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HomeMy WebLinkAbout09 - Lido Isle Community Association (LICA) Lease Agreement0 • • ITEM 11 9 TO: Members of the Newport Beach City Council FROM: Dave Kiff, Assistant to the City Manager SUBJECT: Lease Agreements with the Lido Isle Community Association (LICA) for Street End Parks, Marina, and Beaches on Lido Isle RECOMMENDED ACTION: (1) Approve proposed leases with the Lido Isle Community Association, including one lease for approximately $31,500 per year and one lease where" rent" is L1CA's park maintenance obligations; (2) Per Council Policy F -7, find that the City may enter into a lease lower than the projected rental value of an appraisal for a specified reason; and (3) Adopt Resolution 99 -_ relating to the findings and the two lease agreements with LICA. BRIEF The Lido Isle Community Association (LICA) today pays $7,800 per year to lease SUMMARY: 13 parcels (including street end parks, beaches, two dry boat storage areas, and a marina) from the City. This 25 -year lease expires on April 14, 2000. According to a recent appraisal, LICA should pay the City $47,000 per year to lease the properties. In a key assumption, the appraisal assumes that the appropriate park maintenance costs for the street end parks and beaches are 50% less than LICA pays today. As a result, the appraisal does not consider about $50,000 per year of L1CA's current park maintenance costs. LICA members argue that LICA should not be "punished" for choosing to care for the parks at a high level. In an attempt to forge a compromise, Council Member Ridgeway has met with LICA and has reached concurrence on a new lease structure that would include two leases as described below: • A marina lease with rent set at 30% of the marina's gross receipts OR a $20,000 per year "base rent," whichever is higher. NOTE: Using this formula, the marina lease rent would be about $31,500 /year in 1998 -99. • A lease for the street end parks, beaches, and dry storage areas with no rent. In exchange for no rental charge, LICA would have to maintain the parcels at lease at the current high level of maintenance. In effect, this compromise gives LICA additional consideration for what it pays in park maintenance costs. It also reflects an appropriate standard (30% of Gross Receipts) for marina rent payments baywide. Newport Beach City Council Page 2 BACKGROUND: As a part of its income property inventory, the City holds title to the street end parks, beaches, and marina of Lido Isle. These parcels, which total 219,004 • square feet, include: • Walkways (23,062 square feet) • Landscaped "Street End" Parks (37,344 square feet) • Beach Areas (113,738 square feet) • Marina Area (12,673 square feet) • Dry Boat Storage Areas (32,142 square feet) In April 1975, the City leased these properties to the Lido Isle Community Association (L1CA) for $3,700 per year (with an inflation adjustment). The lease payment is now $7,880 per year. The 1975 Lease expires on April 14, 2000. For planning purposes (especially relating to the capital expenses that L1CA expects to incur to upgrade the marina), L1CA has asked to negotiate a new lease prior to the termination of the current lease. Council Policy F -7 Council Policy. The City Council's Policy F -7 (Income Properties) directs the City to "continually evaluate the potential of all City -owned property to produce revenue. This may include leasing unused land, renting vacant space, establishing concessions in recreation areas or other similar techniques." The Policy further directs the City that "whenever possible the City shall conduct an open bid or proposal process to insure the highest financial return..." in order to help "...determine the highest and best use of the property." Specific finding required Policy F -7 also states that, "whenever less than the open market or appraised . When appraised value value is received or when an open bid process is not conducted, the City shall not accepted... make specific findings setting forth the reasons thereof.. Such findings may include but need not be limited to the following: a) The City is prevented by tideland grants, Coastal Commission guidelines or other restrictions from selling the property or converting it to another use. b) Redevelopment of the property would require excessive time, resources and costs which would outweigh other financial benefits. c) Converting the property to another use or changing the manager, concessionaire or lessee of the property would result in excessive vacancy, relocation or severance costs which would outweigh other financial benefits. d) Converting residential property to another use or opening residential leases to competitive bid would create recompensable liabilities and other inequities for long -term residents. e) The property provides an essential or unique service to the community that might not otherwise be provided were full market value of the property be (sic) required. t) The property serves to promote other goals of the City such as affordable housing, preservation of open space or marine related services." • BACKGROUND: Appraisal. In late 1997, the City hired William Hansen to conduct an • (cont'd) appraisal of the value of the Lido Isle street end parks, beaches, and marina. Hansen submitted the completed appraisal in March 1998. In his appraisal, Hansen assigns a yearly rental value of $47,000 to the leased premises. • Page 3 To achieve this valuation, Hansen... Appraisal O Determined the economic land rent (rent associated with an economic activity Methodology like slip and dry storage space rental) by... Estimating the gross income from wet slip rentals: $100,320 Adding the estimated gross income from dry slip rentals: 109,83 Total Effective Gross 2 0 1 Taking 25% of the Slip Space effective gross: $ 25,080 Taking 20% of the Dry Storage effective gross: 267 Economic Rent for Dry and Wet 7047 0 Determined the rental value of passive open space (parks and beaches) by... Valuing passive open space at 30% of value of active open space: $686,305 Assigning an 8% rate of return on that value: 54,904 Estimating LICA's annual open space maintenance expenses: $111,500 Assuming that the City would maintain it at half the cost: 55,750 Subtracting $55,750 from $54,904 to get: -0- Indicated rental value of passive open space: -0- © Combined the economic rental value of the premises with the rental value of the passive open space by... Adding (rounded the economic land rental value: $ 47,000 to the indicated rental value of the passive open space: =0- To get the Annual Rental Value far the leased premises $ 4J.000 Please note that Hansen offers LICA a 50% "credit" for its maintenance costs by arguing that the City, if it were to take over the parks, would maintain them "at a significantly lover level than the historical high level of the Community Association."' This 50% credit may or may not be appropriate - it can be argued that LICA should be afforded a higher credit for its maintenance expenses and should not be "punished" for keeping the parks well- manicured. Modification to the Determining What's "Fair." Given the subjective nature of the maintenance Appraisal... credit and the large difference between LICA's lease expense today and the proposed lease value assigned by Mr. Hansen, City staff and Council Member Ridgeway have met with LICA representatives to attempt to reach a supportable consensus. As a result, LICA and Council Member Ridgeway have concluded that two separate leases - one that addresses the wet slip marina at Via Antibes and another that covers the street end parks, beaches, and dry storage areas - might be an appropriate compromise. Summaries of the proposed lease agreements follow on the next page. Appraisal of Fair A4arket Rental Value, Lido Isle Community Association, Lease of City Lands, Wllllam R. Hansen. March 18, 1998, page 79. Page 4 BACKGROUND: * Lease Agreement A (proposed) - Via Antibes Marina (cont'd) TERM: 25 years RENT: $20,000 base rent or 30% of gross rent from wet slips (in 1998, • potential gross rent was $105,600), whichever is higher. INFLATOR: Base rent inflated by 10% every 5 years INSURANCE: General Liability not less than $2 million City to be named as additional insured OTHER: LICA must maintain Antibes marina rent at 90% of market City reserves right to audit marina records at any time Lease Agreement B (proposed) - Street End Parks, Beaches, and Dry Storage areas TERM: 25 years RENT: No rent. In exchange, LICA must maintain parks, beaches, and dry storage areas at "high standard of maintenance' INSURANCE: General Liability not less than $2 million City to be named as additional insured OTHER: City may use tidelands on Lido Isle's north side for Eelgrass mitigation banking If the City Council chooses to agree to the terms proposed above, the City must adopt findings to satisfy Council Policy F -7. An appropriate finding may include a reference to subsection (e), which reads: "The property provides an essential or unique service to the community that might not otherwise be provided were full market value of the property be (sic) required." ATTACHMENTS: Exhibit A - Lease Summary Exhibit B - Map of Lido Isle and Lease Premises Exhibit C - Chronology of Lido Isle Lease History Exhibit D - Resolution 99- • • • • Page 5 Exhibit A - Lease Summary Summary and Comparison of Leases Premises Leased Area Tem Rent Insurance Lease PD = $50K; 25 years. BI /Death = $250K for Current Lease Same as A and B combined 219,004 sf