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HomeMy WebLinkAboutSS2 - Balboa Village TheaterCITY OF NEWPORT BEACH City Council Staff Report March 11. 2014 Study Session Agenda Item No. 2. TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dave Kiff, City Manager — (949) 644 -3002, dkiff @newportbeachca.gov PREPARED BY: Dave Kiff, City Manager TITLE: Balboa Village Theater - Lease Amendment, Contribution (4:35 p.m.) ABSTRACT: Supporters of the Balboa Village Theater have asked the City to amend its current lease with the City and have the City participate with up to $2 million to improve the Theater to a level at which it can open. In exchange, the Theater's Foundation would raise $2 million for tenant improvements, A/V equipment, and enough resources to begin operations. RECOMMENDATION: Discuss and provide direction for a Council action later on the evening of March 11, 2014 FUNDING REQUIREMENTS: If the Foundation's request is approved, the City would allocate $2 million towards the Theater's construction and possibly an additional cost for Construction Management. DISCUSSION: Brief History. The Balboa Theater is located at 707 East Balboa Boulevard, and operated as a theater as far back as 1928. The Theater closed in 1992. In an effort to revitalize the Balboa Village area, the City worked with the then - formed Theater Foundation to have the City purchase the Theater for $480,000 in October 1998 using Community Development Block Grant (CDBG) funds. The City entered into a lease with the Balboa Performing Arts Theater Foundation in November 1998 to manage and operate the Theater. The lease was amended three times to reduce the insurance requirement and to allow more latitude in the historical accuracy of the Theater's rehabilitation (current version of the lease provided as Attachment A). Later, the City contributed $175,000 to assist the Theater Foundation to complete plans for a large - scale renovation. The estimated cost of the renovation at the time (2011) was $4.8 million. To pay for SS3 the renovation, the Foundation intended to use $800K from cash on hand as well as $41M in donations from large donor givers. At the time of a Council presentation about the renovation (September 2011), the Foundation hoped to begin construction within a few months. Today, a new Foundation Board has asked the Council consider a new plan and direction - this is: • An exterior remodeling project that is smaller in scope — that portion (exterior) estimated at $2M and funded by the City. The project would restore and improve the shell of the building, with some tenant improvements (seating) as well as theater -ready lighting and sound. • A 50 -year lease with the City. • Rent back to the City would be 2.5% of ticket revenue. • The Foundation would raise and hold on deposit $2M for tenant improvements, the sound /lighting, enough to cover Year 1 Operations, and "adequate reserves to support the initial years of the Theater's operations." • Only when the Foundation's $2M was raised and set aside would the City's $2M be used. • The Foundation's $2M would be in addition to $400,000 that is in hand today. • The Foundation would provide a "fully articulated business plan authored by a ... firm that supports to the City's satisfaction the successful operation of the theater over time." Foundation notes that the City "would be responsible for funding the design and construction of the shell so the building is 'tenant ready' ... " It is not certain what this entails, and whether, should the City hire a construction management firm to do the work, the CM's costs are included in the $2M. Given the significant CIP program underway at Public Works, it is not likely that the City can manage this project with existing resources. For more information about the Foundation's proposal, please see Attachment B. Representatives of the Foundation, including Mr. Steve Beazley and Mr. Don Hecht, will attend the Study Session to speak more about this proposal. ENVIRONMENTAL REVIEW: CEQA work has been completed on the Theater project, and permits (including a Coastal Development Permit and a building permit for a previous design) have been issued. NOTICING: Noticed according to the Brown Act (at least 72 hours in advance of the meeting). ATTACHMENTS: Name: Attachment A - Current Lease.odf ❑ Letter from Foundation to Mike Henn - 1- 20- 2014.odf Description: Attachment A - Current Lease Attachment B - Letter from Foundation to Mike Henn SS4 I_10 r<<91 08 1 ITtl=Iki Ir-1 RECORDING REQUESTED AND WHEN RECORDED RETURN TO: City Clerk's Office City of Newport Beach 3300 Newport Boulevard P.O. Box 1768 Newport Beach, CA 92658 -8915 Space above this line for Recorder's use only. Exempt Recording Request per Government Code Section 27383 I'mmill 0A 1192 0080 V0,0461" �� 1 ii 1[11111 111 M AMENDED AND RESTATED LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND THE BALBOA PERFORMING ARTS THEATER FOUNDATION This Amended and Restated Lease ( "Lease "), entered into as of September _ 2011 ( "Effective Date ")•by and between the City of Newport Beach, a charter city and municipal corporation ( "Lessor ") and the Balboa Performing Arts Theater Foundation, a California non - profit public benefit corporation ( "Lessee "), is made with reference to the following: RECITALS A. Lessor is the owner of the property, structures and improvements, commonly known as the Balboa Theater located at 707 East Balboa Blvd in the City of Newport Beach ( "Property") as depicted in the attached Exhibit "A ", which is incorporated herein by reference. B. Lessor purchased the Property with Community Development Block Grant ( "CDBG ") funds ( "Federal Funds ") from the United States Department of Housing and Urban Development. The Federal Funds were granted pursuant to Title 1 of the Housing and Community Development Act of 1974 (42 U.S.C. 5301 et. seq.) as amended ( "Act ") and the Regulations of 24 C.F.R. Section 570 et. seq. ( "Regulations "). C. The Federal Funds were granted to Lessor, in part, to benefit low income residents and households in the vicinity of the Property and to revitalize the economy in the primary commercial area that serves these residents. D. Lessee is a non - profit corporation organized pursuant to and in compliance with the provisions of California law and is presently in good standing. Lessee was organized by, and its members include, individuals who reside in an around the Property and the area to be benefited by the use of the Federal Funds. E. The City Council of the City of Newport Beach ( "City Council') has determined that this Lease and the use of the Property as a theater is consistent with the City Charter, the Newport Beach General Plan and Zoning Ordinance and all other applicable Federal, State and local laws. F. The City Council has also determined that this Lease will benefit, and serve the interests of, the low income residents and business owners in the area for which the Federal Funds were granted. 2 "{. G. An original Lease was entered into as of November 23, 1998, and was amended on September 27, 1999, December 13, 1999, and December 12, 2000, and as amended and restated on September 14, 2004 (collectively "Original Lease'). H. This Lease replaces the Original Lease, and represents the parties' full agreement with regard to the Property. NOW, THEREFORE, in consideration of the terms, covenants and conditions in this Lease, Lessor and Lessee hereby agree as follows: ARTICLE 1 SUBJECT OF LEASE 1.1 Purpose of the Lease The purpose of this Lease is to require Lessee to renovate and rehabilitate the Property and, subsequent to renovation, require Lessee to operate a first class community multi -use theater as contemplated in Section 7.1. The renovation and operation of the theater is intended to serve the needs and interests of the residents and business owners in the area to be benefited through the use of the Federal Funds. 1.2 The Propert y The term "Property' includes the land described in Exhibit A and depicted in Exhibit B as well as the structure(s), any improvements, and personal property thereto. 1.3 Lessor Lessor is the City of Newport Beach, a Charter City and municipal corporation. The principal office of Lessor is located at City Hall, 3300 Newport Boulevard, Newport Beach, California 92658 -8915. For the purposes of this Lease, the.term "Lessor" shall include all officers, employees, agents or representatives of Lessor. 1.4 Lessee Lessee is the Balboa Performing Arts Theater Foundation. Lessee is a California non - profit public benefit corporation organized for the purpose of renovating, operating and maintaining the Theater and engaging in activities that will, among other things, serve the interests of, and benefit, the area commonly known as Central Balboa or Balboa Village. 3 q7 SS7 1.5 Termination of Original Lease The Original Lease shall terminate and be of no further affect upon the execution of this Lease by the parties. ARTICLE 2 LEASE OF PROPERTY 2.1 Lease of Property Lessor leases the Property to Lessee, and Lessee leases the Property from Lessor for the Term (as defined in Section 4.1 below) and pursuant to the terms, provisions, covenants and conditions of this Lease. Lessor reserves all rights to substances below the surface of the Property and the right to produce or take any of those substances so long as the activities do not impair or interfere with the purpose of this Lease. 2.2 Condition of Title The Property is leased subject to the permitted exceptions (Exhibit C) and other matters affecting title which do not inhibit, prevent or impair the purpose of this Lease. ARTICLE 3 POSSESSION OF PROPERTY 3.1 Quiet Enioyment Lessee shall be entitled to peaceably and quietly use and enjoy the Property for the Term, without .hindrance or interruption by Lessor, except for the exercise of Lessor's rights pursuant to this Lease. Lessor shall not be liable in damages or otherwise, because of the interruption or termination of any service provided by Lessor (such as, water or sewer service), or a termination, interruption or disturbance of any service attributable to any act or omission of Lessee. 