HomeMy WebLinkAbout06 - Balboa Yacht Basin Lease AgreementITEM 6
TO: Members of the Newport Beach City Council
FROM: Tony Melum, Division of Harbor Resources
SUBJECT: Lease Agreement for Shipyard/ Retail Store at Balboa Yacht Basin (with
Basin Marine, Inc.)
RECOMMENDATION:
Authorize the Mayor to execute the proposed lease with Basin Marine, Inc. on behalf of
the City of Newport Beach.
BACKGROUND:
The City owns certain harbor frontage and tidelands together with abutting upland
property, commonly known as the Balboa Yacht Basin (BYB), located at 829 Harbor
Island Drive (Exhibit A). This property consists of a 171 -slip commercial marina, 44
storage garages, 3 apartments, a yacht brokerage facility, a cafe and a marine hardware
store and shipyard.
Prior to 1981, the entire property was under lease to a master lessee. In July of 1981 the
master lessee assigned their interest to the City and the City took over management of
the property. As part of that management, the City undertook a major redevelopment
of the property, which included rebuilding the marina and refurbishing the marine
hardware and shipyard facility. Also as part of that development the City entered into
a long -term lease with Basin Marine, Inc., for operation of the marine hardware store
and shipyard on site. That 25 -year lease began in July of 1985 and is due to end on June
30, 2010.
Fair market rental value for the 1985 lease was developed by an appraisal done in 1984.
The lease itself contained a provision that, besides periodic rental adjustments during
the course of the lease, the property would be periodically re- appraised to evaluate the
fair market value of the lease premises and, if need be, further adjust rental rates. These
appraisals assume that the primary use of the property is restricted to that of a boat
repair facility for the sale of new and used boats, marine equipment and marine
hardware. The most recent reappraisal was conducted in August of 1997 and at that
time the rental rate was adjusted to its current level (Exhibit B).
In July of 2000, Dave New, the president of Basin Marine, contacted the City and asked
for a new lease. Their existing lease had approximately 10 years more to run. Mr. New
Newport Beach City Council
requested the new lease to assist him in procuring financing for approximately $300,000
in improvements at the site. These improvements will include:
• A paint spraying structure that will allow them to paint at the facility and remain
in compliance with Air Quality Management District regulations ($180,000);
• Replacement of an existing crane which has worn out ($80,000); and
• Other site repairs of an ongoing nature (which are lessee's responsibility) and
necessary now that the lease facility is 15 years old ($40,000).
City Council Policy F -7 directs the City, whenever a lease is considered, to conduct an
analysis to determine the maximum or open market value of the property. This
analysis must be conducted using appraisals or other techniques to determine the
highest value and best use of the property.
George Hamilton Jones conducted an appraisal on October 4, 2000 (Exhibit C). This
appraisal assumes the same basic terms as the existing lease, except for new rental
amounts and the extension of the lease term. It also opined that the City deserved
additional consideration for the extension as follows:
1) City would receive 5% of gross sales price if leasehold is sold, and
2) Basin Marine should pay all administrative costs associated with extension.
Both of these suggestions are included in the attached lease
The proposed new lease's monthly rent = a guaranteed minimum rent + percentage
rent. Jones established each amount (minimum and percentage rent) based on a land
lease rental survey of boatyards in 10 other harbors from Ventura to San Diego (see
Exhibit D). That data indicated that minimum rent should be a percentage of the prior
year's average of total rent paid. The percentages ranged from 67% to 80 %; the
applicable period ranged from one year to five years. The most recent data was 75% of
the average annual total rent for the past three years. Using 75% applied to an annual
average of Basin Marine, Inc.'s total rent for the previous three years, Jones established
minimum rent at $63,642. The percentage rent for the new lease is consistent with the
majority of the above survey data and particularly with the more recently - negotiated
rental adjustments.
Exhibit E compares the original lease rent and lease term with the most recently
adjusted rent and term and the proposed new rent and term.
As stated above Basin Marine Inc. has been a tenant of the City since 1981 and the
premises, under other leases, has been operated by the lessee's family essentially since
1939. There is a value to the City and to the BYB tenants in maintaining the "heritage"
of Basin Marine at the Basin.
The proposed lease (Exhibit F) has been reviewed and approved as to form by the City
Attorney.
Newport Beach City Council
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EXHIBIT B
GEORGE WA&i -TaN JONES. INC.
.. APPRAISAL CONSULTANTS .
GEORGE NAMBTON JONES, MM ` 717 MO.PARK DMV4 SURE D TE MHONE p11JAUM .
MWU D. DNVAn, MAI NEWPOkl Bwai, ULmmm 9960
KENT F WtVF/, MAI FAX m0673b9W
August 20, 1.997
Mr. Tony Melum
Deputy Chief Marine Environmental Division'
Newport Beach Fire and Marine Department
City of Newport Beach,
P. O. Box 1768
Newport Beach, CA 92658 -8915: Re: Basin Marine,. Inc..
Market Rent Appraisal
Dear Mr. Melum:
In accordance with your request and authorization dated July 11, 1997, we
have. examined Basin Marine Boat Yard, located at 829 Harbor Island Drive Fast,
Newport Beach, and considered the terms and conditions of the land and water lease
which currently applies to the property, for the purpose of formulating and
expressing our opinion of the fair market rental value of the site (land and water
only) as described in the existing lease.
In addition, we have also estimated the fair market rental value of the site if
enlarged by 9,100 square feet, as proposed. Our opinion is premised on the
representation that adequate offsite parking will be provided.
Fair market rental value is comprised of a combination of guaranteed
minimum rent and percentage rent. After investigation of the property and matters
pertinent to its valuation, we have formed the opinion that fair market rental value
for the land and water, is as follows:
Fair Market Rental Value Conclusion:
Guaranteed Minimum Renta4•.
Existing Site (37,432 U. effective): $51,200 per year
Proposed Enlarged Site (46,442 s.f. effective): $71,600 per year
Mr. Toni Mehun
August 20, 1997
Page -2-
Percentage Rental:
1.) Shipyard/boat repair
(labor, service and materials): 4% of gross
2) Outside labor: 10% of net income
3) Equipment and hardware sales, exclusive
of internal sales to boat repair business: 5% of gross
It is assumed that future adjustments in the minimum rent will be made as
specified in Section 3(b) of the subject lease, which is every four years based on
changes in the consumer price index (CPI).
Your attention is directed to the following report which sets forth premises
and limiting conditions, descriptions, exhibits, factual data, discussions,
computations, and analyses which form. in part, the basis of our value conclusions.
Respectfully submitted,
corg Jones, MAI
(State Ce i d General Real Estate
Appraiser No. AG005632)
1, V
f Harve AI
Late Cerrifie General g Estate
Appraiser No. AG006753)
Exhibit C
GEORGE HAD¢ TON JONES. INO.' -:
APPRAISAL CONSULTANTS
717 La>o PARK LIRR7E,sur n D
NEWPORT REAC CALIFORNIA RUM
06tobei.4, 2000''
TaURONE (➢49)¢7""
FACSMU (949) 679fi971
. �onnlnc0p4cbA.oet
Mr. Tony Melnik
Deputy Chief Marine Environmental Division,,
Newport B each Fire and Marine Department
City of Newport Beach
P. O. Box'1768
Newport Beach, CA 92658 78915 Re: Lease Extension. - Basin Marine
Market Rent Appraisal
Dear Mr. Melum:
In accordance with your request and authorization, we have examined Basin
Marine Boat Yard, located at 829 Harbor Island.Drive East, Newport Beach. We
have considered the terms and conditions of the existing.land and water lease and
the proposed extension of.lease term, for the purpose of formulating and expressing
our opinion of the fair market redtal,value of tho ske.(including.stom building) as
described in the existing lease. We have formed, au opinion of the additional
consideration, if any; which is-indicated by the market for the extension of the lease
term.
You have advised us tha(the new lease has not yet been drafted and for
purposes of this appraisal:we are to consider thai.the.new lease.will be essentially the
same as the existing lease,., except for the lease term. It is a premise of this report
that the city will continue to allow offsite parking in lieu of the 14 on -site parking .
spaces specified in the existing lease...The eurmnt lease term.will 'expire in 10 years.