Expires in $7,800 /yr one person or April 2000 $500K for two or more persons Greater of $20,000 /yr or 30% Lease A Marina at Via Antibes 12673 sf , 25 years of wet slip gross GL >$2 MN+ hold (proposed) receipts. NOTE: harmless approx $31,500 in FY 1998 -99 No rent. In Lease B Street End Parks, Beaches, 206,331 sf 25 years exchange, LICA GL >$2 MN+ hold (proposed) and Dry Boat Storage Areas must maintain harmless parks at current level. PARCEL E LOT, Pate 6 Exhibit B - Map of Lido Isle and Lease Premises Page 7 December 10, 1928 Declaration of Protective Restrictions recorded with County. Declaration provides that "no structures shall be erected (on the lettered lots) ... except bandstands, comfort stations, recreational structures or other structures for the use, welfare, and benefit of the community and the public, and on all such lots ... having Bay frontage the structure must be so erected and maintained that free access to the waters of the Bay and the Beach shall at all times be available to the residents of the community or the public." March 4,1929 City and LICA enter into 16 leases for lettered lots A through P. Rent for Lot A (clubhouse area) was $200.00 per year. Others set at $1 per year per lot. June 10, 1929 LICA quitclaims various 10' wide corridors through each lettered lot and along US Bulkhead line (along Lidos North side) to City "for the purpose of constructing public improvements under 1911 Street Improvement Act. 10' strip not coterminous with 4' easements. August 14, 1929 Tide and submerged lands in Pacific Ocean added to Tidelands Trust. July 1930 - May 1931 Correspondence between City, Title Insurance, and Orange Title over deeds to lettered lots. On May 25, 1931, City accepts lettered lot deed a second time. June 5,1933 City Council adopts resolution finding that LICA "has wholly failed to pay any of the rents (associated with the Lease)" and that LICA "has offered to release to the City all of (LICA's) right, title and interest in" the lease property to terminate the lease. October 29,1934 City accepts title to "parcels" A, E, and F on north side of Lido in connection with harbor improvement project. Exhibit C - Chronology of Lido Isle Lease History -- Date — -- Event -- October 1897 Portion of Lido Isle (swamplands) conveyed by State of California to James McFadden. July 1919 State grants City of Newport Beach "all of the right, title, and interest" of the State to tidelands and submerged lands within the 1919 boundaries of the City. Includes most of Newport Harbor. Referred to as the "Tidelands Trust." 1923 W.K. Parkinson acquires Lido Isle, begins filling island with attempt to create residential and commercial development 1927 Parkinson sells to William Crittenden. Crittenden and John Elsbach prepare plans for island that would pattern development after Venice, Italy. As a part of sale, Title Insurance and Trust Company holds legal title to Lido Isle. July 29,1927 State adds tide and submerged lands within Newport Harbor to the Tidelands Trust. May 25,1928 Superior Court sets "line of ordinary high tide" as decree line around Lido. Properties bayward of decree line are City's tidelands and landward of the decree line are owned by Title Insurance and Trust. August 1928 City Council discusses subdivision map for Lido Isle. On August 23,1928, Newport News reports that the City Council "insists that at least six street ends be dedicated to the public" and that "the public should not be denied the beaches, which, they say, are being all too rapidly absorbed by private interests." September 7,1928 City Council approves subdivision map. Map includes "lots at the end of each street" deeded to City. "In return for deeded property, the City agrees to lease the Isle to the developers (Crittenden and Elsbach) over a period of 50 years at a rental of $1002 per year." (Newport News, September 13, 1928). Map includes 16 lettered lots (A through P), most with a 4' easement for City utilities and storm drains. September 14, 1928 City and Title Insurance finalize Agreement to grant and convey lots A through P to City. In same agreement, City agrees to lease lots back to LICA for 25 years with an option to extend for an additional 25 years. December 10, 1928 Declaration of Protective Restrictions recorded with County. Declaration provides that "no structures shall be erected (on the lettered lots) ... except bandstands, comfort stations, recreational structures or other structures for the use, welfare, and benefit of the community and the public, and on all such lots ... having Bay frontage the structure must be so erected and maintained that free access to the waters of the Bay and the Beach shall at all times be available to the residents of the community or the public." March 4,1929 City and LICA enter into 16 leases for lettered lots A through P. Rent for Lot A (clubhouse area) was $200.00 per year. Others set at $1 per year per lot. June 10, 1929 LICA quitclaims various 10' wide corridors through each lettered lot and along US Bulkhead line (along Lidos North side) to City "for the purpose of constructing public improvements under 1911 Street Improvement Act. 10' strip not coterminous with 4' easements. August 14, 1929 Tide and submerged lands in Pacific Ocean added to Tidelands Trust. July 1930 - May 1931 Correspondence between City, Title Insurance, and Orange Title over deeds to lettered lots. On May 25, 1931, City accepts lettered lot deed a second time. June 5,1933 City Council adopts resolution finding that LICA "has wholly failed to pay any of the rents (associated with the Lease)" and that LICA "has offered to release to the City all of (LICA's) right, title and interest in" the lease property to terminate the lease. October 29,1934 City accepts title to "parcels" A, E, and F on north side of Lido in connection with harbor improvement project. Page 8 -- Date -- — Event -- November - LICA writes to City, requests new lease. City and LICA enter into lease on December 5, December 1938 1938. Lease splits lots into five lettered "parcels." Parcel A is 10' bayward of US Bulkhead line, Parcel B is uplands to Parcel A (a 5(Y wide strip running along north side of Lido), Parcel C is tidelands between lots B and D along south side of Lido, Parcel D is uplands of Parcel C, Parcel E is strip of land adjacent to Peninsula on east side of Lido Bridge. March 23,1959 Lease declares that "industrial uses" not appropriate for parcels. Parcels must be kept for "park, recreational, residential, and educational purposes." Lease also notes that LICA requests that City renew 1951 lease for additional 25 years. Memorandum City Council finds that "the uplands ... cannot be used without the tidelands (and vice - versa) ... and that the leasing of the whole of said lands -- is necessary for the proper development and use of said lands, water frontage, and tidelands..." relating to the assessed value of all Lido Isle property. Term of lease is 25 years with a rental rate of $750 per year. July 3,1974 Lease also declares that LICA may 'at all times have the right to quietly and peaceably hold, possess, use, occupy, and enjoy said leased land and premises." April 1, 1940 City Council "closes and abandons" certain 10' wide strips of land through lettered lots A -J (see earlier action, June 10, 1929 regarding these strips). May 31,1951 LICA asks City to cancel 1938 lease and to enter into another lease for 25 -year term. June 11, 1951 City and LICA enter into new lease with same lands and term as 1938 Lease with expiration date of June 10, 1976. March 22, 1954 City and LICA agree to delete Parcel E (land not on Lido Isle) from 1951 Lease. Same Conservation Act may apply and the California Environmental Quality Act does apply action adds property south and adjacent to Lido Isle Bridge (now the site of the marina). March 23,1959 City and LICA amend 1951 Lease to allow LICA to build and maintain a marina. March 19,1973 LICA requests that City renew 1951 lease for additional 25 years. Memorandum proposes that rent be set at $3,566.18 per year adjusted every five years by a factor relating to the assessed value of all Lido Isle property. July 3,1974 Mr. Robert Krueger of Nossaman, Waters, Scott, Krueger, and Riordan writes letter to City Attorney Dennis O'Neil noting that (among other things): (1) the City can enter into a renewal consistent with Tidelands Trust; (2) lease must provide for reasonable access routes for public; (3) lease should reflect current fair rental value without deduction for LICA's maintenance expenses; and (4) the California Coastal Zone Conservation Act may apply and the California Environmental Quality Act does apply to the lease. April 15,1975 City enters into new 25 -year lease with LICA. February 4, 1998 City staff first meets with LICA representative John Polovina regarding new lease. March 18,1998 William Hansen transmits copies of appraisal to City. April 15, 1998 LICA president J. Jeffrey Pence writes to City, notes LICA's "strong opposition" to methodology used by Hansen to value lease. October 26, 1998 City Council appoints Council Member Hedges and Mayor pro Tem O'Neil to meet with LICA to discuss lease terms. November 10, 1999 Meeting held to review terms - no agreement reached. Dec 1998 - Mar 1999 Council Member Ridgeway meets with LICA representatives. Agree to present two leases to City Council - one for wet slips at Antibes Marina and one for Street End Parks, Beaches, and Dry Storage areas. April 12,1999 Council hearing set regarding proposed two -lease system. Page 9 Exhibit D - Resolution 99 -_ • A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH RELATING TO THE LEASE OF SPECIFIC CITY PROPERTIES TO THE LIDO ISLE COMMUNITY ASSOCIATION WHEREAS, the City of Newport Beach has, since 1928, held title to various parcels and lots on and around Lido Isle; and WHEREAS, these parcels and lots are used today as active and landscaped parks, beaches accessible to the public, and dry storage and wet slip storage areas for boats; and WHEREAS, the City of Newport Beach has leased these parcels and lots to the Lido Isle Community Association (LICA) since March 1929; and WHEREAS, the current lease over these parcels and lots between the City and LICA expires on April 14, 2000; and WHEREAS, the City and LICA desires to enter into a new lease agreement regarding these parcels and lots; and WHEREAS, Newport Beach City Council Policy F -7 (Income Properties) requires the City to determine the "maximum or open market value of the property ... using appraisals or other techniques to determine the highest and best use of the property and the highest value of the property'; and WHEREAS, the City and LICA have jointly funded an appraisal that has appraised the annual rental • value of the parcels and lots; and WHEREAS, Newport Beach City Council Policy F -7 also requires the City to make specific findings to set forth the reasons whereby the City accepts less than the open market value of the appraised value of a particular parcel; now, therefore be it RESOLVED by the City Council of the City of Newport Beach that the Council finds and determines that the premises of the proposed leases - especially the high level of maintenance that LICA applies to to the street end parks and beaches -- provides an essential or unique service to the community that might not otherwise be provided if the City were to charge LICA the full rental value identified in the appraisal; and be it also RESOLVED that the Mayor of the City of Newport Beach is hereby authorized by the City Council to enter into two separate leases as identified in Attachments A and B to this resolution for the Lido Isle parcels and lots identified in Exhibit A of each attachment. E ADOPTED this 12ffi day of April, 1999. ATTEST: CITY CLERK MAYOR Attachment A Lease of Via Antibes Marina (to be added) • • PARCELE LOT Exhibit A - Lease Premises (Marina Lease) Attachment B • Lease for Street End Parks, Beaches, Dry Boat Storage Areas (to be added) • 11 April 12, 1999 Itepi # 9 r Attachments • LEASE Antibes Marina THIS LEASE, made and entered into this 121h day of April, 1999, by and between the CITY OF NEWPORT BEACH, a chartered municipal corporation (hereinafter referred to "Lessor'), and the LIDO ISLE COMMUNITY ASSOCIATION, a California corporation (hereinafter referred to as "Lessee ") RECITALS A. The City of Newport Beach has, since September 1928, held title to certain real property located on Lido Isle (property designated on Exhibit "A ") that is attached hereto and incorporated herein by reference. • B. Lessee and Lessor entered into a long -term lease of certain real property on Lido Isle on March 4, 1929. The 1929 Lease was later renegotiated into a series of new leases in December 1938, June 1951, and April 1975. The April 1975 lease expires in March 2000. C. It is the intention of the Lessor and the Lessee to enter into two separate new leases that divide the property leased under the 1975 lease into two separate agreements, with one lease ( "Marina Lease ") covering the wet slips at Parcel E of Exhibit A (also known as the Via Antibes Marina) and a second lease ( "Parks and Beaches Lease ") covering the street end parks, beaches, and dry boat storage areas on the Isle. D. It is the intention of Lessee to continue to operate and maintain all of the leased properties in a manner that reflects the high standards of care and maintenance that existed in the year in which this lease was entered into, so that Lido Isle residents and visitors will continue the active use and enjoyment of the City-owned parcels. • E. Lessee will maintain the Marina Premises in good condition and repair • throughout the term of this Lease, ensure adequate fire and other public safety equipment at the Marina Premises as may be determined by the Newport Beach Fire Marshal or designee, and insure the Marina Premises to the extent described in the this Lease. NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS hereinafter set forth, it is agreed as follows: 1. DESCRIPTION OF LEASED PREMISES Lessor hereby leases, and Lessee does hereby accept a lease of the property hereinafter described and as shown on Exhibit "A" attached hereto: The property shown on Exhibit A as "Parcel E" including a portion of Sec. 28, T6S., R10W., S.B.B. & M. These premises • include 17 concrete boat slips plus side ties. 2. TERM The term of this Lease shall be for a period of twenty-five (25) years, commencing on the 1st day of April, 2000 and terminating on March 31, 2025 unless sooner terminated as provided for in this Lease. 3. CONSIDERATION The consideration for this Lease shall be the rent described in §4 of this Lease and the Lessee's agreement to maintain and operate of the Premises in good condition and repair for the term of the Lease. • • 4. RENT A. By July 30 of each year of this Lease, Lessee shall remit to the City a payment of either: • Base Rent of $20,000 per year (increased to $22,000 in 2005, then to $24,200 in 2010, then to $26,620 in 2015, then to $29,282 in 2020, then to $32,210 in 2025) OR • Percentage Rent equal to 30% of the Annual Gross Receipts from the rental of the wet slips at the Marina; WHICHEVER AMOUNT IS HIGHER. As a descriptive example of the above calculations, if Lessee receives $110,000 in a year of operations from rentals of the Antibes Marina wet slips, Lessee shall remit to Lessor the Percentage Rent of $33,000 for that year. If Lessee receives $55,000 in a year of operations from rentals of the Antibes Marina wet slips, Lessee shall • remit to Lessor the Base Rent of $20,000. If Lease requires Lessee to remit the Base Rent in a year subsequent to 2004, Lessee shall remit the Base Rent as revised (increased) above. B. For the purposes of this Lease, Annual Gross Receipts means the cumulative and total amount of revenue received by Lessee over the 12 months previous to each July 1 of this lease's term from the rental of each "wet slip' in the Antibes Marina. C. Lessee shall rent the Marina wet slips at a rate that is not less than 90% of the average rent charged for a similar slip at any one of the following facilities: • Balboa Yacht Basin Marina • American Legion Marina • Bahia Corinthian Yacht Club • 5. USE • Lessee shall use the Premises to manage and operate a public marina. Lessee shall operate and manage the marina in a manner that does not violate State or Federal discrimination laws. Lessee shall make all services, programs and facilities available to the public on fair and reasonable terms. 6. CAPITAL IMPROVEMENTS A. All capital improvements constructed during the term of this lease become the property of Lessor upon expiration of the Lease. B. Lessee shall be required to obtain, prior to commencing the construction of any long term improvements, all permits, licenses or approvals that may be required. C. No long term improvements shall be erected or maintained on the Premises unless and until plans, specifications, and structural improvements have been • approved, in writing, by Lessor. D. Lessee shall, at all times, indemnify and hold Lessor harmless from any and all claims for labor or materials in connection with the construction, repair, alteration or installation of any structure, capital improvement, equipment or facilities on the Premises and from the costs of defending such claims, including reasonable attorney's fees. Lessee shall not suffer or permit to be enforced against the Premises, or any part thereof, any mechanic's, materialmen's, contractor's or subcontractor's liens arising from, or any claim for damage growing out of, the work of any construction, repair, restoration, replacement or improvement or any other claim or demand arising from Lessee's operations under this Lease. In the event any lien or stop notices imposed or recorded on the Premises as a result of the construction, repair or alteration of the facility, Lessee shall pay or cause to be paid all such liens, claims or demands before any action is brought to enforce the same against the leased Premises. Notwithstanding anything to the contrary contained in this paragraph 6D, if Lessee • • shall in good faith contest the validity of such lien, claim or demand, then Lessee shall, at its expense, defend itself and Lessor against the same and shall pay and satisfy any adverse judgment that may be rendered thereon, before the enforcement thereof against Lessor or the Premises upon the condition that if Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to such contested lien, claim or demand indemnify Lessor against liability for the same and holding the leased Premises free from the effect of such lien or claim. E. Before the commencement of any work or construction of any building structure or other improvement on the Premises, or of any substantial repairs, alterations, additions, replacement or restoration, in or about the Premises, Lessee shall give Lessor advanced written notice which specifies the nature and location of the intended work. Lessee shall coordinate with Lessor for the scheduling of any work so that the work does not excessively burden Lessor's use of the Premises. . 