3.2 Condition of Property Lessee has investigated and researched all physical conditions :of the Property that could affect Lessee's use, enjoyment and improvement of the Property including soil conditions, the condition of structures, and the condition of utilities. By execution of this Lease, Lessee shall be deemed to have accepted the Property in an "AS IS" condition. Lessor has provided Lessee with a report that confirms the presence of lead -based paint on the Property and .Lessee acknowledges that substantial improvements, including seismic retrofit and 0 L[ 6 SS8 remediation of the lead -based paint, will be necessary before the Property can be operated as a first -class community theater as required by this Lease. 3.3 Ownership of Improvements During the Term of this Lease, Lessee shall hold title to the improvements and personal property necessary or convenient to the operation or maintenance of the theater, such as fixtures, machinery, rigging, lighting, staging, merchandise, trade fixtures (collectively, "Equipment ") that have been constructed or placed on the Property. Title to the Equipment shall automatically pass to the Lessor at the expiration or termination of this Lease as provided in Section 3.4. 3.4 Surrender of Property 3.4.1 On expiration of the Term or termination of this Lease, Lessee shall peaceably and quietly leave and surrender the Property and Equipment to Lessor, in good order, condition and repair, reasonable wear and tear and obsolescence excepted. Lessee shall deliver to Lessor all contracts, agreements, books, records, and other documents related to the operation, maintenance or use of the Property. 3.4.2 Upon the expiration of the Term or termination of this Lease and within ten (10) days of a written request by Lessor, Lessee shall immediately deliver to Lessor the following: (i) Documents reasonably necessary for Lessor's ownership of the Property and Equipment to be clearly reflected of record. (ii) Title insurance, surety bond, or other assurances reasonably acceptable to Lessor insuring Lessor against all claims and liens against the Property other than those incurred by Lessor or accepted by Lessor in writing. (iii) All plans, surveys, permits and other documents relating to the Property as may be in the possession of Lessee at the time. 3.4.3 All documents and instruments to be delivered pursuant to this subsection shall be in a form satisfactory to Lessor. 5 Sys s ARTICLE 4 TERWOPTION TO PURCHASE 4.1 Duration and Commencement The Term of this Lease shall commence on the Effective Date and shall expire on the fiftieth (50th) anniversary subject to early termination or Lessee's exercise of the option to purchase as provided in Section 4.3. 4.2 Option to Extend Any extension of this Lease, and the terms and conditions of the extension, shall be at Lessor's option, in its sole and absolute discretion. 4.3 Option to Purchase Lessee shall have the option to purchase the Property subject to satisfaction of the following: 4.3.1 Lessee shall have completed the Required Improvements (as defined in Section 8.1); and 4.3.2 Lessee shall have operated the theater in full compliance with the provisions of Article 7 for a period of five (5) years; and 4.3.3 Lessee has given Lessor thirty (30) days written notice of its intention (notice of intent) to exercise the option to purchase; and 4.3.4 Lessee is not in default in any of the terms of this Lease when the notice of intent is served and /or at close of escrow: and 4.3.5 Lessee, within fifteen (15) days after service of the notice of intent, opens an escrow for the purchase of the Property and deposits ten percent (10 %) of the purchase price into escrow. 4.3.6 Lessee may only use the Property for the permitted uses contemplated in Section 7.1. At the time of transfer Lessee shall record a deed restriction against the Property limiting its use to the permitted uses in Section 7.1. The deed restriction shall include a reversion clause providing that if Lessee uses or attempts to use the Property for any use not contemplated in Section 7.1 the Property shall automatically revert to the Lessor, without any consideration due to Lessee. m SS'A 4.4 Option - Purchase Price The purchase price of the Property shall be the sum of (1) the price paid by Lessor ($480,000) and (2) an amount equal to $480,000 multiplied by the cumulative percentage increase in the Consumer Price Index (All Urban Consumers — Los Angeles, Anaheim Riverside — All Items) from the Effective Date of the Original Lease (November 23, 1998) to the date of the Notice of Intent. For example, if Lessee exercises the option nine (9) years after the Effective Date of the Original Lease and the increase in the CPI during that period is thirty percent (30 %), the purchase price would be $624,000. ($480,000 plus $144,000) 4.5 Right of First Refusal Lessee shall have the right of first refusal to purchase the Property prior to the sale to any third party. Lessor shall give Lessee sixty (60) days written notice of its intent to sell the Property and Lessee's right to purchase during that period. Lessee shall exercise the option by serving Lessor with written Notice of Intent to purchase within sixty (60) days after receipt of the notice of intent to sell and complying with Subsection 4.3.5. The purchase price for the Property shall be as specified in Section 4.4. For purposes of clarity, if the Property is sold at any time during the Term to a third party, the option to purchase the Property (on the terms set forth in Sections 4.3 and 4.4) shall remain in full force and effect, shall not be affected by such sale, and shall be binding upon such purchaser. If requested by Lessee, Lessor agrees to execute, acknowledge, and deliver a Memorandum of Lease, in form mutually acceptable to Lessor and Lessee, which shall include, among other provisions, disclosure of Lessee's option to purchase the Property and its right of first refusal. ARTICLE 5 RENTICONSIDERATION 5.1 No Money Payable by Lessee Lessee shall not pay money as rent to Lessor. 5.2 Other Consideration In consideration for this Lease, Lessee covenants that, during the Term, it will: 5.2.1 Operate and maintain a first class community multi -use Theater on the Property in full compliance with the terms and VA SS11 conditions of this Lease and at no cost to Lessor. 5.2.2 Maintain its non - profit status. 5.23 Construct the Required Improvements in accordance with the provisions of Article 8 and maintain the Property in accordance with this Lease at no cost to Lessor. 5.2.4 Defend, indemnify and hold Lessor harmless with respect to the renovation, use, maintenance and operation of the Property. 5.2.5 Use any excess revenue or funds for purposes related to the operation of the theater or the revitalization of Central Balboa /Balboa Village. The term "excess revenue or funds" means any revenue or funds (other than the principal and interest of the Capital Campaign Fund) in excess of the amount projected in Lessee's then current Budget and which, in Lessee's reasonable determination, are not needed for Lessee's reserve account(s). ARTICLE 6 LONG RANGE PLAN, BUDGET AND RECORDS 6.1 Long Range Plan Lessee shall prepare, and submit to Lessor, a plan which projects fundraising, renovation, marketing and operational expectations and financial needs including active operations of the theater ( "Long Range Plan "). The initial Long Range Plan shall be adopted within sixty (60) days after the Effective Date. The Long Range Plan shall be reviewed and updated /revised from time -to -time, not more frequently than once per year, to reflect changes to renovation plans, fundraising strategies and goals, active operations including performances /events, and marketing programs. The Long Range Plan shall comply with, and provide information relevant to, the provisions of Articles 7 and 8, and specify in reasonable detail (as appropriate given the status of the project). the following: (i) fundraising needs and efforts, including a report on fundraising efforts for the prior year; (ii) schedule for completion of Required Improvements; (iii) proposed number of performances and /or events; and (iv) marketing plan for the theater including programs for attracting attendees and efforts to integrate the operation of the theater into efforts to revitalize the local economy. 6.2 Annual Budget Lessee shall prepare and submit to Lessor an annual budget ( "Budget "), which D SS12 shall be based on the Long Range Plan and indicate more specifically the expectations and financial needs and sources for the current fiscal year. The Budget shall specify in reasonable detail (as appropriate given the status of renovation) (i) the balance in all funds and accounts maintained by Lessee; (ii) all projected revenues and sources of funds for the fiscal year; (iii) the expenditures proposed to be made by Lessee in fulfilling its obligations pursuant to this Lease; and (iv) all other proposed expenditures of Lessee. Lessee has prepared Budgets as required by the Original Lease. Subsequent Budgets, and material modifications. or revisions to the Budget, shall be submitted within forty five (45) days after adoption by Lessee. 6.3 Year End Financial Statement Within. ninety (90) days -after the last day of Lessee's fiscal year, June 30`h, Lessee shall submit to Lessor a financial statement including a profit and loss statement itemizing all of its revenues and expenditures for that fiscal year, a balance sheet and statement of cash flow, all prepared in accordance with generally accepted accounting standards. 