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HomeMy WebLinkAbout15 - Real Property Lease• CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 15 November 12, 2002 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Sharon Wood, 644 -3222, swood @city.newport- beach.ca.us SUBJECT: Real Property Lease for 709 E. Balboa Blvd. And Units 5 and 6, 111 Main Street ISSUE: Lease agreement for space adjacent to Balboa Theater, to allow the Balboa Performing Arts Theater Foundation to provide restrooms, dressing rooms and office space. RECOMMENDATION: • 1. Approve lease in substantial conformance with the attached draft, and authorize the Mayor to execute the lease with minor changes. 2. Approve budget amendment transferring $10,000 from unappropriated reserve to the City Manager rental of property and equipment account (0310- 8070). DISCUSSION: Background: The City has worked to secure space in the subject property to provide restroom, dressing room and office space for the Theater for several months. The City Council directed staff to enter into negotiations to acquire the property on April 23, 2002. These negotiations were not successful as the owner decided not to sell the property. The owner was willing to lease the portion of the building needed by the Foundation, and we have been negotiating a lease agreement for the past few months. Lease Provisions: Staff has reached agreement with the property owner on the substantive provisions of the lease agreement, which include the following. Term of 30 years • Rental rate of $4,470.20 per month with annual CPI adjustments • City's first right to purchase the property • City's ability to sublet the leased property to the Foundation • City's and Foundation's right to make tenant improvements needed for the Foundation Real Property Lease November 12, 2002 Page 2 Submitted by: Sharon Wood Assistant City Manager Attachments: Lease Budget Amendment C� • Tenant improvements will consist of Theater restrooms and storage on the first floor, and dressing rooms and Foundation offices on the second floor, with an elevator connecting the two floors. Reconstruction of the Theater will require removing electrical connections for the subject property from their present location on the Theater building and converting them to underground service. The cost for this work will be the responsibility of the City or the Foundation, to be resolved as part of our new agreement to sublease this space to the Foundation. Staff is continuing to discuss final details of the lease with the landlord, and expects that there will be minor changes to the attached lease before it is executed. These details include some lease format issues, ability to sublet the second floor apartments until the Foundation is ready to begin construction, and insurance provisions. Environmental Review: This action is categorically exempt from environmental review under Class 1, leasing or minor alteration of existing public or private structures. Funding Availability: Funds for this lease are not included in the budget at this time. Staff is recommending that the City Council approve a budget amendment to transfer $10,000 from unappropriated reserve for the security deposit and first two months of rent. The ongoing division of costs between the City and the Foundation will be determined through negotiation of a sublease agreement, and an additional budget amendment may be presented to the City Council with that agreement. • Submitted by: Sharon Wood Assistant City Manager Attachments: Lease Budget Amendment C� REAL PROPERTY LEASE • for 709 E. Balboa Boulevard and Units 5 and 6, 111 Main Street Balboa Boulevard Table of Contents Preamble ARTICLE l TERM OF LEASE 1.1 Original Term 1.2 Possession; Payment of First Month's Rent and Security Deposit 1.3 Termination of Present Tenants 1.4 Holding Over 1.5 Landlord's Inability to Deliver Possession 1.6. Termination for Failure of Possession ARTICLE 2. SECURITY DEPOSIT; RENT 2.1 Security Deposit 2.2 Minimum Rent - Original Term 2.3 Late Payment and Returned Check Charges • 2.4 Annual Rent Adjustment ARTICLE 3. COMMON AREA; USE OF PREMISES 3.1 Description of Common Area 3.2 Permitted Use of Premises 3.3 Insurance Hazards 3.4 Waste or Nuisance 3.5 Compliance With Laws 3.6 Hazardous Materials ARTICLE 4. TAXES AND UTILITIES 4.1 Utilities 4.2 Personal Property Taxes 4.3 Real Property Taxes • ARTICLE 5. ALTERATIONS AND REPAIRS 5.1 Condition of Premises 5.2 Maintenance by Landlord 5.3 Maintenance by Tenant 5.4 Maintenance of Plate Glass 5.5 Alterations; Improvements; Trade Fixtures -i- 5.6 Liens and Encumbrances 5.7 Inspection by Landlord 5.8 Surrender of Premises ARTICLE 6. INDEMNITY AND INSURANCE 6.1 Hold - Harmless Clause 6.2 Public Liability and Property Damage Insurance 6.3 Tenant's Personal Property 6.4 Fire and Extended Coverage Insurance 6.5 Cancellation Requirements ARTICLE 7. TRADE FIXTURES: SIGNS 7.1 Installation and Removal of Trade Fixtures 7.2 Unremoved Trade Fixtures 7.3 Signs ARTICLE 8. DESTRUCTION OF PREMISES 8.1 Landlord's Obligation to Repair; Reduction of Rent ARTICLE 9. CONDEMNATION 9.1 Partial Condemnation 9.2 Condemnation in Whole 9.3 Condemnation Award ARTICLE 10. DEFAULT; ASSIGNMENT; TERMINATION 10.1 Restrictions Against Subletting or Assignment 10.2 Default Defined 10.3 Termination of Lease and Recovery of Damages 10.4 Landlord's Right to Continue Lease in Effect After Breach 10.5 Landlord's Right to Relet 10.6 Landlord's Right to Cure Tenant Defaults 10.7 Cumulative Remedies 10.8 Waiver of Breach ARTICLE I I. TENANT'S FIRST RIGHT TO PURCHASE' I L I Tenant's First Right to Purchase ARTICLE I I. MISCELLANEOUS 12.1 12.2 12.3 12.4 12.5 12.6 Force Maj eure-Un avoidable Delays Estoppel Certificate Attomeys' Fees Notices Binding on Heirs and Successors Partial Invalidity -ii- • • is • is • 12.7 Sole and Final Agreement; Changes and Amendments 12.8 Time of Essence 12.9 Addenda Made a Part Hereof ADDENDUM A House Rules A -1 Noise Abatement A -2 Common Areas A -3 Building Security ADDENDUM B Tenant Improvements B -1 Completion of Work; Payment of Coasts; Landlords Prior Approval B.-2 Statement of Work -iii- CJ REAL PROPERTY LEASE Preamble This lease is made and entered into as of , 2002 by and between Evelyn F. Collins, Trustee of the 1994 Collins Family Trust, (hereinafter "Landlord" ) and the City of Newport Beach, a municipal corporation hereinafter "Tenant "). Landlord, for and in consideration of the rent to be paid by Tenant and of the covenants and provisions to be kept and performed by Tenant under this lease, hereby leases to Tenant, and Tenant agrees to lease from Landlord the following real property: (a) The street level premises known as 709 E. Balboa Boulevard, Balboa, California consists of approximately 1,426 square feet of floor space. These premises have been used in the past for retail business operations; (b) The second floor residential units numbers 5 and 6. Unit 5 consists of approximately 399 square feet of floor space; Unit 6 consists of approximately 616 square feet of floor space. • (c) Tenant may additionally, at tenants option, take possession of the space on the second floor between Units 5 and 6 presently used as a laundry room, provided Tenant replaces same with another laundry room of comparable utility, using part of the space now occupied by residential unit #6. The present laundry room consists of approximately 180 square feet of floor space. If this option is exercised by Tenant, an adjustment in rent will be made if there is a net loss of square footage by Landlord as a result of the changed configuration and location of the laundry room. Said real property (hereinafter referred to as "the Leased Premises" or "the Premises ") consists of approximately one thousand four hundred twenty -six (1,426) square feet of ground floor space having approximately thirty-one (3 1) feet frontage on Balboa Boulevard. Disregarding the laundry room space at this time, apartments 5 & 6 on the second floor constitute one thousand fifteen (1,015) square feet of space. The space on the first and second floors together consist of two thousand four hundred forty-one (2,441) square feet of floor space. The leased premises are part of a two story building containing multiple businesses on the ground floor and residential apartment units on the second floor. The building provides limited parking spaces at the rear of the building. Page 1 • ARTICLE l TERM OF LEASE Original Term Section 1. L This lease shall be for an original term of thirty (30) years, commencing on the date that Tenant takes possession of any segment of the leased premises. That date shall be inserted into this section by pen and ink and initialed by landlord and tenant 2002 and it shall be known as the "Commencement Date." The lease shall end October 31, 2032 unless terminated sooner pursuant to other provisions of this lease. Possession; Payment of First Month's rent and Security Deposit Section 1.2. (a) Subject to the provisions of Sections 1.6 and 1.7, Tenant shall have physical possession of the premises at 709 E. Balboa Blvd on the day following the signing of the Lease. Possession of Apartments #5 and #6 by tenant shall pass to tenant three (3) working days after the present tenants have vacated the apartments. (b) At such time as both parties have signed this lease, Tenant shall pay to Landlord in advance, the first months's rent for 709 E. Balboa Blvd in the amount set forth in Section 2.3 plus an additional amount equal to one and one -half (1 V2) times the first month's rent which shall • serve as a security deposit. The security deposit shall be held pursuant to the provisions of Section 2.1. When second floor units 5 and 6 each become available to Tenant, the first month's rent is due and payable in the amounts set forth in Section 2.3 below, along with security deposits equal to one and one -half ( l'' /3) times the first month's rent. (c) To facilitate the payment of rents on the I" of each month, the first month's rent will be prorated to the end of the month in which it becomes due if possession is taken on other than the first day of the month. However, if the balance of the month contains ten days or less, rent will be paid for the balance of the month plus the full rent for following month. Termination of Present Tenants Section 1.3. (a) Parties acknowledge that Apartment Unit #5 is occupied by a tenant under a one year lease which expires on February 28, 2003. Unit #6 is occupied by a tenant holding on a month -to -month basis. Landlord agrees that when this lease is signed by both parties, Landlord will: (1) Serve a 30 -day notice to vacate on the tenant in Unit #6; (2) Commence negotiations with the tenant in Unit #5 which are intended to result in tenant returning possession of the premises to Landlord prior to the • Page 2 lease expiration date. (3) All costs and expenses incurred by Landlord in reacquiring is possession of units #5 and #6 will be reimbursed to Landlord by Tenant upon presentation of proper invoices therefor. Holding Over Section 1.4. In the event Tenant holds over and continues in possession of the Premises after expiration of the Original Term, Tenant's continued occupancy of the Premises shall be considered a month -to -month tenancy subject to all the terms and conditions of this lease. Landlord's Inability to Deliver Possession Section 1.5 If Landlord is for any reason unable to deliver possession of the Premises to Tenant pursuant to Section 1.2 of this lease, this lease shall not be void or voidable nor shall Landlord be liable to Tenant for any loss or damage resulting from failure to deliver possession to Tenant so long as Landlord has exercised, and continues to exercise, reasonable diligence to deliver possession of the Premises to Tenant. However, no rent shall accrue or become due from Tenant to Landlord under this lease until actual physical possession of the respective premises is delivered, or the right to actual unrestricted physical possession of the Premises under this lease is tendered by Landlord to Tenant. Furthermore, the term of this lease shall not be extended by Landlord's inability to deliver possession of the Premises to Tenant as provided for in Section 1.2. is Termination for Failure of Possession Section 1.6 (a) Notwithstanding any provision of Section 1.5 of this lease, if Landlord for any reason fails to deliver actual physical possession of a 709 E. Balboa Blvd, or fails to tender actual unrestricted physical possession of that segment of the leased Premises under this lease to Tenant within thirty (30) days after the date specified in Section 1.2 of this lease, Tenant may terminate this lease by giving Landlord written notice of its election to do so. Such notice shall be conditional, stating that "if possession is not given within thirty days (or such later number of days as Tenant may elect) of the commencement date stated in Section 1.2 then the lease is thereupon terminated on the date so determined." Such Notice shall be rendered to Landlord not later than ten (10) days prior to the termination date thus established. (b) In the event Tenant elects to so terminate this lease, this lease shall become null and void as of the termination date established by Tenant's notice to Landlord unless Landlord delivers actual physical possession or tenders actual unrestricted physical possession to Tenant prior to that termination date. In the absence of such delivery and the termination takes place, neither party to this lease thereafter shall be under any further obligation or liability to the other because of this lease and Landlord shall return to Tenant any consideration received from Tenant Page 3 is • pursuant to or for execution of this lease. ARTICLE 2 SECURITY DEPOSIT; RENT Security Deposit Section 2.1. The security deposit required by Section 1.2 will secure performance of Tenant's obligations hereunder. Landlord may, but will not be obligated to, apply all or portions of the deposit on account of Tenant's obligations. In the event all or a portion of the security deposit is applied, Landlord will notify Tenant in writing of the amount applied, and within ten (10) days of such notice, Tenant will pay to Landlord sufficient funds to reinstate the security deposit to its full amount. Within three (3) weeks (or such other period of time as may be required by law) of the date possession of the premises is returned to Landlord or his authorized agent, Landlord will return to Tenant any unused balance of the security deposit along with a statement showing any charges made against the deposit by Landlord. Minimum Rent - Original Term Section 2.2. (a) Tenant agrees to pay to Landlord, in