The term of the proposed extended lease will be 15 years with two options to
extend the term for five years, each. The eford,:t he effective increase in the lease
term beyond the existing term, assuming exercise ofboth.options,.is 15 years.
Fair market rental value is comprised of &combination of guaranteed minimum
rent and percentage rent: After'investigaiiori of the property and matters pertinent
to its valuation',.we have formed the' opinion.thacfaii, market rental value for the
land and water, is as set out'on the'follOivmg pager
- L
Mr. Tony Melum
October.4, 2000
Page -2- .
Fair Market Rental Value Conclusion:
Guaranteed Minimum Rental: $63,642 per year
` Payable in installments of $5,303 per month
To be adjusted every three years to 75% of the
average annual" total rentIor the prior- three years
Percentage Rental:
1) Shipyard/boatrepair
(labor, service'and materials): 4% of gross receipts
2) Outside labor: 10% of net income
3) Equipment and hardware sales, exclusive
of internal sales to boat repair business: 5% of gross receipts
Additional Consideration For Extension:
City to receive 5% of gross sales price if leasehold is sold.
Lessee to pay all administrative costs associated with extension.
Your attention is directed to the following summary appraisal report which sets
forth premises and limiting conditions, descriptions, exhibits, factual data, discussion,
computations, and analyses which form, in part, the basis of our value conclusions.
Respectfully
ified General Real Estate
No. AG005632)
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Exhibit D
Port of Laa.Aiigcles :10 % retain 35% :;,.3:096' 10.0% Retucedmininnam :50 %.dutingrecession
(310] 7343862.] iarlyiTmalewdz- oa Sl5lati�d and afteraavyinoveout of Long Beach.
psin•vanous,lea ? efiolds::i;' and:SS:
1::200�sG
in Cakiiillo
City-of: . now 6:06 . notie Newedafamyolves master lease with
bolt j+erd on. ilz 3 sublease.. No
City - leases. ]/S.oflland'.�',wazec" . Percemages.i':.. .. .....
regYs,for Cemms Batiia Mari6a...
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minimum: "All. "do it yourself 'boat work.
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`'4.0%
4:0 %"
�a:o%:Mapmt
Channel LtleGds.
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t;,, 35Bnf '
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fgetds with differwt;'.:: '
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'75%,prior
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4 deal wasPar 53 Yamaha
(310) 30sA520 :$en Foreman :.4
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ireent.ivas 9 %'z S Is %s.f for upland and
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996 z $375)'orwater M% of land value)
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. Kirtg.Hatbor(Reddndo8weh) :
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(310)
. 3
va.56of- sublemoome,
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(310] 7343862.] iarlyiTmalewdz- oa Sl5lati�d and afteraavyinoveout of Long Beach.
psin•vanous,lea ? efiolds::i;' and:SS:
1::200�sG
in Cakiiillo
City-of: . now 6:06 . notie Newedafamyolves master lease with
bolt j+erd on. ilz 3 sublease.. No
City - leases. ]/S.oflland'.�',wazec" . Percemages.i':.. .. .....
regYs,for Cemms Batiia Mari6a...
(714)834d4A31keHepsett,':.
3year'avg:
s }guWl?N4.iegwzesrebuildtng
County'.ofOrenge�:Dept:ufHH83-
..
: °'
' marifftaatid:bsses rent 'on80%ofad
dasti {Ioiv;,after deht.service: % used as
" .
minimum: "All. "do it yourself 'boat work.
Dana Point .�_.._'.::�; "`,.
75%pnor
`'4.0%
4:0 %"
�a:o%:Mapmt
1971. '1975. .
...... ...
(714) 834 -4716 Barry Permenter:...:
5 year, avg.
,..
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.'; .: :'-
Adiustmeat dices. in 1996, no change.
Countyiof Orange; Deprof FiB&.P
Mission Day (City ofS:anMiego) -.;.
67%49%
4.0 %,
0% :'
10.0%
�, (619) 23(r6020'MaryLou Groad:. �-
S y'ear;apg.
p
change m percentage teat at sale,
Port of San Diego
'75%,prior
sA%
10.0%.
Boat yard 'rents are not based on
(619).686 -6291; Dan Strum
,. year rhea
'
_:.
petceat8ge.6u[ 9 %of fee value. Most
`.
level 19 yrs..
-
ireent.ivas 9 %'z S Is %s.f for upland and
996 z $375)'orwater M% of land value)
Exhibit E
Lease Comparisons
Lease
Premises
Term
Rent
Original Lease
37,432 square feet at
25 years -
Minimum: $33,000 per year
March 1985
829 Harbor Island
to June 2010
Percentage:
Drive
4 %of lessees gross receipts from labor,
service and materials, plus
—10% of Lessee's net income from outside
labor, plus
5% of Lessees gross on hardware sales,
exclusive of internal sales.
Current Lease
same
same
Minimum: $51,200 per year
A reappraisal
Percentage:
directed by the
Same as above
March 1985 Lease
in Februanj 1998
15 years + 2 five
Proposed
same
year options.
Minimum: $63,642 per year
Lease
Potentially
Percentage:
March 2001
terminates 2026.
Same as above
LEASE AGREEMENT
BALBOA YACHT BASIN /SHIPYARD & RETAIL
BASIN MARINE, INC.
THIS LEASE is made and effective as of the _th day of , 2001 ( "Effective
Date "), by and between the CITY OF NEWPORT BEACH, a Municipal Corporation ( "City ") and
BASIN MARINE, INC., a California Corporation ('Tenant').
RECITALS
A. City is owner of certain harbor frontage and tidelands, together with certain
abutting upland property known as 'Balboa Yacht Basin" located on Harbor Island Drive in the
City of Newport Beach, County of Orange in the State of California. A portion of the area of the
Balboa Yacht Basin is currently being used by Tenant for a shipyard /boat repair facility with a
marine hardware store, ( "Premises ") and is described in Exhibit A. Tenant is occupying the
Premises pursuant to a Lease dated March 5, 1985, which will expire on June 30, 2010 ( "Old
Lease').
B. Under the Old Lease terms Tenant agreed to improve and repair the shipyard
and boat repair facilities on the Premises under terms and conditions that would allow Tenant
an opportunity to recover funds contributed to the redevelopment of the site. The improvements
have been completed and tenant desires a new lease with extended term to replace the Old
Lease.
C. The rent in the Old Lease was agreed to based upon an appraisal of the fair
rental value of the property, given the then current condition of the property, the restrictions on
the use of the property, the improvements to be made to the property and the commitments of
Tenant and City with respect to those improvements. Landlord with Tenants concurrence has
obtained a recent appraisal of the fair market value rental based upon current conditions. The
Base Rent and Percentage Rental has been agreed to based upon the October 4, 2000
appraisal by George Jones, MAI.
D. Tenant and City desire to terminate the Old Lease and enter into a new Lease of
the Premises to allow Tenant to continue to operate shipyard /boat repair facilities for an
extended term upon revised terms and conditions as provided in this Agreement.
E. The uses to be made of the Premises are consistent with provisions of the Local
Coastal Plan and General Plan of the City of Newport Beach, and the terms and conditions in
this Lease are consistent with the provisions of the City Charter and the ordinances of the City
of Newport Beach.
F. The uses to be made of the property subject to this Lease are consistent with
provisions of the Tideland Grant pursuant to which the City obtained title to the property.
10
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, City and Tenant agree as follows:
1.
1.1 General Definitions. As used in this Lease, the following words and phrases
shall have the following meanings:
(a) Alteration — any addition or change to or modification of, the Premises
made by Tenant including, without limitation, fixtures.
(b) Annual Total Rent — the combination of Base Rent and Percentage
Rental for the Lease Year.
(c) Authorized Representative — any officer, agent, employee, or independent
contractor retained or employed by either Party, acting within authority
given by that Party.
(d) City - the City of Newport Beach.
(e) Damage — an injury to or death of any Person, or the damage destruction,
or loss of property caused by another Person's acts or omissions.
(f) Damages — monetary compensation or indemnity that can be recovered
in the courts by any Person who has suffered Damage.
