Awards and Payments shall be held and
applied as provided with respect to proceeds of insurance as set forth in Section 13.6.1. The
balance, if any, shall be paid to Lessee and Lessor as their respective interests may appear in the
Premises and the Improvements and Site and Site Improvements.
(iii) Net Awards and Payments received on account of a Partial Taking for
temporary use shall initially be received by Lessee.
(iv) Net Awards and Payments received on account of a Total Taking shall be
allocated as follows:
First: There shall be paid to each Mortgagee an amount equal to the sum of any
unpaid principal amount of the indebtedness secured by the Mortgage, if any, and any interest
accrued thereon, all as of the date on which such payment is made; provided, however, that each
such Mortgagee shall only be paid to the extent of its security in the applicable portion which is
the subject of the Taking.
Second: To Lessee and Lessor as their respective interests may appear in the
Premises and the Improvements and Site and Site Improvements; provided, that (i) any payment
to a Mortgagee or pursuant to the preceding paragraph shall be charged against Lessee's interest;
and (ii) Lessee shall be entitled to payment and receipt of any portion of Net Awards and Payments
attributable to leasehold bonus value.
14.5 Taking Prior to Commencement Date. Notwithstanding any other provision set
forth in this Lease to the contrary, Lessee shall have no right to share in any Net Awards and
Payments if the Date of Taking occurs prior to the Commencement Date. Notwithstanding the
foregoing sentence, in the event a Taking occurs prior to the Commencement Date, Lessee shall
have the right, in its sole and absolute discretion, to terminate this Lease.
18. Article 15. Article 15 (Defaults, Remedies, and Termination) shall be amended to read
as follows:
ARTICLE 15
DEFAULTS, REMEDIES, AND TERMINATION
15.1 Defaults — General. Subject to the extensions of time for Events of Force Majeure,
the failure or delay by either Party to timely perform any term or provision of this Lease
3-128
constitutes a default under this Lease (herein, a "Default"). The Party who so fails or delays must
immediately commence to cure, correct, or remedy such failure or delay, and shall complete such
cure, correction, or remedy within such time as may be expressly stated in any other provision of
this Lease (including without limitation Section 8.6) and, if the time for completion of such cure,
correction, or remedy is not expressly stated in any other provision of this Lease, within ten (10)
days of such failure or delay for monetary Defaults and, for non -monetary Defaults, within the
minimum reasonable period of time within which such Default can be cured if the Defaulting
Party acts with commercially reasonable diligence to cure, correct, or remedy the same (the "Cure
Period").
The injured Party shall give written notice of default to the Party in Default, specifying
the Default complained of by the injured Party. Except as required to protect against further
damages, and except as may be otherwise expressly provided elsewhere in this Lease, the injured
Party may not institute proceedings against the Party in Default until the expiration of the
applicable Cure Period. In addition, Lessor's exercise of its remedies under this Article 15 shall
be subject to the provisions of Article 12 of this Lease.
In addition to the foregoing, each of the following shall be deemed to constitute a Default
hereunder and the Cure Period shall be deemed to have expired at the times specified: (i) if Lessee
becomes insolvent or files any debtor proceedings, or if any adjudication in bankruptcy is rendered
against Lessee, or if Lessee takes or has taken against it, in any court pursuant to any statute either
of the United States or of any State, a petition in bankruptcy or insolvency or for reorganization
or for the appointment of a receiver or trustee of all or any portion of Lessee's property, and
should the same not be discharged within one hundred twenty (120) calendar days thereafter; (ii)
if Lessee makes an assignment for the benefit of creditors or petitions for or enters into such an
arrangement; (iii) if Lessee abandons or vacates the Premises and Site for a period of fifteen (15)
consecutive calendar days after written notice to Lessee (excluding, however, any abandonment
or vacation attributable to an Event of Force Majeure or by the remodeling, reconstruction,
alteration, or repair of the Hotel or Bungalows); (iv) if a trustee or receiver is appointed to take
possession of substantially all of the assets of Lessee located at the Premises and the Site where
possession is not restored within one hundred twenty (120) calendar days; and (v) if Lessee
permits or suffers this Lease or any substantial portion of its property on the Premises, Site or any
portion of its interest in the Premises, Site or the Hotel or Bungalows to be taken under any writ
of attachment or execution, and should the same not be discharged within ninety (90) calendar
days thereafter.
Except as may be otherwise expressly provided in this Lease, any failure or delay by either
Party in asserting any of its remedies or rights as to any Default shall not operate as a waiver of
any Default or of any such rights or remedies or deprive either such Party of its right to institute
and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce
any such rights or remedies. Failure or delay in giving a notice of default shall not change the time
of Default.
15.2 Legal Actions. In addition to any other rights or remedies it may have hereunder
or under applicable law, either Party may institute legal action to cure, correct, or remedy any
Default by the other Party, to recover damages for any Default by the other Party, or to obtain any
other remedy consistent with the purpose of this Lease. Such legal actions must be instituted and
maintained in the Superior Court of the County of Orange, State of California, in any other
3-129
appropriate court in that county, or in the United States District Court in the Central District of
California. To the fullest extent permitted by law, each Party consents to the jurisdiction of such
court(s) and waives any right it might have in the absence of this Lease to object to such
jurisdiction or transfer venue to another court.
In the event that any legal action is commenced by Lessor against Lessee, service of
process on Lessee shall be made on any officer of Lessee or any authorized agent for service of
process and shall be valid whether made within or without the State of California.
15.3 Attorneys' Fees and Court Costs. In any action between the Parties hereto seeking
enforcement of any of the terms and provisions of this Lease, or in connection with the Premises
the prevailing Party in such action shall not be entitled to have and to recover from the other Party
its reasonable attorneys' fees and other expenses and costs in connection with such action or
proceeding.
15.4 Rights and Remedies are Cumulative. Except with respect to any rights and
remedies expressly declared to be exclusive in this Lease, the rights and remedies of the Parties
are cumulative, and the exercise by either Party of one or more of such rights or remedies shall
not preclude the exercise by it, at the same or different times, of any other rights or remedies for
the same Default or any other Default by the other Party.
15.5 Additional Remedies of Lessor. In addition to any other rights and remedies to
which Lessor may be entitled under applicable law or this Lease, including without limitation
Section 8.6, if Lessee commits a Default and fails to cure such Default within the applicable Cure
Period, and subject to any rights of a Mortgagee pursuant to Article 12, Lessor, at its option, shall
have the right but not the obligation to do any of the following:
(i) Correct or cause to be corrected said Default and charge the costs therefor to the
account of Lessee;
(ii) Correct or cause to be corrected said Default and pay the costs thereof from the
proceeds of any insurance;
(iii) Continue this Lease and Lessee's right to possession in effect and enforce its rights
and remedies under the Lease, including the right to recover rent as it becomes due, as provided
in Section 1951.4 of the California Civil Code;
(iv) Have a receiver appointed to take possession of Lessee's interest in the Premises
and Improvements and/or the Site and Site Improvements, with power in said receiver to
administer Lessee's interest therein, collect all funds available to Lessee in connection with its
operation and maintenance thereof, and perform all other acts consistent with Lessee's obligations
under this Lease as the court deems proper;
(v) Maintain and operate the Premises and Improvements and/or the Site and Site
Improvements without terminating this Lease;
(vi) Terminate this Lease pursuant to Section 15.7 hereof, by written notice to Lessee
of its intention to do so.
