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HomeMy WebLinkAboutAgenda Statement 1981/12/22 Item 17COUNCIL AGENDA STATEMENT Item 1 ~ Meeting Date 12/22/81 ITEM TITLE: Resolution ~p ' j~ - Approving Lease Agreement Between the City and Jimmy's Family of Fine Restaurants, Inc. and Authorizing Mayor to Execute Same SUBMITT D BY: Assistant City Manager ~ (4/5ths Vote: Yes No X ) The Ci y Council awarded the contract on December 15, 1981 for the remodeling and enlargement of the restaurant facility at the Chula Vista Municipal Golf Course. Construction on that projec will be underway on or before January 1, 1982. The Ci y Council gave tentative approval to a 20-year, with two 5-year options, lease agree- ' ment with Jimmy's Family of Fine Restaurants, Inc. on July 7, 1981 but held in abeyance final pproval of the lease pending resolution of the financing mechanism and the responsi- biliti s of both the City and the Lessee in terms of remodeling, enlargement and fixturization of the facility. The City Council also held in abeyance a final determination of the request by Les ee that the City consider granting Lessee a first right of refusal for leasing and develo vent of the property to the west and adjacent to the restaurant. The financing mech- ` anism herein the City assumed the entire financial responsibility for the structural and enlarg ment costs has now been resolved and the full responsibility for fixturization by Lessee has been incorporated into the lease. Under the lease terms (Section 5), the City " will s end approximately $801,250 for structural modifications and enlargements and the Lessee ill spend approximately $500,000 on fixturization. ` The fi al lease agreement does not incorporate a provision that would grant Lessee any preemp pry rights to develop the property west of the existing facility. Alternate language that c uld be incorporated and substituted for Section 9 of the agreement (Exhibit A) has been ' prepar d, wherein the City Council could grant such a right if it is determined that the best i terests of the City and the Lessee would be served if such a provision were included. I do n t believe there are any overriding considerations that clearly support granting this additi nal privilege to Lessee unless, in exchange for that right, Lessee agrees to modify Sectio 9 of the proposed agreement to provide a base monthly minimum rent payment of $8,000 or 6% f the gross, whichever is greater. The proposed lease agreement now provides for a ' minimu, $8,000 per month base rent or 5% of the gross, whichever is greater. It is there- fore m ' RECOMMgNDATION; That the City Council: 1. Adopt resolution approving the lease agreement without providing ` for any first right of refusal on development rights on the • property adjacent to the existing facility; or 2. Adopt resolution approving the lease agreement granting lessee first right of refusal on development rights for a period of five _ years provided Lessee agrees to an $8,000 per month minimum base rent or 6% of gross sales, whichever is greater. BOARDS/COMMISSTONS RECOMMENDATION: N.A. DISCUSSIION The ke provisions of the proposed lease provide for an initial term of 20 years, with two 5-year ptions that may be exercised by Lessee without change in terms and conditions unless agreed to by both Lessor and Lessee. Rental payments required would be a minimum base rent ` of $8, 00 per month or 5% of gross sales, whichever is greater. In addition, the lease •. Form A- 13 (Rev. 11/79) continued Page 2, Item X17 Meeting Date 12/22/81 provides fora Consumer Price Index adjustment on the $8,000 per month base rental amount . at t e end of each 3-year period, with a cap on the increase set at 6% per year. Under the erms of this section, if the Consumer Price Index for the first 3-year period aver- aged at least 6% per year, Lessee's new base rent beginning the 37th month would increase . to $ ,440 per month, with the base rate potentially subject to the maximum additional 18% 'ncrease over the previous base at the conclusion of each 3-year period during the life of the agreement. The lease is essentially what is known as a "triple net lease", wherein Lessee is resp nsible for all taxes, insurance and maintenance of the facility for the full term of t e lease agreement in addition to their monthly rental payments.. The City will continue to maintain all landscaping and parking areas surrounding the facility due to ' the ual use of the parking area by Golf Course and