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HomeMy WebLinkAbout04/10/1989 Item #I-1• r 2) *Agenda Item No. I-1 MEMORANDUM OFFICE OF THE CITY ATTORNEY April 10, 1989 TO: Honorable Mayor and Members of the City Council FROM: Robert H. Burnham, City Attorney ,;Y !� Wp ;al 575 �� CITY 'll ..cV�P0�7 cAC RE: Bay elvb Ref-inaming APR 10 19&9 _ _APP-Unn_ Background: International Bay Clubs, Inc. (IBC) has asked the City Council to consent to an assignment of the 1986 Bay Club Lease to a lender as partial security for a loan of $30 million dollars. At Council direction, the City auditor and I met with Bill Ray and Dennis O'Neil to discuss amendments to the proposed consent that would ensure protection of the City's interest. These discussions produced some amendments to the legal document that would evidence the Council's consent (see attached). However, the document still gives the lender more rights than the current lessee and, while approval is recommended, the Council may not be legally bound to give its consent to the proposed assignment. The legal documents and security arrangements associated with the proposed refinancing are somewhat complex, but the City's role in the transaction is relatively simple. IBC proposes to use the Bay Club Lease as partial security for a loan. A ground lease is an interest in property, has value, and is commonly pledged as security to guarantee repayment of loans. The Bay Club Lease is presently collateral for loans amounting to more then $10 million dollars. By analogy, when an individual buys a home, he or she typically borrows a large portion of the purchase price and gives the lender a note and trust deed to guarantee repayment. The 1 Honorable Mayor and Members of the City Council April 10, 1989 Page -2- trust deed allows the lender to obtain title to the property in the event the purchaser fails to pay the mortgage. If IBC were to default on the loan, the lender has the right to step into the lessee's shoes but does not acquire any right to the City's fee interest in the property. Discussion: IBC and the lender have agreed to certain changes in the proposed consent form and those amendments are shown by the underlined and stricken text. The amended document more closely conforms with the term of the 1986 lease, but the following differences remain. A. Assignment by bender. The 1986 lease prohibits assignment without the City's prior written consent which "shall not be unreasonably be withheld." The proposed consent gives lender the right, in the event of a foreclosure, to assign the lease to a "Class A transferee" subject to ten days notice unless the assignment arises from a public sale or auction. Class A transferees include banks, financial institutions, insurance companies, or firms actively engaged in the management of resort properties and having a net worth in excess of $50 million dollars. Class A transferees are, for the most part, very substantial companies possessing resources and/or skill necessary to operate the Club in proper and profitable manner. B. Fire Insurance Proceeds. The proposed consent authorizes the lender to receive fire insurance proceeds and place the money in an interest bearing escrow account to protect the lender's security, as well as PA Honorable Mayor and Members of the City Council April 10, 1989 Page -3- ensure restoration of improvements. According to the consent form, the lender may apply insurance proceeds towards the obligations of lessee in the event of a default under the security documents. The consent form confirms lessee's obligations to restore the premises in the event of a fire or other calamity as required by the 1986 lease. The 1986 lease provides that fire insurance proceeds shall be paid to "lessor and lessor and to any other encumbrancer of lessee in accordance with their respective interest therein as provided in this lease and in any written consent to such incumbrance by the lessor...." The 1986 lease apparently assumed that a lender would, in the ordinary course of business, require a pledge of fire insurance proceeds to protect its security interest. Lessee is required, by the terms of the 1986 lease, to restore buildings damaged or destroyed by fire or other casualty unless the destruction occurs during the last five years of the lease term. If lessee fails to rebuild, the City is entitled to receive all insurance proceeds and terminate the lease. While the proposed consent does not relieve lessee of these obligations, the lender may, under certain circumstances, be entitled to use the proceeds to pay off the loan rather than to rebuild. Courts have ruled that a lender's right to insurance proceeds is subject to an implied covenant of good faith and fair dealing. A lender may not use fire insurance proceeds to pay off a loan secured by a trust deed unless it proves its security would be impaired if the proceeds were used to restore the improvements. 3 0 0 Honorable Mayor and Members of the City Council April 10, 1989 Page -4- While circumstances may combine to support a finding of security impairment, a brief analysis of various scenarios suggests the risk to the City is relatively small. Assuming the premises are damaged by fire late in the lease term when rebuilding may not generate sufficient income to pay off the loan, the balance of the loan will be relatively small and the majority of the proceeds will still be paid to the City. In the event the Bay Club is destroyed by a fire in the next few years, there should be sufficient time left on the lease to permit restoration of the premises and repayment of the loan proceeds. Certain aspects of the proposed refinancing may benefit the City. First, the lender is requiring IBC to provide insurance against seismic damage. This insurance will facilitate prompt rebuilding of the premises in the event of earthquake damage. The lender has also required IBC to prepare environmental and engineering reports to ensure the Bay Club fully complies with all environmental quality laws and regulations. Finally, repayment of the loan is guaranteed by Morgan Bank, Swiss Bank and Financial Security Insurance. These financial institutions have a significant interest in ensuring that the Bay Club is operated in a proper and profitable manner. Recommendation: It is recommended the City Council awtheriae-the "Never --and City Clerk to execute the Consent to Aams4}weent/4Wvdeppe1 Certificate attached to this me Obert H. Burnham RHB/mll ity Attorney 4 • P• 7 r. j fRevised 3/30/89) RECORDING REQUISTED BY AND WHEN RECORDED HAIL TO: ROGERS 4 WELLS 200 Park Avenue Nov York, New York 1oide Attnt Froderick B. Utley III, Esq. LESSOR'S ESTOPPEL CERTIrICATE, ACKNOWLEDGMENT AND CONSENT TO Iy^82 - xT OF v EHa • FATATE AX 0112 OF TRUST KNOW ALL MEN BY TH38E PRESENTS: THAT the CITY OF NEWPORT BEACH, a Municipal- corporation unicipalcorporation having an address at 3300 Newport Boulevard, Newport Beach, Cal::fornia ("Lessor"), ..._.good,._ and valuakle consideration. the receipt of which is hereby acknowledged, hereby certifies to FIRST AMERICAN 'FRUST COMPANY, not personally but solely as trustee under Land Holding Trust PLH-1187 ("Leasee"), INTERNATIONAL BAY CLUBS, INC. ("IBC"), IBC COMMIfRCIAL CREDIT CORPORATION ("Lender"), FINANCIAL SECURITY ASSURANCE :SNC. ("Financial Security") (Lender and Financial Security are hereinafter Collectively referred to as the "Interested Parties") as follows: 1. Lessor is the landlord under that certain lease with Lessee more fully described in Exhibit "A" attached hereto (the "Leases") ,which grants a ground leasehold ijnte_reat to lessee in the premises more Sully described in Exhibit "8" attached hereto (Lessee's leasehold estate is hereinafter jrsferred to as the "Premises"). The Lease (i) is in full force and effect and has not been modified, amended or supplemented in 0 W 0 r.a . any respect, except as set forth in Exhibit "A" and (ii) constitutes the entire agreement between Lessor and Lessee with respect to the Promises. 