(g) Expiration — the lapse of the time specified as the Term of this Lease,
including any extension of the Term resulting from the exercise of an
option to extend.
(h) Good Condition - the clean, safe, physical condition of the Premises and
each portion of the Premises.
(i) Hazardous Materials — shall mean that which any court, government
order or regulatory agency with jurisdiction and authority over the
Premises or Tenants business operations may understand the term to
mean in accordance with state and federal laws.
Q) Hold Harmless — to defend and indemnify from all liability, losses,
penalties, Damage, costs, attorney fees, expenses, causes of action,
claims, or judgments arising out of or related to any Damage to any
Person or property.
(k) Law — any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any
municipal, county, state, federal, or other government agency or authority
having jurisdiction over the Parties or the Premises.
(1) Lease Year — for the purposes of Rent and Rent payments, the Lease
Year shall mean January 1st and end on December 31st of each year.
(m)
Maintenance or Maintain — repairs replacement, maintenance, repainting,
and cleaning.
(n)
Person — one or more natural persons, or legal entities, including, without
limitation, partnerships, corporations, trusts, estates, associations, or a
combination of natural persons and legal entities.
(o)
Premises — those portions of the Balboa Yacht Basin designated on
Exhibit A encompassing the marine hardware store and boat repair yard,
including all structures and improvements located within the premises.
(p)
Provision — any term, covenant, condition, or clause in this Lease that
defines, establishes, or limits the performance required or permitted by
either Party.
(q)
Rent — Base Rent, Percentage Rent, late payment penalties, interest,
taxes, and other similar charges payable by Tenant under the Provisions
of this Lease.
(r)
Rent Commencement Date - the Rent Commencement Date (and the
Effective Date) shall be January 1, 2001.
(s)
Successor — assignee, transferee, personal representative, heir, or other
Person succeeding lawfully, and pursuant to the provisions of this Lease,
to the rights or obligations of either Party.
(t)
Tenant — BASIN MARINE, INC., a California corporation, and any
approved Successor.
(u)
Termination — the termination of this Lease, for any reason, prior to
Expiration.
2. LEASE OF PREMISES
City leases the Premises to Tenant and Tenant leases the Premises from City for the
Term and on the conditions contained in this Lease.
3. TERM
3.1 Term
of Lease. The Term of this Lease shall be fifteen (15) years from the
Effective Date unless sooner terminated as provided in Section 16.
3.2 Option to Extend. Provided Tenant is not then in material default, Tenant may
extend the term of this Lease for two additional successive terms of five (5) years (the "Option
Term" or "Option Terms ") the first commencing on Expiration of the initial Term and the second
commencing on Expiration of the first Option Term. Tenant may exercise the option by giving
City written notice of its intention to do so at least three (3) months prior to Expiration of the
initial Term or the first Option Term.
3.3 Hold Over. Should Tenant, with City's consent, hold over and continue in
possession of the Premises after Expiration of the Term or any Option Term, Tenant's continued
occupancy of the Premises shall be considered a month -to -month tenancy subject to all the
terms and conditions of this Lease, except the provisions of Subsections 3.1 and 3.2.
IN/
4. RENT
4.1 Base Rent.
(a) Base Rent. From and after the Rent Commencement Date, Tenant shall
pay Base Rent to City in the sum of Sixty Three Thousand Six Hundred
Forty Two Dollars ($63,642.00) per year. Base Rent shall be paid in
equal monthly installments of Five Thousand Three Hundred and Three
Dollars ($5,303.00). Base Rent for each full month shall be due on the
tenth (10th) day of that month. Base Rent for any partial month shall be
prorated in accordance with the actual number of days in that month.
(b) Periodic Adjustment. Every three (3) Lease Years the Base Rent shall be
adjusted to seventy five percent 75% of the average Annual Total Rent
for the prior three (3) Lease Years.
4.2 Percentage Rent.
(a) In addition to the Base Rent, Tenant shall pay to City at the time and in
the manner herein specified, a Percentage Rental calculated by
multiplying the Gross Sales Percentage Rate by the Gross Sales (as
defined in Section 4.4) attributable to the Premises during each Lease
Year.
Gross Sales Percentage Rate
1. Shipyard /boat repair
(labor, service and materials) .............. 4% of gross sales
2. Outside labor and materials ................ 10% of gross profit realized
by Tenant
3. Equipment and hardware sales,
exclusive of internal sales to
boat repair business ...................5% of gross receipts.
(b) Percentage Rent shall be due and payable within twenty -five (25) days
after the end of each calendar month, commencing with the first
installment of Base Rent under paragraph 4.1(a) above. Tenant shall
furnish to City a statement, in writing, certified by Tenant to be correct,
showing the total Gross Sales made in, upon or from the Premises during
the preceding calendar month. Percentage Rental paid on or after the
10th day of the month due shall be considered late.
4.3 Payment Location. Rent shall be payable at the office of the City's Revenue
Division at 3300 Newport Boulevard, Newport Beach, California, or at such other place
or places as City may from time to time designate by written notice delivered to Tenant.
4.4 Gross Sales
(a) The term "Gross Sales" means:
(1) The entire amount of the actual sales price, whether wholesale or
retail, and whether wholly or partly for cash, on credit or in
exchange for any other product, commodity, service, commercial
paper or forbearance, of all sales of merchandise, labor, service
and materials and all charges made by or on behalf of Tenant
from or upon the Premises;
F,,
(2) Orders taken in or from the Premises, even if the orders are filled
elsewhere, and sales by any subtenant, or subcontractor in or
from the Premises;
(3) All sales originating at the Premises shall be considered as made
and completed therein, even though bookkeeping and collection
of the account may be transferred to another place, and even
though actual filling of the sale or service order and actual
delivery of the merchandise may be made from a place other than
the Premises.
(4) Gross receipts of all coin - operated devices that are placed on the
Premises by Tenant or pursuant to any rent concession,
percentage or other arrangement (but excluding revenue from one
drink vending machine for employees and telephones that are
collected by a public and /or private utility).
(5) Each sale upon installment or credit shall be treated as a sale for
the full price in the month during which such sale shall be made,
irrespective of the time when Tenant shall receive payment
(whether in full or partial) from its customers.
(b) Exclusions from Gross Sales. Gross Sales shall not include, or if
included there shall be deducted (but only to the extent they have been
included), the following:
(1) Sales and use taxes, so- called luxury taxes, consumers' excise
taxes, and other similar taxes now or in the future imposed on the
sale of merchandise or services, but only if such taxes are
separately stated on the invoice and added to the selling price and
collected from customers.
(2) The amount of returns to shippers or manufacturers.
(3) The amount of any cash or credit refund made upon any sale
where the merchandise sold or some portion is returned by the
purchaser.
(4) Sums and credits received in the settlement of claims for loss of or
damage to merchandise.
(5) Cash refunds made to customers in the ordinary course of
business.
(6) Value Added Taxes ( "VAT') or other taxes added to the selling
price of products and other similar taxes now or hereafter imposed
upon the sale of merchandise or services, whether such taxes are
added to, or included in the selling price.
(7) Uncollectible credit accounts and other bad debts, not to exceed
two percent (2 %) of Gross Sales.
(8) The proceeds of sale of Tenant's personal property, trade fixtures
or business equipment.
(c) Statements of Gross Sales. Tenant shall furnish to City statements of
Tenant's Gross Sales within twenty -five (25) days after the end of each
month, and annual statements of Gross Sales within thirty (30) days after
the end of each Lease Year. Each statement shall be signed and
certified to be correct by an Authorized Representative of Tenant.
(d) Sales and Charges. All sales and charges shall be recorded by one of
the following means: (1) cash registers that display the amount of the
transaction certifying the amount recorded. The register shall be
equipped with devices that log in daily sales totals, and record on tapes
the transaction numbers and sales details. At the end of each day the
tape will record the total sales for that day; (2) or sales invoices.