3-130
15.6 Lessee's Waiver of Right to Specific Perfon-nance Prior to Commencement Date.
Notwithstanding any other provision set forth in this Lease to the contrary, in no event shall Lessee
have the right to specific performance or similar injunctive or mandamus relief to compel Lessor
to execute and deliver the Memorandum of Lease or cause the Commencement Date to occur. In
the event Lessee alleges that Lessor has committed an uncured Default of its obligations under
this Lease by failing or refusing to perform any of its obligations hereunder, and/or by failing or
refusing to execute and record the Memorandum of Lease or consenting to or causing the
Commencement Date to occur, Lessee's sole and exclusive remedy shall be compensatory (but
not special or consequential) damages proximately caused thereby and Lessee, upon receipt of
written request from Lessor, shall promptly execute (in recordable form) and deliver to Lessor a
quitclaim deed disclaiming and terminating any right, title, and interest Lessee may have or claim
to have in the Premises and/or the Site.
15.7 Remedies and Rights of Termination.
15.7.1 In the event that at any time during the Lease Term, in violation of this Lease,
Lessee shall: (i) fail to commence and/or complete the construction of the Improvements as
required by this Lease or within the time required by this Lease; (ii) abandon or substantially
suspend construction of the Improvements or Site Improvements as required by this Lease prior
to the completion thereof; (iii) use the Premises and Improvements and Site and Site
Improvements for any purpose other than those provided for in this Lease or fail to use and
maintain the Premises and Improvements and Site and Site Improvements in accordance with
Article 7 of this Lease; (iv) fail or refuse to pay to Lessor when due the applicable rents and other
sums required by this Lease to be paid by Lessee; (v) fail or refuse to pay when due any taxes,
assessments, or other Impositions as required by this Lease; (vi) make or suffer to be made any
voluntary or involuntary conveyance, assignment, sublease, or other Transfer of all or any portion
of Lessee's leasehold interest in the Premises and Improvements and Site and Site Improvements,
or of the rights of Lessee under this Lease, in violation of any of the provisions of Article I 1 and
Article 12 hereof; (vii) commit or suffer to be committed any waste or impairment of the Premises
or the Improvements or Site or Site Improvements, or any part thereof; (viii) alter the
Improvements in any manner except as expressly permitted by this Lease; (ix) fail to maintain
insurance as required by this Lease; (x) fail to make full repair and restoration of the
Improvements in the event of damage or destruction in violation of the provisions of this Lease;
(xi) engage in any financing except as permitted by the terms of this Lease, or any other
transaction creating any mortgage on the Premises and Site, or placing or suffering to be placed
thereon any lien or other encumbrance, or suffering any levy or attachment to be made thereon in
violation of the provisions of this Lease; (xii) voluntarily file or have filed against it any petition
under any bankruptcy or insolvency act or law, or be adjudicated a bankrupt, or make a general
assignment for the benefit of creditors; (xiii) fail to pay when due any payment or charge or
otherwise default on any loan secured by a leasehold Mortgage permitted by this Lease; (xiv)
abandon or surrender possession of the Premises or the Site or Lessee's interest therein; (xv) fail
to perform any of Lessee's Hazardous Substances covenants; or (xvi) fail to perform or comply
with any other material term or provision hereof, and any such Default of any of Lessee's
covenants referred to in clauses (i)-(xvi), inclusive, is not be cured or remedied within the
applicable Cure Period, then, in such event, subject to the provisions of Article 12 of this Lease
running in favor of any Mortgagee, Lessor may, at its option and in addition to any other remedy
provided for in this Lease, terminate the Lease and revest in Lessor the leasehold interest
theretofore transferred to Lessee, by written notice to Lessee of its intention to do so.
3-131
15.7.2 Upon termination of this Lease pursuant to this Section 15.7 it shall be lawful for
Lessor to re-enter and repossess the Premises and Site without process of law, and Lessee, in such
event, does hereby waive any demand for possession thereof, and agrees to surrender and deliver
peaceably to Lessor immediately upon such termination in good order, condition, and repair,
except for reasonable wear and tear. Upon such termination title to all Improvements on the
Premises specified in this Lease shall remain in Lessor.
15.7.3 No ejectment, re-entry, or other act by or on behalf of Lessor shall constitute a
termination unless Lessor gives Lessee notice of termination in writing. Such termination shall
not relieve or release Lessee from any obligation incurred pursuant to this Lease prior to the date
of such termination.
15.7.4 Termination of this Lease under this Section 15.7 shall not relieve Lessee from the
obligation to pay any sum due to Lessor or from any claim for damages against Lessee. Damages
which Lessor may recover in the event of Default under this Lease shall include, but are not
limited to, the worth at the time of award of the amount by which the unpaid rent for the balance
of the Lease Term remaining after the time of award exceeds the amount of such rental loss that
Lessee proves could be reasonably avoided.
15.7.5 The right of termination provided by this Section 15.7 is not exclusive and shall
be cumulative to all other rights and remedies possessed by Lessor, and nothing contained herein
shall be construed so as to defeat any other rights or remedies to which Lessor may be entitled.
19. Article 16. Article 16 (General Provisions) shall be amended to read as follows:
ARTICLE 16
GENERAL PROVISIONS
16.1 Notices, Demands, and Communications between the Parties. Formal notices,
demands, and communications between Lessor and Lessee shall be sufficiently given if
personally delivered, delivered by reputable overnight delivery service providing a receipt
confirming delivery, or delivered by registered or certified mail, postage prepaid, return
receipt requested, to the following addresses:
If to City: City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Attention: City Manager
With copies to: City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Attention: City Attorney
and City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
3-132
Attention: Community Development Department —
Real Estate Manager
If to Lessee: Lido House, LLC
Attn: Robert D. Olson
520 Newport Center Drive, Suite 600
Newport Beach, CA 92660
With a copy to: Scott S. Pollard, Esq.
Attorney at Law
2804 Cliff Drive
Newport Beach, CA 92663
Such written notices, demands, and communications may be sent in the same manner
to such other addresses as either Party may from time to time designate by delivery of written
notice of change of address in the same manner as provided in this Section. Notices shall be
deemed delivered upon receipt for purposes of calculating all times for performance and all
Cure Periods provided for herein.
16.2 Time of Essence. Time is of the essence with respect to the performance of
each of the covenants and agreements contained in this Lease.
16.3 Conflict of Interests.
1.1.1 No official, officer, or employee of Lessor who participates in the
making of this Lease or in the implementation or enforcement of this Lease by or on behalf
of Lessor shall have any personal financial interest, direct or indirect, in this Lease.
1.1.2 Lessee represents and warrants to Lessor that neither Lessee nor any
official, officer, employee, consultant, or agent of Lessee has paid or given any official,
officer, employee, consultant, or agent of Lessor any money or other consideration for
obtaining this Lease.
16.4 Non -Liability of Lessor Officials and Employees. No official, officer, employee,
consultant or agent of Lessor shall be personally liable to Lessee, or any successor in interest of
Lessee, in the event of any Default by Lessor or any for any amount which may become due to
Lessee or successor of Lessee with respect to the negotiation, execution, implementation, or
performance of this Lease.
16.5 Inspection of Books and Records. Lessor has the right at all reasonable times
to inspect the books and records of Lessee pertaining to the Premises, Site, Site
Improvements, and Improvements as pertinent to the purposes of this Lease. Lessee shall
maintain such books and records in Orange County, California, or shall make such books and
records available for inspection in Orange County, California, during normal business hours
on not less than two (2) business days' notice from Lessor. Lessee also has the right at all
reasonable times to inspect the books and records of Lessor pertaining to the Premises, Site,
Site Improvements, and Improvements as pertinent to the purposes of this Lease.
