HomeMy WebLinkAboutS30 - Balboa Bay Club Lease Option ExtensionAgenda Item # S30
CITY OF NEWPORT BEACH
OFFICE OF THE CITY ATTORNEY
March 14, 2000
TO: Mayor & Members of the City Council
FROM: Robert H. Burnham
RE: Balboa Bay Club (BBC)
Lease Option Extension Request
Proposed Amendment
BACKGROUND
In 1996, the City and BBC entered into an agreement granting BBC an option to
enter into a new 50 -year lease in connection with their proposed redevelopment
of the property. The option expires June 30, 2001. BBC can exercise the option
only if they (a) obtain a revised Coastal Permit; (b) provide evidence of
construction financing; (c) submit final plans and obtain building permits; and (d)
pay City $250,000, plus interest at 8% from June 30, 1996 to the date the option is
exercised.
BBC has requested a one -year extension of the option expiration date (from June
30, 2001 to June 30, 2002). This request is based on delays attributable to
revisions to the design development plan and Coastal Commission processing of
the revisions.
Subsequent to receipt of the BBC request, the City Council authorized the City
Manager, City Attorney and special counsel to negotiate the terms and conditions
of a proposed one -year extension. The City Council directed staff and special
counsel to develop a proposal that would give BBC an additional and substantial
financial incentive to exercise the option and commence redevelopment of the
property as soon as possible.
PROPOSAL
The following is a summary of the proposal submitted for City Council approval:
1. BBC would pay the City $100,000 (First Payment) on April 1, 2000. All of
the First Payment would be a credit against the rent due after completion of all
improvements in the redevelopment plan (Rent Credit) if BBC exercises the
option on or before June 30, 2001. If the option is exercised after that date, BBC
would receive a rent credit equal to $5,000 per month for each full month during
the period from the date of exercise to expiration (June 30 2002);
2. BBC would pay the City $5,000 per month from June 30, 2000 until
the option is exercised (Second Payment). The entire Second Payment would be
a Rent Credit if BBC exercises the option on or before June 30.2001. BBC would
be entitled to a Rent Credit of $2,500 for each payment made after June 30, 2001
if the option is exercised after June 30, 2001.
3. BBC would pay the City $20,000 per month from July 1, 2001 until the
option is exercised (Third Payment). BBC would not be entitled to any Rent
Credit for the Third Payment(s).
4. City would retain all payments if BBC fails to exercise the option on
or before June 30, 2002. All these payments are in addition to the existing
consideration ($250,000 plus interest at 8% from June 30). The other terms and
conditions of the option agreement remain the same.
Staff and special counsel are recommending the City Council authorize preparation
of a formal amendment to the option to lease consistent with the proposal and
authorize execution of the proposed amendment by the Mayor.
IERT H. BURNHAM
Attorney