6.4 Records Lessee shall keep and maintain complete, accurate and customary records and books of account on all sales, whether for cash or on credit, all business transactions made with respect to the Property during each fiscal year, and the principal and income of the Capital Campaign Fund. These records shall be retained intact for a period of not less than three (3) years after the end of each fiscal year to which the records and books of account pertain. Lessor and representatives of the United States Government shall be entitled, upon reasonable notice and during business hours, to inspect and make copies of any and all of the records and books of account. 6.5 Audit Lessor and /or the United States Government shall, once per fiscal year, be entitled to conduct an audit of all records and books of account that Lessee is required to maintain. Lessee shall submit to Lessor a copy of any audit prepared at the request of Lessee or any other party. ARTICLE 7 USE OF PROPERTY 7.1 Permitted Use The Property shall be used primarily for the operation of a first class community v SS13 multi -use theater open to the general public. Lessee shall operate the theater in accordance with the standards specified in this Lease and the relevant Operations Plan. Lessee may, in conjunction with performances, events and fund - raising activities, conduct incidental operations such as food service or catering, on premises sale of alcoholic beverages (provided Lessee obtains all required governmental permits and approvals), concessions, and retail sales directly related to performances or fund raising events ( "Permitted Uses'). Lessee may conduct benefits, fund - raising events, previews, receptions, and similar activities where admission is restricted subject only to compliance with this Lease.. Lessee may allow community and other organizations to periodically use the theater for fund raising, education, community events and business meetings in accordance with this Lease and the Operations Plan. Lessee may conduct fund- raising and similar events on the Property before completion of Required Improvements subject to issuance of a Special Events Permit by Lessor. 7.2 Performances /Frequency Lessee shall operate the' theater in a prudent and businesslike manner reasonably calculated to assist in the efforts of Lessor and others to revitalize the local economy and in full compliance with the Operations Plan. Operation of the theater is the fundamental consideration for this Lease and Lessee shall ensure and promote the maximum reasonable use of the theater by performers, artists, and entertainers and other permitted users likely to attract patrons. The theater shall be operated consistent with the standards, practices and procedures utilized by first class multi -use community theaters in other jurisdictions. 7.3 Program Standards Lessee shall operate the theater in a manner reasonably calculated to achieve the following objectives: 7.3.1 Provide frequent and.high quality performances and cultural events to attract patrons to the theater and Central Balboa /Balboa Village. 7.3.2 To. serve as a catalyst to the revitalization of the economy of the area to be benefited by use of the Federal Funds. 7.3.3 To make the theater accessible to, and enjoyable by, as wide a potential audience as possible including the low income residents of the area to be benefited by the use of Federal Funds; 7.3.4 To utilize the skill, ability and energy of members of the community in combination with a capable and experienced professional staff to 10 SS14 fund and complete the renovation as well as operate and maintain a first class community multi -use theater. 7.4 Change of Use Lessee shall not use, or conduct any activities on, the Property except the Permitted Uses without the prior written consent of Lessor, which consent may be withheld at Lessors sole discretion. 7.5 Compliance with Laws Lessee shall not use the Property in a manner liable to create a public or private nuisance or liable to cause structural injury to the theater. Lessee shall not conduct any operation that would invalidate any insurance coverage required of Lessee. Lessee shall not violate any local, state or federal law in the renovation, maintenance, or operation of the Property or theater. Lessee shall obtain any required permit(s) from the City and approval from the Department of Alcohol Beverage Control prior to any sale of alcoholic beverages on or from the Property. 7.6 Zoning and Planning Lessor acknowledges that the use of the Property as a theater is a legal non- conforming use as that term is defined in Title 20 of the Newport Beach Municipal Code (Zoning Code). Lessee shall be entitled to repair, alter, and modify the structures and improvements on the Property in accordance with the provisions of the Zoning Code provided Lessee complies with the provisions of this Lease. Approvals granted by Lessor pursuant to Article 8 of this Lease shall not substitute for land use and development approvals and permits required by the Newport Beach Municipal Code. 7.7 Nondiscrimination 7.7.1 Lessee shall not discriminate against any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the renovation, operation, enjoyment or occupancy of the Property. 7.7.2 Lessee shall not discriminate against any employee or applicant for employment because of race, color, religion, sex, national origin, age or handicap. Lessee shall take positive steps to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, national origin, age or handicap. Lessee shall post in conspicuous 11 SS15 places, available to employees and applicants for employment, notices specifying the non - discrimination provisions of this Lease. Lessee shall, in all solicitations or advertisements for employees placed by or on behalf of Lessee, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, national origin, age or handicap. Lessee shall not discriminate on the basis of age in violation of any provision of the Age Discrimination Act of 1975. Lessee shall not discriminate against, or with respect to, any otherwise qualified handicapped individual as provided in Section 504 of the Rehabilitation Act of 1973. 7.7.3 Lessee agrees not to discriminate on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person with respect to any agreement, license, or contract related to the renovation, operation, use or occupancy of the Property. All such contracts, licenses, agreements shall contain non- discrimination provisions substantially similar to this Lease. ARTICLE 8 REQUIRED IMPROVEMENTS 8.1 Lessee's Obligations The Property requires substantial renovation and rehabilitation to be used as, or considered, a first class community multi -use theater. Lessee shall design, obtain building permits for, and then construct the improvements specified in this Article ( "Required Improvements) at Lessee's cost and expense. However, Lessor shall waive all building permit and plan fees associated with the Required Improvements. 8.2 Intentionally omitted 8.3 Conceptual Design Plans and Use Permit Lessee obtained Use Permit #2004 -003 (PA2004 -032) from City Planning Department on September 23, 2004. Lessee prepared, and submitted to Lessor for approval, proposed Conceptual Design Plans for the design and construction of the Property for use as a first class community multi -use theater ( "Conceptual Design Plans "). The Conceptual Design Plans were be prepared by a licensed architect. The Conceptual Design Plans generally described those elements typically included in preliminary Conceptual Design Plans for the renovation and rehabilitation of a theater constructed in the 1920's. The Conceptual Design Plans included, (1) seating layout; (2) stage and dressing room layout (3) lobby IV: SGT SS 16 and concession area layout; (4) public area layout; and (5). exterior elevations. Lessor approved the Conceptual Design Plans on April 19, 2005 (Approval -in- Concept No. 0976 -2005) in connection with Lessee's Coastal Development Permit application. 8.4 Design Development Plans Subsequent to approval of the Conceptual Design Plan, Lessee completed Design Development Plans on April 19, 2011 The Design Development Plans were based on, consistent with and amplified the information provided in the Conceptual Design Plans. The Design Development Plans included (1) exterior lighting plans and design; (2) color, material, treatment and design of all exterior elements; (3) sound and projection systems; (4) design and treatment of interior spaces. The Design Development Plans were incorporated into the Plan Check Plan set and submitted to the City on June 15 2011 with the application for a building permit. 8.5 Building Permits Lessee applied for all necessary building permits from Lessor on June 15, 2011 and is currently awaiting approval Lessee shall diligently process any corrections and changes to the submittals that are necessary to comply with State and local law and to ensure consistency with approved Design Development Plans. Lessee shall also obtain all permits or approvals required of any other governmental entity having jurisdiction over the Property or any modification to the Property. In the event that another governmental agency with jurisdiction over the Property requires modification of the Design Development Plans, the modifications shall be submitted to Lessor for review and approval. Lessor shall not unreasonably withhold or delay the issuance of building permits. Lessor shall waive all building permit fees, planning fees and other fees and charges normally imposed on similar projects. 8.6 Final Design Plans Subsequent to approval of Design Development Plans, Lessee shall submit Final Design Plans to Lessor for approval. Final Design Plans shall be based on, consistent with and amplify on the information provided in the Development Design Plans. The Final Design Plans shall include all interior design treatments, colors and materials. Lessor's right of approval, which shall not be unreasonably withheld, shall be limited to a determination that the Final Design Plans are based on and consistent with the approved Design Development Plans. Lessor shall specify with particularity those components of the Final Design Plans disapproved, the reasons for disapproval and the altemative(s) Lessor would approve. The parties shall agree on Final Design Plans within sixty (60) days 13 SS1� after submittal. 