3-133
16.6 No Partnership. Nothing in this Lease and no acts of Lessor or Lessee are
intended or shall be deemed or construed by any person to create the relationship of principal
and agent, or of partnership, or of joint venture, or of any association between Lessor and
Lessee.
16.7 Compliance with Law. Lessee agrees, at its sole cost and expense, to comply
and secure compliance with all the applicable and valid requirements now in force, or which
may hereafter be in force, of all municipal, county, State, and federal authorities, pertaining
to the Premises and Improvements, as well as operations conducted thereon, and to faithfully
observe and secure compliance with, in the use of the Premises, Site, Site Improvements, and
Improvements, all applicable municipal, county, State and federal statutes, ordinances,
regulations, and official rules and policies now in force or which may hereafter be in force,
including all laws prohibiting discrimination or segregation in the use, sale, lease, or
occupancy of the Premises or Site.
16.8 Obligation to Refrain from Discrimination. There shall be no discrimination
against or segregation of any person, or group of persons, on account of sex, sexual
orientation or identity, marital status, race, color, creed, religion, national origin, or ancestry
in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Premises,
Site, Site Improvements, and Improvements, and Lessee itself or any person claiming under
or through it shall not establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use, or occupancy of
subtenants, sublessees, or vendees of the Premises, Site, Site Improvements, and
Improvements.
16.9 Lessor's Reservation of Police Power Authority. Lessee acknowledges that
Lessor is approving and entering into this Lease in its proprietary capacity as fee owner of
the Premises and/or Site only, that Lessor, as a municipality, also has governmental and
regulatory authority over the Premises and/or Site, and that, notwithstanding any other
provision set forth in this Lease to the contrary, nothing in this Lease is intended or shall be
deemed to limit or restrict in any respect Lessor's exercise of its governmental and regulatory
authority over the Premises and/or Site, the construction that occurs on or about the Premises
and/or Site, or the maintenance and use of the Premises and/or Site, nor is anything in this
Lease intended to constitute a prejudgment or commitment by Lessor as to how it will
exercise its governmental and police power regulatory authority with respect to any such
matters. In no event shall Lessor be in Default of its obligations set forth in this Lease if it
takes or fails to take an action when acting in its governmental or regulatory capacity.
Notwithstanding the foregoing, nothing in this Lease is intended or shall be construed as a
waiver of any right or remedy Lessee would have in the absence of this Lease with respect to
any alleged act or omission of Lessor when acting in its governmental or regulatory capacity.
16.10 Applicable Law. The internal laws of the State of California shall govern the
interpretation and enforcement of this Lease, without regard to conflict of law principles.
16.11 Severability. If any provision of this Lease shall be adjudged invalid or
unenforceable by a court of competent jurisdiction, the remaining provisions of this Lease
shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted
by law.
3-134
16.12 Binding Effect. This Lease, and the terms, provisions, promises, covenants,
and conditions set forth herein shall be binding upon and shall inure to the benefit of the
Parties hereto and their respective and permitted heirs, legal representatives, successors, and
assigns.
16.13 No Third -Party Beneficiaries. Except to the limited extent set forth in Article
12 and any other provisions of this Lease specifying rights of permitted Mortgagees, this
Lease is intended to be for the benefit of only the Parties hereto and their respective permitted
successors and assigns and this Lease is not intended to create any third -party beneficiaries.
Not by way of limitation of the foregoing, by entering into and administering and enforcing
this Lease Lessor does not intend to protect any third party against the risk of any particular
kind of injury within the meaning of California Government Code Section 815.6 and Lessor
does not intend to create any rights or liabilities thereunder.
16.14 Captions and Section Headings. The captions and section headings contained
in this Lease are merely a reference and are not to be used to construe or limit the text.
16.15 No Recording of this Lease. This Lease shall not be recorded.
16.16 Events of Force Majeure: Extensions of Times of Performance. In addition to
specific provisions of this Lease, performance by either Party hereunder shall not be deemed
to be in Default where delays or defaults are due to causes beyond the control and without
the fault of the Party claiming an extension of time to perform, including war, insurrection,
strikes, lockouts, riots, floods, earthquakes, fires, casualty losses, supernatural causes, acts
of the public enemy, epidemics, quarantine restrictions, declared state of emergency (federal,
state, or local), freight embargoes, lack of transportation, governmental restrictions or
priority, litigation, unusually severe weather, inability to secure necessary labor, materials or
tools, delays of any contractor or supplier, and unanticipated and unreasonable failures to
timely act by any governmental agency acting in its regulatory capacity (each, individually,
an "Event of Force Majeure" and, collectively, "Events of Force Majeure"). An
extension of time for any such cause shall be for the period of the enforced delay and shall
commence to run from the time of the commencement of the cause. A Party claiming an
extension of time to perform a covenant or satisfy a condition set forth in this Lease due to
an Event of Force Majeure shall promptly, and in no event more than sixty (60) days after
the commencement of any Event of Force Majeure that delays its performance of a covenant
or satisfaction of a condition set forth in this Lease, notify the other Party in writing of the
Event of Force Majeure, such Party shall continue with commercially reasonable diligence
in an effort to limit the period of the delay, and the period of the delay shall be limited
accordingly. If, however, notice by the Party claiming such extension is sent to the other
Party more than sixty (60) days after the commencement of the cause, the period of the
enforced delay shall commence to run only sixty (60) days prior to the giving of such notice.
Times of performance under this Lease may also be extended in writing by Lessor and
Lessee. In no event, however, shall an Event or Events of Force Majeure extend the Lease
Commencement Date or Commencement Date of the Third Amendment beyond the Outside
Commencement Date or Outside Commencement Date of the Third Amendment, as
applicable, without Lessor's and Lessee's written approval, which approval either Lessor or
Lessee may withhold in its sole and absolute discretion.
3-135
16.17 Entire Agreement, Waivers, and Amendments. This Lease constitutes the
entire agreement between Lessor and Lessee with respect to the subject matter addressed
herein and supersedes all prior discussions, negotiations, and agreements between the Parties
with respect thereto.
All waivers of the provisions of this Lease must be in writing and signed by the
appropriate authorities of the Party or Parties to be charged and all amendments hereto must
be in writing and signed by the appropriate authorities of both Lessor and Lessee. Lessor
and Lessee shall each have the right to disapprove waivers of and amendments to this Lease
in their sole and absolute discretion. During the term of any Mortgage obtained in accordance
with Article 12 of this Lease, any amendment to this Lease additionally shall require the
written approval of the Mortgagee.
16.18 Attornment. In the event any proceedings are brought for the foreclosure of, or
in the event of the conveyance by deed in lieu of foreclosure, or in the event of exercise of
the power of sale under, any mortgage and/or deed of trust made by Lessor covering the
Premises and/or Site, or in the event Lessor sells, conveys, or otherwise transfers its leased
fee interest in the Premises and/or Site, Lessee hereby agrees to attorn to the new owner, and
Lessee further covenants and agrees to execute an instrument in writing reasonably
satisfactory to the new owner whereby Lessee attoms to the successor in interest and
recognize the successor as the Lessor under this Lease.