addition to such Additional Rents as may • be provided for elsewhere in this lease, a fixed minimum monthly rental amount for the use and occupancy of the Premises (the "Minimum Rent ") per the following schedule: 709 E. Balboa Blvd: $ 2,812.74 per month Apartment 5, 1 1 1 Main St. 703.18 per month Apartment 6, 1 1 1 Main St. 954.28 per month Total monthly rent when all $ 4,470.20 per month segments are in tenant's possession, exclusive of any rent adjustment relating to the laundry room change as indicated in subparagraph (c) of the preamble, above. (b) The Minimum Rent shall be payable monthly in advance on the first day of each and every month commencing as set forth in Section 1.2 above, at the office of Landlord at 421 Kings Road, Newport Beach, California 92663 or at any other place or places as Landlord may from time to time designate by written notice delivered to Tenant. Minimum Rent for partial calendar months occurring at the commencement and termination of the term of this lease shall be prorated accordingly. The minimum monthly rent will be subject to escalation annually • Page 4 pursuant to section 2.4 below. Late Payment and Returned Check Charges • Section 2.3. In the event that Tenant shall fail to have in the hands of the Landlord, any sum due Landlord hereunder by the fifth day after the date such sum is due, said late payment shall bear interest at the rate of 10% per annum (or the maximum rate allowed by law, whichever is less) from the date due until same is paid. In addition, Tenant shall pay a one -time late charge amounting to 5% of the amount due. Tenant shall pay Landlord a charge of $50.00 for each check returned for "Non- Sufficient Funds" or other reasons within the control of Tenant. All late fees and returned check fees will be considered additional rent. The late charge period of five days as stated above, is NOT a rent grace period and Landlord is entitled to make a written demand for any rent if not paid when due and to collect interest thereon. Annual Rent Adjustment Section 2.4. (a) Commencing on the first day of the second year of the lease term, the rental schedule set forth in Section 2.02 (a) shall be adjusted annually in the following manner: A percentage increase in rent factor shall be determined by using certain Consumer Price Indexes for Urban Wage Earners and Clerical Workers for the Los Angeles- Riverside - Orange County, California as published by the Bureau of Labor Statistics, United States Department of Labor for all items ( "Index "). The applicable percentage rent increase will be determined by subtracting the Index for August 2002 from the Index for September 2003 to determine the Index point • change over that 12 -month period.. The Index point change for that period will then be divided by the Index for August 2002 and the result will be multiplied by 100 to arrive at a percentage rent increase figure. The minimum rent will then be increased by the percentage thus obtained. This procedure will be used to determine the annual rent increase during the term of the lease. (b) In no event shall the minimum monthly rent be decreased below the amount specified under Section 2.2(a). (c) If the Consumer Price Index, as now constituted, compiled, and published shall cease to be compiled and published during the term of this lease, or is calculated on a significantly different basis following the date of this lease, the most comprehensive official Index published that most closely approximates the rate of inflation shall be used for purposes of computing adjustments under this lease. ARTICLE 3 COMMON AREA; USE OF PREMISES Description of Common Area Section 3.1 - (a) The common area for the premises leased to tenant consist only of the parking Page 5 is lot which is located immediately behind the building and any hallways outside of the leased • premises.. The parking lot has limited capacity. Four spaces (two tandem rows) closest to the trash enclosure will be reserved for the use of Tenant. Tenant may mark the spaces and erect signs to effectuate the reserved spaces, subject to prior approval of Landlord. Permitted Use of Premises Section 3.2. During the term of this lease (including the Original Term and any extension to which the parties may agree) the Premises shall be used for the exclusive purposes of the Balboa Theater Foundation in its operation of the adjacent Balboa Theatre at 711 E. Balboa Blvd. Tenant shall not use or permit the Premises to be used for any other purpose, without the prior written consent of Landlord. In conducting the business specified in this Section in and on the Premises: (a) Tenant shall not use or permit any other person or entity to use the premises or any part thereof for any purposes tending to injure the reputation thereof or to interfere with or cause a nuisance to other tenants occupying other parts of the building or to neighbors of the Tenant. Tenant, further, shall at all times during the term of this lease, conform to and cause all persons or entities using or occupying any part of the premises to comply with public laws, ordinances and regulations from time to time applicable thereto.. (b) A breach by Tenant of the covenant contained in this Section 3.2 shall not excuse • Tenant from its obligation to pay the Rents required under this lease for the full term of the lease. Insurance Hazards Section 3.3. Tenant shall not commit or permit the commission of any acts on the premises nor use or permit the use of the premises in any manner that will increase the existing rates for or cause the cancellation of any fire, liability, or other insurance policy insuring the Premises or the improvements on the Premises. Tenant shall, at its own cost and expense, comply with any and al l requirements of Landlord's insurance carvers necessary for continued coverage at reasonable rates of fire and liability insurance policies on the Premises and the improvements on the premises. Waste or Nuisance Section 3.4. Tenant shall not commit or permit the commission by others of any waste on the Premises. Tenant shall not maintain, commit, or permit the maintenance or commission of any nuisance as defined in Civil Code Section 3479 on the Premises. Tenant shall not use or permit the use of the Premises for any unlawful purpose. is Page 6 Compliance with Laws Section 3.5. Tenant shall, at Tenant's own cost and expense, comply with all statutes, • ordinances, regulations, and requirements of all governmental entities, both federal and state and county or municipal, relating to Tenant's specific use and occupancy of the Premises whether those statutes, ordinances, regulations, and requirements are now in force or are subsequently enacted. Hazardous Materials Section 3.6.Tenant will not use, store, or dispose of any hazardous substances upon the Premises, except the use and storage of such substances as are customarily used in Tenant's business and are in compliance with all environmental laws. Hazardous substances means any hazardous waste, substance or toxic materials regulated under any environmental laws or regulation applicable to the Premises. Tenant is liable for cost of removal of any toxic contamination on the Premises caused by Tenant. ARTICLE 4 TAXES AND UTILITIES Utilities Section 4.1. (a) Tenant shall pay, and hold Landlord and the property of Landlord free and • harmless from, all charges for the furnishing of all utilities to the premises except water and gas during the term of this lease. All such charges shall be paid by Tenant directly to the provider of the service and shall be paid as they become due and payable but in any event before delinquency. Landlord will establish a data base of historical costs of water and gas usage in the building prior to occupancy of the premises by Tenant. If ongoing usage of water and gas increases after occupancy by Tenant, Landlord will so advise Tenant and will surcharge Tenant for increased usage. Supporting data for such surcharge will be provided Tenant with notice of the surcharge. (b) Addendum B hereto — "Tenant Improvements" provides that Tenant may add a third trash bin adjacent to the two trash bins currently provided by Landlord for existing Tenants. Tenant shall pay all expenses related to the installation and use of the additional trash bin. Personal Property Taxes Section 4.2. Tenant shall pay before they become delinquent, all taxes, assessments, and other charges levied or imposed by any governmental entity on the furniture, equipment, appliances, and other personal property placed by Tenant in, on, or about the premises including, without limiting the generality of the other terms used in this section, any shelves, counters, safes, partitions, fixtures, office equipment, television or radio antennas, and communication Page 7 is equipment brought on the premises by Tenant. • Real Property Taxes Section 4.3. All real property taxes and assessments levied or assessed against the premises by any governmental entity, including any special assessments imposed on or against the premises for the construction or improvement of public works in, on, or about the Premises, shall be paid by Landlord.. However, if real property taxes are increased by reason of additions, improvements or modifications to the premises constructed by Tenant, such increase shall be paid by tenant within ten (10) days after receipt from Landlord of written notice of such increase. ARTICLE 5 ALTERATIONS AND REPAIRS Condition of Premises Section 5.1. Tenant accepts the premises, as well as the improvements located on the premises, in their present condition and stipulates with Landlord that the Premises and improvements are in good, clean, safe, and tenantable condition as of the date tenant takes possession of the premises. Tenant further agrees with and represents to Landlord that the premises have been inspected by • Tenant, that it has received assurances acceptable to Tenant by means independent of Landlord or any agent of Landlord of the truth of all facts material to this lease, and that the Premises are being leased by Tenant as a result of its own inspection and investigation and not as a result of any representations made by Landlord or any agent of Landlord except those expressly set forth in this lease. Maintenance by Landlord Section 5.2. (a) Landlord shall, at its own cost and expense, maintain in good condition and repair the structural elements of the Building. For purposes of this section, "structural elements" shall mean the exterior roof, exterior walls (except window glass), structural supports, and foundation of the building. Landlord shall also maintain the parking lot. Landlord is also responsible for painting and maintenance of outer walls. Landlord shall not be liable for any damages to Tenant or the property of Tenant resulting from Landlord's failure to make any structural repairs required by this Section unless written notice of the need for those repairs has been given to Landlord by Tenant and Landlord has failed to make or initiate the needed repairs for a period of 30 days after receipt of the notice, unless prevented from doing so by causes or circumstances not the fault of the Landlord. Notwithstanding anything in this section to the contrary, Tenant shall promptly reimburse Landlord for the full cost of any repairs made pursuant to this Section required because of the negligence or other fault, other than normal and proper use, of Tenant or its employees or agents or subtenants, if any. • Page 8 (b) Landlord and its agents shall have the right to enter the Premises at all reasonable • times (and at any time during an emergency) for the purpose of inspecting them or to make any repairs required to be made by Iandlord under this lease. Maintenance by Tenant Section 5.3. Except as otherwise expressly provided in Section 5.2 of this lease, Tenant shall at its own cost and expense keep and maintain all portions of the premises and all improvements located on the premises in good order and repair and in as safe and clean a condition as they were when received by Tenant from Landlord, reasonable wear and tear excepted. Tenant's obligation to repair shall specifically include necessary repairs to the heating, ventilation, and air conditioning systems, interior walls, floor coverings, and maintenance and painting of the interior portions of all doors. Maintenance of Plate Glass Section 5.4. Tenant shall, at its own cost and expense, repair and replace any plate glass in any window on the premises that is broken regardless of any cause, except by fault of Landlord, or by fault of some employee or agent of Landlord. Furthermore, Tenant shall at Tenant's own cost and expense at all times during the term of this lease carry adequate plate glass insurance on the glass in all show windows on the premises to perform the repair and replacement requirements of this section. Should Tenant fail to repair or replace any glass broken in a show window or fail to • maintain adequate plate glass insurance on the glass in the premises, Landlord may replace or repair the broken glass or secure required insurance and Tenant shall promptly reimburse Landlord for the cost of the repair, replacement, or insurance. In addition, Tenant shall pay Landlord interest on those costs at the rate of 10% percent per year from the date the costs were incurred by Landlord to the date they are reimbursed to Landlord by Tenant. Alterations; Improvements; Trade Fixtures Section 5.5. (a) Tenant shall not make or permit any other person to make any alterations to the premises or any improvements on the premises without the prior written consent of Landlord and shall provide Landlord with two copies of architectural drawings or sketches of proposed alterations and/or improvements. Such improvements as are approved by Landlord shall be subject to Newport Beach city building code and permit requirements and such permits, where required, shall be obtained by Tenant at Tenant's expense, prior to commencing any work on the premises. (b) Trade fixtures installed by Tenant will be removed by Tenant at Tenant's expense at the termination of Tenant's possession of the premises. Tenant will pay for costs necessary to Page 9 is repair any damages to the premises caused by such removal. • Liens and Encumbrances Section 5.6 Tenant shall keep the premises free and clear of any and all liens, encumbrances demands for work performed, materials furnished, or operations conducted on the premises at the instance or request of Tenant. If Tenant fails to keep the premises clear of such liens and encumbrances Tenant shall cause such liens and encumbrances to be removed within thirty days after Landlord has placed a