2. Lessor acknowltdgea and consents to the transfer of the lessee's interest in the Lease from 19C to Lessee pursuant to First Amended Land Holding Trust dated November 1, 1983 which created Trust PLN -1187 (the "Trust"). Lessor acknowledges that the lease between. Lessor, as lessor, and Balboa toy Club, Inc., as losses dated May 13, 1986 (the "1986 Lease") was an extension of the prior lease agreements affecting the Premises and that the lessee's interest in such least vested in Lessee, and not Balboa Say club,, Inc. simultaneously herewith, 19C's beneficial interest in the Trust has been assigned, transferred and conveyed to a wholly-owned subsidiary of IBC ("IHC Subsidiary") and Lessor consents to such assignment, transfer and conveyance. 3. The commencement date of the term of the most recent extension of the Loaae wmd Hay 11, 1986, and the term of the Lease will expire on May 12, 2011. All !Minimum Rent due as of 1989, has boon paid. Percentage Rent has been paid and audited through the period ending [Sept. 10, 1989. Lessee has laid in full all other sums preoently due and payable under the mase. 1. To the best of Lessor's knowledge, neither Lessor nor Lessee is in default under any of the provisions of N • P.9 the Lease, and Lessor knows of no event which would, with the passage of tim#: and/or the giving of notice, constitute a default under the Lease. There are no actions, voluntary or otherwise, pending against Lessor, under any bankruptcy, reorganization, insolvency or similar federal or state law. 8. Lessor acknowledges that Lender is making a loan to Lessen and LIBC Subsidiary in tha amount of $30,00o,000.00 (the "Loan").A Lessor hgrgb`L consents to the granting by Leasee to First American Title Insurance Company for the benefit of Lender of a leasehold deed of trust and security agreement (the "Deed of Trust") the granting by Lessee to Lender of an assignment of Lessee's rights to e411ect Images and rents arising from k-osee's operation of the Balboa Bay Club, located gn the Premises (the "Assignment of Leases and Rants"), and the granting by LISC Subsidiary1 to Lender of and acceptance of assignment of beneficial interest in the Trust (the "Collateral Assignment") (the Deed of Trust, the Assignment of Leases and Rents, the Collateral Assignment and any other documents executed in connection therewith are collectively, the "security Documents") i:ncumbering all of Lessee's interest in the Premises and [IBCA Subsidiary's) beneficial interest in the Trust, r �r including, without limitation, Lessee's leasehold estate, all personal property at the Preni"s owned by Leases and/or I8C subsidiary and Lessee's and/or IBC's Subsidiary's interest in • y • P.10 all subleases, rents, profits and other income of the premises arising under the lease. Lessor understands that the Security Documents will be assigned by Lender to Financial Security. Lessor acknowledges that all references to "authorized encumbrancer" shall be deemed to apply to Lender and Financial security. 6. In the event that Financial security (a) cures any defaults of Lessee under the Leake, (b) performs Lessee's covenants and obligations under the Lease, or (c) exercises any election, option or privileges, which Igo*** rwgUld -be entitled to exercise under the Lease, Lessor shall accept Financial Security's performance of the came as if it had been made by Lessee. 7. Lessor shall not modify or amend any term or provision of the Lease without the prior written approval of Financial security, which shall not be unreasonabiv withheld, provided_.Financial.. seourity!s.,.security.interest the Premises is not affected by such modification or amendment. In the event of a default by Lessee under the Lease, lessor shall not voluntarily agree to or accept any surrender, cancellation or modification of the Lease without Financial Security's consent. 8. Lessor shall give Financial security (or any other substitute party designated in writing by Financial Security) notice of any default by Lessee under the Lease R 4 - • P.11 simultaneously with the giving of such notice to Lessee. Upon the giving of such default notice to Financial Security (or such substitute party), Financial security shall have the right, but not t2ie obligation, to cure (i) any monetary default within a period of fifteen (15) days after the expiration of the applicable grace and/or notice period set forth in the Lease and (ii) any non -monetary default within a period of thirty (30) days after the expiration of the applicable grace and/or notice period set forth in the lease, or in the case of any non -monetary default which cannot with due diligence be cured within such 30 -day period, by commsheing to cure such default within trio aforesaid 30 -day period and thereafter prosecuting the .curing of such default with due diligence. With respect to any non -monetary default not susceptible of cure by Financial Security Lessor shall not exercise any of its rights or remedies under the Lease if Financial Security, after receipt of notice froza Lessor, shall (i) commence, and prosecute a foreclosure of the Deed of Trust or (ii) diligently attempt to acquire the Premises encumbered by the Deed of Trust through a deed in lieu of foreclosure or otherwise, and upon completion of such foreclosure or acquisition the then owner of the Premises shall commouce to cure such defaults as have been specified in any notice given to Financial Security as are then susceptible of tura by such owner. Any exercise by Financial Security of n 5 • • P.12 its remedies under the security Documents shall not constitute a default under the Lease. 9. If Financial security is not able to avoid a termination of the Lease, Financial security may, within thirty (30) days after such termination, require that Lessor grant to it a new lease on the same terms and conditions as the terminated Leas: Lessor agreefi to Grant each now lease to Financial Security, provided Financial security pays all rent then owing to Slassor.,... ineludina a 1_ arrearages and diligently cures all defaults susceptible of cure by Financial Security under the terminated Lease within thirty (30) days after Financial Security requires such new Lease, or in the cess of any non -monetary default which cannot be cured within such thirty (30) day period, commences to cure such default within such period and thereafter prosecutes the curing of such defaults) with due diligence. 10, in the event of Lessee's default under the Lease or any exercise by Financial Security of its remedies under the Security Documents, Lessor shall not disturb the estate of any subtenants of the Premises whose sublease has been approved by Lessor pursuant to Article 17 of the 1986 Lj"9%a. Qr for which no consent shall be required thereunder. Lessor agrees not to cancel any license or rental agreements concerning any apartments or boat slips located within the Promises in the event of Lessee's default under the Lease or the exercise by Financial Sticurity of its rights under the security Documents. 6 M4W 31 '99 16:29 BALAOA BAY CLUB 714 642 6947 P.13 '- 11. IS Lessee defaults under the Deed of Trust, Financial Security may foreclose the Deed of Trust through private power of sale or otherwise, effect the appointment of a receiver and take possession of the Promises. In the event of a sale pursuant to such foreclosure or upon Financial Security becoming the holder of Lessee's leasehold estate, Lessee's leasehold estate in the Premises may, subject to provisions of paragraph 12 below, be assigned, and upon such assignment and the assumption of Lessee's obligations by the assignee, Financial Security shall be released from all the Tease obligations arising after the effective date of the assignment. Financial security shall not be personally liable under the Lease either before such foreclosure or after Financial security further assigns or transfers the interest foreclosed. 