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HomeMy WebLinkAboutAbdelmuti Development Corporation & American Express Financial Corporation - 1999-11-15lI7 ,bh/e,e - • I� �/G�'s� �1�v y Council/Agency Meeting Held: a /S Z2 9�l1•:3d 7red/Continued to: oved Conditional) A roved ❑ Denied Chtlerk's Signature Council Meeting Date: November 15, 1999 Depa ment ID Number: ED 99-56 CITY OF HUNTINGTON BEACH REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENC MEMBERS -7 SUBMITTED BY: RAY SILVER, Executive Director PREPARED BY: DAVID C. BIGGS, DIRECTOR ECONOMIC DEVELOPMENZ SUBJECT Approve as to Form: Lease Between Abdelmuti Development Company and American Express Co. (Oceanview Promenade) rn Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: The Owner Participation Agreement (OPA) between the Agency and Abdelmuti Development Company requires the Agency to pay the difference between the "Guaranteed Rental Rate" and the actual amount of the rent collected from a specified portion of the office space in the Oceanview Promenade. The Agreement also requires the Agency's approval as to form on all leases within fifteen (15) days of submission to the Agency. Funding Source: Redevelopment Tax Increment (FY 1999-2000 Appropriation: $135,000) Recommended Action: MOTION TO: Approve as to form the attached lease between Abdelmuti Devlopment Company and American Express Company for Suite 2B in the Oceanview Promenade building for a two year term beginning January 13, 2000 at the rate of $1.80 per square foot for the first year and $1.85 for the second year. Alternative Actions : Do not approve the lease as to form. REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: DEPARTMENT ID NUMBER: ED 99-56 Analysis: In May of 1991, the Agency approved an Owner Participation Agreement with the Abdelmuti Development Company for the development of a 42,000 square foot retail and office building known as Oceanview Promenade. The Provsions of the Agreement (and its subsequent amendments) require the Agency make "Rent Differential Payments" on a monthly basis for an amount equal to the difference between the "Guaranteed Rent" (as defined in the Agreement) and the "Contract Rent" (the rent actually collected from tenants). In March of this year, in an effort to better identify current market rents for office space, staff contracted with an appraiser to perform a rental value appraisal of all the office space in Oceanview Promenade. The results of this work showed that current rents in the building lagged the market. The results of the appraisal were shared with the building owner with the request that, as leases came due for renewal, that the appraisal be used as a guide in negotiatiating future rents. The rent in the attached lease for Suite 213 is consistent, in fact slightly exceeds, the $1.75 per square foot rental value established by the appraisal. It is for a term of two years without option to renew (which means that rents will again be renegotiated at that time) and it includes a rent escalation in the second year (which staff had also requested to be included in all renewals). Therefore, staff recommends approval as to form of this lease. Environmental Status: NA Attachment(s)• RCA Author: kohler @ 5457 AMXrenewalRAA -2- 11/04/991:13 PM • Form of Lease Between Abdelmuti Development Co. & American Express Co. (Oceanview Promenade) ATTACHMENT #1 • FIRST AMENDMENT TO OFFICE SPACE LEASE This First Amendment to Office Space Lease (this "Amendment"), dated as of the. -day of , 199% is made by and between ABDELMUTI DEVELOPMENT COMPANY, a California general partnership ("Landlord"), and AMERICAN EXPRESS FLNANCIAL SERVICES INC., a Delaware corporation, formerly known as IDS Financial Services, Inc. ("Tenant"). RECITALS A. Landlord and Tenant have previously executed that certain Office Space Lease dated November 10, 1994 as amended by that Confirmation of Term undated (the "Lease") demising to Tenant Two Thousand Six Hundred Sixty -Nine (2,669) rentable square feet of space designated as Suite 2B (the 'Premises") in the building known as Oceanview Promenade located at 101 Main Street, Huntington Beach, California (the 'Building"). B. Landlord and Tenant desire to, among other things, extend the term of the Lease for an approximate two (2) year period on the same terms and conditions set forth in the Lease, except as otherwise set forth herein. C. The parties now desire to amend the Lease, pursuant to Section 20.3 thereof, as more particularly set forth below. D. All terms not defined herein shall have the meanings ascribed to them in the Lease. NOW, THEREFORE, for fair and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Landlord and Tenant agree as follows: 1. Extension of Lease Term. The term of the Lease which was otherwise set to expire on January 12, 2000 shall be extended to January 31, 2002. Section 2.3 of the Lease entitled Option to Extend Term is hereby deleted, Tenant specifically acknowledging that it has no further rights to extend the term of the Lease. Section 2.4 of the Lease entitled Right of First Offer is hereby deleted and a new Section 2.4 is inserted in its place as follows: "SECTION 2.4. RIGHT TO NEGOTIATE. Prior to Landlord entering into a lease with a third party for the Premises upon the expiration of the existing term of the Lease, Landlord agrees to negotiate in good faith with Tenant if Tenant desires to further extend the term of the Lease. Landlord and Tenant may agree to enter into such extension, but only on terms and conditions as Landlord may approve in its sole and absolute discretion, and nothing in this Section 2.4 shall be intended as other than an opportunity for Tenant to negotiate an extension of the Lease with Landlord. This right of negotiation shall last for a period of fifteen (15) business days from the date of initiation of discussions by either Landlord or Tenant and shall become null and void at the expiration of such fifteen (15) business day period." 2. Basic Annual Rent. As of January 13, 2000 (the "Effective Date"), the Basic Annual Rent schedule set forth in Item 5 of the Basic Lease Provisions shall be deleted and replaced with the following: • Lease Term January 13, 2000 - January 31, 2001 February 1, 2001 - January 31, 2002 Basic Annual Rent $57,650.40 - payable $4,804.20 per month $59,251.80 - payable $4,937.65 per month 3. Operating Expenses. Upon the Effective Date, Section 3.3 OPERATING EXPENSES shall be deleted and replaced with the following: "SECTION 3.3 OPERATING EXPENSES. Tenant is not obligated to pay any additional sums with respect to common area maintenance expense, building maintenance expense or any other expense except as may be specifically set forth in this Lease." 4. Use. Section 4.1 shall be amended by deleting the phrase in parentheses commencing in the second line of that Section and ending in the third line of that Section. 5. Parking. Section 5.4(a) of the Lease is hereby deleted in its entirety and the following shall be substituted in lieu thereof: "(a) Tenant acknowledges that no parking areas are provided at the Project and that Tenant may use the parking structure provided by the City of Huntington Beach located near the Project. Landlord agrees to provide Tenant with nine (9) parking passes at the expense of Landlord for use by Tenant and its employees during the term of the Lease. Other than as set forth herein, Tenant acknowledges that the availability of parking and the rates charged for parking are subject to change and are not within Landlord's control." 6. Assignment and Subletting. Article VIII shall be amended as follows: (a) Deleting the last sentence of Section 8.3 and substituting the following in lieu thereof: "Notwithstanding the foregoing, Tenant shall not be required to pay the aforementioned transfer fee in connection with an assignment or subletting of the Premises to a "Tenant Affiliate," as defined in Section 8.4 below." (b) A new Section 8.4 is inserted into the Lease as follows: "SECTION 8.4 AFFILIATE TRANSFER. Notwithstanding anything to the contrary in this Article VIII, Landlord's consent shall not be required in the event of an assignment or sublease of the entire Premises to any entity (a) controlling by or under common control with Tenant or American Express Company, or (b) that is