8.7 Schedule for Required Improvements Lessee shall submit plans, diligently pursue their approval, and begin construction of Required Improvements according to the following schedule. Complete Building Permit One hundred eighty (180) days after initial application Building Permit application which is December 15th, 2011 Begin construction Upon reaching 50% of budget for Required Improvements, but no later than two (2) years after issuance of building permits. Lessee is required to request time extensions, as provided under Lessor's Municipal Code, to ensure the building permit(s) remains valid prior to construction Final Design Plans Upon approval of framing by Lessor's Building Department Complete construction One (1) year and six (6) months after start of construction. 8.8 General Requirements 8.8.1 The Required Improvements shall be constructed in compliance with the provisions of this Lease that regulate, or relate to, the construction, alteration or maintenance of improvements on the Property. Lessee acknowledges that the reviews and approvals required by this section, with the exception of the issuance of building permits, are proprietary activities related to Lessor's ownership of the Property and separate and distinct from any review or approval conducted by Lessor in its municipal capacity. Lessee also acknowledges that any approval given pursuant to this section, except the issuance of building permits, does, not bind Lessor when acting in its governmental capacity. 8.8.2 Lessor shall designate an appointed committee of three (3) members, comprised of the City Manager or his or her designee, the Community Development Director or his or her designee, and the City's Building Official or his or her designee to review, and approve or disapprove, the Conceptual Design Plans, the Design Development Plans and the Final Design Plans. Lessee may request City Council review of any decision by the appointed SS 9-66 committee disapproving submittals by serving. a request for review within fifteen (15) days after receipt of the notice of disapproval. 8.9 Extensions Lessee may request., and the City Manager of the City of Newport Beach may grant, an extension of up to sixty (60) days with respect to any of the deadlines specified in this Article. The City Council of the City of Newport Beach may, upon a showing of good cause, grant extensions in excess of sixty (60) days. The extensions authorized by this Section are in addition to any extension resulting from force majeure. ARTICLE 9 REPAIRS AND MAINTENANCE Lessee recognizes that the theater is a designated local historical landmark and is to be maintained as such. Lessee shall, at Lessee's expense, perform all routine and recurring maintenance necessary to keep the theater in first class condition and in accordance with the standards in this Lease. Lessee shall, at a minimum perform the following: (i) the maintenance of the exterior surfaces of the theater (including patching and resurfacing the roof membrane and painting or other protective treatment of the exterior wall of the theater); (ii) maintenance of the public rest rooms (including_ repairs or replacements of tile or rest room fixtures); (iii) the maintenance of electrical systems serving the Property and theater and, the repair and replacement of components; (iv) maintenance of all pipes and plumbing systems serving the theater and Property; and the repair and replacement of components; and (v) the maintenance of all building service equipment (including HVAC equipment, conveyancing systems, and fire, life safety, and emergency equipment). and the repair and replacement of components. As soon as reasonably practicable following the completion of Required Improvements, Lessee shalt prepare and submit to Lessor a schedule for the periodic inspection and maintenance by Lessee of the theater. Lessee shall revise the schedule for maintenance from time to time during the Term as necessary to maintain the theater to the standards . required by this Lease. Lessee shall have the benefit of all warranties available to Lessor with respect to the theater or any component thereof. Lessee shall not be responsible for the cost of and repair or maintenance required, because of the acts or omissions of Lessor. Lessee may terminate this Lease If the cost of repairing or replacing any of the structural, roof, main electrical, plumbing, building service or fire /life safety components of the theater would make continued operation of the theater economically infeasible. 15 SS19 ARTICLE 10 STATUS AND MANAGEMENT OF LESSEE 10.1 Nonprofit Status During the Term, Lessee shall maintain its status as a California public benefit nonprofit corporation in full compliance with the California Nonprofit Corporation Law (California Corporation Code Section 5000 et seq.). Lessee shall also maintain its qualification as a tax - exempt organization under 501(c)(3) of the Internal Revenue Code (or any successor statute). 10.2 By -Laws During the Term, Lessee shall maintain By -Laws governing the management and operation of the foundation, and provide Lessor with a current copy of the by- laws. ARTICLE 11 ALTERATIONS 11.1 Written Consent Except as otherwise provided in this Article, Lessee shall- obtain the written consent of Lessor prior to making any structural or nonstructural alterations to the Property. All structural and nonstructural alterations to the Property shall conform to the theater's designation as a local landmark and shall respect the design of the original front fagade of the theater to the maximum extent feasible. Lessee shall be solely responsible for all costs and expenses incurred in making any alteration. All alterations shall be surrendered with the Property when this Lease expires or terminates. 11.2 Notice of Non - responsibility Structural and nonstructural alterations shall not be commenced until ten (10) days after Lessor has received written notice from Lessee stating the date work is to commence so that Lessor can post and record an appropriate Notice of Non - Responsibility. Structural alterations shall be made by a licensed contractor. ARTICLE 12 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 12.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler systems and interior protective services provided to or for the Property. Lessee 16 ! r. SS20 will comply with the terms and conditions of contracts relating to such services. Lessor shall not be liable for any failure or defect in the supply of any utility. 12.2 Taxes, Assessments, Fees and Charges Lessee covenants to pay when due all applicable taxes, assessments, fees, charges, and levies of every type and character, including all interest and penalties, that are imposed, assessed or levied on the Property, any occupancy or use of the Property, or any income derived from the Property. 12.3 Proof of Payment Lessee agrees to furnish to Lessor, upon request, proof of the timely payment of any tax, assessment, levy, fee or charge or other. Lessee may pay any assessment or tax in installments if legally permissible to do so. In the event Lessee elects to pay assessments or taxes in installments, Lessee shall be liable only for those installments which become due and payable during the Term of this Lease. 12.4 Payment by Lessor Lessor shall have the right to pay any assessment, tax, fee or charge before the due date if Lessor has a reasonable belief that Lessee is unwilling or unable to make the payment. In such event, Lessee shall fully reimburse Lessor within ten (10) days of written notice of payment by Lessor. 12.5 Property Taxes not Valid The obligation of Lessee to pay taxes shall not be construed as evidence that Lessor or Lessee believe that any tax is legal. This Lease is intended only to obligate Lessee to pay taxes if legally imposed. 12.6 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Lease Premises In accordance with California Revenue and Taxation Code Section 107.6(a) and Health and Safety Code Section 33673, Lessor states that by entering into this Lease, a possessory interest subject to property taxes may be created, and if so, that Lessee shall pay taxes upon the assessed value of the entire property and not merely the assessed value of its leasehold interest. Lessee or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. 17 �1 SS2 1' ARTICLE 13 LIENS 13.1. Indemnification Lessee shall indemnify, defend and hold Lessor and the Property free, clear and harmless from any claims, liens, demands, charges, encumbrances or litigation arising directly or indirectly out of (1) Lessee's use, occupancy or operation of the Property or (2) any work performed on, material furnished to the Property. Lessee shall pay, prior to delinquency, for all work performed on, and material furnished to, the Property which may result in a lien on the Property and shall use its best efforts to keep the Property and theater free and clear of all mechanic's liens and similar liens. 13.2 Satisfaction of Liens Lessee shall fully pay and discharge a judgment or lien affecting the Property upon entry of final judgment in any action contesting any claim of lien (if final judgment establishes the validity of all or a portion of the lien). Lessee shall also pay any lien within fifteen (15) days after notice of the filing of any lien that Lessee does not contest. Lessee shall reimburse Lessor upon. demand for any and all loss, damage and expense, including reasonable attorneys' fees,, incurred by Lessor with respect to any judgment or lien resulting from the acts or omissions of Lessee related to the Property. Lessor shall have the right to satisfy any judgment or lien if Lessee fails or refuses to do so and Lessee shall fully reimburse Lessor in such event. 