12. Upon Financial security foreclosing the Deed of Trust, or accepting a deed or surrender in lieu of foreclosure, (which transfer may be made) the Lease may be (i) freely assigned to any Class A Transferee (as hereinafter defined) upon ten 10) days' rior notice to Lessor,. however, if the assignment otiose from a ,public sale or_.,auction, w the up rsuant to fcrecjomure.. pXogdi „yr gay nther nnurt OveAA-rd sale, no such notice to Lessor shall be required, (ii) assigned to any Class H Transferee (as heroinafter defined) after obtaining Lessor's consent thereto, which consent shall not be unreasonably withheld or delayed, or (iii) assigned to any Class C Transferee (as hereinafter defined) after obtaining 7 • P.14 • Lessor's consent thereto, which consent shall be granted or denied at Lessor's sole discretion. For purposes hereof: "Class A Transferee,, shall mean: (i) any bank, trust company, savings bank, savings and loan association or insurance company regulated by the United States or any stater s pension, retirement or profit sharing plan regulated under the Federal Employees Retirement Income Security Act, a corporation, partnership or trust whose securities or beneficial interests are listed on the New York or American stock Exchange, or (ii) any person or entity actively engaged in the operation or management of hotel, resort or vacation properties whose net worth, in its most recent audited financial statement prepared in accordance with generally accepted accounting principles, is not less than $50,000,000, provided that the proposed transferee, and it the proposed transferee is an entity, its chief s -�� G4C oyer P.15 y • executive officer, chairman of the board, president, chief operating officer, chief financial officer, any director or general partner and any person, firm or corporation having a beneficial interest In twenty (204) or more of the soneys invested in the proposed transferee, whether by loan, stock ownership or other form of financial interest, has not, within the past five years been convicted or is not under current indictment for a crime involving corruption or bribery of a public official or body or misuse of public funds. "(:lass B Transferee" shall mean any person or entity actively engaged in the operation or management of hotel, resort or vacation properties whose net worth on its most recent audited financial statement, prepared in accordance with generally accepted accounting principles is less than $50,000,000 but greater than $20,000,000, provided that the proposed transferee, and if the proposed transferee is an entity, its chief executive officer, chairman of the board, president, chief operating Officer, chief financial officer, any director or general partner and any person, firm or corporation 9 . • • P.16 ..J having a beneficial interest in twenty percent (20%) or more of the moneys invented in the proposed transferee, whether by loan, stock ownership or other form of financial interest, has, as of the date of the transfer, a good reputation for integrity. "Class C Transferee" shall mean any individual or entity which is not a Class A Transfer** or Class 8 Transferee. Any parent, subsidiary, sister corporation or other affiliate of the entities described in the definition of Class A, Class B or Class C Transferee shall also respectively be deemed Class A, class 8 or Class c Transferees. 13. Notwithstanding any provision in the Lease to the contrary, and as long as Financial security retains a security interest in Lessee's interest in the Lsase, upon any damage to or destruction of the improvements located on the Premises where the insurance proceeds payable from such damage or destruetoh exceed $2,000,000, Financial Security shall receive all insurance proceeds from such destruction and shall deposit same in an interest-bearing escrow account to protect Financial Security's security and to assure completion of the restoration of the improvements. financial Security shall deliver the proceeds to Leasee no later than thirty (30) days following ('.) completion of the restoration of the improvements or any portion thereof that has been damaged or destroyed, to the same co:adition, character and value as nearly as possible to 10 that existing prior to such damage or destruction, and (ii) the issuance of all applicable governmental approvals in connection with the performance of such work. In the event that, in Financial Security's sole judgment, the insurance proceeds held by Financial security are not sufficient to fully accomplish such restoration, Lessee shall promptly, on demand, deposit with Financial Seeurity the additional amounts necessary to complete such restoration. In lieu of holding such proceeds until after completion of restoration of the improvements, Financial Security shall be obligated to release such insurance proceeds as the restoration of the improvements progresses upon receipt of an unconditional, irrevocable standby letter of credit, issued by an entity satisfactory to Financial Security in its sole discretion, in an amount equal to the proceeds released for restoration, and otherwise upon such terms and conditions as may be set forth in the Security Documents. Anything to the contrary notwithstanding, insurance proceeds may, at Financial Security's option, be applied towards the obligations of Lessee under the Security Documents in the event of a default under the Security Documents. Lassor hereby consents to any subordinate financing encumbering Lessee's leasehold estate or such insurance proceeds solely in connection with financing the restoration of the improvements. if the amount of insurance proceeds exceed the than principal and interest due on the loan 11 - • P.19".,� self -operative without the requirement of the execution of any further instrument. 16. Lessor agrees to provide Financial security with a copy of each notice giver. to Lesase at the same time and in the same manner as such notice is provided Lessee and addressed as fellows: Financial Security Assurance Inc. 350 Park Avenue - 13th Floor New York, New York 10022 Attentions Surveillance Department with a copy to: Rogers i Wells 200 Park Avenue New York, Now York 10166 Attention: Frederick B, Utley III, Esq. or to such other addresses as Financial security may hereafter designate to Lessor in writing from time to time. No such notice from Lessor to Lessee shall be effective until a copy of the same is ao provided to Financial Security, 17. Lessor acknowledges that Lender and Financial Security are relying upon this Certificate and the representations Contained herein in providing financing to Lessee, and Lessor makes the above representations for the benefit and protection of Lesson, IBC, jIBC Subsidiary.1, Interested Parties, and their respective successors and assigns. Any rights granted to Financial Security shall apply to Financial Security or its designee under the Security U 13 • • P. 18 .: ; which is secured by the Deed of Trust, any excess proceeds shall be distributed as otherwise in accordance with the Lease. Financial security shall be entitled to participate in any settlement or• adjustment of fire or other casualty losses. Nothing contained in this paragraph 13 shall be deemed to alter Lessee's obligations to restore the Premises pursuant to Article 25(b) of the 1986 Lease. 14. prior to any distribution of the proceeds of any award for any condemnation or public or quasi -public taking, Financial seaurity shall be entitled to the amount of such award up to the .hen full obligation for principal, interest and other charges of Lessee under the security Documents but in no, event in excess of the Value of Lessee's interest in the portion of the Premises• subject to such "taking" on the day imnmediately preceding to such taking. Nothing contained herein shall effect Lessor's right to a condemnation award equal to Lessor's reversionary interest in the premises on the date immediately preceding such taking. 15. Lessor covenants that the Lease and all amendments, revisions, or other modifications thereto, now or hereafter made, whether recorded or unrecorded, shall be superior to any and all /feacgIbrances placed on Lessor's fee interest in /its Property which is subject to the Lease. The foregoing covenant shall run with the land and shall be U 12 Documents. Lessor shall not, however, be liAplg to an party for any default of Lessee under the Leate. 