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HomeMy WebLinkAboutC-519(D) - West Coast Highway, 1221 (Balboa Bay Resort) - Memorandum of Understanding 1985050385 MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding ("h1OU") is entered into on June 10, 1985, by and between the City of Newport Beach ("City") and International Bay Clubs, Incorporated ("Club"), with reference to the following facts D - - , 1- , l f - A. In March, 1948, Club's predecessors in interest leased from City certain City tidelands and adjoining City -owned uplands generally referred to as the Balboa Bay Club property and facilities ("BBC Site") for a period of fifty (50) years ("Lease") . B. Under the terms of the Lease, Club is required to pay City a percentage of the gross operating revenues. Club is also obligated to expend funds for repairs and maintenance of the facilities during the last ten (10) years of the Lease in an amount equal to the average expenditures for repairs and maintenance made during the twentieth (20th) through fortieth (40th) years of the Lease. C. Club has in the past and desires to continue in the future to spend significant funds for upgrading, main- tenance, and repair of the facilities. Club cannot, how- ever, justify such expenditures so long as the future of the BBC Site remains uncertain and if such expenditures could unfairly be used against the Club to increase its obligation for maintenance and repairs of the BBC Site during the last ten (10) years of the Lease. D. Club and.City deem it desirable for Club to continue to spend significant funds for maintenance and improvements in order to both enhance the BBC Site and increase the amount of rent paid to City. E. The increased level of maintenance and improve- ment expenditures combined with a shortening Lease term have imposed economic and planning restrictions on the Club. This has led to the Club's request that the City Council appoint an Ad Hoc Committee to study the need for a Lease extension. F. The City Council has appointed such a committee and representatives of the City and Club have met from time to time to review a possible Lease extension under terms which would be in the mutual best interests of the City and Club. G. City and Club desire to reach an understanding regarding the terms and conditions under which the City would approve such Lease extension. THEREFORE, the following sets forth the understanding between the parties regarding the extension of the Lease between Club and City for the BBC Site. 1. During the period of this MOU and prior to execution of a Lease extension by City as provided herein, City shall conduct economic and other studies to determine the fair market rental income to be paid to the City for any Lease extension of the BBC site as well as other con- ditions to be included in a Lease extension. 2. During the period of this MOU and prior to execu- tion of a Lease extension, Club agrees to continue the existing level of maintenance and repair of the BBC Site regardless of any limitations on those expenditures as may be.provided in the existing Lease and pay City a guaranteed minimum percentage rent equal to no less than the average percentage rent payments made by Club to City during the calendar year of 1984. 3. At such time as the City and Club mutually agree upon the terms and conditions of a Lease extension, City -2- and Club shall execute an appropriate instrument approving an extension to the term of the existing Lease totaling a period of twenty-five (25) years and incorporating therein a new rental rate and any other provisions as mutually agreed to. Said Lease extension shall be reviewed by the State Lands Commission. 4. Upon execution of the Lease extension as provided in this MOU, City and Club shall cooperate and work together on a comprehensive plan for redevelopment of the BBC Site. As part of that comprehensive plan of redevelop- ment, Club shall: a. Prepare a master plan consistent with the City's General Plan and Land Use Element; b. Conduct the necessary environmental studies for development of the BBC Site in accordance with the master plan and in compliance with the California Environ- mental Quality Act; C. Participate in appropriate public hearings for the purpose of gaining community input and consensus relative to approval of the master plan concept and spe- cific land use; and d. Review the master plan with the California Coastal Commission and obtain approval in concept of the master plan from that Commission. 5. It is acknowledged that implementation of a comprehesive plan of redevelopment of the BBC Site may extend over a significant period of time. It is further acknowledged that such implementation may necessitate substantial immediate and long-term financial commitments by the Club requiring amortizing the return on capital investment over a period beyond twenty-five (25) years. It is, therefore, understood that when the Club complies with conditions (a) through (d) of Paragraph 4 of this MOU, a further Lease extension may be sought by the Club consis- tent with the financing requirements associated with .Za10 implementation of the BBC master redevelopment plan and the Charter of the City of Newport Beach. City agrees to con- sider such further Lease extension under terms and condi- tions to be mutually agreed upon at that time. IN WITNESS WHEREOF, the undersigned have executed this Memorandum of Understanding as of the day and year first above written. ATTEST TO: City Clerk CIT 'O ,NEWPORT BEACH B Mayor INTERNATIONAL BAY CLUBS, INCORPORATED Id- ";KT1V-__V11'1 -4- HISTORICAL DATA SHEET 1. Lease Duration: 50 years from September 1, 1948 to August 31, 1998. 2. Source of City's Title: Grant Deed from The Irvine Company, and tidelands granted in trust to the City of Newport Beach. 3. Approximate Area: 14.15 acres with 1,574.84 feet of water frontage and 1,672.0 feet of street frontage. 4. Purpose of Lease: Any purpose not prohibited by law other than industrial purposes. 5. Rental or Compensation: 5% of gross operating revenues of the first $750,000; 4% of the gross operating revenues between $750,000 and $1 million; 3% of gross operating revenues in excess of $1 million plus a percentage as mutually agreed upon for all sub -rentals. The per- centage rental is payable on or before 60 days following the expiration of each calendar year. 6. Actual Compensation: Year Gross City Paymemt 1978 $ 7,472,332 $ 246,847 1979 8,812,229 286,931, 1980 9,841,569 318,759 1981 11,079,481 349,347 1982 12,070,200 379,606 1983 12,342,728 398,236 1984 13,756,716 442,513 Historical Data Sheet - Continued (Page 2) The payment made to the City in 1981 represents 3.158% of the gross income and in 1982, 3.145% of the gross income These sums do not include the transient occupancy tax revenue to the City (amounting to $110,000 annually at 6%). They reflect only the lease rental obligations. 7. Renewal: Lessee is to yield possession of premises and structures to the City immediately upon expiration or termination of lease or pay $5,000 per month liquidated damages for such time as possession is withheld. 8. Taxes: Lessee is to pay all taxes and assessments of the City, County and State. 9. Insurance: No provisions.