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HomeMy WebLinkAboutJ-3 - Balboa Bay Club - MOUT 11 r - -0 3 COUNCIL AGENDA NO. J-4 CITY OF NEWPORT BEACH OFFICE OF THE CITY MANAGER BY THE CITY Ciinco June 10, 1985 CITY OF NEWPORT I3p(",€i JUN 10 1935 TO: MAYOR AND CITY COUNCIL FROM: Balboa Bay Club Ad Hoc Committee APPROVED SUBJECT: BALBOA BAY CLUB - MEMORANDUM OF BACKGROUND: The 50 -year lease between the City of Newport Beach and the Balboa Bay Club for the Club site will expire on August 31, 1998 (13 years). The Balboa Bay Club ownership has approached the City with the request to extend the lease for another 12 years, for a total of 25 years from 1985. The request is based primarily on the desire to update and improve the Club facilities, which cannot be economically justified unless the investment in the improvements can be amortized over a 25 -year period. Also, the Club may not be motivated to spend significant monies on the facilities during the waning period of the lease if the City determined to allow the lease period to run out. To respond to the Club's request for lease extension, the City Council has appointed a Balboa Bay Club Ad Hoc Com- mittee, consisting of Mayor Philip Maurer and Council Members John C. Cox, Jr., and Evelyn Hart. The Ad Hoc Committee has met on a number of occasions and reviewed the current lease provisions, the ramifications of a lease renewal, possible alternate uses for the site if a lease renewal is not granted, the interest that the Coastal Commission may have as well as the State Lands Division in the subject property, and similar concerns. in addition to reviewing many of the concerns listed above, the Committee has also met with representatives of the Balboa Bay Club and is now recommending to the City Council the attached Memorandum of Understanding. For the Council's information, a Historical Data Sheet has been prepared by the Committee listing some basic data concerning the Balboa Bay Club. MEMORANDUM OF UNDERSTANDING: The Ad Hoc Committee is proposing that the City of Newport Beach and the Balboa Bay Club approve at this Mayor and City Council Page -2- time only a Memorandum of Understanding. Under the terms of the MOU there will be a period of several months to review, evaluate and formulate proposed terms and conditions of a lease renewal. Also during this period, the City can have the necessary financial studies performed to determine what would be the fair rent for the property. An examination of alternate uses for the site may also be appropriate as part of the economic studies. Representatives of the State Lands Division and possibly the Coastal Commission could be contacted to determine their concerns and interest in the subject property. If the studies to be conducted and the review with other agencies indicates that a new lease is the best course of action for the Citv and the community, the matter will have to be brought back to the City Council for public review, deliberation and approval. Should the City Council approve the lease extension up to a total of 25 years, it is the intent of the Balboa Bay Club to undertake a master plan of redevelop- ment and an environmental impact study for the property. These studies would be costly and time-consuming, but would ultimate- ly result in determining the best course of action for the community. It is anticipated that under such a master plan of redevelopment, public access over a portion of the Balboa Bay Club site will be made a requirement. Assuming a master plan of redevelopment is approved in concept by all agencies having jurisdiction, the Balboa Bay Club ownership may seek a further extension of the lease at that time. At this stage, however, the Ad Hoc Committee is recom- mending the attached Memorandum of Understanding. If approved, the City Council is setting the stage for the necessary studies and deliberations, which could lead to an extension of the Balboa Bay Club lease upon terms and conditions mutually agreeable to the parties. BALBOA BAY CLUB AD HOC COMMITTEE Mayor Philip Maurer Council Member John C. Cox, Jr. Council Member Evelyn Hart By: Robert L. Wynn, City Manager Attachments n 0 0 050385 MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding ("MOU") is entered into on June 10, 1985, by and between the City of Newport Beach ("City") and International Bay Clubs, Incorporated ("Club"), with reference to the following facts: 0 c, i f. l c A. In March, 1948, Club's predecessors in interest leased from City certain City tidelands and adjoining City -owned uplands generally referred to as the Balboa Bay Club property and facilities ("BBC Site") for a period of fifty (50) years ("Lease"). B. Under the terms of the Lease, Club is required to pay City a percentage of the gross operating revenues. Club is also obligated to expend funds for repairs and maintenance of the facilities during the last ten (10) Years of the Lease in an amount equal to the average expenditures for repairs and maintenance made during the twentieth (20th) through fortieth (40th) years of the Lease. C. Club has in the past and desires to continue in the future to spend significant funds for upgrading, main- tenance, and repair of the facilities. Club cannot, how- ever, justify such expenditures so long as the future of the BBC Site remains uncertain and if such expenditures could unfairly be used against the Club to increase its obligation for maintenance and repairs of the BBC Site during the last ten (10) years of the Lease. D. Club and City deem it desirable for Club to continue to spend significant funds for maintenance and -2- improvements in