13.3 Notice to Lessor Lessee shall give Lessor written notice of any claim or lien filed against the Property and any action or proceeding instituted affecting the title to the Property. 13.4 Notice of Non - Responsibility Lessor shall have the right to post and maintain on the Property any Notice of Non - Responsibility authorized by law. ARTICLE 1.4 INDEMNIFICATION 14.1 Indemnitv Lessee shall defend, indemnify and hold harmless Lessor from and against.any and all legal or administrative proceedings, claims, reasonable attorneys' fees and costs, expenses, penalties, actual damages, punitive damages and losses, M Et. SS2'Y "7y including indemnity claims, in any way related to (1) the improvement, use, maintenance, or operation of the Property (ii) this lease (iii) the use, release, generation, storage or disposal of Hazardous Materials (as defined in Section 14.6 on the Property or theater, (iv) compliance or non - compliance with any federal, state or local environmental law, ordinance, rule or regulation, (v) any accident or injury to, or death of, persons or damage to property occurring on or about the Property (vi) the removal, clean -up, encapsulation, detoxification or any other action taken by Lessee or any other party, directly or indirectly arising out of the presence of Hazardous Materials in, on or around the Property. 14.2 CERCLA Liability Lessee agrees that this Lease is intended to operate as an indemnification under Section 9607(e)(1) of the Comprehensive Environmental Response, Compensation and Liability Act ( "CERCLA "), as amended, and the California Hazardous Substances Act ( "CHSA "), as amended. 14.3 Expense of Proceedings The defense of any suit, action, legal or administrative proceeding that may be threatened, brought or instituted against Lessor that is the subject to the indemnity provided in this Lease. shall be conducted at Lessee's sole expense by legal counsel selected and approved by Lessor. 14.4 Release Lessee waives, releases and forever discharges Lessor from any and all suits, causes of action, legal or administrative proceedings, claims, demands, liabilities, losses, costs, interest, attorneys' fees, expenses, penalties, actual damages, punitive damages and losses, known or unknown, which Lessee ever had, now has, or may have in the future that are in any way related to (i) the condition, status, quality, nature, contamination or environmental state of the Property including Lessee's claims under the CERCLA, the Carpenter - Presley- Tanner Hazardous Substance Account Act and any other federal, state or local law, ordinance or regulation, or common law theory of recovery, pertaining to the presence, release, clean -up or containment of Hazardous Materials on the Property. 14.5 Waiver of California Civil Code Section 1542 Section 1542 of the California Civil Code states: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor 19 GJ SS23 at the time of executing the release, which, if known by him, must have materially affected his settlement with the debtor. Lessee knowingly and voluntarily waives its rights pursuant to California Civil Code Section 1542. Lessee fully understands the consequences of this waiver and has been advised of the consequences by legal counsel. The Parties intend this Lease will be effective as a bar to Lessee's Claims. 14.6 Definition of Hazardous Materials The term "Hazardous Materials" means, without limitation, gasoline, petroleum products, explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated biphenyls or related or similar materials, asbestos or any other substance or material that may be defined as a hazardous, toxic or dangerous substance, material, waste, pollutant or contaminant under any federal, state or local environmental law, ordinance, rule or regulation as now or at any time hereafter in effect, including, without limitation, (a) CERCLA, (b) the Federal Water Pollution Control Act, (c) the Clean Air Act (d) the Resource Conservation and Recovery Act, (e) the Toxic Substances Control Act, (f) the Hazardous Materials Transportation Act, (g) the Carpenter - Presley- Tanner Hazardous Substance Account Act, (h) Hazardous Waste Control Law, and the (i) the Porter - Cologne Water Quality Control Act (California Water Code Sections 13000 et seq). ARTICLE 15 INSURANCE 15.1 Insurance to be Maintained Lessee shall take out and maintain, no later than thirty (30) days after the Effective Date and for the Term of this Lease, at Lessee's sole cost and expense, the following insurance. 15.1.1 Comprehensive General Liability in an amount not less than two million dollars ($2,000,000) combined single limit per occurrence. Lessor and its officials, employees and representatives shall be covered as additional insureds with respect to liability arising out of activities by or on behalf of Lessee or in connection with the use or occupancy of the Property. Coverage shall be in a form acceptable to Lessor and shall be primary and non- contributing with any insurance or self- insurance maintained by Lessor or Lessee. Any third party permitted to use the Property pursuant to Paragraph 7.1 of this Lease shall provide the same RRE SS24 insurance, unless this requirement is waived or modified, in writing, by Lessor's City manager. 15.1.2 Workers' Compensation Insurance as required by the Labor Code of the State of California. 15.1.3 "All Risk" Property Insurance (Operations) including coverage against the perils of earthquake, fire, explosion of machinery or equipment, and vandalism covering the full replacement cost of all improvements and fixtures on the Property. Lessor shall be added as insured under the standard loss payable endorsement. Lessee waives all rights of subrogation against Lessor for any damage to the improvements or fixtures covered by collectable commercial insurance. Lessee's obligations to provide insurance under this paragraph shall apply to all improvements and fixtures on the Property without regard to the date of construction or installation. Lessee's obligation to provide this coverage is contingent on the availability of coverage at commercially reasonable rates. 15.1.4 Property Insurance - Construction. During construction of any improvements on the Property, Lessee shall maintain Builders Risk Insurance against "all risk" of physical loss, including the perils of fire, collapse and transit, with commercially reasonable deductibles, covering the total cost of work performed, equipment, supplies and materials furnished_ on a replacement cost basis. Lessee's obligation to provide this coverage is contingent on the availability of coverage at commercially reasonable rates. 15.2. Acceptable Terms of Coverage Acceptable insurance coverage shall be placed with carriers admitted to write insurance in California, or carriers with a rating of or equivalent to AVIII by A. M. Best & Company. Any deviation from this standard shall require. the specific written approval by Lessor. Any deductibles or self- insured retentions must be declared to and approved by Lessor. At the option of Lessor, Lessee may be required to reduce or eliminate such deductibles or self- insured retentions or to procure a bond guaranteeing payment of losses and related expenses and costs. Coverage under each policy shall not be suspended, avoided or canceled by either party except after thirty (30) days prior written notice to Lessor. Lessee shall furnish City and Lessor with certificates. of insurance and with original endorsements effecting coverage required by this Lease. The certificates and endorsements for each insurance policy shall be signed by a person authorized by the insurer to bind coverage on its behalf. 21 SSA`, 15.3 Index The limits of insurance coverage required by this Article shall be adjusted on each seven (7) year anniversary of the Effective Date. The adjustment shall reflect the percentage increase for the preceding seven (7) years in the Consumer Price Index for All Urban Consumers, Los Angel es -An a heim- .Riverside. All Items (1982 -84 Base), published by the Bureau of Labor Statistics, Department of Labor. Consumer Price Index. 15.4 Waiver of Subrogation Each policy of insurance procured pursuant to this Article shall contain, if feasible, either (i) a waiver by the insurer of the right of subrogation against either party for negligence of such party, or (ii) a statement that the insurance shall not be invalidated should any insured waive, in writing prior to a loss, any or all right of recovery against any party for loss accruing to the property described in the insurance policy. Lessor and Lessee waive any and all rights.of recovery against the other for any loss or damage to that Party arising from any cause insured against under the insurance policies required by this Article. ARTICLE 16 DAMAGE BY FIRE OR CASUALTY 16.1 Lessee to give Notice In case of any material damage to or destruction of the Property, Lessee will promptly give written notice to Lessor generally describing the nature and extent of the damage or destruction. 16.2 Restoration Except as provided in Section 17.3, in the event of damage to or destruction of the Property, Lessee shall repair and restore the Property to its original condition (subject to changes necessary to comply with then existing laws and any changes in design approved by Lessor), at Lessee's.sole cost and expense. To the extent the insurance proceeds are insufficient to cover the cost of such repair and restoration, Lessee shall make up the deficiency out of Lessee's own funds. The repair and restoration shall be commenced within a reasonable period of time following the casualty and shall be completed with due diligence. Lessee shall have the option to terminate. this Lease and surrender possession of the Property to Lessor if the event the cost of such repair and restoration exceeds the sum of (i) the amount of insurance proceeds available to Lessee plus (ii) the amount of the deductible by an amount which Lessee reasonably determines renders reconstruction of the-Property economically infeasible. In the event of 22 0 SS 6 such a termination, Lessee shall pay to Lessor the amount of the deductible and assign to Lessor any and all rights Lessee may have to the insurance proceeds. 