(e) Production of Statement Records and Audit. Tenant agrees to make
available for inspection by City, or its Authorized Representative, at the
Premises a complete and accurate set of books and records of all sales
of merchandise and revenue derived from the conduct of business or
activity in, at or from the Premises from which Gross Sales can be
determined. Tenant shall also make available, upon City's request, all
supporting records, including federal, state and local tax returns. Tenant
shall also furnish City's Authorized Representative, upon request, copies
of its quarterly California sales and use tax returns filed with the State of
California. Tenant shall retain and preserve for at least three (3) years all
records, books, bankbooks or duplicate deposit books and other evidence
of Gross Sales. City and its Authorized Representative shall have the
right, upon reasonable notice, during the Term or any Option Term, to
inspect and audit Tenant's books and records and to make transcripts to
verify the Rent due City. The audit may be conducted at any reasonable
time during normal business hours. Tenant shall cooperate with City in
making the inspection and conducting the audit. City shall also be
entitled, once during each Lease Year and once within one hundred
eighty (180) days after Expiration or Termination of this Lease, to an
independent audit of Tenant's books of account, records, cash receipts,
and other pertinent data to determine Tenant's Gross Sales. The audit
shall be conducted at City's sole cost and expense by a certified public
accountant designated by City. The audit shall be limited to the
determination of Gross Sales and shall be conducted during usual
business hours in a manner that minimizes any interference with the
conduct of Tenant's regular business operations. If the audit concludes
that there is a deficiency in the payment of any Rent, the deficiency shall
become due and payable within twenty (20) days and if there is an
overpayment, City shall refund the amount of the overpayment within
twenty (20) days. City shall bear its costs of the audit unless the audit
shows that Tenant understated Gross Sales by more than five percent
(5 %), in which case Tenant shall pay all City's reasonable costs of the
audit. City and City's Authorized Representative shall be required to keep
any information gained from such documents, statements, inspections or
audits confidential to the maximum extent permitted by law. City and its
Authorized Representative shall not disclose financial information
received in confidence and pursuant to this Lease except to carry out the
purposes of this Lease unless disclosure is required (rather than
permitted) by law. However, City may disclose the results of any audit in
connection with any financing arrangements, the sale or transfer of City's
interest in the Premises, or pursuant to order of a court or administrative
tribunal.
(f) Tenant's Gross Sales Audit. In the event of any audit by City in
accordance with this Lease, Tenant may contest the results of City's audit
by performing a confirming audit within thirty (30) days of receipt of City's
audit results and supporting evidence, using an independent public
accountant reasonably acceptable to City. If Tenant's audit discloses that
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City's audit was incorrect by more than five percent (5 %), then City shall
pay the cost of Tenant's contesting audit.
(g) Acceptance. The acceptance by City of any money paid to City by
Tenant as Percentage Rent for the Premises, as shown by any statement
furnished by Tenant, shall not be construed as an admission of the
accuracy of said statement, or of the sufficiency of the amount of the
Percentage Rent payment.
4.5 Late Payment Penalty. Base Rent and Percentage Rent shall be late when paid
on or after the 26' day of the month due. Late Rent shall be assessed a one-
time penalty of 10% of the amount due and shall bear interest at the rate of ten
percent (10 %) per annum on the unpaid balance until paid.
5. BUSINESS PURPOSES AND USE OF PREMISES
5.1 Business Purposes. The Premises are to be used by Tenant for the principal
operation of a shipyard/boat repair facility. Tenant may, at Tenant's option also sell new or used
boats and /or marine equipment and hardware, so long as such uses are incidental to the
principal use. Tenant may not use the premises for any other use except with prior written
consent of the City.
5.2 Operation of Premises. Tenant shall operate and manage the Premises in a
manner comparable to other high quality businesses providing similar shipyard /boat repair
services. Tenant shall not use or permit the use of the Premises in any manner that (i) creates
a nuisance or (ii) violates any Law.
5.3 Sales Restrictions. Tenant shall not display, sell or store merchandise outside
the defined exterior walls and permanent doorways of said Premises, and no sale by auction in,
upon or from said Premises, whether said auction be voluntary, involuntary, pursuant to any
assignment for benefit of creditors or pursuant to any bankruptcy or other solvency proceedings,
shall be conducted except such auctions that may be conducted by officers of a court with
respect to any vessels in custody of Tenant.
5.4 Continuous Operation. Weather permitting, Tenant shall at a minimum
keep the Premises in operation and open to the public for business during normal business
hours, Monday — Friday 8:00 a.m. — 4:30 p.m. Tenant may close the Premises on federal and
state holidays and during periods of remodeling, reconstruction, inventory and emergencies
(including substantially inclement weather) or to comply with laws.
5.5 Advertising Display. Tenant may, at its own expense, place signs in or upon the
Premises subject to the prior written consent of the City Manager as to the size, type, design
and method of installation. All signage placed by Tenant on, in or about the Premises shall
remain the property of Tenant and shall be removed by Tenant upon Termination or Expiration
of this Lease at Tenant's expense; and any damage caused by removal shall be repaired at
Tenant's expense. The permanent signage in place as of the Execution Date of this Lease shall
be deemed approved by the City and the City Manager.
5.6 Independent Contractor. City shall have no interest in the business of Tenant.
5.7 No Distress Sales. No auction, fire, bankruptcy, "going out of business" or other
distress sales of any nature may be conducted on the Premises without the prior written consent
of the City Manager, which will not be unreasonably withheld, conditioned.
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5.8 Parking. Tenant shall provide a total of four (4) parking spaces on -site which
satisfy Newport Beach Municipal Code requirements. The required parking shall be provided in
an area that is visible to Tenant's customers and shall be available for parking at all times.
6. SERVICES FOR CITY
Tenant, in addition to the obligation to pay rent, shall perform the other terms and
conditions of this Lease and shall, at Tenant's sole expense, do the following:
(a) Haul out, annually, up to four (4) of the vessels owned and maintained by the
City, of a size capable of being handled by Tenant's equipment provided,
however, the vessels shall be hauled out no more than twice a year;
(b) Transport the vessels to an area on the Premises suitable for the purposes of
repairs or maintenance;
(c) Allow the vessels to remain on the Premises for a period of two (2) weeks
immediately after haul -out;
(d) Permit access to the vessels by employees or representatives of City for the
purpose of repairs and maintenance.
City shall give Tenant thirty (30) days' written notice prior to the date on which the
vessels are to be hauled -out.
7. TAXES. LICENSES AND OTHER OBLIGATION
7.1 Payment of Taxes. Tenant acknowledges that this Lease may create a
possessory interest subject to property taxation and that Tenant may be subject to the payment
of property taxes levied on such interest. Tenant shall pay, before delinquency, all taxes,
assessments, license fees and other charges (Taxes) that are levied or assessed against
Tenant's leasehold interest in the Premises or any personal property installed on the Premises.
Tenant shall pay directly to the appropriate taxing authorities all taxes applicable to this Lease,
fixtures and Tenant's personal property on the Premises, that are levied or assessed against
Tenant. Taxes shall be paid at least ten (10) days before delinquency and before any fine,
interest or penalty is due or imposed by operation of law. Tenant shall, upon request, promptly
furnish to the City satisfactory evidence of payment. Tenant shall not be required to pay any
real property taxes or assessments based upon City's ownership interest in the Premises.
7.2 Payment of Obligations. Tenant shall promptly pay, when due, any and all bills,
debts, liabilities and obligations incurred by Tenant in connection with Tenant's occupation and
use of the Premises.
7.3 Challenqe to Taxes. Tenant shall have the right in good faith, at its sole cost and
expense, to contest the amount or legality of any Taxes on or attributable to this Lease, the
Premises, Tenant's personal property, or Tenant's occupation and use of the Premises,
including the right to apply for reduction. If Tenant seeks a reduction or contests such taxes,
Tenant's failure to pay the taxes shall not constitute a default as long as Tenant complies with
the provisions of this Section. City shall not be required to join in any proceeding or contest
brought by Tenant unless the provisions of any Law require that the proceeding or contest be
brought by or in the name of City or any owner of the Premises. In that case, City shall join in
the proceeding or contest or permit it to be brought in City's name as long as City is not required
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to bear any cost. If requested by Tenant, City shall execute any instrument or document
necessary or advisable in connection with the proceeding or contest. Tenant, on final
determination of the proceeding or contest, shall immediately pay or discharge any decision or
judgment rendered, together with all related costs, charges, interest and penalties. Tenant shall
Hold Harmless the City and its officers and employees from and against any liability, claim,
demand, penalty, cost or expense arising out of or in connection with any contest by Tenant
pursuant to this Section.