7. BUSINESS ACTIVITIES Lessee shall not grant any concession, license, permit or privilege for the conduct of any business or other operation for profit on the Premises without the prior approval of the City Manager. • 8. UTILITIES AND TAXES Lessee shall promptly pay for all utility services furnished to it and shall pay before delinquent any general and special taxes or assessments or other governmental charges, if any, which may be levied on the Premises or improvements thereon, or any possessory interest therein arising out of or based upon the leasehold interest throughout the term hereof, or may be imposed upon Lessee as a result of its operations under the Lease. Satisfactory evidence of such payments shall be delivered to Lessor within seventy-two (72) hours of a written request for such information. 5 9. INSURANCE • Without limiting Lessee's indemnification of Lessor, Lessee shall provide and maintain at its own expense during the term of this Lease policies of liability insurance of the type and amounts described below and satisfactory to Lessor. Certification of all required policies shall be signed by a person authorized by that insurer to bind coverage on its behalf and must be filed with Lessor, prior to execution of this Lease and current certification of coverage shall be provided throughout the terms of this Lease. Except for workers compensation, all insurance policies shall add Lessor, its elected officials, officers, agents, representatives and employees as additional insured for all liability arising from Lessee's operations under this Lease. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance 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 Bests Key Rating Guide: unless otherwise approved by the City's Risk Manager. • A. Worker's compensation insurance covering all employees of Lessee, per the laws of the State of California. B. Commercial general liability insurance covering third party liability risks, including without limitation, contractual liability, in a minimum amount of $1 million combined single limit per occurrence for bodily injury, personal injury and property damage. If commercial general liability insurance or other form with a general aggregate is used, either the general aggregate shall apply separately to this Lease, or the general aggregate limit shall be twice the occurrence limit. C. Commercial auto liability and property insurance covering any owned and rented vehicles of Lessee in a minimum amount of $1 million combined single limit per accident for bodily injury and property damage. D. Fire and extended coverage for not less than ninety percent (90 %) of the cost of replacement of all insurable improvements on the Premises. • • Except for worker's compensation, the policy or policies shall be endorsed to state that coverage shall not be canceled by either party, except after thirty (30) days' • prior notice has been given in writing to Lessor. Lessee shall give Lessor prompt and timely notice of claim made or suit instituted arising out of Lessee's operation hereunder. Lessee shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the work. Lessee agrees that, in the event of loss due to any of the perils for which it has agreed to provide comprehensive general and automotive liability insurance, Lessee shall look solely to its insurance for recovery. Lessee hereby grants to Lessor, on behalf of any insurer providing comprehensive general and automotive liability insurance to either Lessee or Lessor with respect to the services of Lessee herein, a waiver of any right of subrogation which any such insurer of said Lessee may acquire against Lessor by virtue of the payment of any loss under such insurance. 10. HOLD HARMLESS A. Lessee shall indemnify, defend, save and hold harmless Lessor, its City Council, boards and commissions, officers and employees from and against any and all loss, damages, liability, claims, allegations of liability, suits, costs and expenses for damages of any nature whatsoever, including, but not limited to, bodily injury, death, personal injury, property damages, or any other claims arising from any and all negligent acts or omissions of Lessee, its employees, agents or subcontractors in the operation of the Angling Club and use of the Premises pursuant to this Lease. B. Lessor shall indemnify, defend, save and hold harmless Lessee, its officers and employees, from and against any and all loss, damages, liability, claims, allegations of liability, suits, costs and expenses for damages of any nature whatsoever, including, but not limited to, bodily injury, death, personal injury, property damages, or any other claims arising from any and all negligent acts or omissions of Lessor, its • employees, agents or subcontractors in the use of the Premises pursuant to this Lease. 11. MAINTENANCE OF IMPROVEMENTS • A. Lessee to Maintain All Buildings and Improvements Lessee covenants and agrees that during the term of this Lease it will, at its own cost and expense, maintain the Premises in good order and repair and in clean, orderly, safe and sanitary condition. Lessee shall be responsible for the repair of any damage caused by its members or their invitees. B. Lessor May Elect to Repair and Maintain at Expense of Lessee If, in the judgment of the Lessor, such standards of maintenance and repair are not being maintained, it may at its option, after written notice thereof to the Lessee and Lessee's failure to commence in good faith to remedy the same within the time herein provided and thereafter diligently prosecute the same to completion, elect to correct any deficiency. Lessee covenants and agrees to pay to the Lessor on demand any and all sums expended by it in correcting any such deficiency together with interest at the legal rate. If, in the judgment of the Lessor, the disrepair or lack of maintenance constitutes an emergency, the notice herein provided shall be a 24 -hour notice to • remedy; in all other cases it shall be a 5 -day notice. C. Lessor's Right of Inspection In addition to Lessor's rights to use the Premises as provided in this Lease, Lessor reserves the right by its authorized agents, employees or representatives to enter the Premises upon forty -eight (48) hours advance notice, to inspect the same or any part thereof at any time to attend to or protect the Lessor's interest under this Lease. D. Compliance with Laws, Ordinances and Regulations Lessor and Lessee covenant and agree to comply with all rules, regulations, statutes, ordinances and laws of the State of California, County of Orange, the City of Newport Beach, or any other governmental body or agency having lawful jurisdiction over the Premises or the business, enterprises, or activities conducted thereon. • • 12. ASSIGNMENT Lessee shall not assign, transfer, sublease, mortgage, hypothecate or give any grant of control of this Lease or the Premises, or any part hereof, either voluntarily or involuntarily, unless first approved by the City Council. 13. RESTORATION If during the term hereof any building or improvement erected by Lessee on the Premises, or any part thereof, shall be damaged or destroyed by fire or other casualty, Lessee shall, at its cost and expense, repair or restore the same according to the original plans thereof, or, at Lessee's option, Lessee may elect to replace such building or improvement, provided that if Lessee so elects, Lessee shall obtain the approval of Lessor of the proposed architectural plans. Any such work of repair, restoration or replacement shall be commenced within one hundred and eighty (180) days after the • damage or loss occurs and shall be completed with due diligence, but not longer than one (1) year after such work is commenced unless delay is caused by events beyond the control of Lessee. If Lessee does not wish to repair or rebuild the improvements, it may terminate this Lease by giving Lessor written notice of termination, and if Lessee chooses to terminate the Lease it shall be obligated to completely clear and restore the building site to its original condition. 