demand on Tenant to do so. Landlord at Landlord's option may pay the sums necessary to release such liens or encumbrances and Tenant will reimburse Landlord the amounts so expended by Landlord plus 10% interest on such amounts commencing the day of Landlord's payments. Such reimbursements will be made not more than thirty days after demand for reimbursement is made by Landlord. Inspection by Landlord Section 5.7. Tenant shall permit Landlord or Landlord's agents, representatives, or employees to enter the premises at all reasonable times for the purpose of inspecting the Premises to determine whether Tenant is complying with the terms of this lease, for the purpose of doing other lawful acts that may be necessary to protect Landlord's interest in the Premises, or for the purpose of performing Landlord's duties under this lease. isSurrender of Premises Section 5.8. On expiration or earlier termination of this lease, Tenant shall promptly surrender and deliver the Premises to Landlord in as good condition as they are now at the commencement of this lease, excluding reasonable wear and tear, and repairs required to be made by Landlord under this lease. Landlord acknowledges that Tenant will be making Tenant Improvements to the premises as set forth in Addendum B to this lease. At Landlord's request Tenant will return the premises to the configuration, in whole or in part, that existed at the commencement of this lease and prior to tenant improvements by Tenant. ARTICLE 6 INDEMNITY AND INSURANCE Hold- Harmless Provisions Section 6.1. Landlord will not be liable for any damage or injury to Tenant or any other person, or to any property, occurring on the premises, except where such damage or injury results from Landlords' gross negligence. Tenant agrees to hold Landlord harmless from any claims for damages arising out of Tenant's use of the Premises and to indemnify Landlord for any expense incurred by Landlord in defending against any such claims. • Page 10 Public Liability and Property Damage Insurance • Section 6.2. Tenant and any subtenant hereunder shall, at its own cost and expense, procure and maintain during the entire term of this lease, public liability insurance and property damage insurance issued by an insurance company reasonably acceptable to Landlord and insuring Landlord against loss or liability caused by or connected with Tenant's occupation and use of the premises under this lease in a combined amount of, not less than $1,000,000.00 per each occurrence and with an annual aggregate limit of not less that $2,000,000. The policy shall name Landlord as an additional insured. Tenant, and any subtenant hereunder, prior to taking physical possession of the premises, and annually thereafter, shall deposit with Landlord, a Certificate of Insurance showing the required insurance to be in full force and effect. Tenant's Personal Property Section 6.3. Tenant shall, during the full term of this lease and any renewals or extensions thereof, maintain at Tenant's own cost and expense, an insurance policy issued by a reputable company authorized to conduct insurance business in California, insuring for their full insurable value all Tenant's furniture, fixtures and equipment in or on the premises against damage or destruction by fire, theft, or the elements. Fire and Extended Coverage Insurance • Section 6.4. During the term of this lease, Landlord will maintain at Landlord's expense, fire and extended coverage insurance, insuring the building and other improvements on the premises. Tenant shall pay to Landlord, any increase in premiums resulting from the nature of the business in which Tenant is engaged or resulting from modifications or alterations of the premises made by Tenant. Landlord shall notify Tenant in writing of the amount of premium increase incurred and Tenant shall pay that amount to Landlord within 30 days. Cancellation Requirements Section 6.5. Each of the insurance policies shall be in a form reasonably satisfactory to Landlord and shall carry an endorsement that, before changing or canceling any policy, the issuing insurance company shall give Landlord at least 30 days' prior written notice. Duplicate originals or certificates of all such insurance policies shall be delivered to Landlord. Page 11 • • ARTICLE 7 TRADE FIXTURES: SIGNS Installation and Removal of Trade Fixtures Section 7. L Tenant shall have the right at any time and from time to time during the term of this lease, at Tenant's sole cost and expense, to install and affix in, to, or on the Premises any items, herein called "trade fixtures," for use in Tenant's business that Tenant may, in Tenant's sole discretion, deem advisable. However, if such installations require modification of the premises, such installations shall be subject Landlord's prior written consent. Landlord may require as a condition of such approval, that a particular trade fixture must be removed at the expiration or earlier termination of this lease. Any and all trade fixtures that can be removed without structural damage to the Premises or any building or improvements on the Premises shall, subject to Section 7.2 of this lease, remain the property of the Tenant and may be removed by Tenant at any time before the expiration or earlier termination of this lease, provided Tenant restores the premises to their prior state and repairs any damage caused by the removal. Unremoved Trade Fixtures Section 7.2. Any trade fixtures described in this Article that are not removed from the Premises by Tenant within 10 days after the expiration or earlier termination of this lease will be deemed abandoned by Tenant and shall thereupon be the property of Landlord. • Signs Section 7.3. Subject to Landlord's prior written approval, Tenant may erect, maintain, permit, and from time to time remove any signs in or about the Premises that Tenant may deem necessary or desirable, provided that any signs erected or maintained by Tenant shall comply with all requirements of any governmental authority with jurisdiction. ARTICLE 8 DESTRUCTION OF PREMISES Landlord's Obligation to Repair; Reduction of Rent Section 8. L In the event of a partial destruction of the premises during the term, from any cause, Landlord will promptly repair the premises, provided that such repairs reasonably can be made within ninety (90) days. Such partial destruction will not terminate this lease except that Tenant will be entitled to a proportionate reduction of rent while such repairs are being made, based upon the extent to which the making of such repairs interferes with the business of Tenant on the premises. If repairs cannot completed within ninety (90) days, this lease may be terminated at the option of either Landlord or Tenant by giving written notice to the other party when it is determined that more than ninety days will be required for repairs • Page 12 ARTICLE 9 • CONDEMNATION Partial Condemnation Section 9.1. If any part of the premises is condemned for public use, and apart remains which remains useable for the Tenant's business operations, this lease will, as to the part taken, terminate as of the date the condemnor acquires possession. Tenant will be required to pay such proportion of the rent for the remaining term as the value of the Premises remaining bears to the total value of the premises at the date of condemnation. Condemnation