16.19 Subordination. Lessee agrees that this Lease shall be subordinate to any
mortgages or deeds of trust that may hereafter be placed upon the fee of the Premises and/or
Site by Lessor and to any and all advances to be made thereunder, and to the interest thereon, and
all renewals, replacements, and extensions thereof, provided that the mortgagees or
beneficiaries named in said mortgages or trust deeds shall execute and deliver a written non -
disturbance and recognition agreement by and among Lessee, Lessor, and such mortgagees or
beneficiaries, in form reasonably satisfactory to Lessee and its counsel and the holder of any
Mortgage and their counsel, which shall provide the following assurances for the benefit of
Lessee, Mortgagee, and their permitted assignees, sublessees, successors, and assigns:
(i) The leasehold estate granted by this Lease shall not be affected in any
manner by any foreclosure action, trustee's sale, or other action taken or proceeding
commenced under or in connection with any mortgages or deeds of trust placed upon the fee
of the Premises and/or Site by Lessor, or by any taking of possession of the Premises and/or
Site pursuant thereto, or by the exercise of any rights or remedies in connection therewith;
(ii) if the interest of Lessor under this Lease is transferred in connection with
any foreclosure action, trustee's sale, or other proceedings brought under any mortgages or
deeds of trust placed upon the fee of the Premises and/or Site by Lessor (including, without
limitation, any transfer by deed in lieu of foreclosure), then, so long as Lessee is not in Default
in the performance of the terms, covenants, and conditions of this Lease beyond all applicable
notice, grace, and Cure Periods, the transferee of any such interest of Lessor (including,
without limitation, the holder of any such mortgage or deed of trust), together with its
successors and assigns (collectively, "Lessor's Transferee"), shall not terminate this Lease or
interfere with or disturb Lessee in its possession, use, occupancy, and quiet enjoyment of the
Premises and Site under this Lease, for the remaining term of this Lease (as the same may be
3-136
earlier terminated pursuant to any other Article of this Lease), subject to all of the terms,
covenants, and conditions of this Lease;
(iii) Lessee shall not be named or joined in any foreclosure action, trustee's
sale, or other proceeding to enforce any mortgages or deeds of trust placed upon the fee of
the Premises and/or Site by Lessor; and
(iv) any Lessor's Transferee will accept the attornment of Lessee and will
assume and perform all of Lessor's obligations under the Lease for the benefit of Lessee and
its successors and assigns.
The foregoing written assurances shall, at Lessee's request, also be provided to any
permitted Transferee of Lessee under this Lease. Lessee also agrees that in the event Lessor
and any mortgagee or beneficiary elect to have this Lease prior to such mortgage or deed of
trust, and upon notification by Lessor or such mortgagee or beneficiary to Lessee to that
effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this
Lease is dated prior to or subsequent to the date of said mortgage or deed of trust. Lessee
agrees that upon the request of Lessor, or any mortgagee or beneficiary, Lessee shall execute
whatever instruments may be required to carry out the intent of this Section 16.19.
16.20 Approvals. Except to the extent that this Lease authorizes a Party to withhold
its approval or consent to a specified request by the other Party in its sole and absolute
discretion, approvals and consents required of Lessor and Lessee shall not be unreasonably
withheld, conditioned, or delayed.
The City Manager or his or her designee shall have the authority to implement and
enforce this Lease on behalf of Lessor; provided, however, that (i) in no event shall the City
Manager (or designee) have the authority, without City Council approval or express
delegation of authority, to approve substantive amendments to this Lease that materially
increase Lessor's obligations or materially impair or jeopardize its rights hereunder; (ii) in no
event shall the City Manager (or designee) have the authority, without City Council approval
or express delegation of authority, to approve waivers that materially impair or jeopardize
Lessor's rights hereunder; (iii) the City Manager (or designee) shall have the right, even if
he or she has the authority to act hereunder without seeking City Council approval, to seek such
approval, and in such event Lessor shall not be deemed to be in Default hereunder; and (iv) the
City Attorney's approval shall also be required with respect to (A) the form and content of any
agreement, estoppel certificate, or other document approved by the City Manager or his or her
designee, (B) whether the City Manager's and/or his/her designee's approval is consistent with the
terms and conditions set forth in this Lease, including without limitation the provisions of clauses
(i) and (ii) above, and (C) whether the City Manager and/or his/her designee has the authority
under this Lease and applicable law to grant or provide such approval.
In the event that Lessee requests Lessor approval of any matter pertaining to this Lease,
including without limitation approval of Lessee's Evidence of Financial Capability, any of
Lessee's development or building plans or permits, Transfer of Lessee's interest, Transfer to a
Mortgagee, and execution of an estoppel certificate, as a condition to Lessor's taking such
action, and without regard to whether Lessor's final action is to approve, conditionally approve,
or deny such request, Lessee shall pay or reimburse Lessor for all of Lessor's actual and
3-137
reasonable costs and expenses in conjunction therewith, including without limitation the payroll
costs of Lessor's in-house staff and reasonable consultant fees incurred with respect thereto.
This obligation of Lessee shall survive the termination or expiration of this Lease.
16.21 Lessee's Representations and Warranties. As a material inducement to Lessor to
enter into this Lease, Lessee represents and warrants the following: (i) Lessee is a corporation
organized, validly existing, and in good standing under the laws of the State of California; (ii)
Lessee has all necessary power and authority to enter into this Lease and to carry out the
transactions and obligations contemplated herein; (iii) the execution and delivery of this Lease
and the performance by Lessee of its obligations hereunder will not violate or constitute an event
of default under the terms and provisions of any agreement, ordinance, regulation, law, or court
order to which Lessee is a party or by which Lessee is bound; (iv) all actions required to be taken
by or on behalf of Lessee to authorize it to execute, deliver, and perform its obligations set forth
in this Lease have been taken; (v) the person(s) executing this Lease on behalf of Lessee have
full power and authority to bind Lessee to the terms hereof; and (vi) this Lease is a valid and
binding obligation of Lessee enforceable in accordance with its terms, except as the same may be
affected by bankruptcy, insolvency, moratorium, or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally.
16.22 Lessor's Representations and Warranties. As a material inducement to Lessee to
enter into this Lease, Lessor represents and warrants the following: (i) Lessor is a municipal
corporation duly organized, validly existing, and in good standing under the laws of the State of
California; (ii) the execution and delivery of this Lease and the performance by Lessor of its
obligations hereunder will not violate or constitute an event of default under the terms and
provisions of any agreement to which Lessor is a party or by which Lessor is bound; (iii) all
actions required to be taken by or on behalf of Lessor to authorize it to execute and deliver this
Lease have been taken; and (iv) the person(s) executing this Lease on behalf of Lessor have full
power and authority to do so.
16.23 No Liability for Broker's Commissions or Finder's Fees. Each Party represents
and warrants to the other Party that it has not entered into any agreement or incurred any
obligation which might result in the obligation to pay a brokerage commission or finder's fee with
respect to this transaction. Each Party agrees to indemnify, defend, and hold harmless the other
Party from and against any and all claims, liabilities, and losses, including attorney's fees, which
the other Party may incur as the result of any claim made by any person or entity to a right to a
brokerage commission or finder's fee in connection with this transaction to the extent such claim
is based, or purportedly based, on the acts or omissions of the indemnifying Party.
16.24 Counterparts. This Lease may be executed in counterparts and when so executed,
each such counterpart will constitute an original document and such counterparts will constitute
one and the same agreement.