14. DEFAULT AND TERMINATION OF LEASE A. Default Time and each of the terms, covenants and conditions hereof are expressly made the essence of this Lease. If the Lessee shall fail to comply with any of the terms, covenants, or conditions of this Lease, including: 1. Failure of Lessee to keep current on all utility payments for the Premises; 2. Failure of Lessee to keep the Premises in good order and repair and to keep it • in a neat, clean, orderly, safe and sanitary condition; 3. The failure to make payment of rent at the time and in the amount herein • required; 4. Failure to provide certificates of insurance evidencing insurance coverage as required in paragraph 12 of this Lease; and shall fail to remedy such default within thirty (30) days after service of a written notice from Lessor to do so, if the default may be cured by the payment of money, or to commence in good faith to remedy any other default within thirty (30) days and thereafter diligently prosecute the same to completion, or if Lessee shall abandon or vacate the Premises, Lessor may, at its option and without further notice or demand, terminate this Lease and enter upon the Premises and take possession thereof, and remove any and all persons therefrom in the appropriate manner provided by law. B. Surrender of Possession upon Termination Lessee covenants and agrees that upon the expiration or sooner termination of this Lease, the Lessee will peaceably surrender the Premises with all buildings and improvements, in the same condition as when received or constructed, • excepting reasonable use and wear thereof, and damage by fire, act of God, or by the elements. The Premises and all other improvements built, constructed or placed upon the Premises by the Lessee, or anyone holding by, under, or through it, shall remain on the Premises and become the property of the Lessor without any cost to Lessor upon the termination of this Lease, whether by lapse of time or by reason of default, unless the Lessee elects to remove said improvements within sixty (60) days following the expiration or termination of this Lease. The provisions of this section shall be effective upon expiration or termination of this Lease regardless of whether Lessee holds over under the provisions of section E, below. C. Remedies Cumulative The rights, powers, elections and remedies of the Lessor contained in this Lease shall be construed as cumulative and no one of them shall be considered exclusive of the other or exclusive of any rights or remedies allowed by law, and the 10 • exercise of one or more rights, powers, elections or remedies shall not impair or be deemed a waiver of Lessor's right to exercise any other. -D. No Waiver No delay or omission of the Lessor to exercise any right or power arising from any omission, neglect or default of the Lessee shall impair any such right: or power or shall be construed as a waiver of any such omission, neglect or default on the part of the Lessee or any acquiescence therein. No waiver of any breach of any of the terms,covenants, agreements, restrictions or conditions of this Lease shall be construed as a waiver of any succeeding breach of the same or of any of the terms covenants, agreements, restrictions or conditions of this Lease. E. Holding Over It is mutually agreed that if the Lessee shall hold over after the expiration of this Lease for any cause, such holding over shall be deemed a tenancy from month -to -month only, and upon the same terms, conditions, and provisions of this Lease. 15. EMINENT DOMAIN In the event the whole or part of the property or improvements is condemned by a public entity in the lawful exercise of the power or eminent domain, this Lease shall cease as to the part condemned upon the date possession of that part is taken by the public entity. If only a part is condemned and the taking of that part does not substantially impair the capacity of the remainder to be used for the purposes required in this Lease, Lessee shall continue to be bound by the terms, covenants and conditions of this Lease. If only a part is condemned and the taking of that part substantially impairs the capacity of the remainder to be used for the purposes required in this Lease, . Lessee shall have the election of: 11 (1) Terminating this Lease and being absolved of obligations hereunder which . have not accrued at the date possession is taken by the public entity; or (2) Continuing to occupy the remainder of the property and remaining bound by the terms, covenants and conditions of this Lease. Lessee shall give notice in writing of his election hereunder, within thirty (30) days of the date possession of the part is taken by the public entity. Lessor shall be entitled to receive and shall receive all compensation for the condemnation of all or any portion of the property by exercise of eminent domain. Lessee shall be entitled to receive and shall receive all compensation for the condemnation of all or any portion of the improvements constructed by Lessee on the Premises by the exercise of eminent domain. 16. NOTICES It is mutually agreed that any notice or notices provided for by this Lease or by law, to be given or served upon the Lessee, may be given or served by mail, registered or certified, with postage prepaid, and if intended for the City of Newport Beach, addressed to the City Manager,P.O. Box 1768, Newport Beach, California 92659, or at such other address as may be hereafter furnished to the Lessee in writing, and if intended for the Lessee, addressed to its Association President, 701 Via Lido Soud, Newport Beach, California 92660, or at such other address as may be hereinafter furnished to the Lessor in writing; or it may be served personally upon any corporate officer of Lessee or person charged with general maintenance responsibilities in connection with the Premises; and that any notice or notices provided by this Lease or by law to be served upon Lessor may be served personally upon the Mayor of the City of Newport Beach or the City Clerk of the City of Newport Beach. Such service shall be deemed complete at the expiration forty-eight (48) hours from and after the deposit in the United States mail of such notice or demand or communication. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written. 12 u • LESSOR: CITY OF NEWPORT BEACH • ATTEST: City Clerk LESSEE: • f:\ cat \ag \LICAMarina\ LcaseFina1041299.doc By: Dennis D. O'Neil Mayor m 0 13 APPROVED AS TO FORM AND CONTENT Robin L. Clauson Assistant City Attorney Lido Isle Community Association John Polovina LICA President PARCEL E LOT A Exhibit A — Lease Premises (Marina Lease) 0 • LEASE Lido Isle Parks and Beaches THIS LEASE, made and entered into this 121h day of April, 1999, by and between the CITY OF NEWPORT BEACH, a chartered municipal corporation (hereinafter referred to "Lessor "), and the LIDO ISLE COMMUNITY ASSOCIATION, a California corporation (hereinafter referred to as "Lessee "). RECITALS A. The City of Newport Beach has, since September 1928, held title to certain real property located on Lido Isle (property designated on Exhibit "A ") that is attached hereto and incorporated herein by reference. • B. Lessee and Lessor entered into a long -term lease of certain real property on Lido Isle on March 4, 1929. The 1929 Lease was later renegotiated into a series of new leases in December 1938, June 1951, and April 1975. The April 1975 lease expires in 10=91Pz11110 C. It is the intention of the Lessor and the Lessee to enter into two separate new leases that divide the property leased under the 1975 lease into two separate agreements, with one lease ( "Antibes Marina Lease ") covering the wet slips at Parcel E of Exhibit A (also known as the Via Antibes Marina) and a second lease ( "Lido Isle Parks and Beaches Lease ") covering the street end parks, beaches, and dry boat storage areas on the Isle. D. It is the intention of Lessee to continue to operate and maintain all of the leased properties in a manner that reflects the high standards of care and maintenance that existed in the year in which this lease was entered into, so that Lido Isle residents and visitors will continue the active use and enjoyment of the City-owned parcels. E. Lessee will maintain the Parks and Beaches Lease Premises in good • condition and repair throughout the term of this Lease and insure the Premises to the extent described in the this Lease. F. It is the intent of the Lessee and Lessor that public access to the beaches of Lido Isle that require open and public access to a sidewalk or walkway upon the Lease Premises be maintained throughout the term of this Lease and that Lessee will maintain the sidewalks or walkways in order to ensure public access. G. It is the intent of the Lessee and Lessor that this Lease be interpreted to allow Lessor to use any properties held in trust by the Lessor (including tidelands properties) for the purposes of establishing, maintaining, and operating mitigation bank locations for Eelgrass (zostera marina) or similar water - oriented plant life that enhances the water quality or ecosystem of Newport Bay. In establishing and maintaining these sites, it is the intent of Lessor to not infringe upon or limit Lido Isle residents' ability to operate and maintain legal and permitted residential piers. • NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS hereinafter set forth, it is agreed as follows: 1. DESCRIPTION OF LEASED PREMISES Lessor hereby leases, and Lessee does hereby accept a lease of the property hereinafter described and as shown on Exhibit "A" attached hereto: The property shown on Exhibit A including the Lots designated as A (1 -5), B, C, D, E, F, G, H, I (1 -6), J, and the Parcels designated as B, C, and that portion of Parcel E that does not include the premises of the Antibes Marina Lease. • 2 • 2. TERM The term of this Lease shall be for a period of twenty -five (25) years, commencing on the 1st day of April, 2000 and terminating on March 31, 2025 unless sooner terminated as provided for in this Lease. 3. CONSIDERATION The consideration for this Lease shall be Lessee's obligation to maintain the Premises at a high standard of care and maintenance that substantially reflects the standard of care and maintenance provided to the street end parks, beaches, and dry boat storage areas at the time this Lease was executed (April 1999). 4. RENT In exchange for the consideration noted above, there shall be no rent 0 charged for the term of this Lease. 