7.4 License. Tenant shall maintain in good standing all required licenses and
permits required for operation of the business on the Premises, including but not limited to a
City Business License.
8. UTILITIES AND REFUSE COLLECTION
(a) Basic Utilities. Tenant shall make all arrangements for and pay for all utilities
furnished to or used on the Premises, including, without limitation, gas, electricity,
water, telephone service, cable TV and janitorial service. Any repair to utility lines
within the Premises is the sole responsibility of Tenant.
(b) Refuse Collection. Tenant shall make arrangements for and pay for all refuse
collection and hazardous materials disposal. Tenant shall keep the Premises
free and clean of rubbish and litter and shall deposit accumulated rubbish and
litter in containers designated by City. Trash containers shall be kept in an
approved enclosed area. Tenant shall comply with the provisions of the Newport
Beach Municipal Code and state and federal laws relative to the deposit of
material to be collected and the disposal of hazardous materials.
9. ALTERATIONS TO THE PREMISES
(a) Alterations Requiring Building Permits. Any alteration that requires a building
permit from City shall require the written consent of the City Manager which shall
not be unreasonably withheld.
(b) Non - Structural Alterations. Tenant shall have the right to make, at its sole
expense, such non - structural changes, alterations, improvements and additions
in and to the interior of the buildings, or to the piers, slips, floats and ramps on
Premises, and Tenant may install therein such trade fixtures and equipment as it
may deem advisable for the conduct of its business.
(c) Alterations Costing More than $50,000. Tenant shall not make any Alterations
(other than non - structural Alterations costing less than Fifty Thousand Dollars
[$50,000.00]) to the Premises without the prior written consent of the City
Manager which shall not be unreasonably withheld. In granting or withholding
consent to proposed Alterations by Tenant, the City Manager shall consider the
impact of the proposed Alterations on public views and the impact of the
proposed Alterations on space available for public use of the Balboa Yacht
Basin. The City Manager may require, as a condition of approval, that Tenant
agree to amendments to this Lease, including amendments increasing the
amount of Rent payable under this Lease if the proposed Alterations would
materially increase the floor area of the structures on the Premises. The City
Manager may also require Tenant to provide, at Tenant's expense, appropriate
engineering and feasibility studies regarding the structural integrity of the
Premises.
(d) Quality of Work Performed. All work shall be performed in a good and
workmanlike manner, shall substantially comply with the plans and specifications
submitted to City and shall comply with all applicable governmental permits and
Laws in force at the time permits are issued.
(e) Payment of Costs. Tenant shall pay all costs related to the construction of any
Alterations by Tenant or its agents. Tenant shall keep the Premises free and
clear of all mechanics' liens resulting from construction performed at the direction
of Tenant.
(f) Indemnification. Tenant shall Hold Harmless City and its officers and employees
with respect to any Damage or Damages related to any work performed on the
Premises by Tenant. City shall promptly provide Tenant with a copy of any claim
filed by any third party with respect to work performed by Tenant.
(g) Disposition of Alterations at Expiration or Lease Termination. Any Alterations
made to the Premises shall remain on, and be surrendered with, the Premises on
Expiration or Termination of this Lease (excluding Tenant's fixtures, equipment,
furniture, movable decorations and the like). However, City may elect not less
than thirty (30) days prior to Expiration or Termination of this Lease, to require
Tenant to remove any Alterations that Tenant has made to the Premises, except
those Alterations existing as of the date of this Lease or approved by City. If City
requires removal of Alterations, Tenant shall, at its cost, remove the Alterations
and restore the Premises to its condition prior to installation of such Alterations,
ordinary wear and tear excepted, before the last day of the Term, or within thirty
(30) days after notice is given, whichever is later. Prior to Expiration or within
fifteen (15) days after Termination of this Lease, Tenant may remove any
movable partitions, machinery, equipment, furniture, and trade fixtures previously
installed by Tenant, provided that Tenant repairs any damage to the Premises
caused by removal.
10. REPAIRS AND MAINTENANCE OF PREMISES
10.1 Maintenance and Repair by Tenant and City. Tenant agrees that it will maintain
the Premises in Good Condition. City shall be responsible for the maintenance of the bulkheads
serving the Premises. Tenant shall also, at its sole cost and expense, at all times during the
term hereof, maintain the Premises and every portion thereof including, but not limited to, store
fronts, entrances and exits, plate glass, roofs, doors, plumbing and other fixtures, equipment,
interior walls, ceilings and floors, piers, slips, floats and ramps, in good order, condition and
repair, and Tenant shall comply with all laws, ordinances and regulations applicable thereto.
City may perform Maintenance or repairs in the event Tenant fails to commence required
Maintenance or repairs within three (3) business days after receipt of notice to do so. The cost
of any Maintenance or repairs by the City pursuant to this Subsection shall be payable as
additional Rent.
(a) Entry by City. City and its Authorized Representatives may enter upon
and inspect the Premises at any reasonable time for Maintenance or
other purposes. In case of emergency, City or its Authorized
Representatives may enter the Premises by the master key if Tenant is
not present to open and permit an entry. During entry City and its
Authorized Representatives shall exercise reasonable care relative to the
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Premises and to Tenants property. Any entry to the Premises by City
shall not be construed as a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Tenant from the Premises or any portion
thereof.
(b) Additional Covenants of City Regarding Maintenance Oblioations. In
addition to other provisions of this Lease:
(1) Written Notice. Interference with Business Operations. and
Additional Improvements. City shall, at the earliest time
reasonably possible given the circumstances that may then exist,
provide Tenant with prior written notice of its intent to: (i) perform
any Maintenance, repair or remodeling of the Balboa Yacht Basin
which may reasonably be expected to adversely affect, by
interference with access, visibility, availability of utilities or
otherwise, Tenant's business operations at the Premises or any
portion; or (ii) except in the case of an emergency, enter upon the
Premises for any of the purposes set forth in this Lease. City
agrees not to construct any additional improvements at the Balboa
Yacht Basin that relate to any commercial enterprise which might
conflict or compete with Tenant's business operations on the
Premises.
(2) Due Diligence by City Regarding Repairs. Whenever City elects
or is obligated to repair or restore the Premises or any portion of
the Balboa Yacht Basin, City shall proceed, at City's cost and with
due diligence to repair or rebuild the same, including any additions
or improvements made by City or by Tenant with City's consent, in
accordance with the same plan and design as existed immediately
before such damage or destruction occurred and in accordance
with all applicable Laws. The materials used in said repair or
reconstruction shall be as nearly like the original materials as may
then be reasonably procured.
11. LIENS
Tenant shall not permit to be enforced against said Premises, or any part thereof, any
mechanics', materialman's, contractors' or other liens arising from, or any claims for damages
growing out of, any work or repair or alteration (except from the actions of City), and Tenant
shall pay or cause to be paid said liens and claims before any action is brought to enforce the
same against Tenant or the Premises, or shall adequately indemnify Tenant and the Premises
by payment bonds acceptable to City and as provided for by Law. Tenant agrees to indemnify
and hold City and the Premises free and harmless from all liability for any and all such liens and
claims and all costs and expenses in connection therewith. Tenant shall give City notice in
writing before commencing construction of any kind on the Premises.
12. INDEMNITY AND EXCULPATION: INSURANCE
12.1 Exculpation of City. Except as otherwise expressly provided in this Lease, City
shall not be liable to Tenant for any damage to Tenant or Tenant's property from any cause
other than the negligent, intentional or willful acts of City or its Authorized Representatives.
Except as otherwise expressly provided in this Lease, Tenant waives all claims against City for
Damages arising for any reason other than the negligent, intentional or willful acts of City or its
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Authorized Representatives. City shall not be liable to Tenant for any Damage to the Premises,
Tenant's property, Tenant's goodwill, or Tenant's business income, caused in whole or in part
by acts of nature including, without limitation, waves, wind and tidal flows.