16.25 Estoppel Certificates. Within fifteen (15) days after each request therefor by either
Party, the other Party agrees to deliver a certificate to any person designated by the requesting
Party (including a proposed Mortgagee or purchaser), or to the requesting Party, certifying (if
such be the case) that this Lease is in full force and effect, that to the best of such Party's
knowledge at that time, there are no Events of Default by Lessee hereunder or any defaults by
Lessor hereunder and that no events have occurred which, with the giving of notice or the passage
3-138
of time or both, would constitute an Event or Default with respect to Lessee or a default with
respect to Lessor hereunder, or stating those claimed by the responding Party, and that to the best
of such Party's knowledge, there are no defenses or off -sets in favor of either Party hereto, or
stating those claimed by the responding Party, and/or certifying whether any consent or approval
required under this Lease has been denied or granted by the responding Party and whether any
specified rights have been waived or deemed waived or expired. Any such certificate shall also
contain a warranty that the person signing has the authority to execute the certificate on behalf of
such Party. Each such estoppel certificate shall identify the Lease and all amendments, shall
specify the date to which Base Rent and Percentage Rent have been paid, and shall specify the
then applicable Base Rent payable hereunder. Nothing in this Section 16.25 shall be construed as
reducing the period of time that either Party has under the terms of this Lease to respond to a
request by the other Party for a consent or an approval.
16.26 No Attorney's Fees. In any action between the Parties hereto seeking enforcement
of any of the terms and provisions of this Lease, Second Amendment, and/or Third Amendment,
or in connection with the Premises and/or the Site, the prevailing Party in such action shall not be
entitled to have and to recover from the other Party its reasonable attorneys' fees and other
expenses and costs in connection with such action or proceeding.
16.27 Integrated Agreement. Except as expressly modified herein, all other provisions,
terms, and covenants set forth in the Lease shall remain unchanged and shall be in full force and
effect.
[Signatures on the following pagel
3-139
IN WITNESS WHEREOF, the parties have caused this Third Amendment to Lease to
be executed as of the day and year first above written.
LESSOR:
CITY OF NEWPORT BEACH, a California municipal
corporation and charter city
By:
Name: Grace K. Leung
Title: City Manager
Date:
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
By:
Name: Aaron C. Harp
Title: City Attorney
Date:
ATTEST:
By: _
Name: Leilani I. Brown
Title: City Clerk
Date:
LESSEE:
LIDO HOUSE, LLC., a California limited liability
company,
By: Olson Real Estate Group, Inc., a California
corporation, Manager
By:
Name: Robert D. Olson
Title: President
Date:
Exhibit "A-1" LEGAL DESCRIPTION OF PREMISES AND SITE
Exhibit "A-2" DEPICTION OF PREMISES AND SITE
Exhibit "A-3" DEPICTION OF PUBLIC PARKING AREA
Exhibit "B" SCHEDULE OF PERFORMANCE FOR THIRD AMENDMENT
Exhibit "C" FORM OF AMENDMENT TO MEMORANDUM OF LEASE
3-140
EXHIBIT A-1
LEGAL DESCRIPTION
"LEASE PARCEL"
THAT PORTION OF LOTS 6 AND 7 IN SECTION 28, TOWNSHIP 6 SOUTH, RANGE 10 WEST, SAN
BERNARDINO MERIDIAN IN THE CITY OF NEWPORT BEACH, COUNTY OF ORANGE, STATE OF
CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF LOT 1 IN BLOCK "A" AND "THE HUDSON" OF
MAP OF "LANCASTER'S ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN
BOOK 5, PAGE 14 OF MISCELLANEOUS MAPS, THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS
SHOWN ON A MAP RECORDED IN BOOK 35, PAGE 48 OF MISCELLANEOUS MAPS AND THAT
PORTION OF A 20.00 FOOT ALLEY, AS VACATED BY THAT CERTAIN RESOLUTION NO. 3280 OF THE
CITY COUNCIL OF SAID CITY, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 11, 1946 IN
BOOK 1400, PAGE 189 OF OFFICIAL RECORDS, ALL OF RECORDS OF SAID COUNTY, MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHWESTERLY CORNER OF SAID LOT 3, THENCE ALONG THE WESTERLY
LINE OF SAID LOT 3, NORTH 00°09'03" EAST 128.00 FEET TO THE WESTERLY TERMINUS OF THAT
CERTAIN COURSE SHOWN AS "N89°15'30"E 90.00 FEET" ON THE SOUTHERLY BOUNDARY OF
PARCEL 1 OF PARCEL MAP RECORDED IN BOOK 85, PAGES 1 AND 2 OF PARCEL MAPS, RECORDS OF
SAID COUNTY AND BEING THE TRUE POINT OF BEGINNING;
THENCE ALONG THE SOUTHERLY BOUNDARY OF SAID PARCEL 1, THE FOLLOWING FOUR (4)
COURSES:
(1) NORTH 00°09'03" EAST 53.55 FEET,
(2) NORTH 39-53-38" WEST 108.61 FEET TO THE BEGINNING OF A CURVE CONCAVE
SOUTHWESTERLY, HAVING A RADIUS OF 351.15 FEET,
(3) NORTHWESTERLY 306.25 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF
49°58'10" AND
(4) NORTH 89°51'48" WEST 97.67 FEET TO THE MOST NORTHEASTERLY CORNER THAT
CERTAIN IRREVOCABLE OFFER OF DEDICATION TO THE CITY OF NEWPORT BEACH
RECORDED SEPTEMBER 18, 2014 AS INSTRUMENT NO. 2014000378678, OF OFFICIAL
RECORDS OF SAID COUNTY;
1 OF 4
January 17, 2024
M:\Mapping\1100\04\Legals\LEASE\1100-004 Lease PL.docx
3-141
THENCE ALONG THE EASTERLY LINE OF SAID IRREVOCABLE OFFER OF DEDICATION THE FOLLOWING