5. USE A. Lessee shall use the Premises to provide community recreational facilities and dry boat storage areas for the members of the Association. Lessee shall operate and manage the Premises in a manner that does not violate State or Federal discrimination laws. B. As described in Recital F, Lessee shall maintain and operate all sidewalks and walkways that exist at the time of the execution of this Lease so that the walkways always allow for open public access to the beaches of Lido Isle. C. As described in Recital G, Lessee shall allow Lessor to use any properties held in trust by the Lessor (including tidelands properties) for the purposes of establishing, maintaining, and operating mitigation bank locations for Eelgrass (zostera marina) or similar water - oriented plant life that enhances the water quality or • ecosystem of Newport Bay. In establishing and maintaining these sites, Lessor shall not infringe upon or limit Lido Isle residents' ability to operate and maintain legal and permitted residential piers. 6. CAPITAL IMPROVEMENTS A. All capital improvements constructed during the term of this lease become the property of Lessor upon expiration of the Lease. B. Lessee shall be required to obtain, prior to commencing the construction of any long term improvements, all permits, licenses or approvals that may be required. C. No long term improvements shall be erected or maintained on the Premises unless and until plans, specifications, and structural improvements have been approved, in writing, by Lessor. D. Lessee shall, at all times, indemnify and hold Lessor harmless from • any and all claims for labor or materials in connection with the construction, repair, alteration or installation of any structure, capital improvement, equipment or facilities on the Premises and from the costs of defending such claims, including reasonable attorney's fees. Lessee shall not suffer or permit to be enforced against the Premises, or any part thereof, any mechanic's, materialmeri s, contractor's or subcontractor's liens arising from, or any claim for damage growing out of, the work of any construction, repair, restoration, replacement or improvement or any other claim or demand arising from Lessee's operations under this Lease. In the event any lien or stop notices imposed or recorded on the Premises as a result of the construction, repair or alteration of the facility, Lessee shall pay or cause to be paid all such liens, claims or demands before any action is brought to enforce the same against the leased Premises. Notwithstanding anything to the contrary contained in this paragraph 6D, if Lessee shall in good faith contest the validity of such lien, claim or demand, then Lessee shall, at its expense, defend itself and Lessor against the same and shall pay and satisfy any • adverse judgment that may be rendered thereon, before the enforcement thereof against Lessor or the Premises upon the condition that if Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to such contested lien, claim or demand indemnify Lessor against liability for the same and holding the leased Premises free from the effect of such lien or claim. E. Before the commencement of any work or construction of any building structure or other improvement on the Premises, or of any substantial repairs, alterations, additions, replacement or restoration, in or about the Premises, Lessee shall give Lessor advanced written notice which specifies the nature and location of the intended work. Lessee shall coordinate with Lessor for the scheduling of any work so that the work does not excessively burden Lessor's use of the Premises. 7. BUSINESS ACTIVITIES Lessee shall not grant any concession, license, permit or privilege for the • conduct of any business or other operation for profit on the Premises without the prior approval of the City Manager. 8. UTILITIES AND TAXES Lessee shall promptly pay for all utility services furnished to it and shall pay before delinquent any general and special taxes or assessments or other governmental charges, if any, which may be levied on the Premises or improvements thereon, or any possessory interest therein arising out of or based upon the leasehold interest throughout the term hereof, or may be imposed upon Lessee as a result of its operations under the Lease. Satisfactory evidence of such payments shall be delivered to Lessor within seventy-two (72) hours of a written request for such information. 9. INSURANCE Without limiting Lessee's indemnification of Lessor, Lessee shall provide . and maintain at its own expense during the term of this Lease policies of liability insurance of the type and amounts described below and satisfactory to Lessor. • Certification of all required policies shall be signed by a person authorized by that insurer to bind coverage on its behalf and must be filed with Lessor, prior to execution of this Lease and current certification of coverage shall be provided throughout the terms of this Lease. Except for workers compensation, all insurance policies shall add Lessor, its elected officials, officers, agents, representatives and employees as additional insured for all liability arising from Lessee's operations under this Lease. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance 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 Bests Key Rating Guide: unless otherwise approved by the City's Risk Manager. A. Worker's compensation insurance covering all employees of Lessee, per the laws of the State of California. B. Commercial general liability insurance covering third party liability • risks, including without limitation, contractual liability, in a minimum amount of $1 million combined single limit per occurrence for bodily injury, personal injury and property damage. If commercial general liability insurance or other form with a general aggregate is used, either the general aggregate shall apply separately to this Lease, or the general aggregate limit shall be twice the occurrence limit. C. Commercial auto liability and property insurance covering any owned and rented vehicles of Lessee in a minimum amount of $1 million combined single limit per accident for bodily injury and property damage. D. Fire and extended coverage for not less than ninety percent (90 %) of the cost of replacement of all insurable improvements on the Premises. Except for worker's compensation, the policy or policies shall be endorsed to state that coverage shall not be canceled by either party, except after thirty (30) days' prior notice has been given in writing to Lessor. Lessee shall give Lessor prompt and timely notice of claim made or suit instituted arising out of Lessee's operation • • hereunder. Lessee shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the work. Lessee agrees that, in the event of loss due to any of the perils for which it has agreed to provide comprehensive general and automotive liability insurance, Lessee shall look solely to its insurance for recovery. Lessee hereby grants to Lessor, on behalf of any insurer providing comprehensive general and automotive liability insurance to either Lessee or Lessor with respect to the services of Lessee herein, a waiver of any right of subrogation which any such insurer of said Lessee may acquire against Lessor by virtue of the payment of any loss under such insurance. 10. HOLD HARMLESS A. Lessee shall indemnify, defend, save and hold harmless Lessor, its City Council, boards and commissions, officers and employees from and against any and all • loss, damages, liability, claims, allegations of liability, suits, costs and expenses for damages of any nature whatsoever, including, but not limited to, bodily injury, death, personal injury, property damages, or any other claims arising from any and all negligent acts or omissions of Lessee, its employees, agents or subcontractors in the operation of the Angling Club and use of the Premises pursuant to this Lease. B. Lessor shall indemnify, defend, save and hold harmless Lessee, its officers and employees, from and against any and all loss, damages, liability, claims, allegations of liability, suits, costs and expenses for damages of any nature whatsoever, including, but not limited to, bodily injury, death, personal injury, property damages, or any other claims arising from any and all negligent acts or omissions of Lessor, its employees, agents or subcontractors in the use of the Premises pursuant to this Lease. 11. MAINTENANCE OF IMPROVEMENTS A. Lessee to Maintain All Improvements • Lessee covenants and agrees that during the term of this Lease it will, at its own cost and expense, maintain the Premises in good order and repair and in clean, orderly, safe and sanitary condition. Lessee shall be responsible for the repair of any damage caused by its members or their invitees. B. Lessor May Elect to Repair and Maintain at Expense of Lessee If, in the judgment of the Lessor, such standards of maintenance and repair are not being maintained, it may at its option, after written notice thereof to the Lessee and Lessee's failure to commence in good faith to remedy the same within the time herein provided and thereafter diligently prosecute the same to completion, elect to correct any deficiency. Lessee covenants and agrees to pay to the Lessor on demand any and all sums expended by it in correcting any such deficiency together with interest at the legal rate. If, in the judgment of the Lessor, the disrepair or lack of maintenance constitutes an emergency, the notice herein provided shall be a 24 -hour notice to remedy; in all other cases it shall be a 5 -day notice. C. Lessor's Right of Inspection In addition to Lessor's rights to use the Premises as provided in this Lease, Lessor reserves the right by its authorized agents, employees or representatives to enter the Premises upon forty -eight (48) hours advance notice, to inspect the same or any part thereof at any time to attend to or protect the Lessor's interest under this Lease. D. Compliance with Laws, Ordinances and Regulations Lessor and Lessee covenant and agree to comply with all rules, regulations, statutes, ordinances and laws of the State of California, County of Orange, the City of Newport Beach, or any other governmental body or agency having lawful jurisdiction over the Premises or the business, enterprises, or activities conducted thereon. 