restaurant patrons. The agreement fur er provides that at such time as the existing parking facilities become inadequate to a commodate the needs of both the City and Lessee, a separate agreement for the ex- pansion of the parking area will be entered into wherein Lessee and the City will bear the ost of such expansion equally, exclusive of land value if the expansion occurs on City-owned land to the west. When the City Council considered the tentative lease aareement in July, 1981, I had reco mended that the lease not provide the Lessee with`any pre-determined development righ s on the property to the west of the existing facility. I do not find overriding cons'derations to grant Lessee any pre-determined development rights to that property base on the fact that he has long-term lease rights to the restaurant facility. uJhile any uture plans for development and lease terms would be solely at the discretion of the ity Council, as a matter of public policy it would seem preferable that if and when the City Council determines that development on the subject property is appropriate, ' maximum flexibility to entertain and consider all proposals should be retained. It woul not seem appropriate at some future date for the City to seek proposals from all interested parties if, in the final analysis, the Lessee had the right to develop the ' prop rty in the same general way as proposed by another party. If the City Council dete mines that some limited first right of refusal provision should be incorporated into the lease agreement, I would suggest that the right be limited to 5 years with or with ut increasing the gross percentage figure from 5% to 6% and that the Lessee be giv exclusive development rights during that period whether the development proposal on inates with the City or the Lessee. I believe the exclusive 5-year development + pro osal should be approved by the City Council if Lessee agrees to some gross per- • cen ge figure in excess of 5% in exchange for that additional privilege. The anguage in Exhibit A, which would revise Section 9 of the lease agreement, could be ' util zed by the City Council in approving the agreement with a modification that would prov de for the option right in exchange for the 6% of gross sales or, by slight modifica- tion to Exhibit A, the City Council could grant the option and leave the gross percentage figu e at 5% or any other percentage that was determined by merely adjusting the total gros monthly sales figure that would be required times the percentage that would equal the 8,000 minimum rent. . FINA CIAL IMPACT Unde terms of the lease agreement (assuming a minimum $8,000 per month base rent), the City will receive $96,000 per year in rental. If gross sales exceed $160,000 per month in a y given month during the first 3 years, the City would receive in that month 5% times the ross sales occurring on the premises. ERA: ab ,. ~' ~'~~'i ASSIGNMENT OF CONTRACT FOR THE EXPANSION AND RENOVATION OF JII~,MY'S ON THE GREEN FAMILY RESTAURANT IN CHULA VISTA, CALIFO RNIA FROM R. E. MARTIN CONSTRUCTION TO JIMMY'S FAMILY OF FINE RESTAURANTS WITH RAY MARTIN AS RESPONSIBLE MANAGING EMPLOYEE day F M THIS ASSIGNMENT, is made and entered into on this~~- of ~Gint.~C~(~`~- 1982, by and between R. E. MARTIN STRUCTION, here nafter referred to as "Assignor" and JIMMY'S ILY OF FINE RESTAURANTS, INC. with Ray Martin as Responsible aging Employee, hereinafter referred to as "Assignee"; W I T N E S S E T H E. MARTIN CONSTRUCTION JIMMY'S FAMILY OF FI^TE RESTc>TTRE'=Cd~' `' INC. with Ray Martin as ReSpo.~s:'-b'~` anaging Employee WHEREAS, the City of Chula Vista has awarded the co tract for the expansion and renovation of Jimmy's on the Green Fa lily Restaurant in the City of Chula Vista, California (h :reinafter "Contract") to R. E. Martin Construction, and WHEREAS, Assignor des~_res to assign its rights and d legate its duties under the "Contract" to Assignee in order t.o o tain Assi=knee's financial support. WHEREAS, Assignee wants to accept the assignment of the " ontract" to insure the expeditious completion of work on the p oposed restaurant. NOW, THEREFORE, IT IS AGREED between the Assignor and A signee that the Assignor does hereby assign its rights and d legate ~].l its duties under the "Contract" to the Assignee and t e Assignee accepts the assigment of rights and delegation of d ties. LN WITNESS WHEREOF, the parties hereto have executed t is AssigTzment the day and year first hereinabove set forth. . ~-/D 73/