TWO (2) COURSES:
(1) SOUTH 00°26'22" WEST 47.25 FEET,
(2) NORTH 89°33'38" WEST 8.13 FEET TO AN ANGLE POINT THEREIN;
THENCE LEAVING SAID EASTERLY LINE SOUTH 01°27'07" WEST 12.14 FEET;
THENCE SOUTH 49°26'59" WEST 22.96 FEET TO A POINT IS SAID EASTERLY LINE, SAID POINT BEING
ON A NON -TANGENT CURVE CONCAVE EASTERLY, HAVING A RADIUS OF 2724.04 FEET, A RADIAL
LINE TO SAID POINT BEARS NORTH 82°33'58" WEST;
THENCE ALONG SAID EASTERLY LINE THE FOLLOWING SEVEN (7) COURSES:
(1) SOUTHERLY 89.31 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 01°52'43" TO
THE BEGINNING OF A REVERSE CURVE, HAVING A RADIUS OF 58.00 FEET, A RADIAL LINE TO
SAID POINT BEARS SOUTH 84°26'40" EAST,
(2) SOUTHERLY 13.75 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 13-35-10",
(3) SOUTH 19°08'30" WEST 36.43 FEET TO THE BEGINNING OF A CURVE CONCAVE EASTERLY,
HAVING A RADIUS OF 42.00 FEET,
(4) SOUTHERLY 10.88 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 14'50'20" TO
THE BEGINNING OF A COMPOUND CURVE, HAVING A RADIUS OF 2736.04 FEET, A RADIAL
LINE TO SAID POINT BEARS NORTH 85°41'50" WEST,
(5) SOUTHERLY 62.82 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 01-18'56" TO
THE BEGINNING OF A REVERSE CURVE, HAVING A RADIUS OF 873.00 FEET, A RADIAL LINE
TO SAID POINT BEARS SOUTH 87°00'46" EAST,
(6) SOUTHERLY 74.65 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 04°53'58"
TO THE BEGINNING OF A REVERSE CURVE, HAVING A RADIUS OF 37.00 FEET, A RADIAL
LINE TO SAID POINT BEARS NORTH 82°06'48" WEST,
(7) SOUTHERLY 9.24 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 14-18-33" TO
AN ANGLE POINT IN SAID EASTERLY LINE;
20F4
January 17, 2024
M:\Mapping\1100\04\Legals\LEASE\1100-004 Lease PL.docx
3-142
THENCE CONTINUING ALONG SAID EASTERLY LINE AND THE SOUTHERLY PROLONGATION THEREOF,
NON TANGENT TO SAID CURVE, SOUTH 39°29'57" EAST 40.40 FEET TO A POINT ON A NON -
TANGENT CURVE CONCAVE NORTHERLY, HAVING A RADIUS OF 37.00 FEET, A RADIAL LINE TO SAID
POINT BEARS SOUTH 17°24'48" WEST;
THENCE EASTERLY 9.24 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 14°18'32";
THENCE SOUTH 86°53'44" EAST 46.04 FEET;
THENCE NORTH 26°56'46" WEST 20.77 FEET;
THENCE SOUTH 86°56'46" EAST 180.71 FEET;
THENCE SOUTH 26°56'46" EAST 21.18 FEET TO THE BEGINNING OF A CURVE CONCAVE
NORTHEASTERLY, HAVING A RADIUS OF 8.50 FEET;
THENCE SOUTHEASTERLY AND EASTERLY 9.33 FEET ALONG SAID CURVE THROUGH A CENTRAL
ANGLE OF 62°55'02";
THENCE SOUTH 89°51'48" EAST 118.46 FEET TO THE BEGINNING OF A CURVE CONCAVE
NORTHERLY, HAVING A RADIUS OF 700.00 FEET;
THENCE EASTERLY 80.34 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 06'34'35";
THENCE NORTH 38'56'26" EAST 13.56 FEET;
THENCE NORTH 76°17'19" EAST 10.79 FEET;
THENCE SOUTH 00°12'29" WEST 7.39 FEET;
THENCE SOUTH 89*47'31" EAST43.00 FEET;
THENCE NORTH 00'12'29" EAST 7.21 FEET;
THENCE NORTH 90°00'00" EAST 9.54 FEET;
THENCE SOUTH 44'56'13" EAST 12.76 FEET
THENCE SOUTH 89047'31" EAST 25.45 FEET;
3OF4
January 17, 2024
M:\Mapping\1100\04\Legals\LEASE\1100-004 Lease PL.docx
3-143
THENCE NORTH 00'00'01" EAST 135.53 FEET;
THENCE NORTH 90°00'00" EAST 15.78 FEET;
THENCE NORTH 00°09'03" EAST 10.99 FEET TO SAID SOUTHERLY BOUNDARY OF PARCEL 1;
THENCE ALONG SAID SOUTHERLY BOUNDARY NORTH 89°50'57" WEST" 90.00 FEET TO THE TRUE
POINT OF BEGINNING.
CONTAINING 180,941 SQUARE FEET, 4.154 ACRES MORE OR LESS.
AS SHOWN ON EXHIBIT "B" ATTACHED HERETO AND BY THIS REFERENCE MADE A PART HEREOF.
SUBJECTTO CONVENANTS, CONDITIONS, RESTRICTIONS, RESERVATIONS, EASEMENTS AND
RIGHTS -OF -WAY OF RECORD, IF ANY.
DATED THIS 17 DAY OF JANUARY
V
KURT R. TROXELL, L.S. 7854
40F4
January 17, 2024
M;\Mapping\1100\04\Legals\LEASE\1100-004 Lease PL.docx
• � nn
4
V
V4`
�v • 7
3-144
L LA G VIA OPORTO L19 L18
� R TR TRACT NO, III-/ -----i-
Y � N00'00'01"E 135.53' j
r
- S'LY LINE LOT -3 � SEE
- PARCEL 1 04 DETAIL "C"
-- - - P.M.B. 85/1 a
J� ��'' �� N1.N1• �� SHEET 2 OF 2
y� No.7854 T.P.O.B.
�OF C�1 1�O o L1 128.00'
y N00'09'03"EI 181.55' I
01 /17/2024 l� �����
fit' a S'WLY COR. 6 j
LOT 3, TR NO. 1117,
S'LY LINE ALLEY VACATED PER M.M. 35/48
PARCEL 1 BK. 1400, PG. 189,
IP.M.B. 85/1 O.R. REC. 3-11-46 10
W
W
h "' 0O �
' co w cn
Q-
h 1,01 1a
t
CS
V �f
r: U
c Q Q
w
CC
E'LY LINE IRREVOCABLE OFFER OF w w O
DEDICATION TO THE CITY OF NEWPORT I M
BEACH, FOR STREET AND HIGHWAY n Q w
SEEcc
PURPOSES, INST NO. 2014000378678, O.R. z
DETAIL "A" N
r� �
rcn co ,I� �� at
Z 1 w "a 4 f
1 IN �, r SEE Q 1 I
to I� of 1 DETAIL "B"
SHEET 2 OF 2
cc I
cl
C2 C4� C5 /
+�
w w _r'� — c3 �`—� c)
J LLJ fZ
rz co NEWpORT BOULEVARD
I� NOTE: SEE LINE AND CURVE TABLE ON SHEET 3 OF 3
EXHIBIT' B' DATE: January 17, 2024
FUSCOE SCALE: 00.00'
SKETCH TO ACCOMPANY LEGAL DESCRIPTION JN: 110.004.01
�liE• LEASE PARCEL DRAWN BY: DB
E R 6 1 N E E R I R 6 CHECKED BY: KRT
16795 Von Korman, Suite 100, 1-ine, Colifomio 9260E LIDO HOUSE HOTEL
lei 949.474.19600 fox 949.474.5315 o—fuscoe.com NEWPORT BEACH, CA SHEET 7 OF 3
M:\MAPPING\1100\04\LEGALS\LEASE\1100-004 LEASE SNORY.DWG (01-17-24)
3-145
FA
I /
\� OFFER OF DEDICATION, /
INST. NO. 2014000378689. O.R. �/0-1
DETAIL "A"
�- WHO 'E 135.53'
I
J
I I
ILo
JL14
W
I I c.�
---- 128.00'
-- NOO'09'03'E 181.55' L13
PAC
SW'LY COR.