12. ASSIGNMENT Lessee shall not assign, transfer, sublease, mortgage, hypothecate or give any grant of control of this Lease or the Premises, or any part hereof, either voluntarily • • or involuntarily, unless first approved by the City Council. 13. RESTORATION If during the term hereof any building or improvement erected by Lessee on the Premises, or any part thereof, shall be damaged or destroyed by fire or other casualty, Lessee shall, at its cost and expense, repair or restore the same according to the original plans thereof, or, at Lessee's option, Lessee may elect to replace such building or improvement, provided that if Lessee so elects, Lessee shall obtain the approval of Lessor of the proposed architectural plans. Any such work of repair, restoration or replacement shall be commenced within one hundred and eighty (180) days after the damage or loss occurs and shall be completed with due diligence, but not longer than one (1) year after such work is commenced unless delay is caused by events beyond the control of Lessee. If Lessee does not wish to repair or rebuild the improvements, it may terminate this Lease by giving Lessor written notice of termination, and if Lessee • chooses to terminate the Lease it shall be obligated to completely clear and restore the building site to its original condition. 14. DEFAULT AND TERMINATION OF LEASE A. Default Time and each of the terms, covenants and conditions hereof are expressly made the essence of this Lease. If the Lessee shall fail to comply with any of the terms, covenants, or conditions of this Lease, including: 1. Failure of Lessee to keep current on all utility payments for the Premises; 2. Failure of Lessee to keep the Premises in state of repair and operation dictated by §3 of this lease ( "Consideration') and to keep it in a neat, clean, orderly, safe and sanitary condition; 3. Failure to provide certificates of insurance evidencing insurance coverage as required in paragraph 12 of this Lease; and shall fail to remedy such default within thirty (30) days after service of a • written notice from Lessor to do so, if the default may be cured by the payment of money, or to commence in good faith to remedy any other default within thirty (30) days and thereafter diligently prosecute the same to completion, or if Lessee shall abandon or vacate the Premises, Lessor may, at its option and without further notice or demand, terminate this Lease and enter upon the Premises and take possession thereof, and remove any and all persons therefrom in the appropriate manner provided by law. B. Surrender of Possession upon Termination Lessee covenants and agrees that upon the expiration or sooner termination of this Lease, the Lessee will peaceably surrender the Premises with all buildings and improvements, in the same condition as when received or constructed, excepting reasonable use and wear thereof, and damage by fire, act of God, or by the elements. The Premises and all other improvements built, constructed or placed upon the Premises by the Lessee, or anyone holding by, under, or through it, shall remain on the Premises and become the property of the Lessor without any cost to Lessor upon the • termination of this Lease, whether by lapse of time or by reason of default, unless the Lessee elects to remove said improvements within sixty (60) days following the expiration or termination of this Lease. The provisions of this section shall be effective upon expiration or termination of this Lease regardless of whether Lessee holds over under the provisions of section E, below. C. Remedies Cumulative The rights, powers, elections and remedies of the Lessor contained in this Lease shall be construed as cumulative and no one of them shall be considered exclusive of the other or exclusive of any rights or remedies allowed by law, and the exercise of one or more rights, powers, elections or remedies shall not impair or be deemed a waiver of Lessor's right to exercise any other. D. No Waiver No delay or omission of the Lessor to exercise any right or power arising from any omission, neglect or default of the Lessee shall impair any such right: • 10 • or power or shall be construed as a waiver of any such omission, neglect or default on the part of the Lessee or any acquiescence therein. No waiver of any breach of any of the terms,covenants, agreements, restrictions or conditions of this Lease shall be construed as a waiver of any succeeding breach of the same or of any of the terms covenants, agreements, restrictions or conditions of this Lease. E. Holding Over It is mutually agreed that if the Lessee shall hold over after the expiration of this Lease for any cause, such holding over shall be deemed a tenancy from month -to -month only, and upon the same terms, conditions, and provisions of this Lease. 15. EMINENT DOMAIN In the event the whole or part of the property or improvements is • condemned by a public entity in the lawful exercise of the power or eminent domain, this Lease shall cease as to the part condemned upon the date possession of that part is taken by the public entity. If only a part is condemned and the taking of that part does not substantially impair the capacity of the remainder to be used for the purposes required in this Lease, Lessee shall continue to be bound by the terms, covenants and conditions of this Lease. If only a part is condemned and the taking of that part substantially impairs the capacity of the remainder to be used for the purposes required in this Lease, Lessee shall have the election of: (1) Terminating this Lease and being absolved of obligations hereunder which have not accrued at the date possession is taken by the public entity; or (2) Continuing to occupy the remainder of the property and remaining bound by the terms, covenants and conditions of this Lease. • Lessee shall give notice in writing of his election hereunder, within thirty 11 (30) days of the date possession of the part is taken by the public entity. • Lessor shall be entitled to receive and shall receive all compensation for the condemnation of all or any portion of the property by exercise of eminent domain. Lessee shall be entitled to receive and shall receive all compensation for the condemnation of all or any portion of the improvements constructed by Lessee on the Premises by the exercise of eminent domain. 16. NOTICES It is mutually agreed that any notice or notices provided for by this Lease or by law, to be given or served upon the Lessee, may be given or served by mail, registered or certified, with postage prepaid, and if intended for the City of Newport Beach, addressed to the City Manager,P.O. Box 1768, Newport Beach, California 92659, or at such other address as may be hereafter furnished to the Lessee in writing, and if intended for the Lessee, addressed to its Association President, 701 Via Lido Soud, Newport Beach, California 92660, or at such other address as may be hereinafter • furnished to the Lessor in writing; or it may be served personally upon any corporate officer of Lessee or person charged with general maintenance responsibilities in connection with the Premises; and that any notice or notices provided by this Lease or by law to be served upon Lessor may be served personally upon the Mayor of the City of Newport Beach or the City Clerk of the City of Newport Beach. Such service shall be deemed complete at the expiration forty-eight (48) hours from and after the deposit in the United States mail of such notice or demand or communication. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written. LESSOR: CITY OF NEWPORT BEACH By: Dennis D. O'Neil • 12 • Mayor ATTEST: 0 • City Clerk LESSEE: f: \cat \ag \UCAParks and Beaches\ LeaseFinaID41299.doc a a 13 APPROVED AS TO FORM AND CONTENT Robin L. Clauson Assistant City Attorney Lido Isle Community Association John Polovina LICA President PARCEL E LOT Exhibit A - Lease Premises (Lease for Street End Pocks, Beaches, Dry Boat Storage Areas) • i \J ITEM _ 0 9 TO: Members of the Newport Beach City Council FROM: Dave Kiff, Assistant to the City Manager SUBJECT: Lease Agreements with the Lido Isle Community Association (LICA) for Street End Parks, Marina, and Beaches on Lido Isle RECOMMENDED ACTION: BRIEF SUMMARY: (1) Approve proposed leases with the Lido isle Community Association, including one lease for approximately $31,500 per year and one lease where "rent" is LICA's park maintenance obligations; (2) Per Council Policy F -7, find that the City may enter into a Iease lower than the projected rental value of an appraisal for a specified reason; and (3) Adopt Resolution 99 -_ relating to the findings and the two lease agreements with LICA. The Lido Isle Community Association (LICA) today pays $7,800 per year to lease 13 parcels (including street end parks, beaches, two dry boat storage areas, and a marina) from the City. This 25 -year lease expires on April 14, 2000. According to a recent appraisal, LICA should pay the City $47,000 per year to lease the properties. In a key assumption, the appraisal assumes that the appropriate park