12.2 Hold- Harmless Clause. Tenant agrees to Hold Harmless the City, its officers and
employees from any and all claims, liability, loss, Damage, or expenses resulting from Tenant's
occupation and use of the Premises, specifically including, without limitation, any claim, liability,
loss, or Damage arising by reason of:
(a) The death or injury of any Person caused or allegedly caused by the
condition of the Premises or an act or omission of Tenant or an agent,
contractor, employee, servant, sublessee or concessionaire of Tenant;
and
(b) Any work performed on the Premises or materials furnished to the
Premises at the request of Tenant or any agent or employee of Tenant,
with the exception of Maintenance performed by City; and
(c) Tenant's failure to perform any provision of this Lease or to comply with
any requirement of Law or any requirement imposed on the Premises by
any duly authorized governmental agency or political subdivision.
Tenant's obligations pursuant to this Subsection shall not extend to any claim, loss,
liability, Damages, costs or fees that are proximately caused by the sole negligence, willful
misconduct, or unlawful or fraudulent conduct on the part of the City or its officers or employees.
12.3 Insurance Limits.
(a) Bodily Injury and Property Damage Insurance Thresholds. Tenant shall,
at its own cost and expense, secure and maintain during the entire Term,
and any Option Term of this Lease a broad form comprehensive
coverage policy of public liability insurance issued by an insurance
company reasonably acceptable to City. The policy shall name City, and
its officers, employees and agents as additional insureds and protect,
against loss or liability caused by or connected with Tenant's occupation
and use of the Premises under this Lease in amounts not less than:
combined single limit bodily injury and property damage, including
products /completed operations liability and blanket contractual liability, of
One Million Dollars ($1,000,000) per occurrence.
(b) City's Ability to Increase Amount of Public Liability and Property Damage
Insurance. Not more frequently than once every five (5) years, Tenant
shall increase the insurance coverage as reasonably required by City if, in
the opinion of the City or its employees or agents, the amount of public
liability and property damage insurance coverage at that time is not
reasonably adequate to fully protect the City.
12.4 Fire Insurance on Building and Other Improvements. Tenant at its cost shall
maintain on the Buildings and other improvements that are or become a part of the Premises a
policy of standard fire and extended coverage insurance, with vandalism and malicious mischief
endorsements, to the extent of at least full replacement value, in a form acceptable to the City's
Risk Manager The insurance policy shall be issued in the names of City and Tenant, as their
interests appear. The insurance policy shall provide that any proceeds shall be made payable
to City and Tenant jointly.
12.5 Determination of Replacement Value. The `full replacement value" of the
Buildings and other improvements to be insured under Section 12 shall be determined by the
company issuing the insurance policy at the time the policy is initially obtained. Not more
frequently than once each year, either Party shall have the right to notify the other Party that it
'7 1
elects to have the replacement value re- determined by an insurance company. The re-
determination shall be made promptly and in accordance with the rules and practices of the
Board of Fire Underwriters, or a like board recognized and generally accepted by the insurance
company. Each Party shall be promptly notified of the re- determination by the company. The
insurance policy shall be adjusted according to the re- determination.
12.6 Loss of Rent Insurance. Tenant at its cost shall maintain loss of rent insurance
insuring that the Base Rent will be paid to City for a period up to six (6) months if the Premises
are destroyed or rendered unusable or inaccessible for commercial purposes by a risk insured
under a special form property coverage policy including vandalism and malicious mischief
endorsements.
12.7 Workers' Compensation. Tenant shall comply with all of the provisions of the
Workers' Compensation Insurance and Safety Acts of the State of California, the applicable
provisions of Divisions 4 and 5 of the California Labor Code.
12.8 Waiver of Subrogation. The parties release each other, and their respective
Authorized Representatives, from any claims for Damage to any Person or to the Premises and
to the fixtures, personal property, and Alterations of either in or on the Premises that are caused
by or result from risks insured against under any insurance policies carried by the parties and in
force at the time of any Damage or required to be carried under this Lease. Tenant shall cause
each insurance policy obtained by it to provide that the insurance company waives all rights of
recovery by way of subrogation against the City in connection with any Damage covered by any
policy of property insurance. Neither party shall be liable to the other for any Damage caused
by fire or any of the risks insured against under any insurance policy required by this Lease. If
any insurance policy cannot be obtained with a waiver of subrogation, or is obtainable only by
the payment of an additional premium charge above that charged by the insurance company
issuing policies without a waiver of subrogation, the Party undertaking to obtain the insurance
shall notify the other Party of this fact. The other Party shall have a period of twenty (20) days
after receiving the notice either to place the insurance with a company that is reasonably
satisfactory to the other Party and that will carry the insurance with a waiver of subrogation, or
to agree to pay the additional premium. The Party is relieved of the obligation to obtain a
waiver of subrogation rights with respect to the particular insurance involved if the insurance
cannot be obtained with a waiver of subrogation or the other Party refuses to pay the additional
premium.
12.9 Other Insurance Matters. All the insurance required under this Lease shall:
(a) Be issued by insurance companies authorized to do business in the State
of California, with a Best or equivalent financial rating of A -VII unless
otherwise approved by City Risk Manager;
(b) Be issued as a primary policy;
(c) Be noncontributing with any insurance that may be carried by City; and
(d) Contain an endorsement requiring thirty (30) days written notice from the
insurance company to both Parties before cancellation or material change
in the coverage, scope or amount of the policy.
Each policy, or a certificate of the policy, together with evidence of payment of
premiums, shall be deposited with City, and on renewal of the policy not less than thirty (30)
days before expiration of the term of the policy. Either Party may effect for its own account any
insurance not required under this Lease.
13. DAMAGE OR DESTRUCTION OF PREMISES
13.1 Destruction of Premises. If the Premises are totally or partially destroyed,
rendering the Premises or any portion thereof totally or partially inaccessible or unusable,
Tenant shall restore the Premises to substantially the same condition as immediately prior to
such destruction (including all trade fixtures, personal property, improvements and Alterations
as are installed by Tenant, which shall be replaced by Tenant at its expense). Tenant can elect
to terminate this Lease by giving notice of such election to City within sixty (60) days after the
date of the occurrence of any casualty if the cost of the restoration exceeds the amount of any
available insurance proceeds, if the damage has been caused by an uninsured casualty or
event, or if Tenant reasonably estimates that repairs of the Premises will take more than six (6)
months. Upon such termination, insurance proceeds applicable to reconstruction of the
Building(s) (excluding Tenant's personal property therein) shall be paid to City and Tenant shall
have no further liability or obligations under this Lease.
13.2 Replacement of Tenant's Property. In the event of the damage or destruction of
improvements located on the Premises not giving rise to Tenant's option to termination of this
Lease, Tenant shall, at its own expense, replace and repair all Tenant's trade fixtures,
equipment, machinery, furnishings, furniture and inventory as soon as reasonably possible to
permit the prompt continuation of Tenants business at the Premises.
13.3 Destruction of Balboa Yacht Basin. In the event that all or a portion of the Balboa
Yacht Basin or access to the Balboa Yacht Basin is damaged, deteriorates or destroyed by fire
or any other casualty and the Premises or a material portion becomes inaccessible or
commercially unusable, and the Damage or destruction cannot reasonably be repaired within
twelve (12) months after the date of the casualty, City shall have the right to either:
(a) Terminate this Lease by giving to Tenant written notice (which notice shall
be given, if at all, within thirty (30) days following the date of the casualty),
in which case this Lease shall be terminated thirty (30) days following the
date of the casualty; or
(b) Give Tenant written notice of City's intention to repair such damage as
soon as reasonably possible at City's expense, in which event this Lease
shall continue in full force and effect; however, Rent shall be abated in
accordance with the procedures set forth in Section 14. Tenant may
terminate this Lease by giving City written notice at any time prior to the
commencement of repairs if City agrees to repair the Balboa Yacht Basin
pursuant to this Section and fails to commence repairs within one
hundred twenty (120) days after giving Tenant written notice of its
intention to repair. In such event, this Lease shall terminate as of the
date of notice from Tenant to City, and City shall have no liability under
this Lease.