LOT 3, TR NO. 1117,
M.M. 35/48
L-------------
DETAIL "C"
V. _
I
C7 I
I 1
1 S8334-39-W (R)�
N82b6'48'W SPR�
1 �
r C61 I �/
DETAIL "B"
SCALE: V=40-
1011-H
"JEXHIBIT'B' DATE: January 17, 2024
CO SCALE: 10.00'
SKETCH TO ACCOMPANY LEGAL DESCRIPTION JN: 1too.004.ot
titsLEASE PARCEL DRAWN BY: :
E ■ 6 1 ■ E E R 1 r s CHECKED BY: KRT
16795 von Kamm., Suite 100, !nine, Califomia 92606 LIDO HOUSE HOTEL
rd949.474.1960a fox949.474.5315 0—.fuscoo.wm NEWPORT BEACH, CA SHEET 2 OF 3
U:\WPMNG\1100\04\LM4LS\L.EASE\1100-004 LEASE BNDRY.DWG (01-17-24)
3-146
LINE TABLE
LINE
BEARING
LENGTH
L1
N00'09'03'E
53.55'
L2
S00'26'22'W
47.25'
L3
N89'33'38'W
8.13'
L4
S01'27'07"W
12.14'
L5
S49 26'59'W
22.96'
L6
S19'08'30"W
36.43'
L7
S3929'57'E
40.40'
L8
S86'53'44'E
46.04'
L9
N26'56'46'W
20.77'
L10
S26'56'46'E
21.18'
L11
N38756'26"E
13.56'
LINE TABLE
LINE
BEARING
LENGTH
L12
N7617'19'E
10.79'
L13
S0012'29'W
7.39'
L14
N0012'29"E
7.21'
L15
N90'00'00'E
9.54'
L16
S44'56'13'E
12.76'
L17
S89'47'31'E
25.45'
L18
N90'00'00'E
16.78'
L19
N00'09'03'E
10.99'
L20
N89'50'57'W
90.00'
CURVE TABLE
CURVE
DELTA
RADIUS
LENGTH
C1
1'52'43"
2724.D4'
89.31'
C2
13'35'10*
58.00'
13.75'
C3
14'50'20"
42.00'
10.88'
C4
118'56"
2736.04'
62.82'
C5
4'5,3'58"
873.00'
74.65'
C6
1418'33'
37.00'
9.24'
C7
1418'32"
37.00'
9.24'
C8
62'55'02"
8.50'
9,33'
C9
634'35"
700.00'
80.34'
•`E1II EXHIBITS' DATE: January 17, 2024
= FUSCDE SCALE: 00.00'
SKETCH TO ACCOMPANY LEGAL DESCRIPTION JN: 1100.004.01
b1'" LEASE PARCEL DRAWN BY. DB
E 1 6 1 ■ E E R l r s CHECKED BY: KRT
16795 Van Kaman, Suite 100, Irvine, Colifomia 92606 LIDO HOUSE HOTEL
tal 949. 474.1960 a fax 949.474.5315 a-fua oe.cem NEWPORT BEACH, CA SHEET 3 OF 3
M.\WIPPI14G\1100\04\LM4LLS\LEASE\1100-004 LEASE BNDRY.DWG (01-17-24)
3-147
I II
j, Alk, \
i
�Ipl
-
Tj
�
--
I I
LOCATION MAP
1"=eo• SEE �,.'D'
FF
I' I
R. LRR IJrE ' � I
I u1
I
8 i �
® Y a
� I
, r
I
,
F, dUISl
r]1W'Ii7Y•f i
Xa3N'2eT '� -
� � [x IMSf ux5, 4]W -- - XN]1l St 1 i343 I
- lL1Y PORigx A —+r J � m � xFlelEp
y�N Ek ILlSE fX
ur
32nd STREET (PUBLIC STREET)
LEGEND AND ABBREVIATIONS AREA DETAILV LEASE LINE EXHIBIT
GNOViTl1' LINE - - - - LCASC ipXllpX A - qpp! M
MPaO�VK ENE Po�FTmd4 N .Ail IC A
FOR
K �FU=E ® LIDO HOUSE HOTEL EXPANSION EXHIBIT A-2
R R6P4
vaavtamuxc 3300 NEWPORT BLVD.
NEWPORT BEACH, CA. DATE: 126/2024
IrAm.GIIIarn1�T!!la 1wm.sun SryyC, �•-lp•
3-148
r
f
f
1 LOCATION MAP
,,,=ED' si
OFLLKOE
32nd STREET (PUBLIC STREET)
LEGEND AND ABBREVIATIONS AREA DETAIL ID'
PiO.ORV IfAS[ IiK 10i41d1m IFASC NIG IIF.ISi A t 8I - 4Y1] IC
�. UNE
I
+wr
I
PUBLIC PARKING AREA EXHIBIT
FOR
LIDO HOUSE HOTEL EXPANSION EXHIBIT A-3
3300 NEWPORT BLVD.
NEWPORT BEACH, CA. DATE: 1/26/2024
3-149
EXHIBIT "B"
SCHEDULE OF PERFORMANCE —THIRD AMENDMENT
ITEM OF PERFORMANCE
TIME FOR COMPLETION
1.
Lessor takes final administrative action to
Within ninety (90) calendar days of the last to
approve and/or affirm all Development
occur of unappealable approval of the Local
Entitlements for which City is the final
Coastal Plan Amendment, issuance of Notice
administrative decision maker (Article 2 —
of Intent to issue a permit (CDP), and final
Additional Development Entitlements for Site
executed Coastal Development Permit
Improvements)
Amendment by the California Coastal
Commission.
2.
Lessor files application with California Coastal
Completed
Commission to approve amendment to
certified Coastal Land Use Plan consistent
with Item 1 above, and cooperate and
exercise commercially reasonable diligence to
obtain approval of such amendment.
3.
Lessee submits to Lessor, for "approval in
Completed
concept," the site plans, floor plans,
landscaping, and elevations for Site
Improvements, consistent with Development
Entitlements referred to in Items 1 and 2
above.
4.
Lessor's staff issues its "approval in concept"
Completed
of Lessee's site plan, floor plans, landscaping,
and elevations for Site Improvements,
consistent with Development Entitlements
referred to in Items 1-3 above.
5.
Lessor/Lessee files application with California
Completed
Coastal Commission for Coastal Development
Permit Amendment (CDP) for Site
Improvements, consistent with Development
Entitlements referred to in Items 1-4 above.
6.
Lessor/Lessee cooperate and exercise
Subject to Force Majeure, within six (6)
commercially reasonable diligence in Lessee's
months of the Option Date. Should this item
effort to cause California Coastal Commission
not be completed within the time allotted,
to approve CDP for Site Improvements.
subject to Lessee's commercially reasonable
response times for any resubmittals required
by the California Coastal Commission, Lessor
and Lessee shall, upon mutual written
agreement, extend the time for completion
of this item of performance.
7.
Lessee submits building permit application(s)
Within one -hundred -twenty (120) calendar
to Lessor for approval of construction plans,
days of completion of Item 1 above.
security instruments, any applicable
3-150
application fees, and other items (other than
fees payable upon issuance of permits)
required to obtain approval of all
construction permits for construction of
storage spaces and break-out meeting rooms.
8.
Lessee submits building permit application(s)
Within ninety (90) calendar days of
to Lessor for approval of construction plans,
completion of construction of storage areas
security instruments, any applicable
and break-out meeting rooms.
application fees, and other items (other than
fees payable upon issuance of permits)
required to obtain approval of all
construction permits for demolition of the
fire station, grading and non -vertical
improvements to the Site including public
parking stalls.
9.
Lessee submits building permit application(s)
Within ninety (90) calendar days of
to Lessor for approval of construction plans,
completion of the demolition, grading and
security instruments, any applicable
non -vertical improvements to the Site
application fees, and other items (other than
including public parking stalls.
fees payable upon issuance of permits)
required to obtain approval of all
construction permits for construction of the 5
cottage units and 3 king suite room additions.
10.
Lessor completes first plan check of
Within forty-five (45) calendar days of
construction plans/documents referred to in
completion of Items 7, 8, or 9 respectively.
Items 7, 8, or 9 respectively and returns
comments/requested corrections to Lessee.
11.