16.3 Casualty Late in Term Lessee or Lessor shall have the right to terminate this Lease on ninety (90) days written notice if (i) the Property is damaged or destroyed subsequent to the fifteenth (15th) year of the Term, (ii) the costs of restoration and repair are estimated to exceed fifty percent (50 %) of the then full replacement cost of the Property (excluding land costs /value), and (iii) Lessee elects not to repair or restore the Property. In such event, Lessor shall have the right to receive and retain all insurance proceeds paid or payable to Lessee on account of any damage or destruction to the Property. 16.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 16.2, proceeds from policies of insurance required by Article 15 and which are received on account of any damage to or destruction of the Property (less the costs, fees and expenses incurred in the collection), shall be applied as follows: 16.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 16.2. Lessee shall then furnish to Lessor satisfactory evidence that it has available the total amount of money which, when added to the insurance proceeds received, shall be sufficient to pay the cost of such Restoration. 16.4.2 Assuming satisfaction of the conditions of subsection 16.4.1 net insurance proceeds shall be paid to Lessee, unless Lessee is in Default, to fund restoration. Payments from the proceeds of insurance for restoration shall be made only upon written request of Lessee accompanied by a certificate of an architect to the effect that the amount requested has been paid or is then due, is properly a cost of restoration, and there are no mechanic's or similar liens for labor or material supplied in connection with the restoration to date. 16.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred in the restoration, then to Lessee as working capital 23 0 SS27 ARTICLE 17 EMINENT DOMAIN 17.1 Lease Governs The rights and obligations of the Parties with respect to any Award shall be as provided in this Article if there is any Taking during the Term of this Lease. 17.2 Termination of Lease This Lease shall terminate effective on the date of surrender of possession of the Property to the condemning authority in the event of a Total Taking. Lessee shall continue to observe and perform all of the terms, covenants and conditions of this Lease until the date of termination. 17.3 Partial Taking —,Restoration If there is a Partial Taking, Lessee may, at its sole cost and expense, whether or not the condemnation award is sufficient for the purpose, promptly commence and diligently proceed to effect restoration of the Property as nearly as possible to the condition and character immediately prior to such Taking. - 17.4 Distribution of Award All awards and damages received on account of any Taking, whether partial or total, including interest received (Award), shall be paid promptly by the person(s) receiving the same to an escrow agent mutually acceptable to Lessor and Lessee to be distributed upon appropriate instruction from the Parties. 17.5 Allocation of Award — Partial Takinq Any Award in a Partial Taking shall be distributed by escrow in the following order of priority: 17.5.1 First, to Lessor and Lessee to reimburse all costs and expense incurred in the collection of the Award, including fees and expenses incurred in the condemnation proceeding; 17.5.2 Second, to Lessor, as reimbursement for the costs and expenses of restoration of the Property and as those costs and expenses are incurred by Lessee; 17.5.3 Third, if Lessor and Lessee are unable to agree upon the allocation of the balance of the Award, if any, it shall be deposited by escrow into a court of competent jurisdiction to be equitably allocated by 24 SS28 the court. 17.6 Allocation of Award — Temporary Taking In the event of a Taking for temporary use or occupancy, this Lease shall continue in full force and effect and Lessee shall be entitled to claim, recover and retain any Award made on account of such temporary Taking. However, if the period of temporary Taking extends beyond the Term, the Award shall be apportioned between Lessor and Lessee as of the date of expiration. 17.7 Allocation of Award —Total Taking Any Award in a Total Taking shall be distributed by escrow in the following priority: 17.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 17.7.2 Second, if Lessor and Lessee are unable to agree upon the allocation, the balance of the Award shall be deposited by escrow into a court of competent jurisdiction to be equitably allocated by the court. The determination of the value of Lessee's and Lessor's respective interests in the Property shall be made as if the Lease were to continue in full force and effect until the Expiration Date. 17.8 Conduct of Proceedings Lessee and Lessor shall jointly participate in and prosecute /defend any action or proceeding involving a Taking of the Property by condemnation or under the power of eminent domain and shall jointly make any compromise or settlement. 17.9 Notices Any party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other party. ARTICLE 18 ASSIGNMENT AND SUBLETTING Lessee may not assign or sublet this Lease or any portion of the Property, without Lessor's prior written consent which consent may be withheld in Lessor's sole discretion. However, Lessee may grant such licenses, permits and concessions as are reasonable, appropriate and customary to promote a Permitted Use and are in accordance with the Operations Plan. Notwithstanding any provision to the contrary, (i.) ` *7 Sly Lessor may, at any time during the Term and in its sole discretion, assign this Lease or its interest in the Property to a non - profit entity, and (ii) if the Property is sold, transferred, or assigned during the Term to a third party, the consent of the successor lessor to any assignment or subletting of the Lease or any portion of the Property by Lessee may not be unreasonably withheld, delayed, or conditioned. ARTICLE 19 LEASEHOLD MORTGAGES Lessee shall have no right to encumber its interest in this Lease, the Property or the theater without Lessors prior written consent, which consent may be withheld in Lessor's sole and absolute discretion. ARTICLE 20 PERFORMANCE OF LESSEE'S COVENANTS 20.1 Right of Performance If Lessee fails to pay any tax, fee or other charge in accordance with Article 12 within the time period required or shall fail to pay for or maintain any of the insurance policies provided for in Article 15 within the time required, or to make any other payment or perform any other act within the time required by this Lease, then Lessor may, after 30 days' written notice to Lessee (or without notice in case of an emergency) and without waiving or releasing Lessee: 20.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 20.1.2 Pay for and maintain any insurance policies required by this Lease; or 20.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 20.2 Reimbursement and Damaqes Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 20.1. ARTICLE 21 REPRESENTATIONS 21.1 Lessors Representations 26 SS3 ' Lessor represents to Lessee that: 21.1.1 Lessor owns the Property. in fee simple subject only to the Permitted Exceptions and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the theater. 21.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 21.2 Lessee's Representations Lessee represents to Lessor that 21.2.1 Lessee has examined the Property and finds it will be fit for use as a cultural and performing arts center in accordance.with this Lease and the Operations - Plan upon completion of Required Improvements. 21.2.2 Lessor has not made any representations or warranties regarding - the condition of the Property, or its suitability for the construction of Required Improvements or the operation and maintenance of a theater consistent with this Lease and the Operations Plan. 21.2.3 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 21.2.4 Lessee is a California public benefit nonprofit corporation in full compliance with the provision of the California Nonprofit Corporation Law (California Corporation Code Section 5000 et seq.), and is a tax exempt organization under 501(c)(3) of the. Internal Revenue Code. ARTICLE 22 DEFAULTS, REMEDIES AND TERMINATION 22.1 Legal Actions 22.1.1. Institution of Lec al Actions In addition to any other rights or remedies, either party may institute legal action to cure, -correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent 27 SS31 rr with the purpose of this Lease. Any legal action shall be filed in the County of Orange, State of California. 22.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease, with venue in Orange County. 22.2 Rights and Remedies are Cumulative Except with respect to rights and remedies expressly declared to be exclusive in this Lease, the rights and remedies of the parties are cumulative. 22.3 Occurrence of Default The following acts or omissions shall be considered material breaches of this Lease if Lessee fails to cure the default within thirty (30) days after written notice of default from Lessor or, if cure is not feasible within thirty (30) days, Lessee has failed to commence cure within thirty (30) days or fails to diligently complete the cure: 22.3.1 The failure of Lessee to comply with the provisions of Article 8 related to the design and construction of Required Improvements. 