18. Alt-19 excresaly understood that the Loan and the transactions to be entered into in connection therewith shall encumber only the Lessee's leasehold estate under the Lease,A shall notA in any way encumber the tee estate of Lessor, and axaept as specifically set forth heroin, shall not impair Lesscr's rights and remedies under the Lease. IN WITNESS WHEREOP, the undersigned have executed and acknowledged this certificate as of the __^_, day of 1989. Approved as to force and flue authorization City Attorney ,A CITY OF NEWPORT BEACR By: Mayor ATTEST; By: City Clerk PIP= AMERICAN TRUST COMPANY, not personally but solely as trustee under Land Holding Trust PLH-1187 By., INTEMAT70NAL BAY CLUBS, INC. By: S� 0 P.21 "... The undersign96 hereby ratifies and Confirms the provisions of paragraph 2 Wain BALBOA BAY CLUB, INC. eys (Acknowledgements) Exhibit A 1. Indenture of Lease dated March 24, 1946 by and between City of Newport beach, as landlord, and The Newport Bay Company, as tenant, recorded in the Official Records of the County Recorder's Office of orange County, California in Book 2691, Page 126 2. Amendment to Lease dated April 10, 1950 by and between City of Newport Beach, as landlord, and The Newport bay Company, as tenant, recorded in the Official Records of the County Recorder's Office of Orange County, California in Hook 2651, Page 146 3. Amendment to Lease dated September 29, 1952 by and between City of Newport Beach, as landlord, and The Newport Bay Company, as tenant, recorded in the Official Records of the County Recorder's office of Orange County, California in Book 2651, Page 152 4. Amendment to Lease dated March 28, 1960 by and among. City of Newport Beach, as landlord, and The Newport Bay Company, as tenant, and wrather investment, Inc., as assignee of tenant's interest, recorded in the Official Records of the County Recorders office of orange County, California in Book 5179, page 430 S. Lease dated May 13, 1986 by and between City of Newport Beach, as lessor, and Balboa Bay Club, Inc., as lessee, a mamorandum of which is intended to be recorded in the Official Records of the County Recorder's Office of Orange County, California simultaneously herewith IMFak,31 '�J9 iE 34 BALBOP _ CLUB 714 642 6947 P.23 Exhibit B [legal description] RECORDING REQUESTED BY AND WHEN RECORDED PLEASE RETURN BY NAIL TO: ROGERS & WELLS 200 Park Avenue New York, New York 10166 Attention: Gail S. Wilson, Esq. SPACE ABOVE THIS LINE FOR RECORDER'S USE ONLY LESSOR'S ESTOPPEL CERTIFICATE AND CONSENT TO CHANGE OF NAME Dated: May 31, 1989 between CITY OF NEWPORT BEACH, FIRST AMERICAN TRUST COMPANY, not personally but solely as Trustee of Trust $PLH-1187 INTERNATIONAL BAY CLUBS, INC., BBC PROPERTY, INC., BALBOA BAY CLUB, INC. and FINANCIAL SECURITY ASSURANCE OF IOWA, INC. LOCATION OF PREMISES: Street Address: 1221 West Coast Highway City: Newport Beach County: Orange State: California • LESSOR'S ESTOPPEL CERTIFICATE, AND CONSENT TO CHANGE OF NAME KNOW ALL MEN BY THESE PRESENTS: THAT THE CITY OF NEWPORT BEACH, a municipal corporation having an office at 3300 Newport Boulevard, Newport Beach, California ("Lessor"), for good and valuable consideration, the receipt of which is hereby acknowledged, hereby certifies to FIRST AMERICAN TRUST COMPANY, not personally, but solely as trustee under Land Holding Trust PLH-1187, a California corporation having an office at 421 North Main Street, Santa Ana, CAlifornia 92702, ("Lessee"), INTERNATIONAL BAY CLUBS, INC., a California corporation having an office at 1221 West Coast Highway, Newport Beach, California ("IBC"), BBC PROPERTY, INC., a New York corporation having an office at 1221 West Coast Highway, Newport Beach, California ("BBC Property"), FSA/IBC Credit Co., a Delaware general partnership, having an office at c/o Rogers & Wells, 200 Park Avenue, New York, New York 10166 ("Lender"), FINANCIAL SECURITY ASSURANCE OF IOWA, INC., an Iowa stock insurance company and FINANCIAL SECURITY ASSURANCE, INC., a New York stock insurance company having an office at 350 Park Avenue, Thirteenth Floor, New York New York 10022 ("Financial Security") (Lender and Financial Security are hereinafter collectively referred to as the "Interested Parties") as follows: 1. Lessor previously executed a LESSOR'S ESTOPPEL CERTIFICATE, ACKNOWLEDGMENT AND CONSENT TO ASSIGNMENT OF LEASEHOLD ESTATE BY DEED OF TRUST dated May 2, 1989, executed by Lessor by Donald A. Strauss, its Mayor, and by -Irene Butler, its assistant City Clerk and approved by Robert Burnham, its City Attorney and duly acknowledged on May 10, 1989. Said Certificate is hereinafter referred to as the "CITY ESTOPPEL CERTIFICATE". 2. The CITY ESTOPPEL CERTIFICATE was delivered at the request of Financial Security and Lender in connection with the placement of that certain Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing made by Lessee to - 2 - Chicago Title Insurance Company, as Trustee, in favor of Lender, as Beneficiary (the "Deed of Trust"). 3. LESSOR is the landlord under that certain lease with Lessee more fully described in Exhibit "A" attached to the CITY ESTOPPEL CERTIFICATE. 4. The CITY ESTOPPEL CERTIFICATE ran in favor, among others, of an entity named Balboa Bay Credit Co., a Delaware general partnership, which entity was intended to be formed prior to the execution of the Deed of Trust. 5. The Interested Parties have formed the entity originally contemplated to be named "Balboa Bay Credit Co." has been renamed "FSA/IBC Credit Co." 6. The change in name from Balboa Bay Credit Co. to FSA/IBC Credit Co. is a change in name only. FSA/IBC Credit Co. is to fulfill all functions and shall have all rights and obligations of the Lender named in the CITY ESTOPPEL CERTIFICATE. 7. Financial Security Assurance of Iowa, Inc. has replaced Financial Security Assurance, Inc, as an Interested Party. The change in name from Financial Security Assurance, Inc. to Financial Security of Iowa, Inc. is a change in name only. Financial Security Assurance of Iowa, Inc. is to fulfill all functions and shall have all rights and obligations of an Interested Party. S. Lessor acknowledges and consents to the change of name of Lender from Balboa Bay Credit Co. to FSA/IBC Credit Co. and the change in name from Financial Security Assurance, Inc. to Financial Assurance of Iowa, Inc. and agrees that the original CITY ESTOPPEL CERTIFICATE shall remain in full force and effect. 9. Page 1 of the CITY ESTOPPEL CERTIFICATE. is hereby corrected to add the following address to line 11 thereof, immediately following the words "BBC Property, Inc., a New York corporation having an office at": 1221 West Coast Highway Newport Beach, California 92660. Page 1 is also hereby corrected to add the following address to line 13 thereof, immediately following the words "Balboa MZ Bay Credit Co., a Delaware general partnership having an office at": C/o Rogers S Wells 200 Park Avenue New York, NY 10166 10. Paragraph 3 of the CITY ESTOPPEL CERTIFICATE is hereby corrected by deleting, in the fifth line thereof the words "(Sept. 30, 1989]" and replacing it with the words Sept. 30, 1988. 11. Paragraph 5 of the CITY ESTOPPEL CERTIFICATE is hereby corrected to replace the words "in the amount of" with the words "in an amount not to exceed" immediately before the number "$30,000,000.00" in line 2 thereof. 