Lessee resubmits corrections to Lessor's plan
Within sixty (60) calendar days of receipt of
check comments/review of construction
plan check comments as outlined in Item 10.
plans/documents (with any applicable
additional fees that are owed).
12.
Lessor completes subsequent plan check(s) of
Within twenty-five (25) calendar days of
Lessee's resubmittal(s) of matters referred to
submittal(s) by Lessee.
in Item No.11.
13.
Lessee submits amendments to the Hotel
Within ninety (90) calendar days of the later
Management Agreement and Hotel Franchise
of: (i) The Commencement Date of the Third
Agreement, as applicable, and supporting
Amendment; or (ii) completion of Item 7.
documents/information to Lessor for
review/approval.
14.
Lessor approves or disapproves Lessee's
Within thirty (30) calendar days of
amended Hotel Management Agreement and
completion of Item 13.
Hotel Franchise Agreement, as applicable,
and notifies Lessee.
15.
Lessee submits Evidence of Financial
Within ninety (90) calendar days of the later
Capability, Construction Loan Documents, as
of: (i) The Commencement Date of the Third
applicable, and supporting
Amendment; or (ii) completion of Item 7 for
the scope of work outlined in Item 7.
3-151
documents/information to Lessor for
review/approval.
16.
Lessee submits Evidence of Financial
Within ninety (90) calendar days of the later
Capability, Construction Loan Documents, as
of: (i) the Commencement Date of the Third
applicable, and supporting
Amendment; or (ii) completion Item 8 for the
documents/information to Lessor for
scope of work outlined in Item 8 and 9.
review/approval.
17.
Lessor approves or disapproves Lessee's
Within thirty (30) calendar days of
Evidence of Financial Capability and
completion of Item 15 and Item 16,
Construction Loan Documents, as applicable,
respectively.
and notifies Lessee.
18.
Lessee resubmits any additional/new
Within ninety (90) calendar days of
information required to obtain Lessor
completion of Item 14 and Item 17,
approval of Lessee's Evidence of Financial
respectively.
Capability, Construction Loan Documents,
amended Hotel Management Agreement,
and Hotel Franchise Agreement, as
applicable, in response to Lessor's
disapproval notice, if applicable.
19.
Lessor approves Lessee's Evidence of
Within thirty (30) calendar days of
Financial Capability, Construction Loan
completion of Item 18, as applicable.
Documents, amended Hotel Management
Agreement, and Hotel Franchise Agreement,
as applicable.
20.
Lessee executes and delivers to Lessor the
Within fifteen (15) calendar days of the later
Third Amendment to Ground Lease and the
of: (i) the Commencement Date of the Third
Memorandum of Third Amendment to
Amendment; or (ii) completion of Item 19
Ground Lease; Commencement Date of the
above, as it relates to the Lessee's tasks
Third Amendment to Ground Lease occurs.
outlined in Items 7, 13, and 15 above.
21.
Lessee commences construction of new
Within the later to occur of: (i) the
storage areas construction and break-out
Commencement Date of the Third
meeting rooms construction.
Amendment; (ii) twelve (12) months after
completion of Item 1 above; or (iii) six (6)
months after completion of Item 7 above.
22.
Lessee commences construction of
Within twelve (12) months of the later of: (i)
demolition of the fire station, grading and
the Commencement Date of the Third
non -vertical improvements to the Site
Amendment; or (ii) Item 21 above.
including public parking stalls.
23.
Lessee commences construction of the 5 new
Within twelve (12) months of the later of: (i)
cottages and 3 king suite additions.
the Commencement Date of the Third
Amendment; or (ii) Item 22 above.
24.
Lessee completes Items 21, 22, and 23 and
Within three (3) years of the later of: (i) the
opens Site for business to the general public.
Commencement Date of the Third
Amendment; or (ii) Lessee being issued the
first building permit to construct the scope of
work outlined in Item 7.
3-152
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
Attn: City Clerk
EXHIBIT "C"
(SPACE ABOVE THIS LINE FOR RECORDER'S USE)
MEMORANDUM OF THIRD AMENDMENT TO GROUND LEASE
This Memorandum of Third Amendment to Ground Lease ("Memorandum") is entered
into and is effective as of , 20_ (the "Commencement Date of the Third
Amendment"), by and between the CITY OF NEWPORT BEACH, a charter city and
California municipal corporation ("Lessor"), and LIDO HOUSE, LLC, a California limited
liability company ("Lessee").
RECITALS
A. On September 9, 2014, Lessor and Olson Real Estate Group, Inc., a California corporation
doing business as R.D. Olson Development ("R.D. Olson Development"), entered into
that certain Ground Lease ("Ground Lease") for the development of a hotel with one
hundred thirty (130) guest rooms and related facilities ("Hotel") on City owned land at
3300 Newport Boulevard in the City of Newport Beach, County of Orange, State of
California, as more particularly described on Exhibit A attached hereto ("Premises").
B. On May 3, 2016, a First Amendment to Lease to amend and clarify the Legal Description
and the Depiction of the Premises which are the subject of the Ground Lease was executed
("First Amendment to Ground Lease").
C. On May 3, 2016, an Assignment and Assumption of Lease was executed, whereby all the
rights, title and interest in the Ground Lease, as amended by the First Amendment to
Ground Lease, were transferred by R.D. Olson Development to Lessee.
D. On , 2024, a Second Amendment to Lease amended certain provisions related
to Lessee's refinancing of the Premises was executed ("Second Amendment")
E. On , 2024, an Option Agreement to Ground Lease with Related Third
Amendment to Ground Lease was executed.
F. Lessor and Lessee have entered into that certain Third Amendment to Ground Lease dated
as of , 20_, ("Third Amendment to Ground Lease" and, together with
the Ground Lease and the First and Second Amendments to Ground Lease, the "Lease")
relating to the incorporation to the Lease of certain contiguous real property located at
3-153
475 32"d Street in Newport Beach, County of Orange, State of California, as more
particularly described on Exhibit B attached hereto ("Site"). Lessor and Lessee desire to
execute this Memorandum for recordation in the real property records of the County of
Orange in order to memorialize the existence of the Third Amendment to Ground Lease
and the occurrence of the Commencement Date of the Third Amendment.
NOW, THEREFORE, with reference to the foregoing recital, Lessor and Lessee agree as follows:
Lease of Premises. Lessor has leased and is currently leasing the Premises to Lessee
and Lessee has hired and is currently hiring the Premises from Lessor on the terms
and conditions set forth in the Lease.
2. Lease of Site. Lessor hereby leases the Site to Lessee and Lessee hereby hires the
Site from Lessor on the terms and conditions set forth in the Lease.
3. Incorporation of Lease. This instrument is a memorandum of the Third Amendment
to Ground Lease and is subject to all of the terms and conditions of the Lease. The
terms of the Lease, shall prevail if there is any inconsistency between the terms of
this Memorandum and the terms of the Lease.
[end — signature page follows]
3-154
IN WITNESS WHEREOF, Lessor and Lessee have executed this Memorandum as of the
date first set forth above.
APPROVED AS TO FORM: LESSOR:
Aaron C. Harp,
City Attorney
ATTEST:
Leilani I. Brown
City Clerk
CITY OF NEWPORT BEACH,
a California municipal corporation and charter city
Grace K. Leung
City Manager
LESSEE:
LIDO HOUSE, LLC., a California limited liability
company,
By: Olson Real Estate Group, Inc., a California
corporation, Manager
By:
Name: Robert D. Olson
Title: President
Date:
3-155