22.3.2 The failure of Lessee to operate the theater in compliance with the provisions of Article 7 related to frequency and quality of performances and events. 22.3.3 The failure of Lessee to maintain the Property as specified in Article 9. 22.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction 22.3.5 The failure of Lessee to pay any fee, tax, charge, or assessment when due or the failure to. reimburse Lessor in the event Lessor pays the fee, tax, charge or assessment. 22.4 Remedies If Lessee has materially breached this Lease after expiration of all applicable cure periods then a Default shall be deemed to have occurred, Lessor may give written termination notice to Lessee, and on the date specified in the notice this Lease shall terminate. In addition to the right of termination, Lessor shall have M r SS32 the following additional rights and remedies: 22.4.1 Lessor shall have the right to terminate this Lease with or without cause upon ninety (90) days written notice to Lessee and reenter the Property and /or the theater, take possession of the Property and /or theater, any and all Equipment, books and records, contracts and any other property. In the event of termination under this section Lessor shall owe no compensation to Lessee. 22.4.2 Lessor may, at its option, enforce all of its rights and remedies under this Lease, including the right to recover the consideration and all other sums payable as they become due. Lessor shall also be entitled to recover from Lessee all costs of maintenance and preservation of the Property and /or the theater, and all costs, including attorneys' and receiver's fees, incurred in connection with the appointment of and performance by a receiver to protect the Property. 22.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the theater, all bank accounts, accounts receivable, working capital and cash reserves (if any after payment of Lessee's debts), and the balance in the Contributions Fund. ARTICLE 23 PERMITTED CONTESTS Lessee, at no cost or expense to Lessor, may contest (after prior written notice to Lessor), by appropriate legal proceedings conducted with due diligence, the amount or validity or application, of any Imposition or lien, provided that the proceedings suspend collection from Lessor and any action against the Property. If Lessee fails to contest the matter, or fails to protect Lessor and Lessors interest in the Property, Lessor may contest or settle the matter in its sole discretion and obtain reimbursement from Lessee. ARTICLE 24 ENTRY BY LESSOR Lessor may enter the Property at reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property and /or the theater, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. 29 -73 SS33 ARTICLE 25 FORCE.MAJEURE Any prevention, delay, non - performance or stoppage due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any Federal, State or municipal government; acts of God; acts or omissions of Lessor; fire, explosion or floods; strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Lessee. ARTICLE 26 MISCELLANEOUS 26.1 Notices. All notices and other communications shall be in writing, shall be sent by first class registered or certified United States mail, postage prepaid, and shall be deemed to have been given two (2) days after the day of mailing, addressed: To Lessor; City Manager City of Newport Beach 3300 Newport Blvd. Newport Beach, CA, 92658 -8915 With a copy to: City Attorney's Office City of Newport Beach 3300 Newport Blvd. Newport Beach, CA, 92658 -8915 or at such other addresses as Lessor shall have furnished to Lessee; and To Lessee; Executive Director Balboa Performing Arts Theater Foundation P.O. Box 752 Balboa, CA 92661 26.2 No Claims Against Lessor Nothing in this Lease constitutes any consent or request by Lessor for the KH �S& performance of any labor or services or the furnishing of any materials to the Property 26.3 Integration This Lease, and the exhibits, are the entire Agreement between the Parties, and there are no agreements or representations between the Parties except those specified in this Lease. This Lease supersedes any prior negotiations, representations, discussions or agreements between the Parties with respect to the Property and /or the Theater. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the parties. 26.4 No Waiver By Lessor To the extent permitted by law, no failure by Lessor to insist upon the strict performance of any term of this Lease, or to exercise any right, power or remedy upon a Default under this Lease, shall constitute a waiver. 26.5 Severability If any term of this Lease or any application thereof shall be declared invalid or unenforceable by a court of competent jurisdiction, the remainder of this Lease shall not be affected. Unless otherwise expressly provided, any approval or consent of Lessor required shall not be unreasonably withheld or delayed. This Lease shall be binding upon and inure to the benefit of and be enforceable by the respective successors of the parties. 26.6 Holding Over A tenancy for month -to -month shall result if Lessee remains in possession of the Property or the theater with the consent of Lessor after the expiration of the Term. The month -to -month tenancy shall be on the same terms and conditions as contained in this Lease. 261 No Partnership This Lease does not cause Lessor to be a partner of Lessee, a joint venturer with Lessee, or a member of a joint enterprise of Lessee relative to the operation of the theater or otherwise. 31 r� SS35 26.8 Federal Funds Provisions No Federal appropriated funds shall be paid, by or on behalf of Lessee to any person for the purpose of influencing or attempting to influence an officer or employee of any Federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement. If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, and officer or employee of Congress or an employee of a Member of Congress in connection with this Federal contract, grant, loan or cooperative agreement, Lessee shall complete and submit Standard Form -LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions. Lessee shall require that the language of this certification be included in the award documents for all contracts, subcontracts, and agreements. 26.9 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. [SIGNATURES ON NEXT PAGE] 32 SS36 FOR LESSOR CITY OF NEWPORT BEACH Michael F. Henn Mayor for City of Newport Beach FOR LESSEE BALBOA PERFORMING ARTS THEATER FOUNDATION Chairman, Board of Directors. of Balboa Performing Arts Theater Foundation APPROVED AS TO FORM CITY OF NEWPORT BEACH: A roHarp City Attorney for City of Newport Beach ATTEST: CITY OF NEWPORT BEACH Leilani Brown City Clerk for City of Newport Beach. Exhibit "A "— Property Depiction Dated Dated Dated Dated [END OF SIGNATURES] 33 I� SS37 ATTACHMENT B "[W RU N% % fib NOR R fNVNDOM PlUfl(•DPH(f•iHfPIER • fllm • fDV(PlIOH January 20, 2014 Councilmember Mike Henn Newport Beach City Council 100 Civic Center Drive Newport Beach, Ca 92660 Dear Councilmember Henn, Delivered by e-mail The Balboa Performing Arts Theater Foundation, as the Balboa Village Theatre, hereby requests consideration by the City Council of Newport Beach of the proposal set forth below for an amended Lease of the building at 707 E. Balboa Blvd for the purposes of operating a performing arts theatre. Whereas, the area known as the Balboa Village has been in need of substantial rejuvenation for more than a decade,and Whereas, community efforts to build a theatre and spark area rehabilitation have been well intentioned but unsuccessful thus far, and Whereas, the building is an empty shell, of four structurally unsound walls, a holed roof open to the sky, with a sandy floor, ready either for demolition or restoration, and Whereas, the rehabilitation of Balboa Village cannot succeed without City's active and positive involvement and leadership, and Whereas, a revitalized and attractive Balboa Village area with a keystone Theatre will attract visitors, investment and development, increase the economic viability of the Village and raise neighborhood property values, Therefore, the BPATF submits this proposal for City Council consideration and adoption: 1. The City passes a resolution affirming its approval in concept to rehabilitate the current Theatre property at 707 E. Balboa Blvd which it owns to tenant -ready status, so that it can be occupied and leased as a community performing arts theatre by BPATF, subject to the conditions outlined below. 2. Our architects and contractor estimate that the all -in cost of this would be approximately $2 million, subject to confirmation by the City. 3. The City's actual approval to proceed with construction would be conditioned on the following: 1) negotiation of a mutually agreeable minimum 50 year lease that contemplates BPATF to be responsible for all interior tenant improvements necessary to successfully operate as a theatre; 2) the SS38 lease will specify rent payable to the City in the amount of 2.5% of ticket revenue to provide the City the opportunity to recoup its investment; 3) BPATF will raise and have on deposit prior to the expenditure of any City funds for the project $2 million in unencumbered cash donations for tenant improvements and resources such as designing and installing first class theatre systems, first year's start -up costs of operation, and adequate reserves to support the initial years of theater's operations. The $2 million would be in addition to the net cash reserves on deposit in the Foundation, currently totaling approximately $400,000, and 4) BPATF will present a fully articulated business plan authored by a respected performing arts consulting firm that supports to the City's satisfaction the potential for successful operation of the theatre over time. 4. With the conditional approval in concept in place as described above, BPATF will then move forward with developing an expanded Board and fund raising through community action in order to fulfill the $2 million donation commitment. 