12. Except for the changes of name and the corrections approved as described above, all remaining terms, covenants and conditions of the May 10, 1989 CITY ESTOPPEL CERTIFICATE are hereby ratified, reaffirmed and incorporated herein by this reference as though fully set forth at length. IN WITNESS WHEREOF, the undersigned have executed and acknowledged this certificate as of the 31st day of May, 1989. Approved as to form and due thorizaattiion By: -��— ame: Robert H. Burnham Title: City Attorney CITY OF NEWPORT BEACH By: Lav� Name: Rithelyn Plummer Title: Mayor Pro Tem ATTEST: By: 11 ._tet / �1CC11� Name: 1RENE BUTLER Title: City Clerk - 4 - FIRST AMERICAN TRUST COMPANY, not personally but solely as trustee of Trust Number PLH-1187 By: lt� Name: William W. Rofne Title: Attorney in Fact INTERNATIONAL BAY CLUBS, INCORPORATED By: Name: W.D. Ray Title: Chief Exec tive Officer BBC PROPERTY, By: Name: W.D. Ray Title: Chief Executive Officer BALBOA BAY CLUB, INC. By: Name: W.D. Ray Title: 5 the year 1989 before me the a Notary Public in and for said n, personally appeared Robert H. or proved to me on the basis of person whose name is subscribed known to me to be the City :T BEACH, the corporation that nd acknowledged to me that such a same pursuant to its By-laws or :tors. eunto set my hand and affixed my in this certificate first above Signature r- , 1989 ficate >f Name the year 1989 before me the Notary Public in and for said n, personally appeared Ruthelyn r proved to me on the basis of person whose name is subscribed nown to me to be the Mayor Pro , the corporation that executed ledged to me that such CITY OF pursuant to its By-laws or a 7S. unto set my hand and affixed my n this certificate first above `ficate ' Name Signature STATE OF NEW YORK ) ss.. COUNTY OF NEW YORK ) On the Z- day of June, 1989, before me the undersigned, a Notary Public in and for said County and State, personally appeared William W. Rome, known to me (or proved to me on the basis of substantial evidence) to be the person whose name is subscribed to the foregoing instrument and known to me to be the Attorney in Fact of First American Trust Company, the corporation that executed the within instrument not personally but solely as Trustee of Trust Number PLH-1187 therein described and acknowledged to me that such corporation executed the instrument as Trustee under Trust Number PLH-1187 pursuant to itsy-laws and a resolution of its Board of Directors, made on �, 1989 and a Power of Attorney dated Nab► _�, 1989 intended to be recorded simultaneously herewith. 'Zwrq— Given under my hand and notarial seal this Z day of June, Z , 4'&'6 Notary Publ' My Commision Expires: IRMA ROSCRELLE Notary Public, State of New York No. 4831515 Qualified n Nassau County farm Ewpues July 31, 1989 • STATE OF NEW YORK COUNTY OF NEW YORK On the _7 day of June, 1989, before me the undersigned, a Notary Public in and for said County and State, personally appeared W.D. Ray, known to me (or proved to me on the basis of substantial evidence) to be the person whose name is subscribed to the foregoing instrument and known to me to be the Chief Executive Officer, of International Bay Clubs, Incorporated, the corporation that executed the within instrument and acknowledged to me that such corporation executed the instrument pursuant to its By-laws or a resolution of its Board of Directors. Given under my hand and notarial 1989. lh Notary Public My Commission Expires: IRMA ROSCHELLE Notary Public. State of New York No. 4831515 Qualified in Ntssau County Term Enprtes July 31. 1989 seal this Z— day of June, STATE OF NEW YORK ss.. COUNTY OF NEW YORK On the day of June, 1989, before me the undersigned, a Notary Public in and for said County and State, personally appeared W.D. Ray, known to me (or proved to me on the basis of substantial evidence) to be the person whose name is subscribed to the foregoing instrument and known to me to be the Chief Executive Officer, of BBC Property, Inc., the corporation that executed the within instrument and acknowledged to me that such corporation executed the instrument pursuant to its By-laws or a resolution of its Board of Directors. Given under my hand and notarial seal this day of June, 1989. �4 O� Notary Public My Commission Expires: IRMA ROSCHELLE Notary Public, State of New York No. 4Sj1b'L5 Qualified in rv.SSau County Term E.apirac July 31, 1989 STATE OF NEW YORK ss.. COUNTY OF NEW YORK On the L day of June, 1989, before me the undersigned, a Notary Public in and for said County and State, personally appeared W.D. Ray, known to me (or proved to me on the basis of substantial evidence) to be the person whose name is subscribed to the foregoing instrument and known to me to be the Chief Executive Officer, of Balboa Bay Club, Inc., the corporation that executed the within instrument and acknowledged to me that such corporation executed the instrument pursuant to its By-laws or a resolution of its Board of Directors. Given under my hand and notarial 1989 zql'� p0 Notary Public My Commission Expires: IRMA ROSCHELLE Notary Public, State of New York No. 48J1515 Qualified on Nassau County 7WM Cap.rca July 31. 1909 seal this �` day of June, i^•) 0 EXHIBIT "A" • ALL THAT CERTAIN IAND STRIATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF NEWDORT BEACH, DESCRIBED AS Falx -'S: PARCEL 1: THAT PORTION OF LOT 171, BLOCK 54 OF IRVINE'S SUBDIVISION, AS SHOWN ON A MAP RECORDED IN BOOK 1, PAGE 86 OF MISCELLANEOUS RECORD MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA, AND THAT PORTION OF THE NAVIGABLE TIDE AND SUBMERGED LANDS, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE U.S. BULKHEAD LINE EXTENDING FROM U.S. BULKHEAD STATION NO. 129 TO U.S. BULKHEAD STATION NO. 130, AS SAID BULKHEAD LINE AND BULKHEAD STATIONS ARE LAID OUT AND SHOWN ON A MAP OF NEWPORT BAY, CALIFORNIA, SHOWING HARBOR LINES APPROVED BY THE WAR DEPARTMENT, JANUARY 18, 1917, SAID POINT BEING DISTANT SOUTH 61 DEGREES 01' 07" EAST, MEASURED ALONG SAID BULKHEAD LINE, 1498.00 FEET FROM THE INTERSECTION OF SAID BULKHEAD LINE WITH THE SOUTHWESTERLY PROLONGATION OF THE CENTERLINE OF IRVINE AVENUE, AS SHOWN ON A MAP OF FIRST ADDITION TO NEWPORT HEIGHTS, RECORDED IN BOOK 4, PAGE 94 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY, SAID POINT ALSO BEING ON THE SOUTHEASTERLY BOUNDARY LINE OF PARCEL 1, PER A DEED OF TRUST RECORDED MARCH 30, 1966 IN BOOK 7884, PAGE 298 OF OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY; THENCE ALONG SAID SOUTHEASTERLY BOUNDARY LINE, THE FOLLOWING COURSES: NORTH 28 DEGREES 58' 53" EAST 130.00 FEET; THENCE NORTH 27 DEGREES 00' 00" WEST 16.66 FEET; THENCE NORTH 28 DEGREES 58' 53" EAST 195.71 FEET TO A POINT IN THE SOUTH- WESTERLY LINE OF THE 100 -FOOT RIGHT-OF-WAY OF THE CALIFORNIA STATE HIGHWAY ORA -60-B, THENCE LEAVING SAID SOUTHEASTERLY BOUNDARY, SOUTH 74 DEGREES 21' 30" EAST ALONG SAID SOUTHWESTERLY LINE, 130.08 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE NORTHERLY, HAVING A RADIUS OF 2550.00 FEET; THENCE EASTERLY 715.57 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 16 DEGREES 04' 41" TO AN INTERSECTION WITH THE NORTHEASTERLY PROLONGATION OF THE NORTHWESTERLY LINE OF TRACT NO. 1140, AS SHOWN ON A MAP THEREOF RECORDED IN BOOK 36, PAGE 28 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY; THENCE SOUTH 28 DEGREES 58' 53" WEST 975.03 FEET TO A LINE PARALLEL WITH AND DISTANT SOUTHWESTERLY 350.00 FEET FROM SAID BULKHEAD LINE; THENCE NORTH 61 DEGREES O1' 07" WEST 776.91 FEET ALONG SAID PARALLEL LINE OF THE SOUTHWESTERLY PROLONGATION OF THE SOUTH- EASTERLY LINE OF SAID PARCEL 1; THENCE ALONG SAID PROLONGATION AND SAID SOUTHEASTERLY LINE, NORTH 28 DEGREES 58' 53" EAST 350.00 FEET TO THE POINT OF BEGINNING. PARCEL 2: THAT CERTAIN PARCEL OF LAND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE U.S. BL'IQiEAD LINE, EXTENDING FROM U.S. BULKHEAD STATION NO. 129 TO U.S. BULKHEAD STATION NO. 130, AS SAID BULKHEAD LINE AND BULKHEAD STATIONS ARE LAID OUT AND SHOWN ON A MAP OF NEWPORT BAY, CALIFORNIA, SHOWING HARBOR LINES APPROVED BY THE WAR DEPARTMENT, JANUARY 18, 1917, WHICH SAID POINT IS DISTANT SOUTH 61 DEGREES 01' 07" EAST, MEASURED ALONG SAID BULKHEAD LINE, 700.00 FEET FROM THE INTERSECTION OF SAID BULKHEAD LINE WITH THE SOUTHWESTERLY PROLONGATION OF THE CENTERLINE OF IRVINE AVENUE, AS SHOWN ON A MAP OF FIRST ADDITION TO NEWPORT HEIGHTS RECORDED IN BOOK 4, PAGE 94 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, SAID POINT OF INTERSECTION BEING THE MOST SOUTHERLY CORNER OF IAT H OF TRACT NO. 919 AS PER MAP RECORDED IN BOOK 29, PAGES 31 TO 34 INCLUSIVE OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE NORTH 28 DEGREES 58' 53" EAST 154.19 FEET TO A POINT IN THE SOUTHWESTERLY LINE OF THE 100 -FOOT RIGHT OF WAY OF THE CALIFORNIA STATE HIGHWAY ORA -60-B, SAID POINT BEING RADIAL TO ENGINEER'S STATION 6+56.15 IN THE CENTERLINE OF SAID HIGHWAY, SAID RADIAL BEARS NORTH 19 DEGREES 37' 57" EAST FROM SAID POINT, SAID SOUTHWESTERLY LINE BEING A CURVE CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 2050.00 FEET; THENCE