in Whole Section 9.2. In the event Premises are condemned in whole, or a partial condemnation leaves the Tenant no usable remainder, this lease will terminate upon the date the condemnor acquires possession Condemnation Award Section 9.3. If at any time during the term of this lease, title and possession of all or any portion of the Premises is taken under the power of eminent domain by any public or quasi- public agency or entity, the compensation or damages for the taking shall be awarded to and be the sole property of Landlord. Tenant, however, is free to negotiate with the condemnor for moving costs, costs of is tenant improvements and other related costs, and to receive compensation or damages separately from Landlord. ARTICLE 10 DEFAULT, ASSIGNMENT, AND TERMINATION Restriction Against Subletting or Assignment Section 10.1. Tenant shall not encumber, assign, sublet, or otherwise transfer this lease, any right or interest in this lease, or any right or interest in the premises or any of the improvements that may now or hereafter be constructed or installed on the premises without first obtaining the express written consent of Landlord. Tenant shall not sublet the premises or any part of the premises or allow any other person, other than Tenant's agents, servants, and employees, to occupy the Premises or any part of the Premises without the prior written consent of Landlord. A consent by Landlord to one assignment, one subletting, or one occupation of the Premises by another person shall not be deemed to be a consent to any subsequent assignment, subletting, or occupation of the Premises by another person. Any encumbrance, assignment, transfer, or subletting without the prior written consent of Landlord, whether voluntary or involuntary, by operation of law or otherwise, is void and shall, at the option of Landlord, terminate this lease. Page 13 is The consent of Landlord to any assignment of Tenant's interest in this lease or the subletting by • Tenant of the Premises or parts of the Premises shall not be unreasonably withheld. Notwithstanding the foregoing, Landlord will consent to the subletting of the premises to the Balboa Theater Foundation, provided the terms of the sublease are approved in advance and by a writing of the Landlord. Default Defined Section 10.2. The occurrence of any of the following shall constitute a material default and breach of this lease by Tenant: (a) Any failure by Tenant to pay the rent or to make any other payment required to be made by Tenant under this lease. (b) The abandonment or vacation of the Premises by Tenant. The absence of Tenant from or the failure by Tenant to conduct business on the Premises for a period in excess of ten (10) consecutive days shall constitute an abandonment or vacation for purposes of this lease. (c) A failure by Tenant to observe and perform any other provision of this lease to be observed or performed by Tenant, when that failure continues after written notice of Tenant's failure is given by Landlord to Tenant; provided, however, that if the nature of that default is such that it cannot reasonably be cured within a 30 -day period, Tenant shall not be deemed to be in default if • Tenant in good faith commences to cure within 15 days of Tenant's receipt of notice of failure from Landlord and thereafter diligently prosecutes it to completion. (d) The making by Tenant of any general assignment for the benefit of creditors; the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or of a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, it is dismissed within 60 days); the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this lease, when possession is not restored to Tenant within 30 days;p or the attachment, execution, or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this lease, when that seizure is not discharged within 30 days. The notices provided for in subsections (a) through (c) of this Section 10.2 are not intended to replace, but rather are in addition to, any required statutory notices for unlawful detainer proceedings under Code of Civil Procedure Section 1161 et seq. Termination of Lease and Recovery of Damages Section 10.3. In the event of any default by Tenant under this lease, in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the right to terminate this lease and all rights of Tenant hereunder by giving written notice of the termination. No act of Landlord shall be • Page 14 construed as terminating this lease except written notice given by Landlord to Tenant advising Tenant that Landlord elects to terminate the lease. In the event Landlord elects to terminate this lease, Landlord • may recover from Tenant: (a) The worth at the time of award of any unpaid rent that had been earned at the time of termination of the lease; (b) The worth at the time of award of the amount by which the unpaid rent that would have been earned after termination of the lease until the time of award exceeds the amount of rental loss that Tenant proves could have been reasonably avoided; (c) The worth at the time of award of the amount by which the unpaid rent for the balance of the term of this lease after the time of award exceeds the amount of rental loss that Tenant proves could be reasonably avoided; and (d) Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform its obligations under this lease. The term "rent" as used in this lease shall mean the Minimum Rent, and all other sums required to be paid by Tenant pursuant to the terms of this lease. As used in subsections (a) and (b), above, the "worth at the time of award" is computed by allowing interest at the rate of 10 percent per year. As used in subsection (c), the "worth at the time of award" is computed by discounting that amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1 percent. Landlord's Right to Continue Lease in Effect After Breach is Section 10.4. (a) If Tenant breaches this lease and abandons the Premises before the natural expiration of the term of this lease, Landlord may continue this lease in effect by not terminating Tenant's right to possession of the Premises, in which event Landlord shall be entitled to enforce all its rights and remedies under this lease, including the right to recover the rent specified in this lease as it becomes due under this lease. For as long as Landlord does not terminate this lease, Tenant shall have the right to assign or sublease the Premises with the Landlord's prior written consent. Landlord shall not unreasonably withhold consent. (b) No act of Landlord, including but not limited to Landlord's entry on the Premises, efforts to relet the Premises, or maintenance of the Premises, shall be construed as an election to terminate this lease unless a written notice of that intention is given to Tenant or unless the termination of this lease is decreed by a court of competent jurisdiction. Landlord's Right to Relet Section 10.5. In the event Tenant abandons the Premises, Landlord may enter on and relet the premises or any part of the premises to a third party or third parties for any term, at any rental, and Page 15 is on any other terms and conditions that Landlord in its sole discretion may deem advisable, and shall • have the right to make alterations and repairs to the Premises. Tenant shall be liable for all of Landlord's costs in reletting, including but