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HomeMy WebLinkAboutI-4 - Basin Marine Lease- CITY OF NEWPORT BEACH Marine Department February 11, 1985 TO: MAYOR AND CITY COUNCIL FROM: Tideland Affairs Committee SUBJECT: BASIN MARINE LEASE' Recommendation: rah AGENDA ITEM: I-4 CY THE CITY COUNcil CITY OF NEWPORT REACH FEB 111985 If desired, approve the terms and conditions of the attached lease with Basin Marine, Inc. Background: The City Council, on January 28, 1985, referred the Basin Marine, Inc. lease to the Tideland Affairs Committee for them to review the following: (a) The possibility of a shorter term lease, and (b) The possibility of the City financing all or a portion of the capital improvements proposed by the lessee. nierugeinn- The Tideland Affairs Committee met on January 31, 1985 with the City Attorney and Marine Department staff and reviewed the proposed lease in relationship to the appraisal submitted by George Hamilton Jones, MIA, dated March 15, 1982 and an up -date of fair rental value submitted by Mr. Jones on May 2, 1984. A second Tideland Affairs Committee meeting was held on Monday, February 4, and Mr. George Jones and Bill Hansen were present to answer questions regarding the appraisal reports. The following information was discussed during the two T.A.C. meetings: 1. The lease negotiations with Basin Marine, Inc., commit Basin Marine to approximately $550,000 worth of capital improvements. These include $200,000 of improvements to the water site of the lease, $200,000 for building improvements to the shop and hardware store, and $150,000 worth of improvements to equipment; i.e., travel lift, etc. These improve- ments will be built to the lessee's specifications and approved by the City. 2. The primary reason for a 25 -year lease term is financial. Lenders require a lease term of approximately 10 years in excess of the loan term. This allows a lender a certain leasehold position, should the lessee default on the loan. With a 25 -year lease term a loan for capital improvements would be amortized over a 15 year period. Any lease term less than 25 years; i.e., fifteen years, would require that the loan would have to be.airlortized in a 5 year period. Page 2 Basin Marine Lease 3. There are no distinct advantages to the City financing these capital improvements and leasing back the improvements to the lessee. The main advantage of a lease back provision is that it allows the lessee a longer period to amortize the improvements. The primary disadvantage to the City is that the City would be tying up public funds to a lessee's specifications. Should the lessee's business fail, or the economic con- ditions change, the City would have a major capital investment in improve- ments that might not meet the City's future objectives for the site. In addition, the State Boating and Waterways money on loan to the City to rebuild the Balboa Yacht Basin Marina cannot be used for lessee improvements. 4. Mr. Jones explained that the Basin Marine, Inc. proposed lease is consistent with recent leases with boatyards in the San Diego Port District, Los Angeles Port District, Marina del Rey, Dana Point and Ventura. The terms and conditions of the proposed lease protect the City by the escalation clauses built into the lease; i.e., tying the minimum rent to the CPI increases every four years, and by the City's ability to increase the percentage rent schedule by re -appraisal on a ten year basis. 5. The Tideland Affairs Committee recommended that the City and Council approve the terms and conditions of the lease for a 25 year period and that staff meet with the lessee to review the possibility of a view corridor being widened on the west side of the lease boundary, and that the block wall fence around the lessee's parking facility be softened and opened to encourage his business clientele to use this parking area versus the marina parking. The staff will also review the entire landscape plan of the Balboa Yacht Basin with the Tideland Affairs Committee at a future meeting. Tideland Affairs Committee Chairman, Mayor Pro Tem Ruth Elyn Plummer Council Woman Evelyn Hart