SOUTHEASTERLY ALONG SAID SOUTHWESTERLY LINE, THROUGH A CENTRAL ANGLE OF 3 DEGREES 59' 27", 142.79 FEET TO A TANGENT LINE; THENCE SOUTH 74 DEGREES 21' 30" EAST ALONG SAID TANGENT LINE AND SAID SOUTHWESTERLY LINE, 662.08 FEET; THENCE SOUTH 28 DEGREES 5D' 53" WEST 195.71 FEET; THENCE SOUTH 27 DEGREES 00' 00" EAST 16.66 FEET; THENCE SOUTH 28 DEGREES 58' 53" WEST 480.00 FEET TO A LINE PARALLEL WITH AND SOUTHWESTERLY 350.00 FEET FROM SAID BULKHEAD LINE; THENCE NORTH 61 DEGREES O1' 07" WEST ALONG SAID PARALLEL LINE, A uib,ANCE OF 798.00 FEET TO A POINT WHICH BEARS SOUTH 28 DEGREES 58' 53" WEST 350.00 FEET FROM THE POINT OF BEGINNING; THENCE NORTH 28 DEGREES 58' 53" EAST 350.00 FEET TO THE POINT OF BEGINNING. EXCEPT THAT PORTION DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHERLY LINE OF THE 100 -FOOT RIGHT OF WAY OF THE CALIFORNIA STATE HIGHWAY ORA -60-B, SAID POINT OF BEGINNING BEING AT RIGHT ANGLES TO ENGINEER'S STATION 7+95.46 IN THE CENTERLINE OF SAID HIGHWAY; THENCE SOUTH 15 DEGREES 38' 30" WEST 44.00 FEET; THENCE NORTH 74 DEGREES 21' 30" WEST 34.00 FEET; THENCE NORTH 15 DEGREES 38' 30" EAST TO AN INTERSECTION WITH THE SAID SOUTHERLY LINE OF THE STATE HIGHWAY: THENCE SOUTHEASTERLY ALONG SAID SOUTHERLY LINE TO THE POINT OF BEGINNING. FnP:E'_ 3: A NON-EXCLUSIVE EASEMENT FOR INGRESS AND EGRESS OVER THAT CERTAIN PARCEL OF LAND INCLUDED WITHIN A STRIP OF LAND 25.00 FEET IN WIDTH, THE NORTHEASTERLY LINE OF WHICH 15 DESCRIBED AS FOLLOWS: BEG'NNING AT A POINT ON THE U.S. BULKHEAD LIN£ EXTENDING FROM U.S. 8:::_.FI.EAD STATICS' NO. 129 TO U.S. BULKHEAD STATION NO. 130, AS SAID BULKHEAD LINE AND BULKHEAD STATIONS ARE LAID OUT AND SHOWN ON A MAP OF NEWPORT BAY, CALIFORNIA, SHOWING HARBOR LINES APPROVED BY THE WAR DEPARTMENT, JANUARY 18, 1917, WHICH SAID POINT IS DISTANT SOUTH 61 DEGREES 01' 07" EAST, MEASURED ALONG SAID BULKHEAD LINE, 700.00 FEET FROM THE INTERSECTION OF SAID BULKHEAD LINE WITH THE SOUTHWESTERLY PROLONGATION OF THE CENTERLINE OF IRVINE AVENUE, AS SHOWN ON A MAP OF FIRST ADDITION TO NEWPORT HEIGHTS RECORDED IN BOOK 4, PAGE 94 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, SAID POINT OF INTERSECTION BEING THE MOST SOUTHERLY CORNER OF LOT H OF TRACT NO, 919, AS PER MAP RECORDED IN BOOK 29, PAGES 31 TO 34 INCLUSIVE OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE NORTH 28 DEGREES 58' 53" EAST 154.19 FEET TO A POINT IN THE SOUTHWESTERLY LINE OF THE 100 -FOOT RIGHT OF WAY OF THE CALIFORNIA STATE HIGHWAY ORA -60-B, SAID POINT BEING RADIAL TO ENGINEER'S STATION 6+56.15 IN THE CENTERLINE OF SAID HIGHWAY, SAID RADIAL BEARS NORTH 19 DEGREES 37' 57" EAST FROM SAID POINT, SAID SOUTHWESTERLY LINE BEING A CURVE CONCAVE NO-ATHEASTERLY AND HAVING A RADIUS OF 2050.00 FEET; THENCE SOUTHEASTERLY ALONG SAID SOUTHWESTERLY LINE, THROUGH A CENTRAL ANGLE OF 3 DEGREES 59' 27", 142.79 FEET TO A TANGENT LINE; THENCE SOUTH 74 DEGREES 21' 30" EAST ALONG SAID TANGENT LINE AND SAID SOUTHWESTERLY LINE, 662.08 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 74 DEGREES 21' 30" EAST 130.08 FEET TO THE BEGINNING OF A CURVE ON SAID SOUTHWESTERLY LINE, CONCAVE NORTH- EASTERLY, HAVING A RADIUS OF 2550.00 FEET; THENCE SOUTHEASTERLY 715.56 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 16 DEGREES 04' 40" TO THE NORTHEASTERLY PROLONGATION OF THE NORTHWESTERLY LINE OF TRACT NO. 1140, AS PER MAP RECORDED IN BOOK 36, PAGE 28 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. THE SOUTHWESTERLY LINE OF SAID 25.00 -FOOT STRIP IS TO BE SHORTENED SO AS TO TERMINATE IN SAID NORTHWESTERLY PROLONGATION AND LENGTHENED SO AS TO TERMINATE ON A LINE WHICH BEARS SOUTH 28 DEGREES 58' 53" WEST FROM THE TRUE POINT OF BEGINNING. PARCEL 4: A NON-EXCLUSIVE EASEMENT FOR AUTO PARKING PURPOSES OVER THE SOUTH- WESTERLY 20.00 FEET OF THE NORTHEASTERLY 45.00 FEET OF THAT CERTAIN PARCEL MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE V.S. BULKHEAD LINE EXTENDING FROM U.S. BULKHEAD STATION NO. 129 TO U.S. BULKHEAD STATION NO. 130, AS SAID BULKHEAD LINE AND BULKHEAD STATIONS ARE LAID OUT AND SHOWN ON A MAP OF NEWPORT BAY, CALIFORNIA, SHOWING HARBOR LINES APPROVED BY THE WAR DEPARTMENT, JANUARY 18, 1917, WHICH SAID POINT IS DISTANT SOUTH 61 DEGREES 01' 07" EAST, MEASURED ALONG SAID BULKHEAD LINE, 700.00 FEET FROM THE INTERSECTION OF SAID BULKHEAD LINE WITH THE SOUTHWESTERLY PROLONGATION OF THE CENTERLINE OF IRVINE AVENUE, AS SHOWN ON A MAP OF FIRST ADDITION TO NEWPORT HEIGHTS RECORDED IN BOOK 4, PAGE 94 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, SAID POINT OF INTERSECTION BEING THE MOST SOUTHERLY CORNER OF LOT H OF TRACT NO. 919, AS SHOWN ON A MAP RECORDED IN BOOK 29, PAGES 31 TO 34 INCLUSIVE OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE NORTH 28 DEGREES 58' 53" EAST 154.19 FEET TO A POINT IN THE SOUTHWESTERLY LINE OF THE 100 -FOOT RIGHT OF WAY OF THE CALIFORNIA STATE HIGHWAY ORA -60-B, SAID POINT BEING RADIAL TO ENGINEER'S STATION 6+56.15 IN THE CENTERLINE OF SAID HIGHWAY, SAID RADIAL BEARS NORTH 19 DEGREES 37' 57" EAST FROM SAID POINT, SAID SOUTHWESTERLY LINE BEING A CURVE CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 2050.00 FEET; THENCE SOUTHEASTERLY ALONG SAID SOUTHWESTERLY LINE, THROUGH A CENTRAL ANGLE OF 3 DEGREES 59' 27", 142.79 FEET TO A TANGENT LINE; THENCE SOUTH 74 DEGREES 21' 30" EAST ALONG SAID TANGENT LINE AND SAID SOUTHWESTERLY LINE, 662.08. FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 28 DEGREES 58' 53" WEST 195.71 FEET; THENCE SOUTH 27 DEGREES 00' 00" EAST 16.66 FEET; THENCE SOUTH 28 DEGREES 58' 53" WEST 480.00 FEET TO A LINE PARALLEL WITH AND SOUTHWESTERLY 350.00 FEET FROM SAID BULKHEAD LINE; THENCE SOUTH 61 DEGREES O1' 07" EAST 235.68 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 29 DEGREES 30' 13" EAST 697.99 FEET; THENCE NORTH 11 DEGREES 45' 40" EAST 49.32 FEET TO SAID SOUTHWESTERLY L114E OF THE STATE HIGHWAY, SAID SOUTHWESTERLY LINE BEING A CURVE CONCAVE NORTHEASTERLY, HAVING A RADIUS OF 2550.00 FEET; THENCE NORTHWESTERLY 118.56 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 2 DEGREES 39' 50" TO THE NORTHWESTERLY TERMINUS THEREOF; THENCE NORTH 74 DEGREES 21' 30" WEST 130.08 FEET TO THE TRUE POINT OF BEGINNING. 0 • i i i li. LTJ i, i i i i April 16, 1990 ?�� APR„c�� Ms. Wanda Raggio City Clerk City of Newport. Beach 3300 Newport Blvd. Newport Beach, Ca. 92663 Dear Wanda: Per your request, I am enclosing an executed copy of the "Lessor's Estoppel Certificate and Consent to Change of Name” dated May 31, 1989. If you need anything further, please feel free to call me. Yours very truly, W.D. Ray Chairman of the Board WDR:ml CC: Robert Burnham, Esq. 1221 WEST COAST HIGHWAY. NEWPORT UACH. CAUFORN1A 92660 • TELEPHONE (74) 645-5000 C;JNCIL AGENDA � N0. Z - / `Parch 18, 1989 Mr. Donald Strauss, Mayor City of Newport Beach Dear Flavor Strauss: 0rx% t.iaa,e r.r I]OIMe ❑ APR 10 % I would like to go on record with my disappointment of the Council's action (or lack of action) at their session last Monday evening in dealing with the Balboa Bay Club's Memorandum of Understanding. REC?.-. D, fa,l n 211989 ► Mayor city of oort I am an employee of the Balboa Bay Club, so you will probably immediately conclude that I am biased. I probably am, but I am also a resident of Newport Beach and this letter is written in that capacity. I attended the Council session and was amazed at what observed. I have reflected below on a few of my observations; 1. Most matters presented before the Council "Rubber Stamp" approval with the Council accepting the recommendations made by the and other City staff employees. were gkv members \l Citv Man On the matter of the Balboa Bav Club Memorandum of Understanding, a majority of the Council decided to override the City Manager's recommendation and also to disregard the City Attorney's opinion and conclusion. 