not limited to remodeling costs required for the reletting. In the event Landlord relets the premises, Tenant shall pay all rent due under and at the times specified in this lease, less any amount or amounts actually received by Landlord from the reletting. Landlord acknowledges its obligation in reletting, to mitigate Tenant's damages. Landlord's Right to Cure Tenant Defaults Section 10.6. If, after receipt of the required notice as provided for in Section 10.2, Tenant breaches or fails to perform any of the covenants or provisions of this lease, Landlord may, but is not required to, cure Tenant's breach. Any sum expended by Landlord, long with the then maxi- mum legal rate of interest, shall be reimbursed by Tenant to Landlord with the next due rent payment under this lease. Cumulative Remedies Section 10.7. The remedies granted to Landlord in this Article shall not be exclusive but shall be cumulative and in addition to all remedies now or hereafter allowed by law or provided in this lease. • Waiver of Breach Section 10.8. The waiver by Landlord of any breach by Tenant of any of the provisions of this lease shall not constitute a continuing waiver or a waiver of any subsequent breach by Tenant either of the same or another provision of this lease. ARTICLE l l TENANT'S FIRST RIGHT TO PURCHASE Section 11. l if at any time the Landlord proposes to sell the subject property, Tenant will be given the first opportunity to purchase same provided the parties reach agreement of terms of sale and price. Concurrently, if Landlord receives a bona fide offer to purchase the subject property which Landlord deems otherwise acceptable, Tenant shall have the first right of refusal to purchase the property subject to the same terms and conditions set forth in the bona fide offer. • Page 16 ARTICLE 12 MISCELLANEOUS • Force Majeure- Unavoidable Delays Section 12.1. If the performance of any act required by this lease to be performed by either Landlord or Tenant, is prevented or delayed by reason of an act of God, strike, lockout, labor troubles, inability to secure materials, restrictive governmental laws or regulations, or any other cause, except financial inability, that is not the fault of the party required to perform the act, the time for performance of the act will be extended for a period equivalent to the period of delay, and performance of the act during the period of delay will be excused. However, nothing contained in this section shall excuse the prompt payment of rent by Tenant as required by this lease or the performance of any act rendered difficult solely because of the financial condition of the party required to perform the act. Estoppel Certificate Section 12.2. (a) On ten (10) days' prior written notice from Landlord, Tenant will execute, acknowledge, and deliver to Landlord, a statement in writing: (1) certifying that this lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this lease as so modified, is in the full force and effect), the amount of any security deposit, and the date to which the rent and other charges are paid in advance, if any; and (2) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of • Landlord, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective buyer or encumbrancer of the premises.. (b) At Landlord's option, Tenant's failure to deliver such statement within such time will be a material breach of this Lease or will be conclusive upon Tenant: (1) that this Lease is in full force and effect, without modification except as may be represented by Landlord; (2) that there are no uncured defaults in Landlord's performance; and (3) that not more than one month's rent has been paid in advance (c) If Landlord desires to finance, refinance, or sell the premises or any part thereof, Tenant agrees to deliver to any lender of buyer designated by Landlord such financial statements of Tenant as may be reasonably required by such lender or buyer. Such financial statements will be received by the Landlord or the lender or buyer in confidence and will be used only for the purposes set forth. Attorneys' Fees Section 12.3 (a) Tenant agrees to reimburse Landlord for attorney fees not exceeding $3,000.00, paid by Landlord in the process of developing this lease agreement. Page 17 is • (b) If any litigation or arbitration is commenced between the parties to this lease concerning the premises, this lease, or the rights and duties of either in relation to the premises or to this lease, the party prevailing in that litigation or arbitration shall be entitled to, in addition to any other relief that may be granted, a reasonable sum as and for its attorneys' fees and costs as determined by the court or the Arbitrator. Notices Section 12.4. Any notice which either party may or is required to give, will be given in writing by personal delivery to the other party, or by first class mail, postage prepaid. Where notice is deemed to concern both Tenant and Subtenant, both will be served. (a) To Tenant: Tenant's offices at the City of Newport Beach, 3300 Newport Blvd, Newport Beach, CA 92663 -3884 , addressed to the Attention of (b) To Landlord at 421 Kings Road, Newport Beach, CA 92663 A party may change its address by giving notice to the other party in writing. Binding on Heirs and Successors • Section 12.5 This lease shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors, and assigns of Landlord and Tenant, but nothing in this section shall be construed as a consent by Landlord to any assignment of this lease or any interest therein by Tenant except as provided in Section 10.1 of this lease. Partial Invalidity Section 12.6. If any provision of this lease is held by a court of competent jurisdiction to be either invalid, void, or unenforceable, the remaining provisions of this lease shall remain in full force and effect, unimpaired by the holding. Sole and Final Agreement; Changes and Amendments Section 12.7. This instrument, including the Exhibits made a part hereof, constitutes the sole and only full, final, and complete agreement between Landlord and Tenant respecting the Premises, the leasing of the Premises to Tenant, or the lease term created under this lease, and correctly sets forth the obligations of Landlord and Tenant to each other as of its date. Any agreements or representations respecting the Premises or their leasing by Landlord to Tenant not expressly set forth in this instrument are null and void. All prior negotiations between the parties are subsumed into this lease to the extent they have been agreed to, and if not agreed to by the parties such negotiations are • Page 18 not set forth in the terms and conditions of this lease. This lease may not be extended, amended, modified, altered, or changed, except in a writing signed by Landlord and Tenant. Time of Essence Section 12.8. Time is expressly declared to be of the essence in this lease. Addenda Made a Part Hereof Section 12.9. The following Addenda are attached and thereby incorporated into and made a part of this agreement. Addendum A — House Rules Addendum B - Tenant Improvements Executed as of the day and year first written above, at Newport Beach, California. LANDLORD: Evelyn F. Collins, Trustee 1994 Collins Family Trust of 12/5/94 DM:aj W90\coll ins'balboa l .doc TENANT: CITY OF NEWPORT BEACH By: Name Printed: Title: By: Name Printed: Title: Page 19 u • is • ADDENDUM A TO LEASE AGREEMENT BETWEEN EVELYN F. COLLINS, TRUSTEE AND CITY OF NEWPORT BEACH, CA A- l NOISE ABATEMENT All other tenants in the property are bound to minimize noise between the hours of l OPM and I OAM daily. This Tenant shall conform to that rule consistent with Balboa Theater operations. A -2 COMMON AREAS • Common areas in the building are the parking lot and the hallways (exclusive of those in the leased premises.) A -3 BUILDING SECURITY Because of numerous instances of trespassing in the past, Landlord requires that the front door and rear door to the residential units at l l l Main Street be locked at all times, so that each resident must have a key for purposes of entry and egress. Tenant needs to keep that fact under consideration in considering emergency exit from the leased premises. Landlord Initials Tenant Initials • TO • THE LEASE BETWEEN EVELYN F. COLLINS, TRUSTEE — LANDLORD a.Wnb THE CITY OF NEWPORT BEACH, CALIFORNIA - TENANT In Re 709 E. Balboa Blvd and Units 5 and 6, 111 Main Street Balboa, CA A. COMPLETION OF WORK; PAYMENT OF COSTS; LANDLORD'S PRIOR APPROVAL 1. All work provided for herein shall be completed by Tenant and Tenant will pay all associated costs and expenses. Improvements are intended to make the premises usable by the Balboa Theatre Foundation. All work will comply with building codes; permits will be drawn as appropriate. 2. Tenant will be the contracting party for all tenant improvement work. Tenant will is notify Landlord at least 5 days in advance of starting work to permit Landlord to record and post notices of non - responsibility on the premises. 3. All drawings are subject to prior approval of Landlord and Landlord's approval signature must appear on all final drawings. B. STATEMENT OF WORK 1. In general, the first floor premises at 709 E. Balboa Blvd will be converted into dressing rooms, restrooms, storage and lounge. An elevator will be installed. The second floor space (Apartments 5 and 6, 111 Main St.) will be modified to provide offices and restrooms. An elevator will be installed for service between the first and second floors. An existing laundry room between apartments 5 and 6 may be taken over by Tenant in consideration of which Tenant will provide a new laundry facility, utilizing part of the space currently occupied by Apartment 6 and a portion of the upstairs hallway. 2. Following completion of work on the second floor the space then allocable to this lease will be re- measured and the rent adjusted if there is decrease in the Landlord's space . . is 3. The electrical service drop to the Landlord's building is currently located on the • Balboa Theatre building owned by Tenant and that service easement in favor of Landlord will be lost when the theater wall holding the present service is removed. Tenant will provide new electrical service to the Landlord's building. Landlord's electrician is Ray Amburgcy, ( Amburgey Electric, 714 979 231 1) who has serviced the Landlord's building for a number of years. Tenant or Tenant's contractor should consider engaging Amburgcy as a consultant and/or subcontractor as appropriate to facilitate completing the new and changed electrical service and systems in Landlord's building as required by this lease. 4. Landlord's plumber, who has serviced the subject building for a number of years, is Bill Davis (AAA Plumbing 949 642 5667). Considering the age of the building it may be beneficial for the contractor to utilize Davis in a consulting capacity. 5. Tenant originally proposed adding a new exit and stairway from the second floor to the parking area. Landlord has reviewed preliminary drawings of the proposal and disapproves the concept in its entirety. Landlord will not permit any new exit door(s) to be created in the parking lot wall or any new stairs from the second floor to ground level. 6. Tenant is allocated the two tandem parking rows (4 cars) closest to the existing trash bin enclosure which presently accommodates two trash bins. Tenant may extend the trash enclosure to accommodate a third bin for the Tenant's use. Tenant will pay to extend the enclosure, provide for a third bin and for the collection services. Encroachment on the parking spaces by the enclosure extension is not permitted. is7. Tenant proposes to occupy the space on the second floor now used as a laundry room for the second floor residential tenants and will construct another laundry room out of space now partially occupied by Apartment #6 and the adjoining hallway. The present laundry room does not include a hot water heater as it draws from an extra large water heater on the first floor. Tenant should continue that usage in the new laundry room unless technicalities prove it to be unfeasible. 8. Preliminary drawings indicate that an office wall will be shared with a bedroom in Apartment #4. Noise mitigation is to be provided on that common wall in the form of offset sound proofing board. 10. Contractors and subcontractors have a statutory obligation to mitigate interference with businesses which occupy the building, during construction/remodeling. Tenant will note this obligation in all contracts and subcontracts for work on this program. 11. It is the Landlord's requirement that residential tenants continue to have access to the trash bins via an access door adjacent to the bins 12. Tenant proposes a doorway be constructed in the wall adjacent to the Balboa Theatre so as to provide easy access to the leased premises from the leased premises to the adjoining Balboa Theatre and also proposes access to the theater projection room from the second floor. • 2 13. Contractor and subcontractors may draw electrical power only from the resources of • units which are leased by Tenant or must bring in a new electrical terminal for the their use. Landlord's Initials Tenant's Initials • City of Newport Beach BUDGET AMENDMENT 2002 -03 CT ON BUDGETARY FUND BALANCE: Increase Revenue Estimates I Increase Expenditure Appropriations Transfer Budget Appropriations SOURCE: from existing budget appropriations from additional estimated revenues X from unappropriated fund balance EXPLANATION: NO. BA- 022 AMOUNT: $ao,000.00 Increase in Budgetary Fund Balance AND X Decrease in Budgetary Fund Balance No effect on Budgetary Fund Balance This budget amendment is requested to provide for the following: To increase expenditure appropriations to lease space adjacent to the Balboa Theatre to allow the Balboa Performing Arts Theater Foundation restroom, dressing room and office space. ACCOUNTING ENTRY: BUDGETARY FUND BALANCE Eund Account Description 010 3605 General Fund, Fund Balance REVENUE ESTIMATES (3601) • Fund /Division Account Description EXPENDITURE APPROPRIATIONS (3603) Signed: Signed: El Approval: Administrative Services Director Administrative Approval: City Manager City Council Approval: City Clerk Amount Debit Credit $10,000.00 Automatic $10,000.00 Date Date Date Description Division Number 0310 City Manager's Office Account Number 8070 Rental of Property and Equipment Division Number Account Number Division Number Account Number Division Number Account Number Division Number Account Number Signed: Signed: El Approval: Administrative Services Director Administrative Approval: City Manager City Council Approval: City Clerk Amount Debit Credit $10,000.00 Automatic $10,000.00 Date Date Date