Tenant's successor through merger, reorganization or consolidation, or (c) that acquires substantially all of the assets of Tenant (collectively, a "Tenant Affiliate"); provided that in each such instance (i) Tenant shall not be in default under this Lease (beyond any applicable cure or grace periods) at the time of said transfer; (ii) no change in use of the Premises shall result by reason of such transfer; (iii) Tenant shall give Landlord at least ten (10) business days' prior written notice of said transfer; and (iv) the assignee or sublessee shall furnish Landlord at least ten (10) business days prior to the transfer a written instrument reasonably satisfactory to Landlord by which such assignee or sublessee agrees to assume and perform all covenants and conditions of Tenant contained in this Lease. No such :6q/oy9:o-000i/�g9�so.� uo/:q/qq assignment or sublease shall release the original Tenant or any assignee thereof from liability under this Lease." 7. Default. Article = shall be amended by inserting the following at the end of Section 13.1(a): "However, that Tenant shall not be in default hereunder if it abandons the Premises so long as Tenant continues to perform all of its obligations hereunder, including without limitation, the payment of Basic Annual Rent and all other charges due hereunder, and the continuation of all insurance policies required herein." S. All notices to be given to Tenant in accordance with the Lease shall be delivered to Tenant at: American Express Financial Corporation Attention: Portfolio Manager IDS Tower 10 F12/677 Minneapolis, MN 55440 With a copy at the same time and in the same manner to: American Express Lease Administration 2022 N. 31 st Ave. Mail Stop 080106 Phoenix, AZ 85027 American Express Financial Corporation Attn: Managing Lawyer, Real Estate IDS Tower 10 T27/52 Minneapolis, MN 55440 Or such other address(es) as Tenant may designate from time to time. 9. As -Is Condition. Tenant acknowledges that Landlord shall have no obligation to perform any improvements or work of any kind in the Premises in connection with this Amendment and that Tenant's continued tenancy in the Premises shall be on a "AS -IS" basis except as stated otherwise in the Lease. 10. Brokerage Commission. Tenant is responsible for the payment of any brokerage commission to CB Richard Ellis payable in connection with the extension of the term of the Lease pursuant to a separate agreement and Landlord shall have no obligation to pay any brokerage commission. 11. Approval by Redevelopment Agency. The effectiveness and validity of this Amendment is conditioned upon the approval of this Amendment by the Redevelopment Agency of the City of Huntington Beach (the "Agency"). Should the Agency disapprove the Amendment, it shall automatically become null and void. :b7/oy9Zo- L/SA8150.S AAO/:q/qy -3- C� C 12. Conflict. In the event of a conflict between this Amendment and the Lease, the terms of this Amendment shall govern and control. 13. Full Force and Effect. Except as specifically modified herein, the Lease remains in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. ABDELMUTI DEVELOPMENT COMPANY, a California general partnership 1.2 "Landlord" Ahmad H. Abdelmuti, general partner AMERICAN EXPRESS FINANCIAL SERVICES INC., a Delaware corporation By: Its: By: Its: "Tenant" -4- • A04 W 0,d' 4/�u. RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development SUBJECT: Approval as to Form: Lease Between Abdelmuti Development Co. & American Express . COUNCIL MEETING DATE: November 15, 1999 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution (w/exhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (w/exhibits if applicable) (Signed in full by the City Attome Not Applicable Subleases, Third Party Agreements, etc. (Approved as to form by City Attome Attached Certificates of Insurance (Approved by the City Attome Not Applicable Financial Impact Statement Unbud et, over $5,000 Not Applicable Bonds If applicable) Not Applicable Staff Report If applicable) Not Applicable Commission, Board or Committee Report if applicable) Not Applicable Findings/Conditions for Approval and/or Denial Not