2. Several members of the Council seem to believe they are qualified to practice law, interpreting the City Charter as they wish, rejecting the City Attorney's and other legal opinions and conclusions. Councilwoman Hart firmly stated she could never vote to allow a lease extension of more than 25 years as she did not. rare what the legal opinions stated, she interpreted the Charter differently. Later during the session, she inferred she might go along with a lease extension of longer than 25 years for the club portion of the BBC if the apartment building section was excluded and could be razed and made into a park. Isn't this a little inconsistent? Councilman Sansone also had a question regarding the legality of a lease extension beyond 25 years. He too chose to disregard legal opinions, stating he "had an inherent distrust" of attornevs. He them went on rr.cor•d to vote to defer the matter to allow Mrs. Hart time to meet with BBC officials and also to obtain another legal opinion. This too seems inconsistent. 1 0 r1 One must wonder why the City has a City Attorney on staff as a paid employee. Even the testimony by one of the authors of the Charter about the intent of the 25 year limitation was not good enough. :3. Councilwoman Hart seemed to be well versed on the amount of rent received from the Balboa Bay Club on the apartment revenue. Unfortunately, this is a prime example of a little knowledge being more dangerous than no knowledge at all. Thede are a number of items which she failed to recognize in the "Amount" of rent paid to the City for the apartments. a. She apparently did not take into account the arbitrary allocation made on the internal accounting by the City between tidelands and uplands. b. She failed to recognize the difference between cash basis and accrual basis accounting. c. She gave no recognition for the "Phase-in" effect the City and BBC agreed upon as part of the lease extension granted in 1986. This "Phase-in" increases the rate paid by the BBC from 3% to 16.5% of gross revenues from the apartments from the existing rate in 1986 to the year 1998 (the end of the original 50 year lease). This is an increase of five and one- half times the rate that was in existence in 1986. 4. There is much talk these days about environmental impact. studies. What about doing an economical impact study? Or isn't that important anymore. Chances are neither _you nor myself, nor many others on the Council for that matter, will be around in 2011 when this vision comes to pass. Unfortunately, our kids and our kid's kids will be. They are the ones who will have to pick up the price tag of a park. The citizens of Newport Beach at that time and in subsequent _years will be hit with a double whammy. They will not only lose a significant revenue Producing asset, but, will now have to dip into their own pocket to pav for- a liability, year after year ,after Year. 2 0 0 5. Maybe paying for a park isn't a bad idea. It is, though, it you aren't going to use it. Let's look at the location of the proposed park. Will the residents of Newport Beach use it? I doubt it. it: isn't easily accessible or within walking distance from a residential area. There isn't an area for parking, or if you use part of the area for parking, there won't be enough room for a park. It would, however, be accessible by bus, which would allow persons from the inland cities to utilize the park. They would not spend any money in our city which we could deposit into our bank account.. They would only deposit their thrash which we would have to pav for to clean up. 6. By converting this valuable piece of real estate into a park, which probably won't be used by the citizens of Newport Beach, we will have at least created a view corridor so that all may enjoy a view of the bay as they zoom by it on Pacific Coast Highway. I question just how much bay you can see from street level, standing on PCH. If you are biking by, I would hope you will be watching where you are going instead of looking at the view, or else you may be enjoying the view of the bay from Hoag Hospital, or even possibly Pacific View. The views of a few residents on Kings Road or Cliff Drive may be enhanced with better views of the bav and thev will undoubtedly receive the benefits of increased values in their property. Unfortunately, the many other residents of Newport Beach will be the ones that will pay for those increased values as they will be the ones saddled with the loss of rent and the cost to maintain the park. 7. Let's look now at the City's liability exposure for the decision to put a park on PCH. Parks are for kids. I hope I'm not around when one of those kids strays out onto PCH. That would certainly be an ugly sight. B. The major issues of traffic congestion and the lack of adequate parking still need to be addressed and resolved. 9. One last point I would like to make is one of ,just plain business mathematics. The BBC was led to believe a lease extension would be, granted on the existing BBC parcel. They even traded I 0 off a very significant "rent advantage" in 1986 to obtain a lease extension and the Memorandum of Understanding. The BBC expended several hundred thousand dollars for preliminary engineering and design and put together a plan for a substantial redevelopment, program for the property. This will take a substantial investment by the BBC. The BBC is willing to put up all the money; the City of Newport Beach, their business partner, doesn't put up a dime. Both parties, however, will hopefully benefit by this investment. At the end of the lease period, the City owns all the assets; lock, stock and barrel. Not a bad deal. We now, however, have a problem. The 13BC already agreed to make a significant part of the property accessible to the public as part of its redevelopment plans. Now, it seems the Council is considering taking a significant portion of the remaining property away to make it public also. With the loss of this income producing property (to both the BBC and the City), it will not be economically feasible to recover the intended investment from the remaining portion of the property. As the elected officials of our City, I was more than a little disturbed with your decision to defer action on a subject which should not have even been proposed. It is only logical that a proposal be thoroughly reviewed and analyzed before it is presented. It seemed apparent the Council did not have the opportunity to do either and it certainly had not been clone by Mrs. Hart. As a result, the majority of the Council apparently had decided before the meeting to defer action on the matter. Mrs. Hart indicated she would utilize the time to meet and discuss the BBC plans. She has already had that opportunity. I fail to see what will be gained by the deferral. cc: Evelyn Hart Robert_ Wynn A Concerned Citizen, Robert 0. Basmajia 827 Gardenia Way Corona del Mar, A 92625 4 DATE_ T�o/ —_ .TIMI—/6- Pon�/GZG�ta't-LL ILE Y`OU/,/' WER�Ep OUT OF PHONE EM FCAIACIN V j PLEASE CALL I� UR CALL WILL CALL AGAIN _.. C YOU URGENT / __..... TIME LD- FORtzcn c� ILE YOU WERE OUT O► PNoNE No. EXT. TELEPHONED 'v PLEASE CALL }I RETURNED YOUR CALL WILL CALL AGAIN CAME IN TO SEE YOU I URGENT MESSAGE / _.. TIME/ . FOR �... WHILE YOU WERE OUT PHONE NO._. 3-� EXT. TELEPNONEO PLEASE CALL RETURNED YOUR CALL WILL CALL AGAIN CAME IN TO SEE YOU VROENT MESSAGE 'y "RECEIVED TER AGENDA a PRINTED:" ' 9,GIPM38CA 4-0098985071 03/12/89 ICS IPMRNCZ CSP 7146735004 FRS TORN NEWPORT BEACH CA 17 03-12 0610P EST PMS NEWPORT BEACH CITY HALL, DLR ATTN CITY COUNCIL. DLR C 3300 NEWPORT BLVD 6 NEWPORT BEACH CA 92663 n BALBOA BAY CLUB MOU SHOULD BE APPROVED AS IS. EVELYN HARTS GGESTION o` FOR A PARK IS WRONG. 3 4 GLORIA CARRAS •Z s E 104 VIA HAVRE t_.tom N NEWPORT BEACH CA 92663 . m 1811 EST . IPM38CA • E � o` o E Yp� N RC � • • 3 PWE E g E IPM38CA 4-0160305072 03/13/89 ICS IPMRNCZ CSP • 07148528595 FRB TDRN NEWPORT BEACH CA 24 PMS NEWPORT BEACH CITY HALL RPT DLY MGM, cCITY COUNCIL °-N' NE14PORT BEACH CA 3EVELYN HART'S PROPOSAL FOR A BEACH SITE ECONOMICALLY UNREASONABLE FOR THE CITY C K KNICKERBOCKER 226 RUBY ST BALBOA ISLAND CA 92663 4001 BIRCH SUITE A NEWPORT BEACH CA 92660 1321 EST • IPM38CA �c ftD I • c E `� . 