14. ABATEMENT OF RENT
In the event of Damage or destruction of the Premises or Damage to the Balboa Yacht
Basin that impacts the Premises and this Lease is not terminated, Tenant shall continue to
utilize the Premises for the operation of its business to the extent it may be practicable and
commercially reasonable. Base Rent shall abate in proportion to the area of the Premises that
is rendered unusable. The abatement of Rent shall commence on the date that use of the
Premises is impacted and continue until the completion of those repairs necessary to restore full
use of the Premises and Tenant's re- opening of the Premises. Tenant's obligation to pay Taxes
pursuant to this Lease shall not be abated or reduced. Rent shall not abate if the Damage or
destruction to the Premises is the result of the negligence or willful conduct of Tenant or its
employees, officers or agents. Tenant's right to abatement of Base Rent is contingent on
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payment of insurance proceeds, if any, equal to the amount of Base Rent pursuant to coverage
required by Subsection 12.6.
15. PROHIBITION AGAINST VOLUNTARY ASSIGNMENT, SUBLETTING AND
ENCUMBERING
15.1 Prohibition of Assignment. The Parties acknowledge that City is entering into this
Lease in reliance upon the experience and abilities of Tenant and its principals. Consequently,
Tenant shall not voluntarily assign or encumber its interest in this Lease or in the Premises, or
sublease substantially all or any part of the Premises, or allow any other person or entity (except
Tenant's Authorized Representatives) to occupy or use all or any part of the Premises without
the prior written consent of City, which shall not be unreasonably withheld. City's consent to
any assignment, subletting or other transfer is subject to Tenant providing City with evidence
reasonably satisfactory to City that the proposed transferee has financial strength and
shipyard /boat repair experience comparable to Tenant and the use of the Premises by the
proposed transferee is consistent with the terms of this Lease. Except as otherwise expressly
provided herein, any dissolution, merger, consolidation, reorganization of Tenant, or the sale or
other transfer resulting in a transfer of a controlling percentage of the capital stock of Tenant,
shall be deemed a voluntary assignment; provided, however, that the sale or transfer of a
controlling percentage of the capital stock of Tenant pursuant to a public offering(s) of equity or
debt instruments issued by Tenant, or other transfers of publicly traded capital stock or debt
instruments shall not constitute a voluntary assignment and shall not require City's consent or
approval. The phrase "controlling percentage" means the ownership of, or the right to vote,
stock possession of at least fifty percent (50 %) of the total combined voting power of all classes
of Tenant's capital stock issued, outstanding, and entitled to vote for the election of directors,
except for ownership of publicly traded shares, warrants or similar equity interests in Tenant
traded on a national exchange or over - the - counter markets.
15.2 Additional Consideration for Extension of Lease
(a) Lessee to pay all administrative costs associated with lease extension.
(b) City to receive 5% of gross sale price if lease hold is sold.
15.3 Exceptions. Notwithstanding the foregoing paragraphs or anything to the
contrary contained herein, City's consent shall not be required for a transfer or assignment of
any stock or interest by a share holder or member to a spouse, children or grandchildren or an
assignment or subletting to an Affiliate, Subsidiary, or Successor of Tenant defined as follows:
(a) An "Affiliate" is any corporation or other entity which directly or indirectly
controls or is controlled or is under common control with Tenant (for this
purpose, "control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
such corporation or other entity, whether through the ownership of voting
securities or by contract or otherwise);
(b) A "Subsidiary" shall mean any corporation or other entity not less than
twenty -five percent (25 %) of whose outstanding stock shall, at the time,
be owned directly or indirectly by Tenant and which is at least as
creditworthy as Tenant; and
(c) A "Successor" shall mean a corporation or other entity in which or with
which Tenant is merged or consolidated, in accordance with applicable
statutory provisions for merger or consolidation of corporations or a
corporation or other entity acquiring a substantial portion of the property
and assets of Tenant.
15.4 Continuing Effect. City's consent to any assignment, encumbrance, or sublease
shall not relieve Tenant from its obligations or liabilities under this Lease nor act as a waiver of
the requirement that such consent be obtained to any subsequent assignment, encumbrance or
sublease.
16. DEFAULT
16.1 Default by Tenant. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant two (2) times in any six (6) month period to make
any payment of Rent or any other payment required by this Lease, as and
when due, when such failure shall continue for a period of ten (10) days
after written notice of default from City to Tenant.
(c) The failure of Tenant to observe or perform any of the material covenants,
conditions or provisions of this Lease to be observed or performed by
Tenant where such failure shall continue for a period of thirty (30) days
after written notice thereof from City to Tenant; provided, however, that if
the nature of Tenant's default is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commences such cure within said thirty (30) day period
and thereafter diligently prosecutes such cure to completion.
(d) The making by Tenant of any general arrangement or assignment for the
benefit of creditors.
(e) Tenant becomes a "debtor" as defined in 11 U.S.C. Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days).
(f) The appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such appointment is not discharged within
sixty (60) days.
(g) The attachment, execution or the judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where such seizure is not discharged within sixty (60) days.
16.2 Remedies.
(a) Cumulative Nature of Remedies. If any default by Tenant shall continue
without cure and after notice as required by this Lease, City shall have
the remedies described in this Subsection in addition to all other rights
and remedies provided by law or equity, to which City may resort
cumulatively or in the alternative.
(1) Reentry without Termination. City may reenter the Premises, and,
without terminating this Lease, re -let all or a portion of the
Premises. City may execute any leases made under this provision
in City's name and shall be entitled to all rents from the use,
operation, or occupancy of the Premises. Tenant shall
nevertheless pay to City on the dates specified in this Lease the
equivalent of all sums required of Tenant under this Lease, plus
City's expenses in conjunction with re- letting, less the proceeds of
any re- letting or attornment. No act by or on behalf of City under
this provision shall constitute a Termination of this Lease unless
City gives Tenant specific notice of Termination.
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(2) Termination. City may terminate this Lease by giving Tenant
notice of Termination. In the event City terminates this Lease,
City may recover possession of the Premises (which Tenant shall
surrender and vacate upon demand) and remove all Persons and
property. City shall be entitled to recover the following as
damages:
(i) The value of any unpaid Rent or other charges that are
unpaid at the time of Termination;
(ii) The value of the Rent and other charges that would have
accrued after Termination less the amount of Rent and
charges the City received or could have received through
the exercise of reasonable diligence as of the date of the
award;
(iii) Any other amount necessary to reasonably compensate
City for the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease; and
(iv) At City's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time -to -time
by applicable California law.
City shall be entitled to interest at the rate of ten percent (10 %)
per annum on all Rent and other charges from the date due or the
date they would have accrued. City shall also be entitled to an
award of the costs and expenses incurred by City in maintaining
or preserving the Premises after default, preparing the Premises
for re- letting, or repairing any damage caused by the act or
omission of Tenant.
(3) Use of Tenant's Personal Property. City may use Tenant's
personal property and trade fixtures located on the Premises or
any of such property and fixtures without compensation or liability
to tenant for use or damage. In the alternative City may store the
property and fixtures at the cost of Tenant. City shall not operate
the Premises in any manner tending to indicate that the Premises
is affiliated with, part of or operated in conjunction with Tenant's
business.
(b) City's Right to Cure Tenant's Default. Upon continuance of any material
default beyond applicable notice and cure periods, City may, but is not
obligated to, cure the default at Tenant's cost. If City pays any money or
performs any act required of, but not paid or performed by, Tenant after
notice, the payment and /or the reasonable cost of performance shall be
due as additional Rent not later than five (5) days after service of a written
demand accompanied by supporting documentation. No such payment
or act shall constitute a waiver of default or of any remedy for default or
render City liable for any loss or damage resulting from performance.
(c) Waiver of Rights. Tenant waives any right of redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 or 1179,
or under any other present or future law, in the event Tenant is evicted or
City takes possession of the Premises by reason of any default by
Tenant.