order to both enhance the BBC Site and increase the amount of rent paid to City. • E. . The increased level of maintenance and improve- ment expenditures combined with a shortening Lease term have imposed economic and planning restrictions on the Club. This has led to the Club's request that the City Council appoint an Ad Hoc Committee to study the need for a Lease extension. F. The City Council has appointed such a committee and representatives of the City and Club have met from time to time to review a possible Lease extension under terms which would be in the mutual best interests of the City and Club. G. City and Club desire to reach an understanding regarding the terms and conditions under which the City would approve such Lease extension. • THEREFORE, the following sets forth the understanding between the parties regarding the extension of the Lease between Club and City for the BBC Site. 1. During the period of this MOU and prior to execution of a Lease extension by City as provided herein, City shall conduct economic and other studies to determine the fair market rental income to be paid to the City for any Lease extension of the BBC site as well as other con- ditions to be included in a Lease extension. 2. During the period of this MOU and prior to execu- tion of a Lease extension, Club agrees to continue the existing level of maintenance and repair of the BBC Site regardless of any limitations on those expenditures as may be provided in the existing Lease and pay City a guaranteed minimum percentage rent equal to no less than the average • percentage rent payments made by Club to City during the calendar year of 1984. 3. At such time as the City and Club mutually agree upon the terms and conditions of a Lease extension, City -2- • E ! 1 0 and Club shall execute an appropriate instrument approving an extension to the term of the existing Lease totaling a period of twenty-five (25) years and incorporating therein a new rental rate and any other provisions as mutually agreed to. Said Lease extension shall be reviewed by the State Lands Commission. 4. Upon execution of the Lease extension as provided in this MOU, City and Club shall cooperate and work together on a comprehensive plan for redevelopment of the BBC Site. As part of that comprehensive plan of redevelop- ment, Club shall: a. Prepare a master plan consistent with the City's General Plan and Land Use Element; b. Conduct the necessary environmental studies for development of the BBC Site in accordance with the master plan and in compliance with the California Environ- mental Quality Act; C. Participate in appropriate public hearings for the purpose of gaining community input and consensus relative to approval of the master plan concept and spe- cific land use; and d. Review the master plan with the California Coastal Commission and obtain approval in concept of the master plan from that Commission. 5. It is acknowledged that implementation of a comprehesive plan of redevelopment of the BBC Site may extend over a significant period of time. It is further acknowledged that such implementation may necessitate substantial immediate and long-term financial commitments by the Club requiring amortizing the return on capital investment over a period beyond twenty-five (25) years. It is, therefore, understood that when the Club complies with conditions (a) through (d) of Paragraph 4 of this MOU, a further Lease extension may be sought by the Club consis- tent with the financing requirements associated with -3- i 70 implementation of the BBC master redevelopment plan and the Charter of the City of Newport Beach. City agrees to con- sider such further Lease extension under terms and condi- tions to be mutually agreed upon at that time. IN WITNESS WHEREOF, the undersigned have executed this Memorandum of Understanding as of the day and year first above written. CIT `O )NEWPO4TBEACH B . Mayor ATTEST TO: City Clerk 0 0 INTERNATIONAL BAY CLUBS, INCORPORATED / -4- • HISTORICAL DATA SHEET 1. Lease Duration: 50 years from September 1, 1948 to August 31, 1998. 2. Source of City's Title: Grant Deed from The Irvine Company, and tidelands granted in trust to the City of Newport Beach. 3. Approximate Area: 14.15 acres with 1,574.84 feet of water frontage and 1,672.0 feet of street frontage. 4. Purpose of Lease: Any purpose not prohibited by law other than industrial purposes. • 5. Rental or Compensation: 5% of gross operating revenues of the first $750,000; 4% of the gross operating revenues between $750,000 and $1 million; 3% of gross operating revenues in excess of $1 million plus a percentage as mutually agreed upon for all sub -rentals. The per- centage rental is payable on or before 60 days following the expiration of each calendar year. 6. Actual Compensation: Year Gross City Paymemt 1978 $ 7,472,332 $ 246,847 1979 8,812,229 286,931. 1980 9,841,569 318,759 1981 11,079,481 349,347 1982 12,070,200 379,606 1983 12,342,728 398,236 1984 13,756,716 442,513 0 Historical Data Sheet - Continued (Page 2) The payment made to the City in 1981 represents 3.158% of the gross income and in 1982, 3.145% of the gross income These sums do not include the transient occupancy tax revenue to the City' (amounting to $110,000 annually at 6%). They reflect only the lease rental obligations. 7. Renewal: Lessee is to yield possession of premises and structures to the City immediately upon expiration or termination of lease or pay $5,000 per month liquidated damages for such time as possession is withheld. 0 8. Taxes• 9. Insurance: 0 Lessee is to pay all taxes and assessments of the City, County and State. No provisions.