maintenance costs for the street end parks and beaches are 50% less than LICA pays today. As a result, the appraisal does not consider about $50,000 per year of LICA's current park maintenance costs. LICA members argue that LICA should not be "punished" for choosing to care for the parks at a high level. In an attempt to forge a compromise, Council Member Ridgeway has met with LICA and has reached concurrence on a new lease structure that would include two leases as described below: . A marina tease with rent set at 30% of the marina's gross receipts OR a $20,000 per year "base rent," whichever is higher. NOTE: Using this formula, the marina lease rent would be about $31,5W/ year in 1998A9. • A lease for the street end parks, beaches, and dry storage areas with no rent. in exchange for no rental charge, LICA would have to maintain the parcels at lease at the current high level of maintenance. In effect, this compromise gives LICA additional consideration for what it pays in park maintenance costs. It also reflects an appropriate standard (30% of Gross Receipts) for marina rent payments baywide. Newport Beach City Council • • Page 2 BACKGROUND: As a part of its income property inventory, the City holds title to the street end parks, beaches, and marina of Lido Isle. These parcels, which total 219p04 square feet, include • Walkways (23,062 square feet) • Landscaped "Street End" Parks (37,344 square feet) • Beach Areas (113,738 square feet) • Marina Area (12,673 square feet) • Dry Boat Storage Areas (32,142 square feet) In April 1975, the City leased these properties to the Lido isle Community Association (LICA) for $3,700 per year (with an inflation adjustment). The lease payment is now $7,880 per year. The 1975 Lease expires on April 14, 2000. For planning purposes (especially relating to the capital expenses that LICA expects to incur to upgrade the marina), LICA has asked to negotiate a new lease prior to the termination of the current lease. Council Policy F -7 Council Policy. The City Council's Policy F -7 (Income Properties) directs the City to "continually evaluate the potential of all City -owned property to produce revenue. This may include leasing unused land, renting vacant space, establishing concessions in recreation areas or other similar techniques." The Policy further directs the City that "whenever possible the City shall conduct an open bid or proposal process to insure the highest financial return..." in order to help "...determine the highest and best use of the property." Specific finding required Policy F -7 also states that, "whenever less than the open market or appraised when appraised value value is received or when an open bid process is not conducted, the City shall not accepted... make specific findings setting forth the reasons thereof.. Such findings may include but need not be limited to the following: a) The City is prevented by tideland grants, Coastal Commission guidelines or other restrictions from selling the property or converting it to another use. b) Redevelopment of the property would require excessive time, resources and costs which would outweigh other financial benefits. c) Converting the property to another use or changing the manager, concessionaire or lessee of the property would result in excessive vacancy, relocation or severance costs which would outweigh other financial benefits. d) Converting residential property to another use or opening residential leases to competitive bid would create recompensable liabilities and other inequities for long -term residents. e) The property provides an essential or unique service to the community that might not otherwise be provided were full market value of the property be (sic) required. fl The property serves to promote other goals of the City such as affordable housing, preservation of open space or marine related services." C� Modification to the Determining What's "Fair." Given the subjective nature of the maintenance Appralsal• • • credit and the large difference between LICA's lease expense today and the proposed lease value assigned by Mr. Hansen, City staff and Council Member Ridgeway have met with LICA representatives to attempt to reach a supportable consensus. As a result, LICA and Council Member Ridgeway have concluded that two separate leases - one that addresses the wet slip marina at Via Antibes and another that covers the street end parks, beaches, and dry storage areas - might be an appropriate compromise. Summaries of the proposed lease agreements follow on the next page. AppmW of Fair Alwtxr RoaW Vdm Lido Isle Ca ?nmfty Aseaciciim Lease of City Landr, VAUiam IL Hansen Match1%1998, page 79. Pages BACKGROUND: Appraisal. In late 1997, the City hired William Hansen to conduct an (wnt'd) appraisal of the value of the Lido Isle street end parks, beaches, and marina. Hansen submitted the completed appraisal in March 1998, In his appraisal, Hansen assigns a yearly rental value of $47,000 to the leased premises. To achieve this valuation, Hansen... Appraisal O Determined the economic land rent (rent associated with an economic activity Methodology like slip and dry storage space rental) by... Estimating the gross income from wet slip rentals: $100,320 Adding the estimated gross income from dry slip rentals: 109 Total Effective Grass S 210.156 Taking 25% of the Slip Space effective gross: $ 2500 Taking 20% of the Dry Storage effective gross: 21.967 &vnomic Rent for Dry and Wet X7.047 0 Determined the rental value of passive open space (parks and beaches) by... Valuing passive open space at 30% of value of active open space: $686,305 Assigning an 8% rate of return on that value: 54,904 Estimating LICA's annual open space maintenance expenses: $111500 Assuming that the City would maintain it at half the cost: 5, j7511 Subtracting $55,750 from $54,904 to get: -0- Indicated rental value of passive open spare: -0- 8i Combined the economic rental value of the premises with the rental value of the passive open space by... Adding (rounded the economic land rental value. $ 47MO to the indicated rental value of the passive open space: To get the Annua: Rental Value for the leased premises L7.OQ0 Please note that Hansen offers LICA a 50% "credit" for its maintenance costs by arguing that the City, if it were to take over the parks, would maintain them "at a significantly ]over level than the historical high level of the Community Association. "1 This 50% credit may or may not be appropriate - it can be argued that LICA should be afforded a higher credit for its maintenance expenses and should not be 'punished' for keeping the parks well- manicured. C� Modification to the Determining What's "Fair." Given the subjective nature of the maintenance Appralsal• • • credit and the large difference between LICA's lease expense today and the proposed lease value assigned by Mr. Hansen, City staff and Council Member Ridgeway have met with LICA representatives to attempt to reach a supportable consensus. As a result, LICA and Council Member Ridgeway have concluded that two separate leases - one that addresses the wet slip marina at Via Antibes and another that covers the street end parks, beaches, and dry storage areas - might be an appropriate compromise. Summaries of the proposed lease agreements follow on the next page. AppmW of Fair Alwtxr RoaW Vdm Lido Isle Ca ?nmfty Aseaciciim Lease of City Landr, VAUiam IL Hansen Match1%1998, page 79. 0 0 Page 4 BACKGROUND: * Lease Agreement A (proposed) - Via Antibes Marina (cont'd) TERM: 25 years RENT: $20,000 base rent or 30% of gross rent from wet slips (in 1998, • potential gross rent was $105,600), whichever is higher. INFLATOR: Base rent inflated by 10% every 5 years INSURANCE: General Liability not less than $2 million City to be named as additional insured OTHER: LICA must maintain Antibes marina rent at 90% of market City reserves right to audit marina records at any time rt Lease Agreement B (proposed) - Street End Parks, Beaches, and Dry Storage areas TERM: 25 years RENT: No rent. In exchange, LICA must maintain parks, beaches, and dry storage areas at "high standard of maintenance INSURANCE: General Liability not less than $2 million City to he named as additional insured OTHER: City may use tidelands on Lido Isle's north side for Eelgrass mitigation banking If the City Council chooses to agree to the terms proposed above, the City must adopt findings to satisfy Council Policy F -7. An appropriate finding may include a reference to subsection (e), which reads: "77teproperty provides art essential or unique service to the community that might not otherwise be provided were full market value of the property be (sic) required.° ATTACHMENTS: Exhibit A - Lease Summary • Exhibit B - Map of Lido Isle and Lease Premises Exhibit C - Chronology of Lido Isle Lease History py Exhibit D - Resolution 99 -_ w. sro.t� r", , u • • 11 Exhibit A - Lease Summary Summary and Comparison of Leases Page 5 ftentises Tem Lease Leased Ara Rent Insurance PD - $sox; Current 25 years. BI / Death - $250K for Lease Same as A and B combined 219,004 st Expires in $7,800 1yr one person or April 2000 $500K for two or more persons Greater of $20,000 /yr or 30% Lease A Marina at Via Antibes 12,67! sf 25 years of wet slip gross GL >$2 MN + hold (proposed) receipts. NOTE: harmless approx $31,500 in FY 1998 -99 No rent. In Lease B Street End Parks, Beaches, 206.331 sf 25 years exchange, LICA GL >$2 MN + hold (proposed) and Dry Boat Storage Areas must maintain harmless parks at current level.