17. CONDEMNATION
17.1 Eminent Domain Proceedings. Tenant shall have the right to terminate this
Lease as of the date a public agency with lawful authority to condemn obtains possession or
title to ten percent (10 %) or more of the area within the Premises, the condemnation materially
affects the conduct of Tenant's business in the Premises, or the Premises will no longer be
suitable for the conduct of Tenant's business. In the event of Termination pursuant to this
Subsection, Base Rent shall be prorated to the date of Termination, any unearned Rent shall be
refunded to Tenant and Tenant shall have no further obligations under this Lease. Tenant shall
not grant a right of entry to any condemnor without the written consent of City.
17.2 Proportionate Termination of Lease. Should Tenant not elect to terminate this
Lease or should any taking not be sufficient to permit termination, this Lease shall terminate as
to the portion of the Premises taken upon the date which possession of said portion is taken, but
this Lease shall continue in force and effect as to the remainder of the Premises. Tenant shall,
in the event of a taking of any portion of the Premises, be entitled to a reduction in the Base
Rent in proportion to the percentage reduction in the area of the Premises attributable to the
taking.
17.3 Allocation of Award. In the event that an award is made for an entire or partial
taking or for damage to the Premises or any interest therein in any action in direct or inverse
condemnation or in the event of a taking under the power of eminent domain, the parties hereto
agree that their respective rights to the award or compensation paid shall be as follows:
(a) City shall be entitled to that Portion of the award received for the taking of
the real property within the Premises, including all buildings and other
improvements to which City is entitled on Expiration or Termination of this
Lease, and for severance damages
(b) Tenant shall be entitled to any award that may be made for the taking of
or injury to Tenant's business and profits, including any amount
attributable to Tenant's personal property, fixtures, installations, or
improvements in or on the Premises, Tenant's relocation expenses, but
excluding any "bonus value" attributable to this Lease
(c) Any interest payable on the total award shall be divided between City and
Tenant in the same ratio as are the awards granted to them pursuant to
the other provisions of this Section.
18. SUBJECT TO STATE LANDS COMMISSION GRANT
The Premises are located on property that is the subject of a grant from the State of
California to the City that is administered by the State Lands Commission. Tenant shall not take
any action that would cause the City to be in violation of any provisions of that grant. If the
State Lands Commission terminates this grant, this Lease terminates as a result and the Parties
shall be released from all liabilities and obligations under this Lease
19. WASTE OR NUISANCE
Tenant shall not commit or permit the commission of any waste on the Premises.
Tenant shall not maintain, commit, or permit any nuisance as defined in Section 3479 of the
California Civil Code on the Premises. Tenant shall not use or permit the use of the Premises
for any unlawful purpose.
20. NO CONFLICTS OF USE, HAZARDOUS MATERIALS
The Parties acknowledge that Tenant has been in possession of the Premises pursuant
to the provisions of a Lease since September 20, 1973. Tenant represents and warrants that, to
the best of Tenant's knowledge, (i) Tenant's continued use of the Premises does not conflict
with applicable Laws; (ii) the Premises is not and has not been operated in violation of any
environmental laws, rules or regulations and Tenant's contemplated uses will not cause any
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such violation; and (iii) the land underlying the Premises is free of any and all Hazardous
Materials as of the date of this Lease. In the event that the presence of any Hazardous Material
caused by Tenant is detected in the land underlying the Premises at any time during the Term
of this Lease and any Option Term all remedial or clean up work shall be performed by Tenant
at Tenant's expense. This clause and this lease does not restrict or limit Tenant's right to
lawfully use Hazardous Materials on the Premises.
21. CITY'S DEFAULTS/TENANT'S REMEDIES
City shall be in default if it fails to perform, or commence performance if the obligation
requires more than ten (10) days to complete, any material obligation within ten (10) days after
receipt of written notice by Tenant to City specifying the nature of such default. City shall also
be in default if it commences performance within ten (10) days but fails to diligently complete
performance. In the event of City's default, Tenant may:
(a) Upon five (5) days notice to City cure any such default by City and City shall
reimburse Tenant the amount of all costs and expenses incurred by Tenant in
curing the default, together with interest and expenses at the maximum rate then
allowed by law;
(b) Terminate this Lease if City's default materially interferes with Tenant's use of the
Premises for their intended purpose and City fails to cure such default within ten
(10) days after a second demand by Tenant in which case Tenant shall have no
further or continuing obligations; or
(c) Commence an action for specific performance and recover costs and expense,
including reasonable attorney fees if Tenant is the prevailing party.
22. NOTICES
Any notice, demand, request, consent, approval or communication that either Party
desires or is required to give shall be in writing and shall be deemed given three (3) days after
deposit into the United States registered mail, postage prepaid, by registered or certified mail,
return receipt requested. Unless notice of a different address has been given in accordance
with this Section, all notices shall be addressed as follows:
If to City: CITY OF NEWPORT BEACH
Attention: City Manager
3300 Newport Boulevard
Newport Beach, CA 92663
If to Tenant: BASIN MARINE, INC.
Attention:
Newport Beach, CA
23. SURRENDER OF PREMISES
At the Expiration or earlier Termination of this Lease, Tenant shall surrender to City the
possession of the Premises. Tenant shall leave the surrendered Premises, required personal
property and fixtures in good and broom -clean condition, reasonable wear and tear excepted.
All property that Tenant is not required to surrender, but that Tenant does abandon shall, at
City's election, become City's property at Expiration or Termination.
24. WAIVER
The waiver by City or Tenant of any breach of this Lease by the other shall not be
deemed to be a waiver of any term, covenant, or condition or any subsequent breach. The
acceptance of Rent by City shall not be deemed a waiver of any breach by Tenant other than
the failure to pay the particular rent accepted.
25. PARTIAL INVALIDITY
If any term or Provision of this Lease is declared invalid or unenforceable, the remainder
of this Lease shall not be affected.
26. GOVERNING LAW
This Lease shall be governed by the laws of the State of California. Neither City's
execution of this Lease nor any consent or approval given by City in its capacity as landlord
shall affect City's powers and duties as a governmental body. Any consent or approval Tenant
is required to obtain from City pursuant to this Lease is in addition to any permits or approvals
Tenant is required to obtain pursuant to law or ordinance. However, City shall attempt to
coordinate its procedures for giving contractual and governmental approvals so that Tenant's
requests and applications are not unreasonably denied or delayed.
27. ENTIRE AGREEMENT: MODIFICATION
This Lease contains the entire agreement between the Parties. No verbal agreement or
implied covenant shall be held to vary the provisions of this Lease. Each Party has relied on its
own inspection of the Premises and examination of this Lease, the counsel of its own advisors,
and the warranties, representations, and covenants in this Lease. The failure or refusal of either
Party to inspect the Premises, to read this Lease or other documents, or to obtain legal or other
advice relevant to this transaction constitutes a waiver of any objection, contention, or claim that
might have been based on such reading, inspection, or advice. No provision of this Lease may
be amended or varied except by an agreement in writing signed by the Parties or their
respective Successors.
28. TIME OF ESSENCE
Time is of the essence with respect to the performance of every Provision of this Lease
in which time of performance is a factor.
29. SUCCESSORS
Subject to the Provisions of this Lease on assignment and subletting, each and all of the
covenants and conditions of this Lease shall be binding on and shall inure to the benefit of the
heirs, successors, executors, administrators, assigns, and personal representatives of the
respective parties.
30. BROKERS
Each party warrants to and for the benefit of the other than it has had no dealings with
any real estate broker or other agent (attorneys excepted) in connection
with the negotiation or making of this Lease.
31. GENDER: NUMBER
P.lsl
The neuter gender includes the feminine and masculine, the masculine includes the
feminine and neuter, and the feminine includes the neuter, and each includes corporation,
partnership, or other legal entity whenever the context requires. The singular number includes
the plural whenever the context so requires.
32. EXHIBITS
All exhibits to which reference is made in this Lease are incorporated by reference. Any
reference to "this Lease" includes matters incorporated by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
first written above.
CITY OF NEWPORT BEACH ( "City ")
a Municipal Corporation
A
ATTEST:
LaVonne Harkless
City Clerk
Garold Adams
Mayor of Newport Beach
BASIN MARINE, INC.
A California Corporation ( "Tenant')
APPROVED AS TO FORM:
Robin L. Clauson
Assistant City Attorney
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Dave New, President
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