5. Until the BPATF has the $2 million in a segregated bank account dedicated for tenant improvements and resources listed above, the City will not lift one shovel of dirt, or expend one penny on the rehab, and in this way the City has not risked anything, but has demonstrated its commitment to the community and support of the Balboa Village Theatre revitalization. Without City support, as outline above, the BPATF will be unable to move with the BVT project. Attached to this correspondence is a brief project description with a set of rough financial estimates and deal points expressing the projected investment by the City of Newport Beach and BPATF. Also attached is a set of schematic design drawings of the building presented as a theatre. Councilmember Henn, you have been an ardent supporter of the BPATF and revival of the Theatre and of the Balboa Village area. We are thankful for your concern, consideration and leadership on behalf of your District, and request you to lead the efforts to gain Council approval and spark the project. We at BPATF stand shoulder to shoulder with the City, and hope the Council will rise to the opportunity. In all sincerity, we believe this is the make -or -break moment. Sine qua non. Sincerely, For the Balboa Performing Arts Theater Foundation Dr. Donald Hecht, Chair Dr. Steven Beazley, President /CEO SS39 BALBOA VILLAGE T N E A T R E Project Description Building Remodel at 707 E. Balboa Blvd. for the Purpose of Operating as a Theatre Prepared for: City of Newport Beach January 20, 2014 BA H M ORO K PM 1MIN fOQ011O8 AIViI(•DA0(1.1AEAl1A•11IM-[ 0V(AIIA0 Project Description SS40 Table of Contents History Mission III. City -BPATF Partnership IV. Facility Design Features V. Financial Investment Plan VI. Schematic Design Drawings SS41 Theatre Histo The Balboa Village Theatre dates back to 1928, when J. P. Greeley constructed a performing arts facility at 707 E. Balboa Blvd. called the Ritz Theater, a state -of- the -art theatrical facility for vaudeville and small theater productions. In 1939, the Ritz was renamed the Balboa Theater, and its emphasis turned to film. Many of the best loved Hollywood movies were screened at the Balboa Theater during the 1940s, 50s, and 60s. By the mid - 1970s, the Theater turned into a popular revival /art film house. The Balboa Theater closed its doors in 1992, and the venue sat dark and deserted until the Foundation was formed in 1996 with the goal of reviving and rebuilding the Theater under the new name of the Balboa Village Theatre. II. Mission The Balboa Village Theatre's mission is to create and implement a venue for performing arts, film, theatre and arts education activities to meet the needs of Newport Beach and the surrounding Orange County community. Under the guidance of its Board of Directors, the Foundation has been working in partnership with the City of Newport Beach, which purchased the structure in 1998. The City is leasing the building to the Foundation to operate as a first - class, 300 -seat multi -use theater that will benefit and enrich the entire community, while meanwhile being self- sustaining. III. City -BPATF Partnership The Foundation is proposing that the City of Newport Beach amend the lease to the foundation under the following terms and conditions: 1. The City grants its approval in concept to rehabilitate the current Theatre property at 707 E. Balboa Blvd which it owns to tenant -ready condition, so that it can be occupied and leased as a community performing arts theatre by BPATF. 2. Our architects and contractor estimate that the all -in cost of this would be approximately $2 million, subject to confirmation by the City. 3. The City's actual approval to proceed with construction would be conditioned on the following: 1) negotiation of a mutually agreeable minimum 50 year lease that contemplates BTPATF to be responsible for all interior tenant improvements necessary to successfully operate as a theatre; 2) the lease will specify rent payable to the City in the amount of 2.5% of ticket revenue to provide the City the opportunity to recoup its investment; 3) BPATF will raise and have on deposit prior to the expenditure of any City funds on the project $2 million in unencumbered cash donations for tenant improvements and resources such as designing and installing first class theatre systems, first year's start -up costs of operation, and adequate reserves to support the initial years of theater's operations. The $2 million would be in addition to the net cash reserves on deposit in the Foundation, currently totaling approximately $400,000; and 4) BPATF will present a fully articulated business plan authored by a respected performing arts consulting firm that supports to the City's satisfaction the potential for successful operation of the theatre over time. 4. With the conditional approval in concept in place as described above, BPATF will then move forward with developing an expanded Board and fund raising through community action in order to fulfill the $2 million donation commitment. SS42 5. Until the BPATF has the $2 million in a segregated bank account dedicated for tenant improvements and resources listed above, the City will not lift one shovel of dirt, or expend one penny on the rehab, and in this way the City has not risked anything, but has demonstrated its commitment to the community and support of the Balboa Village Theatre revitalization. IV. Facilitv Desien Features The foundation is proposing a remodel design approach to the existing 5,130 square foot building. This entails keeping the building to a single floor and making improvements to the building to make it a shell in which theatrical systems and equipment may be installed. The City of Newport Beach would be responsible for funding the design and construction of the shell so the building is "tenant ready" for the foundation to design, fund and install the state of the art production elements that enable the building to operate as a theatre. Exterior Imorovements The exterior of the theatre would remain intact with minor modifications including fresh paint in the existing color scheme, windows installed in their current opening locations, a box office window(s) on the lower left sided of the building and advertising window boxes on the right hand side of the theatre entrance doors A new theatre marquee would be designed in the spirit of the original 1920's marquee. The foundation would design and fund the marquee. Interior Imorovements Improvements to the floor, ceiling, roof and addressing seismic considerations with the walls of the current structure would be the primary focus. Infrastructure required by code for assembly of 300 persons would be constructed such as restrooms, fire sprinkler, lighting and mechanical, electrical and plumbing improvements as designed by the City. This interior shell would facilitate the installation of a catwalk system, theatrical lighting, audio - visual systems, acoustic drapery, modular staging that can be sized to the performance, modular risers for seats. A movie screen would be installed which could be rolled up into the catwalks when not used. A film projector would also be installed in the catwalk system. The stage will be 24 -36" high theatrical platforms joined to create the size of stage necessary for the performance. Seating capacity will be maximum 300 with 143 fixed seats in stadium style built to span over the top of the restrooms, 157 portable seats able to be added to the stadium configuration, moved to create a % configuration around a stage, moved to four sides of the stage to create theatre in the round or removed altogether to create an open floor. SS43 A backstage green room will include a pre -show staging area as a well as two restrooms. Dressing rooms, when needed, would be rented hotel rooms from the Balboa Inn, which exists across the 10 foot alley behind the theatre. All of the theatre systems would be temporary installations and removable should the building ever be used for purposes other than a theatre. The Foundation would agree to design and fund all elements of the theatre systems. The design would allow the foundation to operate in compliance with the Lease issued by the City of Newport Beach and maintain all the conditions contained in the current coastal permit including adhering to the operating hours restrictions during the summer months. V. Financial Investment Plan A. Total Project Investment: $ 4.000.000 Based on a $2 million dollar investment match of Lessor (City of Newport Beach) and Lessee(BPATF) Lessor Investment (City of Newport Beach) Tenant Ready Building Investment Investment Year Design /Construction of Building $ 2,000,000 2014 -2015 Lessee Investment (BPATF) Theatre /Support Investment Investment Year Theatre Systems Equipment $ 800,000 2014 -2015 Pre - opening Year Operations $ 450,000 2014 -2015 3 Year operations support /reserves $ 750,000 ($250k per year) 2015 -2018 Total $ 2,000,000 B. Rent Structure 1) For each year of lease, Lessee agrees to pay Lessor rent at the rate of 2.5% of ticket revenue, with the first year rent free 2) Estimated rent per year of lease, subject to adjustment based on the final business plan financial projections: $40,000 SS44 VI. Schematic Drawings of Balboa Village Theatre d r n CENTER LINE SECTION A. Stadium Style Seating U SECOND FLOOR PLAN 3 CATWALK FLOOR PLAN �'Wffsfa m_ i FIRST FLOOR PLAN e A00I SS45 DDOCII �� �i 3 CATWALK FLOOR PLAN �'Wffsfa m_ i FIRST FLOOR PLAN e A00I SS45 Schematic Drawings of Balboa Village Theatre (Continued) B. % Configuration Seating 4 CENTER LINE SECTION I� } I� Z SECOND FLOOR PLAN jsfa IJ CAP ALK FLOOR PLAN FIRST FLOOR PLAN Im 11— A - SS46 �0CI01 I� } I� Z SECOND FLOOR PLAN jsfa IJ CAP ALK FLOOR PLAN FIRST FLOOR PLAN Im 11— A - SS46