03-13 0121P c DLR • AT BALBOA BAY CLUB IS E� c • ItEMWE"M AGM PRIMEV c 12 uIPM38CA 34-009933SO71 03/12/89 ' ICS IPMRNCZ CSP 7146457277 FRB TORN NEWPORT BEACH CA 19 PMS NEWPORT BEACH CITY HALL, DLR CITY COUNCIL, DLR 3300 NEWPORT BLVD NEWPORT BEACH CA 92663 HAS EVELYN HART GONE CRAZY? HER PROPOSAL CLUB SITE IS ECONOMICALLY UNREASONABLE. • GARY DIAL 0 1813 EST N IPM38CA m 3 03-12 0613P EST FOR A PARK ON THE BALBOA BAY E A 3 G: • to r -I L-A J a AFTER AGENDA • "RECEIV • PRINTED:" CIPM38CA E 4-0240635072 03/13/89 Or n ICS IPMBNGZ CSP 3 • 7149552690 FRB TDBN IRVINE CA 60 03-13 0313P EST =PMS MAYOR DON STRAUSS RPT DLY MGM, DLR • iv NEWPORT BEACH CITY HALL • m 3300 NEWPORT BLVD 3NEWPORT BEACH CA 92663 • ' THE HART PARK IDEA ON A VERY BUSY COMMERCIAL HIGHWAY IS CRAZY THE BAY • CLUB AND TERRACE APARTMENTS LEND DIGNITY TO THE AMBIANCE OF NEWPORT • BEACH AND THEY PROVIDE NEEDED REVENUE FOR THE CITY THERE ARE OTHER AREAS IN THE CITY THAT MORE SUITABLE AND LESS EXPENSIVE FOR A PARK • SITE I OPPOSE COUNCILWOMAN HART IDEA IT HAS NO MERIT HARRY ROTHBERG, HILDS ROTHBERG, LEONARD PEARLSTEIN AND MELBA • PEARLSTEIN • E 2301 DUPONT SUITE 150 N IRVINE CA 92715 a 1514 EST g • „IPM38CA • 3 3 ' "RECEIVED AFTER PRINTED =� -- - DONALD E. VANCE March 13, 1989 Councilwoman Evelyn Hart Third District C/O The Newport Beaqh City Hall 3300 Newport Blvd. Newport Beach, CAlifornia 92663 Y W ";E o v Re: BAC/Newport Beach Memorandum of Understanding Dear Councilwoman Hart: As a fourth generation Californian and a resident of the BBC Terrace Apartments you can imagine my shock in reading about your plan to convert our home into a park. You must be aware of the historic position that the Balboa Bay Club enjoys in the Newport Beach development resume. The Bay Club was the catalyst that brought many successful businessmen to the area that later invested in Newport Beach. To suggest that the Bay Club Apartments should be converted into a park would mean that the Council would have to ignore the General Plan Ammendment approved in October 1988, the very rules of good economic planning and the fact that any cloud over a project today can effect the financing of the development on a permanent basis. I must believe that a responsible Council would not take such an action. The fact that to convert the Bay Club to a park would cost the City of Newport Beach millions of dollars in revenue from tax seems to be lost on you. In addition, a study commissioned by the City in 1985 considered a park and determined that the BBC produced economic and community advantages for the City. The Memorandum of Understanding is required to obtain proper financing for the new improvements that are planned. You must be aware of the Saving & Loan, Bank and Mortgage Broker problems that are facing a developer in todays market. The City Council would not be well served by delaying a project to study new suggestions at this late date and the BBC is a community project that needs the new improvements now! f c urse we would like to think that you would vote in favor of the M U. H ever, if you feel that you can't I would hope that you w ul least vote and not attempt to delay the process. Th k you or your consideration. Oy1 D ald E. Vance cc: Mayor Don Strauss Newport Beach City Council 1221 West Coast Highway, Suite 310, Newport Beach, Calif. 92663 714/645-5000 0 March 13. 1989 • "RECEIVED AM ABENQA PRINTED." Z-4 Your Office e7enie RECEIVED 13196 �_ NFNCM Hon. Don Strauss Mayor Newport Beach City Hall 3300 Newport Boulevard Newport Beach, California 92663 Dear Sir: 2620 SOU": CaWorro .AveriJp. MorrOva Cal fo"..a 91016 (818} 3573812 • (816) 358 9103 • (818) 303 8747 X213) 681 8604 It is our understanding that Ms. Evelyn Hart is opposing a lease extension for the Balboa Bay Club involving the Terrace Residents Section. Our strong opinion is that the apartment resident section of the Balboa Bay Club provides substantial income to the City of Newport Beach in addition to the fact that the main- tenance of this portion of property does not represent a cost factor to the City. Additionally, not only would it be extremely costly for the City to maintain a park in that area, but have the crime factors ever been considered? We have been long term residents of the Balboa Bay Club, and not only is this our primary residence, but that of others. The displacement of so many people would be extremely incon- venient. Has the cost factor to the City been considered in demolishing the very large building to build a non -income producing park? Your support of the Balboa Bay Club and its residents would be sincerely appreciated. Yo r very truly, oG 60 a" Ido arole Ciraulo CC:bms RECEIVED' trAR 131989 P, m8 aport C-ity Of , iJ:c.r i; w tau.: ca by' jz'4"cwe* pmwr 0 4 RECEIVED' trAR 131989 P, m8 aport C-ity Of , "!iE c;=!ZDMLAS • • F ;ANTED." K. AMMERMAN Direct Line: 850-4455 HAND DELIVERY Members of the City Council Ladies and Gentlemen: arch 13, 1989 I am greatly disturbed over a recent proposal to convert part of the Balboa Bay Club into a regional park upon the expiration of its lease in 25 years. As former chairman of the Parks, Beaches and Recreation Commission of the City of Newport Beach, I am surprised that such an ill conceived proposal would warrant serious attention. First of all, the philosophy of the PBR department is to maintain fiscal responsibility with respect to its parks. Park programming is offered on a self supported basis to ensure that citizens are provided the maximum benefit for their tax dollars. The subject proposal fails to take into consideration that the City would be loosing millions of dollars a year in revenue for a property that is incapable of generating a fraction of that amount in park fee revenues. It is my understanding the existing 25 year lease currently provides the City with $500,000 per year of net revenues. Given the terms of the lease extension, gross revenues from the apartment units would generate 16 and one-half percent revenue to the City and 33 and one-half percent from the operation of the marina. This is projected to provide over $2,000,000 per year in revenue. In short, the proposal to convert all or a portion of the Bay Club to a park would have a detrimental impact from a fiscal perspective. During my four year tenure on the Parks, Beaches and Recreation Commission, I remember a statistic wherein approximately 25 percent of the users Bay Club recreational facilities are local Newport Beach residents. If the existing property is designed to be a regional park, it is possible that the local residents would have less access to the facility. First of all, ingress and egress to the property is already subject to serious limitations. Opening up the facility to a joint use/regional park would only compound the problem. Secondly, the demolition costs involved would be enormous and any revenue generating activities from the property would be incapable of defraying such costs. Finally, converting the facility to a public park on Coast Highway would result in a similar situation to the traffic congestion on the Balboa Peninsula during the summer months except that the situation would probably continue throughout the vear. U Members of City Council March 13, 1989 Page 2 0 As a final point, it is critical that the City Council send a clear message to the owners of the Bay Club that they intend to cooperate with its existing "joint venture". Any confused or mixed signals regarding the lease extension or the use of the facility will clearly result in the owners not expending money on necessary lease improvements. The facilities are in need of repair and it is doubtful to me that funds for the necessary improvements will be expended while impractical suggestions such as the one before you are being considered. V ry try yours,( i Douglas K. Ammerman DKA:mlf/2157 cc: Ron Whittley DONALD E OL8ON" 1221 WEST COAST HWY OT 214 NEWPORT BEACH'CA 92063 13PR .IIL•Jr 190387863072003 83/13/80 ICS IPMRNC2 CSP SNAA 2 7148469481 MGM TORN NEWPORT BEACH CA 03-13 0704P EST NEWPORT BEACH CITY COUNCIL CARE CITY CLERK 3300 NEWPORT BLVD NEWPORT BEACH CA 92063 THIS IS A CONFIRMATION COPY OF A TELEGRAM ADDRESSED TO YOUI I STRONGLY SUPPORT THE BBC MOU, I THINK THE PUBLIC PARK IDEA I3 RIDICULOUS, DONALD E OLSON 1221 WEST COAST HWY APT 214 NEWPORT BEACH CA 02663 19103 EST MGMCDMP TO REPLY BY MAILGRAM MFSSAGF. SEE REVERSE SIDE f017 WESTERN UNION "S TOLL - FREE PHONE NUMBERS