Applicable EXPLANATION FOR MISSING ATTACHMENTS REVIEWED RETIJRNED FORWARDED Administrative Staff titWf q y , 3-,., Assistant Ci Administrator Initial Ci Administrator Initial City Clerk EXPLANATION FOR RETURN OF ITEM: eA. � z s tih _ i ,, �! A- /AL j,1/Cr i` �10 RCA Author: kohler @ 5457 R Y .t 1• !T-'-n'U S !TA N &'TUCKER A T T 1. RNEYS AT LAW A PART`'ER51-1IP INCLUDING PROFESSIONAL CORPORATIO.14S 611 ANTON BOULEVARD, FOURTEENTH FLOOR COSTA MESA, CALIFORNIA 92626-1998 DIRECT ALL MAIL TO: POST OFFICE SOX 1950 COSTA MESA, CALIFORNIA 92628-1950 TELEPHONE 714-641.5100 FACSIMILE 714-546-903S INTERNETADDRESS wl w.rutanxnm ADAM N. VOLXMT (714) 641-3442 E-Mail: avoucerlOmtan.oam 0 A W. RIETAN HB&D-1971F IAMfs R FLICKER. Sa hose 1950. MI00R0 W'- DAHL. SR, lly ly.l9y1 'I RODCER HOM•FLL 0911.198I. I,AA1E5 R. MOQRE• IAµls 1. MORRIs DAVID R LOSCllc A nNS M. [%-I" RDLE11 E. kINC FAUL FREDERIC MARE 1VILL IAM I. CAFLAN HANS VAW UGTt.N MARK RUDENSIEK OHA M HE!'In�Gx AY RICHARD A_ CU'RA'UTT uLCHAE6 T. NORNAk 5TIPHE.N A. Um E05t PH L. .MAGA, III JULIE K WHAYG LEON-ARD A. HAMPEL PHILIF D KOHN MATTHEW K_ ROSS KRMG C. uLGFR DE"it L. MESTER IOHN B- NUQLRuT, 1; 10[L D KVPERRERG IEFFREY WE;: HEIUEF STE VI.N I GOON M'. A`IDREx- MOORE 1AICHAEL W 1 LLL Slt EN A NLC"OLS RORCRT O. OWEV OOUGLAS I-OENN:..CTO.N ALISON L TSAO M ILFORO IN D.AHL, It. THO—S G 94OCKINGTO-`! ADAM N. VOLKERT TREG A ILILA.YDER CH_ARIES A. DAvE,PORE, III rHEODORE I. WALLACE. Is WTNOER IEFFREY A. GOLDFARA TODD O LI'FIN DANIEL L. CEBERT GILEERT N. KRUGER E VRIDIKI MCRD DALLAS E- KEVIN IW% RARA 5. CA9LSON IL.LIE L. TIRE- IOSEPH O. CARRUTFL RANDALL M. RABBUSH LAVNE H_ MELZER ERIC .. DUNN w-ATASHA L. PIWA RICHARD P- $1 .15 MARY M_ GRffN L. SKI HAR;ISON F[ED CALANTE RICHARD D. ARKO IAMES B-O'NEAL CREGG AMBER SASE K. TRAYNUM CRISTY IOMEYZO PARKER MARK M MALOVO5 RORERT C- BRAU'N MICHAEL F. 51TZER 4ARRY A. CERUT:I IEFFREY 1, MELCHIIG IIKK! YGE.YE.Y THOMAS s-SALINCER- THQMAS I. CRANE CAROL D. URTY HIKED Nf Ve D-AVID C. LARSEY' MARK IFFLAZIER rATHCK D. MICALLA SEAN P. FAARELL OF CClL-15EL- CLIFEOR➢ E. FRI EDE% PENELOFE IRA ES RICHARD K_ HO'NFLL MARLf NE POSE IURGF.YSEN ED'WARD O SYEESM.A_ Ia M5C%AEL D. tut,.' M SASHERINS SENsa- SAMES s WDS=' APRIL LEE WALTER U_'_U I. GARLBALOE_ W IRA C_ RI.N' OUSE F_ WAHLDUIST DASTO N, HOCNHIR KAREN ELI_'ARETH WALTER IEFFREY M_ ODER— RICHARD C- MONTEL'IDEO A. rATRICK MWI OZ NArAIIE S:aa ALD OU.NDAS 'A PQOFFSSF0111. STAN WOLCOT1' LORI 5ARNER SM11H S. DANIEL HAREOTTLE AUSON M BAR7)AROSH CORFORATION RORERT S. a0W'ER ERN EST W. KLATTL III FAUL L SIEVERS EOMN W. HAMILTON- IR. DAVID E. ALESHIRE ELIZARETH L. A�IA[nN ADCHAEL K_ SLATTERY LYHN tOSGH1N MARCIA A. FORSYTH KIM D. THOMKOIY DE BRA ➢U.NN STEEL MILIF I. RLANCHA[D YYIUE M_ MARTFCOKINA µ"l TAYLOR KACER DAN SLATER TERENCE 1. CALEACHER November 12, 1999 VIA FACSIlVIILE AND U.S. MAIL Mr. David C. Biggs Director of Economic Development Redevelopment Agency of the City of Huntington Beach City of Huntington Beach 2000 Main Street RECEIVED Nov 15 lgaq ECONOMIC DEVELOPMFr11 Huntington Beach, California 92648 ``' 7: v� CJ p b Re: Owner Participation Agreement ("OPA") By and Between the Redevelopment Agency of the City of Huntington Beach ("Agency") and Abdelmuti Development Company ("'ADC") Dear Mr. Biggs: This letter is in follow-up to the letter dated September 13, 1999 to ADC from Ray Silver requesting an appraisal of the Guaranteed Rental Rate pursuant to the OPA. As you know, the current Guaranteed Rent is $38,550.00 per month, based on the Guaranteed Rental Rate of approximately $1.90 per square foot. The Guaranteed Rent is determined by multiplying the Guaranteed Rental Rate by the 20,300 square feet comprising the Differential Rent Payment Building Area. For the past few years, the Guaranteed Rental Rate has been adjusted pursuant to increases in the CPI. The OPA provides that the Guaranteed Rental Rate cannot be adjusted below the Guaranteed Rental Rate'then in effect by reason of the appraisal. Because of such limitation, we believe that the requested appraisal is not necessary because it appears unlikely that an appraisal would conclude that the fair market rental rate for office space in Oceanview Promenade is greater than $1.90 per square foot. If the appraisal were conducted, the OPA 267/014820-0001/3299746. all/12199 9 J �RUTAN &TUCKER, A r roen. rs .r ,IW Mr. David C. Biggs November 12, 1999 Page 2 provides that such appraised amount would remain in effect for a three year period, unless the Agency again requests an appraisal. Accordingly, ADC concludes that the Guaranteed Rent to be in effect for the calendar years 2000, 2001 and 2002 should continue to be $38,550.00 per month, with no CPI adjustment to be made to the Guaranteed Rent to be in effect for such period of time. If you agree with the foregoing, please confirm the same by executing the enclosed copy of this letter where indicated. Should you have any questions regarding the foregoing, please do not hesitate to call me. Very truly yours, RUTAN & TUCKER, LLP A A71 /-� amN. Volkert ANV: nw cc: Mr. Mike Abdelmuti (via facsimile) Jeffrey M. Oderman, Esq. Stephen Kohler (via facsimile) THE UNDERSIGNED AGREES TO THE FOREGOING AND TO CONTINUE THE CURRENT GUARANTEED RENTAL RATE AND GUARANTEED RENT IN EFFECT FOR CALENDAR YEARS 2000, 2001, AND 2002, WITH NO CPI ADJUSTMENT TO BE MADE TO THE GUARANTEED RENT TO BE IN EFFECT FOR SUCH PERIOD OF TIME. Acknowledged and agreed this day of November, 1999. David C. Biggs Director of Economic Development Redevelopment Agency of the City of Huntington Beach 2671014820-000113299746. all/121" w 0 0 CITY OF HUNTINGTON BEACH InterOffice Communication Economic Development Department DATE: November 15, 1999 TO: Honorable Mayor and City Council Members _ FROM: David C. Biggs, Director of Economic Development VIA: Ray Silver, City Administrator Subject: LATE COMMUNICATION (ITEM E-9) Curtailment of Increases in Guaranteed Rental Rate CD (Oceanview Promenade) Attached is a letter received today from Adam Volkert, Esq. of the law firm of Rutan and Tucker, counsel for Abdelmuti Development Company (ADC) consenting to no further increases in the "Guaranteed Rent" for office space in the Oceanview Promenade for the years 2000, 2001 and 2002. The provisions of the Owner Participation Agreement (OPA) between the Agency and ADC permit adjustments to the Guaranteed Rent by one of two means: 1) an annual CPI adjustment or 2) adjustment by a fair market appraisal. In the years since the Agreement was approved, the Agency has elected to use the CPI adjustment technique due to the relatively low rate of inflation in the U.S. economy. These adjustments (since 1991) have brought the Guaranteed Rent to $38,550 per month, or about $1.90 per square foot per month, for the 20,300 square feet subsidized by the Agency. Council members will recall that staff contracted for a fair market rental appraisal of the office space in Oceanview Promenade earlier this year. The report showed rental values in the building in the $1.75 per square foot per month range. Therefore, this fall staff put ADC on notice that the Agency would use the appraisal method to determine future adjustments in the Guaranteed Rent. Since an appraisal was done so recently and because it is unlikely that a new appraisal would show any real increase in rents, ADC has agreed to the use of the appraisal method without the formality of actually having an appraisal performed. This will save the Agency, and ADC, about $5,000-$7,500 each. While the Agreement does not permit that the Guaranteed Rent be rolled back, it does provide that, if the appraisal method is selected and the appraised rent is less than the then Guaranteed Rent, then the Guaranteed Rent is fixed for a w three year term. In this case, the Guaranteed Rent will remain fixed for the calendar years 2000, 2001 and 2002. At that time the Agency may again elect to use the appraisal method to determine if an increase in the Guaranteed Rent is warranted. We are in the process of processing this letter from ADC's counsel through the City Attorney's office, but are inclined to sign the acknowledgement. I hope this information will be of assistance to the Council members. If you have any questions, please call. Attachment XC: Ray Silver Gail Hutton Melanie Fallon Gus Duran Stephen V. Kohler